Global Economy’s Momentous Shift and Monumental Inequality

Yves here. This interview with Richard Wolff and Michael Hudson being with a detailed and lively debunking of the widespread media, and particularly Democratic establishment claim, “The economy is great. Why aren’t you lousy voters more appreciative?” This interview deserves to be circulated widely for this section of the talk alone. The duo then continues to discuss the role of finance and the needs of developing countries, the seeming inability of Western leaders to focus on, let alone address, fundamental issues, particularly inequality and resulting deep societal divisions.

By Dialogue Works

Dialogue works (Nima): What’s your take and the reasons behind the failure of the U.S. capitalism? Before going to this question, I’m going to play a clip that Fareed Zakaria did on CNN.

Fareed Zakaria (CNN): The start of the new year is often a time of optimism. But look at surveys from the past few months and you’ll find that strikingly high numbers of Americans, sometimes around three quarters of those polled, think America is on the wrong track. This profound sense of despair is perplexing because I don’t find much objective data to support it.

The US economy grew at an astonishing 5.2% in the third quarter of 2023. The IMF expects growth for last year to be 2.1%, which is substantially better than other advanced Western nations such as Canada, the UK and Germany. Inflation is dropping sharply. Real wages are up, and manufacturing employment is experiencing a boom. It’s hard to find another country where so many measures are pointing in the right direction.

The broader picture is even more positive. As I write in the current issue of Foreign A ffairs, the US has been besting its competitors in various crucial metrics for a while now. The Financial Times did an analysis of the many ways in which America’s economy could be compared with Europe’s, and it found that in per capita growth, America has been outperforming the United Kingdom and the eurozone for 20 years and has dwarfed the economies of Spain, France and Italy.

America’s technology sector dominates the world in a way that no country ever has. The value of the top ten U.S. technology stocks is now greater than the value of the entire stock markets of Canada, the U.K., France and Germany combined.

Dialogue works (Nima): let’s get to the points that Fareed raised in this video. Let’s get started with Richard. Richard, jump in!

Richard D. Wolff: Okay. Fareed Zakaria says he is perplexed at the feelings of Americans that things are not going well. So let me begin by saying I’m perplexed that Fareed Zakaria is perplexed because I don’t find any of this perplexing what he has done.

And by the way, he is not alone. This is all over the financial media. We are opening the year 2024 with one commentator after another telling us that the economy is in great shape and that the mystery, the only mystery is why the average people in America don’t seem to understand how good it all is.

It’s grotesque. I mean, the honest way to ask this question would be to say, I look at the economy as if it were in great shape. Other people don’t. Why is that? What could explain that instead, we have here is how the reality is. And look at the poor befuddled by the people who don’t understand.

For me, the way to get into this is to use the metaphor of the medical doctor. If you’re not feeling well, you’ll go to a doctor and you say to a doctor, please tell me, Mr. Doctor, or Ms. Doctor, how am I doing? And they do a battery of tests. They look at your blood. They look at your urine. They do X-rays. They do a whole host of tests. Why? Because they expect some of the statistics will suggest you’re healthy.

Some of them will suggest you’re not. And their job as the doctor is to examine and to weigh the different pieces of evidence to come up with a judgment. They are not supposed to give you a thermometer, tell you that your temperature is normal, and send you home because you don’t have a medical problem. And you’re a strange, silly person to have imagined that you do.

If you had a doctor who treated you this way, you would know that what you need most is a different doctor and one that could function properly. What Fareed Zakaria has done in company with others is very carefully cherry picked a few statistics, thrown them together and asked why the world doesn’t agree with him that the whole picture is captured.

Let me go through very briefly some examples. Okay. For me, one of the most remarkable realities of the American economy in this period of time is the obvious clear decline of the empire. The recent wars. Vietnam, Iraq, Afghanistan. They’ve all been lost. The war in Ukraine is in the process of being lost. This is not the sign of an exploding, growing empire.

The emergence of the BRICS as an alternative all in the global economy, whose GDP, if you add up the BRICS countries, is now significantly larger than the GDP of the G-7. That’s the United States and its major allies. That is a momentous change in the global economy compared to what it’s been for most of the last 75 years, if not longer.

For the last century. We have monumental inequality in the United States beyond anything that we thought we would see 2040 and 60 years ago. We have an opioid crisis that puts the United States at the top of the number of people per 100,000 who die in the prime of their lives, outrunning all those other countries. He so glibly mentioned we have, for the first time in a century, a real economic competitor, the people’s Republic of China, at all levels, whether it be the highest levels of technology where they are competitive to the little fact that was announced this morning that China is now the world’s number one exporter of automobiles.

Now, I’m no fan of automobiles, but I understand the importance of the automobile in the global economic system. I could go on. I could talk about the decline of Europe and what that has to do with all of this. But to look at the United States, at this situation that we’re facing of extreme inequality, when most of the financial press is obsessed with asking the question, will the economic downturn that we know we are due for last year and the year before, but have so far evaded in a way that, for example, Germany and Italy have not?

And are we going to get that in the next six months, in the next year? In other words, the instability of capitalism is very much with us. The problem, the notion that Keynesian economics could fix it all, could prevent it, could stop it all that’s gone. A year ago, I was asked about the consensus at that time that the year 2023 would be difficult.

That consensus we now know was wrong in terms of the stock market. And so on. I just want to remind people that today’s consensus that everything looks rosy is on track to be just as wrong in the opposite direction as last year was wrong, and not to be taken by Mr. Fareed Zakaria as cheerleading for Mr. Biden. Everything Zakaria said is what is on the wish list for Biden to be reelected.

That’s very nice. I appreciate why he would do that. But to take it seriously, as economic analysis requires of people like Michael and me, a level of childishness of which we are, I am happy to say, incapable.

Michael Hudson: Well, I don’t think that anyone goes to CNN to get serious economic analysis any more than you go to The New York Times, the regional and international affairs or domestic politics.

But, Richard, I have got to say, you’re not talking about the winner. And that’s really what CNN is about. Let’s think. There are a lot of winners and you have got to take them into account. The 1% have been the really great winners and the 1%. Even the 10% own 75% of the stocks and bonds in the United States. Winners, the pharmaceutical industry has been great winners.

And if you’re investing in the stock market, in the military industrial stocks, you’re a winner. And they’re just some of the information technology monopolies that have become winners. So, let’s look at the winners. Now, the problem is and what never says is the failure of capitalism is the rest of the 90% are the losers. And that’s not what either CNN or The New York Times talks about.

So that they’re focusing on their audience. And we have our audience, presumably the people who are watching this show. And our audience does not get richer when GDP goes up, and especially if GDP goes up because the military industrial spending is soaring because our pharmaceutical prices are soaring. My wife is on her employer, pays for her health care and the money we the fees we have to pay at the local drugstore were quintuple on January 1st.

So the average American person who says they’re not doing well is talking about a completely different world from the 10%. And in fact, we’re in a kind of financial apartheid. And since apartheid in the news, you know, I think we should look at just the financial split between creditors and debtors. And something remarkable has happened in the last few years.

If you look at the Federal Reserve balance sheet, which is what the 1% looks at the Federal Reserve loans, the banks have gone way, way up, just as the amount of debt has gone way up. So, the banks seem to be getting richer and richer and the debt seems to be getting larger and larger. But all of a sudden, there’s a word that used to be used in the 19th century.

Marx used it, but other people also have built fictitious capital. And that’s what’s on the front page of The Wall Street Journal in the last couple of days, when we’re talking about one sector that is not doing very well, and that’s commercial real estate, the commercial real estate in the United States is only 40% occupied right now. If you have a brand-new luxury building, that’s not good.

But most of the properties are not. Now, a lot of these mortgages are coming due in the next year or two. Now, what do you do if you’re a banker and you lend a balloon mortgage to a buyer? No money down 100% mortgage to buy a $100 million building. But all of a sudden, this building is only worth 40 million.

Well, just like you had buyers working at walking away from junk mortgages after the Obama bank bailout with jingle mail, they just say, well, why this? My property is overpriced because of bank over lending. Why should I pay this $300,000 mortgage for a house? And I can buy the house next door for 150,000 now. Now, the feedback and the by the other house.

Well, that now what commercial real estate developers are doing now that they’re not getting the rent to pay the interest, why should they use their own money to pay the pain? They’re simply walking away. And what are the banks going to do? Well, if you look at the bank balance sheets, the banks are doing very well. They’re very solvent here.

Their assets in excess of their liabilities. They’re getting rich. They’re paying big bonuses to the leaders. But if you value these properties at the current market price, all of a sudden here are the assets and here are the liabilities they’re beginning to look like the average American family. 50% have no savings at all. But here are the liability credit cards, student loans.

Well, you can imagine how this is upsetting the Biden administration. How are they going to get to November? That’s really what we’re talking about. Well, the first thing is we’ve got to get the people back into the office building. How are we going to do that? We’re going to tell them COVID is over. Don’t worry. You don’t have to wear a mask.

Get back into the building. They’re really not doing anything to warn people about the COVID epidemic and the long COVID. They want them to get back into the building so that their employers will pay the rent to pay the banks. So, the banks will not have to write down their balance sheet from 100 million to 40 million.

It’s all about the banks. So, if you’re a creditor and the 1% capital finance capitalism is a great success. If you’re a wage earner, are things is not a success because you know how you’re being exploited at work and how you can’t leave your job because you would lose your pension. Right. And your health care coverage and all of a sudden you fall behind in your credit card debt.

Your rates would go up 20% or 30% per month. So that’s really you know, we’re talking about a different world, Richard.

Richard D. Wolff: Yes. I agree. But let me go back. I think, you know, we’re filling in the gaps of the story that that each of us has the talent. And that’s and that’s good. That’s as it should be.

But I do want to go back because even with the GDP numbers and everything Michael says about it is correct. Let let’s be a little bit of honest. The United States, Mr. Zakaria tells us, had one quarter of 5%. But it’s basically but, you know, performance is much closer to 2% last year. And I want to remind everyone that the People’s Republic of China is reporting 5%, which is low for them, but it is way ahead of what is happening here in the United States, which means that the closing of the gaps between the United States and China and its allies and the BRICS, that’s continuing.

And if that has shaken up the world economy, which even the American leaders admit, that shake up, which they admit is going to continue and not only continue in the same direction, but there’s not a word about that is absolutely extraordinary that that’s the case that has changed everything. Every country in Asia, Africa, Latin America that has a problem now, it needs money to build a railroad.

It needs money to set up a proper health care system. It needs money to exploit a resource. It discovers onshore, offshore. They used to have to go to New York or London or Paris and beg on their knees for and take the worst conditions imaginable for the grants or the loans or the. And they don’t do that anymore.

They have options. They can go to the east. They can talk to the Chinese or the Russians or the Indians or the Brazilians. And they can compare and contrast and take the better offer, which they are getting more and more from the other side, which reorganizes the whole world economy. Let me give you one more example. All of these powerful countries that are doing so well that Fareed Zakaria mentions the United States and Europe.

They all told us that at the beginning of the year 2022, they would prevail. Russia would be driven to its knees. The ruble would collapse. Absolutely none of that happened. This powerful Western capitalist system has shown itself to be what the Chinese once called paper tigers. They are not able to do any of what they promised. And now they are bleating that they’ve run out of ammunition.

It’s hard to believe the level of incompetence. But if they’re all so powerful, if they’re all so strong, if they’re all so successful, as Mr. Zakaria wants us to believe. How do you account for the lamentable failure in Ukraine that we read about every day? Last point. A very poor country in the world. Yemen has a group of people usually referred to as the Hutus who have been able to stop traffic in the Red Sea, which is a major artery for shipping, particularly of energy, oil and things like that.

And that is now threatening Western shipping. They do it out of solidarity with the Palestinians. Okay. What might seem to be a small, if horrible struggle in Gaza turns out to have ramifications on the world economy. If the price of oil goes back, let me remind you, the years 2021 and 2022 were years of stunning inflation. The barrel price of oil in those years flirted with $120 a barrel.

Today, it is $72 a barrel. It has come way down, which is a major part of why we don’t have the horrible inflation we had. But what comes down in 24 months can very easily go right back up in 24 months. This prediction that we are in great shape is based on a careful forgetting of what we have just gone through.

It’s a remarkable exercise in rose-colored glasses of which Mr. Zakaria ought to be ashamed.

Michael Hudson: Well, if I can take the role of Zakaria, he would look at the WHO is threatening to take a ship and the oil go and the ship go around the South Africa. This is increasingly deep because it now costs a lot more for all the shipping, this tripling of GDP.

And you’re absolutely right. We’ve used all the weapons we had in your brain. This is really going to add more GDP. Germany says we have to rearm. You know, we found our inner Nazism. We’re going to support the Ukraine. They’re going to begin putting huge orders in American arms because they can’t produce arms without having the energy and the oil, because arms require metal and that requires heat in order to make the alloys for the tanks.

So, all of this is going to be a great increase in GDP. But I do think you’re right that there really doesn’t seem to be a plan B for the United States. So, the plan B, I guess it’s sort of like the election coming up and what the Biden election play. I’m not the Donald Trump. Well, America says we’re not communist China, okay?

We’re not communist China. But Donald Trump moves a lot quicker than Biden has moved near the Great Leap and Operation Warp Speed. And that’s from a Republican and Donald Trump that he didn’t want to go to war with Russia and Ukraine. But if he were there, they wouldn’t have had a war. Well, it would not have increased the GDP by military spending.

So, again, we’re somehow if you are writing for CNN or The New York Times or The Washington Post, anything can be put into a celebration speech by President Biden or the reasons why he should be reelected. Look, I say I’m not the devil. And you described China is not thing, but again and again, Biden felt that the enemy and we need an America, a free market.

A free market means you can only buy from us because we are the country of freedom. After all, we are the exceptional country. You can’t buy from each other. I mean, what you’re doing with the BRICS, you know, we’ve got to get the National Endowment for Democracy in there to have regime change in the countries that eventually turn as many of the Brexit possible and throughout and into the Ukraine.

So, you know, that apparently is the plan B. I’m not sure how that is going to affect the 99% of the American population, but you can be pretty sure that the 1% is going to come about.

Richard D. Wolff: Yeah. And I think what you’re seeing is you’re seeing a case study of the function of American politics, these debates between the Republicans and the Democrats are carefully orchestrated to distract us from what the real issues are.

So, we’re going to have debates about Hunter Biden’s corruption. We’re going to have debates about crime in the streets. We’re going to have debates about Taylor Swift’s sexuality. I mean, it’s just going to be wonderful. We’re not going to talk about the underlying inequality. By the way, the inequality of wealth and income in this country has gotten steadily worse for the last 40 years.

Republicans and Democrats have been stunningly equal in their inability to do anything about it. The Republicans pretend it isn’t there. The Democrats say it’s a serious problem. But Neera, neither of them does anything. Even across the pandemic. The inequality got worse. And yet it’s not an issue. It’s not a debate. It’s not there’s no program being put forward to deal with it.

Mr. Biden talks about the big spending programs. My God, we’ve had that before. When the government spends big on the infrastructure puncture or renewed manufacturing, two things people should think about. Number one, the bulk of that money goes into the hands of the biggest corporations in America, and we know what they do with it. We know how that wealth gets distributed.

It goes to the top 10% in dividends and pay packages for top executives. It goes to the minimum it can get away with and with artificial intelligence. Half a jobs it by the God I’m doing the best won’t even be there anymore. We kind of know this is not going to change anything in this society so that the mass of the people are seeing a change is not coming here.

And the whole point of politics is to focus on things that couldn’t in a million years make for change. They are utterly irrelevant for change. And the last thing he hears it for me, always a kind of remarkable absence of a focus in our politics. We have a society that is seriously divided. We know that. We admit that.

We see it on television. We hear it in the speeches. We know that this is very serious and we know it could be exploded at any moment by any kind of event, not just domestic, but also foreign. Look at the amazing opposition to the U.S. policy with Israel and Gaza. I don’t think anyone expected this level of opposition, given the history of U.S. relations with Israel in the past.

So, obviously, domestic viewpoints are not what people thought they were. Well, what is that about? Why are people upset in the way they are? Why are millions identifying with the Palestinians who didn’t seem to have done that in the past? Palestinians have been in a rough place many times over the last 75 years. If you know the history of that area.

Okay. So, wow. Now we have obvious. But no, none of that counts. The political debates go on about what Hunter Biden and impeachment and all of it. They make no difference. They’re not going to make a difference. But the issues that people really care about that are urgent, that could upset the whole applecart of the American economy. I mean, Michael and I can go through with you the level of debt of American corporations is off the chart.

They look they use the last 20 years of near zero interest rates to solve every business problem by doing the easiest, quickest, cheapest thing. Borrow limitless amounts of money from the Federal Reserve at virtually zero interest. So they are way overindebted given their normal range of problems. What are they going to do now? They can’t borrow at those rates anymore.

That’s not likely to come back. etc., etc. These are the real problems. And I’m not even going into the level of government debt and the level of household debt, which are also, you know, sword of Damocles hanging over all of that is magically disappearing. And Zacharias is rendition. Our only problem is to persuade our silly backward population that things are really wonderful.

This is what used to be called Pangloss. This used to be a kind of rosy colored glaze over people’s eyes. We can’t afford that anymore. The U.S. is not the dominant economic powerhouse it once was. And this is mostly a vast program of denial and pretense to cover over that hard to digest reality.

Michael Hudson: Well, Richard, at the beginning of your comment, you mentioned the inequality of wealth and debt.

But you said that pretty quickly, the really very different wealth and income I’m sorry, income is really GDP. Income is what people earn. The wealthiest people don’t make their wealth from income. If you look at all of the great fortune that have been created really since the 1980s, there haven’t been people saving up their income that capital gains depth, asset price inflation.

That is a bank inflation of the price of stocks and bonds, but also the real estate that everybody has to pay, and the any quality of wealth is so much larger than the inequality of income for most of the population. Wealth has not increased at all yet. You had an exponential growth of wealth in the American economy. How can you have an exponential growth of the stock market?

The bond market, wealth, financial wealth, real estate, wealth, and nobody and below the 90%, if you look at the overall figures, has been getting wealthier. How is it that all of this wealth is concentrated at elite? People have enough money. The LeBron, except for the few million homelessness homeless in New York and San Francisco and the other. So, when people talked about GDP and income looking at their distracting attention from wealth.

Now, if you look at the growth of wealth, you see like a Hokusai wave of going up with same wave is out of debt. So, the growth of wealth equals matches on the other side of the balance sheet, the growth of debt. So, the problem is that the people who have the wealth on the effort side of the balance sheet, the creditors are not the people who own the debt.

On the liabilities side of the balance. So, all of this growth and wealth, when people talk about people look at all the famous people and CEOs and entrepreneurs getting richer. They’re not talking about the 90% getting deeper in debt that they have to pay and that you can look at right now and the student debt. The student debt has been it was President Biden who innovated the fact that let’s make the student debt immune from people’s ability to wipe out in bankruptcy on the wealthy, people can wipe out their debts.

But if somebody is so poor that they have less than $50,000 a year to spend on education and actually have to borrow the money, they can never repay their debt. And the result is that these people cannot because they have to spend so much money on the student debt, they can’t afford to go to the bank now and take out another loan to buy a house of their own to start a family.

So you’re having ownership of American property declining and you have especially ownership of property in the last five years wondering for the black population and to a lesser extent the Hispanic population. So you’re having the economy shift all of a sudden from a democratic economy back into what you had in the 19th century, a credit very landlord economy, except the landlords are now financial firms because the financial firms like that are the private capital that is buying all of this, buying up the houses that families can’t afford to buy themselves because they can’t borrow the money for it because they’re already too indebted.

So, you’re having, again, housing apartheid, that apartheid financial apartheid. You’re having a multi-layered economy living in food and nobody’s what you’re really complaining about. And people are not talking about the slowness of the economy and the split that is widening. That is the most serious problem of all. You don’t see Biden doing anything to free the student debtor from the burden they’re bringing.

The wealthy people don’t have to pay debt, but also the income doesn’t seem to be as unequal as their wealth. You remember what Leona Helmsley, the hotel queen, that only the little people pay taxes. If you haven’t them, you have to pay taxes on the rich. People don’t make income. They make capital gains or they make up somehow they make economic rent.

They don’t have it counted as earning in the GDP, but GDP or earnings or the welfare or 10% of the population isn’t earned at all. It’s what John Stuart Mill said made in their sleep. Like DuPont, they collect the interest, they collect the rent. They don’t create the housing. They borrow money to buy it. They don’t. There’s no labor there that’s creating value.

It’s all economic growth. And nobody is using even the vocabulary that they’re using. They’re not saying a rent seeking economy, running a economy. All these seem to be obsolete. Word like usury is an obsolete word. Anything that points to something that is not being discussed by the Republicans or Democrats and considered archaic and sort of impolite. So, you know, one of the things we can do to expand the vocabulary of people, to focus on things that we would look like them to look at for what’s really happening in the economy.

Richard D. Wolff: if I could just add another point to all of this. The reason you want to talk about the real issues is because they’re not static. They’re not just sitting there. This growing inequality, whether it’s of their wealth, as Michael has just laid it out or of income or of them together, or of the inequality politically and culturally, which flows from the inequality of wealth and income as they the rich being smart.

Understanding what Michael has just said. They know that as they become more and more, the holders of this wealth and the rest of the population becomes indebted. They understand they’re a small minority and the people indebted are a very large majority. And where you have universal suffrage, that is very dangerous. Therefore, you need to use a portion of your wealth to shut down the political system so it cannot threaten this inequality that you’ve built up.

That’s how capitalism preserves itself. That’s why it corrupts the political system. It has to because otherwise it can’t be secure in the inequality that its system generates. You know, we had Thomas Piketty just a few years ago, does a nice job of 600 pages explaining how capitalism, everywhere and anywhere it settles, produces deeply in unequal distribution of and of wealth.

But what he didn’t quite finish was telling us that that inequality economically then has to corrupt politics, not because people are mean or stupid or evil, but it’s only to protect the very way that the system works. Now, one honest presidential campaign would talk about that, which would face it and would offer something that might deal with that.

We have an election that does not do any of that. Trump doesn’t do it. Biden doesn’t do it. Their advisors don’t do it. Nobody does it. It’s left to the media. People like you, me and I congratulate you for doing it, to bring on people who can talk about the politics that isn’t being brought into the play of this election.

That ought to be. So it’s not just that they’re not doing their good job of covering, but they are really doing a disservice with this rosy colored happiness where we’re all in great shape. What an amazing thing to say in the middle of two disastrous military wars with no end in sight for either of them, with a level of domestic hostility, you know, making people think of civil war again and to talk about it.

I mean, we have problems that are obvious, and Mr. Zakaria doesn’t want to see any of it. And The New York Times, neither is extraordinary as a cultural phenomena, even as we go through the real economics that is being magically disappeared on us here.

Michael Hudson: Well, you’re complaining about turning politics into a free market up for sale to the highest bidder.

You’ve had a privatization of politics by the donor class and the the winner is the candidate who can raise the most campaign contribution to buy the television time and the political and control of the press who are to get elected for either party. So basically, it’s you’re having what’s happening in politics happen in education, as you’ve just seen in the number of university presidents who’ve had to retire.

The donor class has become the domain main trustees of the universities. And they said, you know, what are you going to do? your university president going to be concerned with whether what you’re teaching the content or are you going to be concerned with us your donors? You know, who are you working for? And are the donors one at Harvard and the donor one Pennsylvania.

And the donor may win in politics if at least the two parties are what you mean by politics. I’ve got to have truth and truth and statement. I’m an economic adviser to Jill Stein on the Green Party ticket, and she is not expecting to get a donor contribution from the Coke Brothers or the Wall Street or the others.

The problem is how it costs maybe $4 million just to get on the ballots in various cities and states and the Democratic and political party have done what the free market usually leads to a monopoly, and they’ve used their monopoly to prevent a third-party candidate from even getting on the ballot, because that’s not a free choice. You’re voting for when you vote against the Republicans, the Democratic voting against America.

That’s not a free choice. You know what they say. And they want to protect the population for making the wrong choice of voting for a third party candidate. So that’s really part of the whole problem here are how are you going to even get issue into a campaign if the Republicans, the Democrats will not permit a third-party candidate from asking these questions in a political debate?

If you have the Republicans, the Democrats, it’s going to be just like you said, Richard, they’re going to talk about how can we just direct voters our take out what Nikki Haley said. Should we change the name of the Defense Department to the War Department? And she recommends, Well, you know, I guess there’s a point in with the honesty of that.

But that’s well, she doesn’t say we shouldn’t go to war. She really wants to accelerate the war. Well, how are we going to get an anti-war candidate like Jill Stein raising the kind of questions that you and I are raising? I mean, the problem is not that great. The problem for the whole Democratic Leadership Committee, the whole Democratic Party, the Republican Party, the whole monopoly that tries to crowd out what we’re discussing with.

You’re playing noise and the result you have known as the election. Without the content that we’re trying to put in, how are we going to get that in?

Richard D. Wolff: If I could add Nima let me know if I’m talking too much. I’ll be glad to go. It is another dimension to get at this. For much of my adult life, and since I’m a similar age as Michael, I know what I’m.

I’m saying is true for him, too. We were professors of economics. We still are in an environment in which we were told that the great debate of economics is whether the government intervenes more or less. Do we have a, quote, free economy or do we have a free market, or do we have a government interventionist Along the lines of the changes arguments of the 19th thirties brought to the fore?

That was the great and we were told for most of that time, suddenly, ever since the 1970s, that the way for success, the way to grow, the way to lead the world was the United States to be the home of let’s say, failure, of the home of minimizing governmental intervention. We had to do it for a short time because of the Great Depression that’s now behind us.

The 1930s are nearly a century away, and so we are now in the modern world in the last half century. We are free marketeers, blah, blah, blah. Okay. Under President Trump and continuing with Biden, we have as a nation radically dropped that attitude. We are now engaged in what used to be called economic nationalism. The United States government is systematically funding with tens or hundreds of billions of dollars the computer chip industry, both the making of the chips and the making of the machinery that goes into the chips.

It is expanding to do this in many other areas. It has gotten the approval of the Republicans to spend wild amounts of money trying and by the way, failing by trying to match the Chinese in a whole range of areas with lots of subsidy, which, by the way, the Chinese also do. But you would imagine having changed course so dramatically in such a short time that the Democrats and Republicans would have something to tell the American people, What are we doing?

Is this Schiff really the best idea? And if we are going to become economic nationalist, if the government is going to use massive amounts of its funding capability to intervene, why does it intervene only in large contracts for big corporations? Why is it not intervening in massive programs of public education, public health care, public fill in the blank.

What a remarkable choice to be made. It’s not at all clear that that’s how you do it. The government has been funding the chip companies, but Huawei, a company targeted by the United States, has, in fact, now leapfrogged over the United States and is now producing a more advanced chip than either they or any American company is able to do.

Nor is that going to stop. So not only have they chosen to be economic nationalism in a very peculiar, skewed way, but they’re not even doing it very well because they’re allowing corporate America to snatch those moneys for their profits and their dividends and all of that instead of any kind of management for what they claim they are interested in.

It is a spectacle. And again, politically silence. No Republican, no drama, everybody. That’s the one thing Biden could get through. He got big spending, big time for big companies to do big projects. What an amazing dereliction of that. Mr. Zacharias managed not to see or comment on at all.

Michael Hudson: Richard, what you just talked about, the role of government is the most important issue that people should be talking about.

This is what changed so radically in the 1980s with Margaret Thatcher and Ronald Reagan, as you pointed out, when we went to school. We know that every country from England and Germany to the United States in the 19th century, every country got rich by government spending on infrastructure. The idea was the government would provide free education, would provide free health care.

The government would make sure that it could avoid monopolies by building natural monopolies. Communications with government. The post office with government transportation was in most countries, not us, but was in all European countries. At National Airline, National Railroad. The government had the basic infrastructure in order to keep the cost of living low, and that was in the interests of industrial capital so that the employers didn’t have to pay their workers enough to pay for their own education, to pay for their own health care, to pay monopolies, to get to work on public transport and communication.

All of that changed in the 1980s, by which time we had already finished their education a decade before. And the whole idea was that somehow private enterprise could do it cheaper with the free market advocates of the free market, the libertarian libertarianism of centralized plans, the common plan by the financial sector, and that’s what the free market is.

The economic investment is determined by credit, and the credit is provided by private banks, not by the Treasury and not by funding the government to build infrastructure. Then you’re going to have an economy that looks Thatcherite and reorganized and we’ll end up by looking like England look devastated after Margaret Thatcher and America was essentially polarized, that all the inequality they really take up with the Reagan administration and that that really, as you pointed out, exactly the thing that the government isn’t financing actual industrial production.

You can see the big change that occurred in China around 1980, end of the 1970s. The Chinese wanted Western advice. They Didn’t want Marxist advice because they thought that that was going to be too much like the old Soviet system, but didn’t work. They invited Milton Friedman over the University of Chicago, and Milton Friedman actually said, Let a hundred flowers bloom.

No one can plan something that hasn’t already existed yet. Let the innovators develop the no new products, and you can then use infrastructure to help them help promote other investment. But if they make too much money, you can tax it away or do whatever China has done to Jack Ma, who got very rich and you had a you have a mixed economy in China.

You’re not one to have a mixed economy in America. The libertarian free market economy is a monopolized economy run by the bank, the mother of drugs. So, you have a kind of Orwellian vocabulary. And at least when we went to school, we knew what Orwell, in a word vocabulary was all about. I’ve got to admit that I didn’t learn anything in getting an economic speech.

I worked in the bank Chase Manhattan, mainly another bank, Arthur Andersen, doing economic statistics largely on the balance of payments and corporate finance. And I found a completely different story from what was taught in the university. And David Rockefeller, when he had assigned me a task that, you know, we want you to say, you know, whatever you fine, we think we know what the answer is.

But look at it. If we don’t like what you say, we want to publish it, but we want to know what it is. So, you have the 1% with one, you know, knowing something just like you and I are talking about as a matter of fact, there were like three major financial economists, maybe four. And well, during the sixties when I was there, we were all Marxists, and we would meet once a month at the Berlin Noodle.

And I remember one evening we all ended up talking about the formula that Marx had in Volume three, and we all broke out laughing. Why are we the economists, for all of these brands? And the answer is because we didn’t go to we didn’t learn about economics, but going to school for a period state, we all had a similar background that is not considered and polite company, but the bank wanted the lead on that on well they’re not looking at Marxist anymore and without Marx this big road map the guide capitalism we’re on earth isn’t doing the well let me add.

Richard D. Wolff: And since we’re doing a little bit of a personal note, here are Michael Hudson and myself. I did go to the university. I went to the universities that I was told were the best that the United States could offer. So I went to Harvard, then I went to Stanford, and I finished and got my Ph.D. at Yale. My macroeconomics professor was James Tobin.

My international economics professor was Robert Griffin. I could go on. If you are in the business, you’ll know all these names in my class at Yale, getting a Ph.D. about the same time I did was Janet Yellen meets. All the same. I would raise my hand and ask questions about the problems of capitalism that I saw all around me.

Yale is located in New Haven, Connecticut. New Haven, Connecticut has the bizarre distinction of being among the ten poorest cities in the United States because of the huge population of black and Hispanic poor people that live in the ghettoized have that isn’t white. So, the problems of American capitalism are screaming all around you. And I would ask questions and I would see that my professors had one of two reactions.

Either they didn’t know the answer and were honest enough to say so, which some of them were, or they didn’t know. And their eyes pleaded with me not to pursue the conversation in the classroom because it was the time of the Cold War and one was not supposed to go where Marxian questions critical of capitalism might take you.

So, I had to do it all on my own with a handful of other students in order to learn from the Marxian tradition. In my case, the kinds of things that Michael learned in the practical arena of bank financing. We had to go outside. But that what that means is and what Mr. Zakaria ought to know is that the official academic world of economics is now a 75-year enterprise in avoiding knowing what the other perspective might be.

It’s childish. You know, the American military study, what the Russians are doing in Ukraine. They want to learn what their strategy is, how they use their weapons, how they mobilize their troops. They need to know so they can learn what might be better than what they’re doing. Well, it works in economics too and yet instead of dealing with the real economic problems that Michael and I have been talking with you about, we have Fareed Zakaria, and he is typical.

He’s smarter than many of them. He does his job well. But it’s a job of making believe of of denial. And it’s a job that can’t engage the real issues because it comes out of a program and remembers the universities, that’s where the journalists get trained. That’s where the professors and teachers get trained. That’s where the CEOs get trained and that’s where the politicians get trained.

So, it’s an important place. And if they tell you that what’s important is not learning any of this other stuff, well, then you go through the rest of your life with a big fat void, which is partly what this conversation is exposing.

Michael Hudson: Well, you mentioned, I think, Zakaria simply because Nima mentioned him as an example. But yeah, I think you could really be talking about the Nobel Prize Committee.

Yeah, that’s really what we’re talking about. The Nobel Prize is given just to reinforce the neo leftist, the neo liberal. Right? It’s a dumb surprise. It’s given to people like Paul Krugman who write for The New York Times about how everything is nice in the economy because the stock market is doing so well. Why won’t people celebrate with the richest 1%?

And why seriously, is that a various economy that they’re trying to encourage? So really, I wouldn’t want to single out the victory and spread the credit around to the people who deserve it universally. And the Nobel Prize Committee is mainly people who have won the Nobel prize before. So perpetuating tunnel vision, we are not going to win it. I’ve got to hope you’re not waiting!

Richard D. Wolff: Long time ago understood that that phone call will never come!

Michael Hudson: I’m already in the seventies, I thought, calling myself an economist, I called my vote the future because that doesn’t mean anything. And of course, then I did get associated with Harvard, but as an archeologist. So, I think that thinking of myself, I think of myself as an archeologist because I found that people were able to solve the problem of problems that we’re having today.

Long before and already in the third millennium, B.C., 2500 B.C., you had all these countries, when they would have debt growing so large that people were going to lose their freedom and lose their land, the rulers would cancel the debts. They knew how to cope with a problem like we’re having today. All change with Western civilization. And that’s why, you know, what people are talking about is the US a failed state for the first time reading President Putin and President Xi, they’re talking about whether Western civilization of a failed civilization, you know that the big picture not what this election will be about in November.

Richard D. Wolff: Yeah, you know, just a footnote on that. There are several world religions that have built into them a concept which some of them call jubilee. And the concept of jubilee in some of them is exactly what Michael just said. When an economic relationship, in this case, the debtor creditor relationship lending becomes overwhelmed me because you have so unbalanced your economy that you have a large group of your people in debt to another group of people.

And that that creates all kinds of bitterness, anger, envy, suffering, in short, social lack of social community or cohesion. Then you have to act. And jubilee is the religious sacrament, if you like, that sanctifies. And what they do is they reshuffle. All the debts are canceled. The ownership of land is changed, and the land is redistributed. If you were lucky last time and you got land where it rained a lot and the sun shone and the soil was fertile, you would now be assigned land that wasn’t so good.

And the person who got the crappy land before would have a chance at the better land. But they would all know that if this got to be extreme, there would be another shuffle so nobody could get up on a high horse and imagine that they could, or that they could leave to their children some immutable long term. Look at it now here in the United States, a married couple can leave over 20.

If my numbers are right, 20 to $23 million of assets to their children before they become liable to federal inheritance tax. This is the effort to create a permanent class of the rich. Gone is any pretense, even of a level playing field of the idea that we start together and see how well we can do with our efforts now that all we are going to be doing as well as our grandfather and we can’t even remember who he stole the money from in the first place, it’s it’s really and again, none of this is discussed.

We have radically altered the inheritance tax structure of the United States over the last couple of decades. That’s not going to be revisited. Mr. Trump doesn’t say a word. Mr. Biden doesn’t say a word. Their advisers don’t say a word. It is a stunning adjustment, as Michael says, to a different kind of economic system in which we all pretend that there are no alternatives, nothing to be debated or discussed, nothing to be argued for or against.

No, let’s spend a lot of time on the Hunter Biden’s laptop.

Michael Hudson: I’m so glad you mentioned the Jubilee that put my many years of Harvard with the Peabody Museum Anthropology Department. We’re all about my book and forgive them. Their debts is all about the origins of the Jubilee and the marrying Babylonian Egyptian and other Near Eastern legislation. And the Jubilee law of Leviticus 25 was word for word from Hammurabi’s Jubilee Declaration, which was the same words that were used by every member of his dynasty and the Sumerian before him and the Assyrian after him.

I headed a group of archeologists and anthropologists and a theory that were published by volume of the work on rewriting the economic history of the Near East to emphasize how they avoided the polarization that subsequent Western civilization had by the debt cancellation, by freeing the debt fund, by restoring land that had been lost in debt. This is now accepted by all Assyrian as the norm.

There’s not a word of it in economic history. Economic history plays no role in the economics curriculum, so it’s been blacked out of history. So, the idea that history began with only the West leaving out every successful society, it talks about the inheritance tax already in the Neolithic. They solved the problem of inheritance. What did they do? They buried the jewelry and the wealth with the person who died so that it wouldn’t be given to the successor.

That’s why they are. There’s so much tomb robbery and a great robbery because they didn’t want this will to be conveyed and become a hereditary class in an epoch when most wealth is made by impoverishing other people, not by adding to it as a modern technology enables us to do. All of this should really be the starting point of economic output.

Economic interest Again. It began with being canceled when it got too large and the long before Judaism and Christianity, you have a hymn to smash the Babylonian God of justice saying that if you have money, you should invest that long term and tangible assets, not short-term usury. You think that you know, but what a great starting point.

And that you could take these various laws that they had and just imagine what that would do to today’s society, not something that the 1% would support.

Richard D. Wolff: And, you know, Nima, what Michael just said is as topical, right now. Right now, in January 2023 as it ever was a thousands of years ago, look, for example, he is simply every single country in Asia, Africa and Latin America is now desperate because it has loans it cannot carry interest rate, it cannot pay.

It is making every day in decisions across the world. The majority of people are doing without medical care, without roads, without water, without toilets, without the most basic needs, because they have to service debt, which they have accumulated at the same time. Elon Musk is the owner of $250 billion, which he can’t even figure out. How could anybody how to spend such an amount of money who could have everything in the world he needed if he had 1 billion leaving the other 249 billion that might be there for who knows?

It is making every day in decisions across the world. The majority of people are doing without medical care, without roads, without water, without toilets, without the most basic needs, because they have to service debt, which they have accumulated at the same time. Elon Musk is the owner of $250 billion, which he can’t even figure out. How could anybody how to spend such an amount of money who could have everything in the world he needed if he had 1 billion leaving the other 249 billion that might be there for who knows?

Debt relief. What a fantastic alteration in the condition of the world. Countries that could go to work building the needs of their people rather than having wars, rather than having desperate decisions that set parts of their community against one another. The election the other day in Argentina would have been completely different if they laboring as that country has under levels of debt that are unbelievable and levels of inflation that are their desperate way to work out of that because they can’t access Jubilee, or they can access debt forgiveness.

There are movements around the world for debt forgiveness. They really are. And they’re fairly powerful, particularly in other parts of the world. But again, on something as fundamental as that, that could really change the politics and the economics of the world in the election here in the United States, not one word. It’s amazing what levels of self-denial we are living through.

At the very least, we ought to have as a national discussion is facing a bit of that reality rather than pretending it isn’t there.

Michael Hudson: Well, actually, you don’t need a penny to be spent on debt relief. All you have to do is cancel the debt, take the student debt. All the President Biden has to say is, we’re not going to do any better guaranteed by the US.

We’re not going to collect them. You don’t have to pay for it. We realize that it never should. We never should have made you pay, but go into a lifetime of debt. It would impoverish you and prevent you from having a house of your own and prevent you from joining the middle class. Which is why you went to school hoping to get into life.

We never met it. To do that, we’re not going to collect it, Argentina and the other countries and simply say we’re not going to pay for canceling the dollar debt. And almost all of Argentina’s debt, by the way, is not. Although it’s denominated in dollars, it narrowed to American the dollar is owed to its own wealthy class. I know because I organized the first and Third World Bond fund, sovereign debt fund, even from 1990.

And the only place we could sell the third world debt that was paying 45% interest was in Brazil and Argentina, where the heads of the central bank and the politicians both bought it because they know they were going to pay it to themselves. So, we’re dealing with it’s an easily solvable problem if it can be solved in 2500 B.C. and Sumer in 1800 B.C. by Hammurabi in Babylonia, and in 800 B.C. by the Assyrians, obviously it can be solved just as easily today.

Dialogue works (Nima): with all that said, why do we have this widespread understanding that capitalism is by far the most effective and productive economic system considering what’s going on, as we should mention in Argentina and other countries, where does it come from, in your opinion, Richard?

Richard D. Wolff: Well, I think you know the answer there.

I don’t mean it to be simpleminded, but I don’t think it’s all that complicated. We have the United States is the empire that emerged in the 20th century. It replaced the old British Empire. The British Empire prepared the way, if you like, the United States inherited that empire. It developed a technology several steps further. I don’t want to take away my admiration for technological development, particularly in communication and transportation and travel.

If I had to, I’d pick out, you know, the jet engine and the Internet as a way of binding together the world as a whole. And so, the United States is able to do globally what other empires were moving towards but never could quite do. And one of the striking successes of the American empire was ability to shape consciousness, in other words, to do the work with the media, with education, to really inculcate in the people a kind of a new religion.

You know, the old religions had been very successful. Islam, Judaism, Christianity had done a good job in settling into the brains of the millions and people ways of thinking and organizing the world. All of that had to be redone for modern capitalism. And the United States has been an agent of doing that, and it has been very successful even to this day.

The same people who answer a questionnaire about capital versus socialism when they finish answering the questionnaire saying that they’re interested in socialism, they will go out and purchase an Apple phone, they will purchase jeans, they will watch an American movie. And in doing those things, they will participate in a kind of celebration of all that comes with those items, which is an ideology.

I respect the power of ideology both in the past and in the present. And so, I do see Mr. Zakaria and others like him as important people keeping alive, even as the empire declines, keeping alive what they can, the military prowess of the United States not looking really good, the political dominance, really, that the economic dominance trouble, but the ideologues, surgical dominance is still pretty strong.

And I can see the need to build on that to celebrate that to keep hyping the notion that what the United States is doing, for example, either in Ukraine or in helping Israel in Gaza, is about human freedom. I mean, take a step back to describe those horrors as exercises in spreading freedom requires an ideological spectacular athleticism that you have to admire.

Michael Hudson: fortunately, I’ve written all about this in my book, Killing the Hope. What is Capitalism? I don’t. What we have today is not the capitalism that we had either When Richard and I went to school or in the 19th century, the kind of capitalism that everyone was talking about in the 19th century, both from Adam Smith and Ricardo through Marx and everyone else, was industrial capitalism.

The whole idea was that when they talked about capital, they were talking about industrial capital. They weren’t talking about land or rent, they weren’t talking about monopolies, they weren’t talking about finance. Discussed this in volume two three. But he said, I don’t have to talk about rent and monopolies in finance. Industrial capitalism is going to get rid of that in order to become a low-cost economy and in order to compete with other economies.

Because the good thing about capitalism is it’s evolving into socialism, that in order to be a successful industrial economy, you need government to start by investing in infrastructure. And then after you get rid of free lunch, rent, unearned income and real estate, rent, monopoly rent and finance, then you can get rid of exploitation. Finally, in the last fight between industrial employer and wage earner, what he was writing about, what everyone else had already written about various forms of economic rent, he was talking about that.

Well, the whole world seems to be going along the path of industrial capitalism, socialism and World War One. Socialism was the bad word. Everybody was using the Social Democratic Party. They were coming to power. Germany was socialist. America was not moving towards socialism. The left form of socialism was going to be worker socialism, but there was already socialism in terms of taking over the committee.

What Lenin involved amending the basic infrastructure that I talked about, the natural monopolies. So what happened at the World War? One of the United States won the war and not really supervised, not finance capitalism and the great disaster that the United States did, the poisoned the world economy and destroyed industrial capitalism occurred in the year that in 1913, the same year the income tax was developed by the Federal Reserve.

On the one hand, you had the income tax in America, only polling 1% of the people, but mainly the rich people who owned up real estate monopolies in finance. But you had the Federal Reserve saying we want to take the most important driver of capitalism, finance out of the hands of Treasury and put it in the hands of the commercial banks.

We’re going to start a central bank. Central bank is the fight of the monopolies against the government. And if we can control the central bank and we’re not going to let the Treasury official have any seat on the central bank board, we’re going to move the central banks out of Washington, into the financial center, into New York, Boston, Chicago, and we’re finally going to have a totally free market.

We’re going to get rid of government and everything that the government is doing and infrastructure to help people live inexpensively is the human right. We can now charge, and we can force them into debt, and we can control society and we can restore feudalism by a by means of the central bank taking the power of control away from government.

Now, if you’re asking what is China done, that is socialism with Chinese characteristics? Well, it’s socialism. What 19th century capital capitalist? The power of money creation and credit creation in the hands of the Bank of China does that the government, so that when China create credit is to actually build houses, then real estate, finance, industry, finance, industrial investment, not to finance corporate takeovers, not to create a financial bubble.

I mean, right now it’s trying to prevent another financial bubble.

So, what China in doing is exactly what the United States, England, Germany and France were trying to do and were developing successfully long before World War One. China’s picked up the lead and the United States has become something that is the emphasis of industrial capital ism and that finance capitalism, another word for it is neo feudalism. So, we’re back to what Richard points out the importance of a vocabulary and character help in shaping how people think about what is happening.

It’s all about double think, it’s about control of the mass media and using the universities as a control of the category that people use to think like GDP or free market or liberty. If you can put them around the mean exactly the opposite, then somehow, you’ve got them in a quandary, and they’re frustrated. And that’s what today’s politics is all about.

Richard D. Wolff: Nima, let me give you a very concrete example. Here in the United States and in many other countries, every working person, and that’s the vast majority of people who are employees understand what I’m about to say when they cross the threshold into the factory or the office or the store where they work, they no longer have democratic rights.

They must do what some supervising person tells them to do sit over there, use that computer process that paper in this manner, do it for the next 2 hours, then go to the bathroom. You have 4 minutes, then come back. Then you have a half an hour. Eat your sandwich, then come back. In other words, for the next 8 hours that you’re there, you are told what to do.

Do you have any democratic rights over the person telling you what to do? Answer No, you have none. You do not vote for that person. You do not select that person. You do not review that person. You do not hire or fire that person. Quite the contrary. They do that to you. You do not do that today. In other words, you know that you have absolutely no demo critic rights in the place where you spend 40 hours a week.

The best hours of five out of seven days of your adult life. And yet you say that you live in, you celebrate and you defend a democracy. What in the world are you talking about? There could be a democratic workplace, of course, that could. All the people in a workplace could have one person, one vote, and they could decide what to produce, how to produce, where to produce, and what to do with the output.

That would be a democratic workplace. Capitalism never, ever establishes that capitalism thinks that that’s weird or odd or out of place or unworkable or ridiculous. But you have convinced people that capitalism equals democracy, that the capital of a system that organizes its factories, offices and stores in so obviously an undemocratic way is democracy. Well, look, all this has Huxley had nothing on us.

In 1984, the novel we wrote when he showed us how you can use words to mean the opposite of what they intended to specify in their original definition. But this is done systematically here in the United States. It’s just done and it’s been done. And again I take my hat off. They’ve done that very well. When I explain to students what I just explained here why capital is not only not democratic, but is the antithesis of democracy, it is an autocracy of the employer they nod their heads.

They understand. I haven’t persuaded them because they already know it. They have already worked in the workplace or their mother has or their father has or their brother. They know. But the power of ideology is extreme and has to be respected, which is why what we’re doing in talking about it is also very powerful.

Michael Hudson: Well, what you’ve described is called the professional managerial class EMC.

That word didn’t exist when I was going to school. It made up for essentially a class of managers that make money. It’s very much narrower than even the Soviet bureaucracy. At least the Soviet bureaucracy provided housing, entertainment, and health care for its workers. But the professional managerial class essentially is the dress rehearsal for intelligent automatic instead of artificial tools.

Artificial intelligence would at least be intelligent but automatic intelligent, like calling, calling a health provider or a company is a try to complain about something and you’ll get a dress. Number one. Number two, everything is somehow computerized and you’ll now have the role of the professional managerial class being made by computers that are designed by people like Mr. Bezos that indeed will computer stock.

How why you cannot take a bathroom break. How much of an adult man diaper you need to wear for every 6 hours work and everything is going to be a stereotype. Then the kind control system, the like is really never been seen before, probably not even in slavery. But they ran the professional managerial class. So far they’ve been able to make money.

But if you’re at a university, how do you make your money? Well, how can we lower the cost of paying professors and what we feed the university in moving from full time tenured professors to part timers? That’ll free up the budget to pay ourselves more. So, you have the administrative, professional, managerial class of the university rising and the content providers going down.

Same thing that you looked at the corporate balance sheet of the layers of corporation system type BP. All of their people who are managing are getting more and more money by figuring out ways to raise productivity, mean do when people work, how do we make the remaining workers work harder and pick up the slack instead of hiring more workers?

Ultimately, how do we squeeze more out of them and whatever they can squeeze out of the workers, they get to pay themselves? That sort of an intra wage conflict. And if you were to talk to these people, you know, they are doing well. You know, you’re a wage earner like we are. I’m not a wage earner. I’m a managerial player.

Even though they’re getting a wage at four shilling the way for squeezing more money of it, exploit it. Exploiting is the good word that something good when a company’s sales of the exploitation to work quite appropriately so it’s really becoming you have an exploitation exploitative class within the wage journey that now is going to be replaced by the automatic intelligence like you are.

A complaint goes through the internal complaint on the telephone that the I’m sorry coverage denied by your broker, your plan and people are like, why do they keep working for a company like that? Well, you can’t say, why don’t you quit trying drugs? Well, the other job that’s like this, if you change jobs again, you lose your health care benefits.

You have to start all over again. You lose anything you’ve been accumulating for the pension. You can’t really go alone the way that the economy is structured. The economy is structured to put you into a dependency situation and dependency is the key to exploitation.

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  1. Jason

    I thought they were going to break down Fareed Zacharia’s statistics but they totally sidestepped it and didn’t provide any statistical evidence to support their assertions. Does Richard Wolff really think Americans aren’t feeling the improving economy because they’re looking enviously at China’s 5% growth? As professors, they have to do better than to rant!

    1. tegnost

      among others…
      It’s all about the banks. So, if you’re a creditor and the 1% capital finance capitalism is a great success. If you’re a wage earner, are things is not a success because you know how you’re being exploited at work and how you can’t leave your job because you would lose your pension. Right. And your health care coverage and all of a sudden you fall behind in your credit card debt.

      Your rates would go up 20% or 30% per month. So that’s really you know, we’re talking about a different world, Richard.

    2. Jeremy Grimm

      “Does Richard Wolff really think Americans aren’t feeling the improving economy because they’re looking enviously at China’s 5% growth?”
      I suppose it is fair to turn your question on its head and ask do you really think Americans are feeling the improving economy because they are looking proudly at a statistic claiming the US economy grew at an astonishing 5.2%? I do not know how you measure your personal well-being. I would not be impressed if I were told the US economy grew at an astonishing 10,000% as I and my family and friends were having trouble paying rent, credit cards, and buying medical care and medicines, and walking past long-empty buildings where businesses once flourished.

      As for a statistic by statistic refutation of Fareed Zacharia, I believe both Michael Hudson and Richard Wolff demolished the statistics in elaborating the cui bono of those statistics. I believe they did so in a way organic to their discussion without devolving into the pedantic stat by stat destruction of Fareed Zakaria’s happy talk that could lend it more weight than it deserves.

      1. Jason

        I suppose it is fair to turn your question on its head and ask do you really think Americans are feeling the improving economy because they are looking proudly at a statistic claiming the US economy grew at an astonishing 5.2%?

        No it is not fair, because nobody thinks that. Wolff simply threw away the GDP growth, wage growth, and unemployment rate statistics by claiming that US GDP growth paled in comparison to China’s 5%. That’s true but is also totally irrelevant.

        As for a statistic by statistic refutation of Fareed Zacharia, I believe both Michael Hudson and Richard Wolff demolished the statistics in elaborating the cui bono of those statistics. I believe they did so in a way organic to their discussion without devolving into the pedantic stat by stat destruction of Fareed Zakaria’s happy talk that could lend it more weight than it deserves.

        They simply didn’t bother to refute the statistics. They side-stepped.

        1. Yves Smith Post author

          Bollocks. There is a VERY ample literature on how GDP is a poor measure of economic performance and even more so of social well being. One widespread view was that military performance was a function of the size of the economy. That was a big reason for the collective West’s overconfidence at the start of the Special Military Operation. How could an economy then the size of Italy’s possibly stand up to the US, EU, Japan and South Korea (both of the latter have supplied weapons).

          From Joseph Stiglitz in Scientific American:

          In truth, “GDP measures everything,” as Senator Robert Kennedy famously said, “except that which makes life worthwhile.” The number does not measure health, education, equality of opportunity, the state of the environment or many other indicators of the quality of life. It does not even measure crucial aspects of the economy such as its sustainability: whether or not it is headed for a crash. What we measure matters, though, because it guides what we do. Americans got an inkling of this causal connection during the Vietnam War, with the military’s emphasis on “body counts”: the weekly tabulation of the number of enemy soldiers killed. Reliance on this morbid metric led U.S. forces to undertake operations that had no purpose except to raise the body count. Like a drunk looking for his keys under the lamppost (because that is where the light is), the emphasis on body counts kept us from understanding the bigger picture: the slaughter was inducing more Vietnamese people to join the Viet Cong than U.S. forces were killing.

          Now a different body count—that from COVID-19—is proving to be a horribly good measure of societal performance. It has little correlation with GDP. The U.S. is the richest country in the world, with a GDP of more than $20 trillion in 2019, a figure that suggested we had a highly efficient economic engine, a racing car that could outperform any other. But the U.S. has recorded more than 600,000 deaths, whereas Vietnam, with a GDP of $262 billion (and a mere 4 percent of U.S. GDP per capita), has had fewer than 500 to date. In the race to save lives, this less prosperous country has beaten us handily.

          In fact, the American economy is more like an ordinary car whose owner saved on gas by removing the spare tire, which was fine until he got a flat. And what I call “GDP thinking”—seeking to boost GDP in the misplaced expectation that that alone would enhance well-being—led us to this predicament. An economy that uses its resources more efficiently in the short term has higher GDP in that quarter or year. Seeking to maximize that macroeconomic measure translates, at a microeconomic level, to each business cutting costs to achieve the highest possible short-term profits. But such a myopic focus necessarily compromises the performance of the economy and society in the long term.

    3. NYMutza

      In every topic he covered Professor Wolff hit the nail on the head. Bravo!! Well done Professor Wolff. Some of the nitpicking here is overwrought.

  2. Mikel

    “The value of the top ten U.S. technology stocks is now greater than the value of the entire stock markets of Canada, the U.K., France and Germany combined.”

    They say that kind of stat as if it shouldn’t be terrifying to the world and bad for the future of those 10 companies as well. Amazing. A total break with reality. Straight-jacket Economics (and Stats).

  3. Mike Moschos

    Thank you for sharing this conversation, Yves.

    However, an important aspect that seems to have been overlooked in the dialogue is the role of decentralization in fostering economic dynamism and political stability, particularly when comparing the past systems in America with those of present-day China. China currently exhibits one of the most politically and economically decentralized systems among advanced economies, with only about 15% of government spending being federal​​ (and crucially, this is also in terms of revenue collection, which is important in regards to who holds power). This stands in stark contrast to the trends they discussed regarding the United States and other Western economies.

    It’s crucial to recognize that decentralization can play a significant role in balancing economic and political power, thereby influencing a nation’s overall socio-economic health. While the conversation adeptly addresses the pitfalls of privatization and centralization under neoliberal policies, it inadvertently misses the opportunity to explore how decentralization, as exemplified by China, can offer a viable alternative path.

    Moreover, when one of them mentions “avoiding knowing what the other perspective might be”, it’s somewhat ironic that this very discussion sidesteps the centralization versus decentralization debate. This omission, whether intentional or not, mirrors the very issue being critiqued: a lack of openness to diverse economic and political structures and theories. Engaging with these different perspectives, such as the decentralized approach that China has adopted, could enrich the conversation and offer a more rounded understanding of the complexities involved in managing national economies.

    1. Mikel

      Overlooked? I thought they talked about how the US and other Western economies are approaching decentralization: the part about feudalism.

      1. Mike Moschos

        In response to you using the word feudalism, I’d like to clarify some points regarding decentralization, particularly in the context of China and the United States.

        Firstly, it’s important to understand that China’s approach to governance and economic policy is significantly different from the Western model. The Communist Party of China (CPC) is deeply integrated into the fabric of Chinese society, representing a broad spectrum of social and occupational backgrounds. Notably, about 50% of CPC members do not hold university degrees, and many others possess technical or vocational qualifications. This diversity is even more pronounced at the local level, especially in cities where most economic policymaking occurs. The CPC’s strong local branches are highly representative of the population. Moreover, these local party members actively engage with their respective community segments, fostering a level of representation and participation that, arguably, has been lacking in American politics for decades.

        This local representation in China ensures that the needs and perspectives of a wide range of citizens are considered in decision-making processes. Contrary to the notion of feudalism, where power is concentrated in the hands of a few and often disconnected from the populace, the CPC’s structure allows for a more grassroots and inclusive approach to governance. This model enables the Chinese government to tailor policies effectively to local needs and circumstances, which is a fundamental aspect of meaningful representation.

        Turning to the United States, it’s evident that local-level political organization and policymaking have become increasingly vital. The diverse and variable nature of the broader American economy means that local policies can more effectively address specific regional needs and challenges. Local governance allows for more nuanced and context-sensitive solutions, fostering a level of community engagement and consensus-building that is crucial for successful policy implementation. In this sense, encouraging and facilitating political organization at the local level in the U.S. can lead to more responsive and representative governance, countering any tendencies towards centralization or a disconnect between the government and its constituents.

        Therefore, characterizing these sorts of economic and political structures as “feudalism” seems misplaced, especially when considering the dynamics of local governance and representation in both China and the U.S. While the two systems are vastly different in their ideologies and methodologies, both demonstrate that decentralization and local-level engagement are key to

        ensuring that government policies and decisions are reflective of and responsive to the needs of the people they serve. In China, the CPC’s engagement with the community and its representation of a wide range of societal groups at the local level are central to its governance model. In the U.S., the potential for local political organization to drive meaningful change highlights the importance of grassroots involvement in the democratic process.

        The essence of feudalism lies in the concentration of power and the disconnection of rulers from the ruled. In contrast, both the Chinese and American systems, through their respective approaches to local governance and representation, strive to bridge this gap, albeit in very different ways. In China, this is achieved through the CPC’s deep integration into local communities, while in the U.S., it is through the empowerment of local governance and political organization.

        Thus, it’s crucial to recognize that meaningful representation in government and the ability to respond effectively to local needs are key indicators of a system that is fundamentally different from feudalism. The focus should be on understanding and appreciating the nuances of each system, recognizing their unique approaches to governance, and learning from their respective strengths and challenges.

        Best regards,

        1. tegnost

          Sorry, but in the US there is a concerted ongoing effort to separate the rulers and the ruled, not only in the us but globally. What is the outcome of a global central bank digital currency? More centralized control.

        2. Mikel

          The essence of feudalism lies in the concentration of power and the disconnection of rulers from the ruled

          Well-known to long time readers of NC.
          Just hold that thought and watch and wait…

        3. CA

          Arnaud Bertrand @RnaudBertrand

          I find this explanation of the Chinese system by Prof Keyu Jin (in a recent lecture at Harvard’s Fairbank center * ) absolutely fascinating.

          Keyu Jin is a professor of economics at LSE (London School of Economics) and serves on the board of companies like Credit Suisse. She’s also the daughter of Jin Liqun, former Vice Minister of finance of China so she’s a rare West-based academic (maybe even the only one) who actually has insight into the Chinese system from the inside.

          Essentially what she’s explaining is that a key reason why China was so successful economically is because of its decentralized nature, which creates two mutually compounding loops of competition, as opposed to one loop in the West.

          What does that mean? Well, contrary to popular belief that imagines China as being this centrally planned economy where almost everything is decided in Beijing, the inverse is actually true: China is actually one of the most decentralized countries in the world. To illustrate this, a metric that’s always amazed me is the fact that in China local governments (provinces, cities, villages, etc.) control a crazy 85% of the country’s expenditures. On average that same metric for OECD countries ** is 33% (as in 64% of the expenditures are controlled at the federal/national level to China’s 15%). In the US for instance, which is already more decentralized than most given it’s a federation with states, only 45% of the country’s expenditures happen at the state and local level: almost twice less than in China!

          The effect of this, as Keyu Jin explains, is that provinces and larger municipalities in China have an immense degree of autonomy over the way they run their respective economies and fiercely compete with each other. This is the first loop. And then of course the second loop is that you have companies competing with each other in the market…


          ** Organisation for Economic Co-operation and Development

          11:13 PM · Jan 10, 2024

          1. Mike Moschos

            Yes, this is correct, thank you for posting it.

            However, I would argue that the US economy is much less decentralized than it appears to be. After having degraded states’ and cities’ economic decision-making capabilities for years, moves began in the late 1970s (much of which was done in part by and in conjunction with corrupt officials and businesspeople within the states themselves) to greatly degrade those capabilities. By 1998 (the year one of the two key provisions of the Interstate Banking Efficiency Act of 1994 came into full and practical effect), the states had been almost entirely stripped of economic decision-making, aside from the little fiscal room they retained. Oh, and of course, the one capability the Liberal World Order makes sure every government retains: the power to ‘compete’ through seeing who can cater to the demands of International Finance and large transnational corporations the most, in order to ‘compete’ for the scraps their willing to throw, even though, in such a centralized economy with ‘planetary divisions of labor’, there will never be enough for most people.

            1. Yves Smith Post author

              I am not sure I agree. Having spent time in Maine and Alabama, both economies have a great deal of activity that has nothing to do with big national and multinational companies. For instance, the only national bank in Alabama is Well Fargo and has very few branches. In Maine, Citi has only 3 ATMs, no branches. Chase has no branches and only one ATM. Wells Fargo only has a couple of offices for securities-related business and 2 ATMs. Only Bank of America has a few branches.

          2. Jeremy Grimm

            Keyu Jin, and your two loop competitions, one between local political entities and a second between the Corporate entities is very pretty but also very simplistic.
            In the u.s. local economies do compete fiercely. Consider the competitions in proffering tax breaks and subsidies to Corporate Entities enticing local communities with placing their production, Warehousing, or Fulfillment facilities in one community instead of another.

            1. Mike Moschos

              Its an entirely different sort of competition, over in China local economies will even sometime engage in trade protectionism at the local level, even applying to the rest of China. But even outside of that its an entirely different ball game, the local areas here, outside of what little fiscal space remains to them, are only left with the “economic policy” of who can cater the most to the needs of outside businesses, in the hopes of enticing them. In China, they run much of the economic policies hat we’ve been mentally conditioned to believe are only held by national governments. The USA used to be this way, fairly fully until the 30s, then still a whole lot until the late 70s; it wasn’t even until 98 that the last legal feature in the USA that was part of the scheme that did it for us, finally died

          3. CA

            There has been no such extended rapid growth period as China is experiencing in the course of development of any nation. Forty-five years of such growth, will soon be found to be 46 years:


            August 4, 2014

            Real per capita Gross Domestic Product for China, Germany, India, Japan and United States, 1977-2022

            (Percent change)


            August 4, 2014

            Real per capita Gross Domestic Product for China, Germany, India, Japan and United States, 1977-2022

            (Indexed to 1977)

    2. Jeremy Grimm

      Though your complaint that the present discussion overlooks decentralization seems odd to me — completely elliptical to the discussion, you raise an interesting question regarding the importance of economic and political decentralization — which I believe suggests questions about the importance of the local to politics and economics. I believe you might find reading G. William Domhoff’s study “Who Really Ruled in Dahl’s New Haven?” enlightening. After that review the way the Republican party has consolidated its control over many state legislatures in the u.s. One big difference between local and national politics in the u.s. is the relatively much lower cost for purchasing and controlling local politics compared to the costs of buying Congressmen, Presidents, and Supremes. The way local politics operates in China and Russia contrasted with that in the u.s. would be an interesting topic.

      “It’s crucial to recognize that decentralization can play a significant role in balancing economic and political power, thereby influencing a nation’s overall socio-economic health.” I believe your claims in this paragraph of your comment is wildly optimistic.

      Besides, in America “the centralization versus decentralization debate” == “states rights versus federal rights” exhumes many unpleasant specters most Americans would prefer remained deeply buried. I am suggesting the multi-century traditions and crimes of slavery — and to a lesser degree — indenture in America could not lay quietly in the ground in a debate of centralization versus decentralization — and they should probably not lay quiet.

      In the not so very long run, politics and economics will indeed be local as diesel fuel grows more scarce and more expensive and the weather and oceans grow ever more inhospitable to long distance trade.

      1. Mike Moschos

        Thank you for your reply,

        The last feature of the USA’s old decentralized system was not legally done away with until 1998, and much, if not most of it still survived until the very late 1970s, well after civil rights legislation. And the centralizing aspects of the new order were instrumental to the bad guys moves to rip opportunity away form minorities (de-industrialization of inner cities, capital flights, etc., etc.).

  4. Mikel

    Michael Hudson started talking about the commercial real estate issue, but stopped.
    Maybe it’s the subject for a bigger discussion later, because CMBS securities and derivatives exist and the issue seems bigger than lack of tenants and developers walking away from loans.

  5. Michael Maratsos

    I pretty much agree with these analyses of the state of American Empire economics and decline. I guess what I disagree with is the sort of happy regard the authors have for the rise of Russian and Chinese power. Clearly they support this rise because they want to see the American empire lose power, and see the Russian-chinese led combination (including the expanding BRIC group) as providing an alternative to U.S. corruption. My own reaction is sadness, because the current situation seems to mean the world has a choice between a pretend-democratic corrupt state (the U.S.) and two authoritarian states that suppress individual rights even more directly and extensively than the U.S., and which have their own corruptly favored governing class and its inheritors, such as the group of communists who were important in the old revolution, and their highly favored children. In particular, China’s Gini (inequality index) is as high as the United States. Also, saying they are now “richer” than the U.S. in purchasing power is insane: they have four times as many people, and now slightly surpass the U.S. in overall purchasing power GDP: that is not “richer” for the average citizen. (Nor do I think that the populous country India, led by Mr. Modi, another central constituent of BRIC, is another great alternative model for people). As I said, I agree with the authors that the United States is running an oligarchic empire founded on deception, corruption, military power and bullying, and it is declining. But as I said, I am sad for the world that its alternative choice seems to be led by two more extremely unpleasant countries, China and Russia. Just because someone opposes someone you dislike, does not mean they are anything wonderful either, and I think that is the situation we currently have.

    1. juno mas

      So the Russian system of government has resulted in a national leadership group that has brought them back from the brink of economic destruction and into a future of political relevance. While America has a system that empowers a feeble minded man who is controlled by an un-elected leadership group that espouses military conflict to resolve geopolitical issues and distribute national wealth to the 10%. Maybe these other systems, Russia and China, are more egalitarian than most people imagine.?

    2. Jeremy Grimm

      This 1.5 hour discussion addressed the disconnect between the happy talk exemplified by Fareed Zakaria at CNN with the feelings of Americans living the American life. The discussion you missed hearing would indeed be interesting and may be a future discussion. I believe both Michael Hudson and Richard Wolff have discussed the operation of the Chinese, and to a lesser extent the current Russian economy. The topics you suggest would indeed be interesting for a future discussion … but wholly peripheral to the present discussion concerning how it might be that Americans are not happy campers given the impressive economic statistics reported by the u.s. government and official news outlets.

      Your concerns about Russian and Chinese authoritarianism contrasted with u.s. authoritarianism might also be an interesting topic for further discussion — though at best peripheral to the discussion in this post. Also, I believe you are making a serious mistake in believing China and Russia are proposed as or promoted as alternative choices to “the United States … oligarchic empire founded on deception, corruption, military power and bullying ….” I believe a broader discussion between Michael Hudson and Richard Wolff about better ways forward for the u.s., China and Russia might be very interesting indeed.

  6. Bsn

    Oh my, that is hard to read. I know it’s a machine translation but is this what AI is planning to give us more of? Are we expected to call writing in this manner progress? Not complaining about NC here, just commenting on this fine example of “progress” in transcription. It takes time and energy to transcribe a conversation such as this and it’s a quality/quantity calculation. I’d go for quality as in the slow food movement. Thanks to Yves and the staff for bringing this to us but I’ll listen to the podcast now. It is an interesting subject that I wish more people were aware of. I’m finishing Hudson’s “Forgive them of their Debts” and I highly suggest it.

  7. Dick Swenson

    This is much too long. Read the first paragraph of Wolfe’s first comment and the same for Hudson. We are inunated with much too complex discussions of very simple ideas. Everything is “ideology.”

  8. GF

    I don’t like having to point out that the transcript and closed captioning for this very important conversation is atrocious. Being hearing impaired I couldn’t read but the first 10% of the article before giving up and turning to the comments – thank you Michael Maratsos for your insightful additions to the dialog.

    This is by far the worst transcription of an article here at NC that I have seen in my years as a reader. I know it is diificult to even get transcriptions or to post videos with closed captioning. In this particular case, IMNSHO, it would have been better to wait for a better transcription before posting or to not include the transcription at all. I don’t like to complain but the topic was a very important one and getting an accurate read-out is required for a complete understanding of what is being stated by the guests.

  9. David B Harrison

    One major quibble. It’s not the 90% that’s truly hurting it’s the 70%. A few years ago the top 30% of the population owned 96.1% of the wealth and the bottom 70% owned 6.9% of the wealth in this country. I have no idea what those numbers are now (probably worse). Just because the bottom of that top 30% are not multi-millionaires or billionaires doesn’t mean that they are not doing better than the bottom 70%. They benefit from a grossly over inflated stock market, pensions and benefits, real estate inflation, etc.

    1. NYMutza

      You make a good point. In Silicon Valley for example, many employees of the tech companies have done very well for themselves and love things just the way they are, even though they may not even be among the top 10%. These people would never consider voting for a third party candidate.

  10. CA

    Thank you Ives for this terrific conversation between Hudson and Wolff.

    Worth reading twice as I just did.

  11. CA,532,546,111,&s=PPPGDP,PPPSH,&sy=1980&ey=2022&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1

    Gross Domestic Product and Share of World Total based on purchasing-power-parity (PPP) for China, European Union & United States, 1980-2022

    October 15, 2023


    China ( 2.3)
    European Union ( 25.9)
    United States ( 21.3)


    China ( 4.0)
    European Union ( 23.5)
    United States ( 21.6)


    China ( 7.6)
    European Union ( 20.2)
    United States ( 20.3)


    China ( 14.1)
    European Union ( 16.2)
    United States ( 16.7)


    China ( 18.5)
    European Union ( 14.9)
    United States ( 15.7)


    China ( 18.8)
    European Union ( 14.9)
    United States ( 15.5)

  12. JonnyJames

    Great stuff!

    Zakaria gets paid $5 MILLION a year, he has do what he’s told by oligarchy-owned MassMediaCartel, otherwise he wouldn’t have a job for very long.

    Since his cushy job overpays him so much, he lives in a bubble and it must be really easy for him to make the “let them eat cake” assumptions.

    Michael Hudson points out that Democracy Inc. is a privatized affair, there is no way to vote against the interests of the donor class. They have the elections bought and paid for. Piketty didn’t connect those important dots.

    Unfortunately, politics is mostly about emotional manipulations and misinformation: many people are caught up in the perceptions and emotion and can’t see the facts in front of them.

    As Wolff and Hudson point out, the MassMedia won’t talk about the serious, hard-core problems, only the emotional fluff that perpetuates the illusion of choice.

    Unless you are a member of the Donor Class, a vote for DT or JB (D or R) is voting against your own interests. But that’s what we call democracy in the USA

  13. podcastkid

    Thanks, NC. At least this is something that sounds on the surface like it’s at my level.

    How bout Mark Weisbrot? He used to write things that made sense to me. Economics was never my main gig, but I always thought some economist could explain something like “let the yuan float” a lot better than what was par. It’s probably so simple it would bowl me over, but so far I haven’t found the explanation. Which makes me think: a lot of comprehension could be attained if some expounders would just think a few more minutes about how to word one thing or another.

  14. Susan the other

    We all lose our balance when we use “balance.” Makes me wonder how we have survived the constant abuse of language. Words really are fungible tokens. Balancing an economy is a real-time practice of keeping everyone functioning and well. It has nothing to do with cutting social spending. It has everything to do with sufficient social investment to keep society and commerce going and improving. And nothing to do with a “free market.” But everything to do with a fair market. I’ve never even heard that term in that context: a “fair market economy.” There’s a reason for that: our market is designed to be one big shakedown. It’s a racket. By and for the racketeers, allowing just enough welfare to keep it all from imploding along with the environment. Is there such a term as “an idea whose time has gone?” For example, the idea of “profit.”

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