Yves here. Nima of Dialogue Works uses the inability of the US (actually the entire Collective West, as described in late 2022 by Alex Vershinin of the Royal United Services Institute) to match Russian artillery output as a point of departure with Richard Wolff and Michael Hudson to discuss the shortcoming of late-stage capitalism. They come to a similar conclusion to the one Andrei Martyanov has made energetically: US arms makers are profit-driven while the Russian military procurement system (even allowing for occasional corruption scandals) is purpose-driven.
Below is the first part of this talk.
By Nima. Originally published at Dialogue Works
Dialogue works (Nima): when it comes to capitalism, they’re talking about that capitalism is by far the most effective and productive economic system. Ohio Senator, James Vance, just recently said that Russia produces as much ammunition in a day as the U.S. does in a month. what’s the problem with the U.S. economy that they’re not capable of producing enough ammunition to help Ukraine?
Richard D. Wolff: Well, let me begin with a comment. I do not believe it is an exaggeration to say that the spokespersons for every economic system in the history of the world have included people who say that whatever system they are, the spokesperson of is the best and the most efficient and the most equitable and the most and the most fill in the blank with positive adjective.
This is childish, and yet you would imagine that a reasonably mature people would get beyond this kind of cheerleading if they’re involved in a serious conversation. It is actually very easy to show whether you are looking at ancient tribal economy or village economies or slave economies or feudal economies that they had their areas where they were remarkably efficient side by side with areas where they were remarkably inefficient.
Assuming that there is a standard that enables you to distinguish between them, which frankly, I don’t believe there ever was or is.
Let me explain briefly,
When you notice that there’s profitability in a particular industry and the CEO, all of the CEOs in that industry are asked, why are you profitable? And they give that wonderful answer that they should have outgrown in fourth grade.
We’re a very efficient company here. The only appropriate response is laughter. Why? Well, what does efficiency mean conventionally in economics? Efficiency purports to do the following thing. It looks at the consequences of some act. Let’s take a, for example. Is it sufficient to expand the hospital to add a new wing to that hospital or for a company?
Is it efficient to buy a fleet of trucks or to hire 50,000 more people or whatever, whatever the issue is? Here’s what you taught. You look at all the benefits that flow from this act and you look at all the costs of this act and you compare them. If the benefits are larger than the cost, why then it’s efficient and you go ahead and do it.
And if the costs are better than or larger than the total of benefits, well then it’s inefficient and you don’t do it. Okay. All right. Now, here are two simple problems. And here I’m simply talking basic philosophy. Or if you like, basic mathematics. How do you know all of the costs or all of the benefits of anything that has ever happened or that could ever happen?
And the answer is, you cannot do that. And no one ever has. Part of the reason is that costs and benefits lie in the future, and it’s kind of hard to get a good number on what they will be. And if there is an economist who knows what the costs will be. Well, then that economist is going to become very rich because they have figured out how to tell the future, which of course is a scam.
They can’t do that. Number two, the costs and benefits are infinite in number and variety. To go back to my example. Suppose there’s a hospital considering building a new wing. Well, if they build that new wing, it will change traffic patterns in that area. Change traffic patterns will alter, real estate prices change, traffic patterns will change. The number of people that get injured or die in automobile accident.
How in the world can you know in advance what all the costs from doing this are? And the answer is you cannot. So here is what all cost benefit analysis has in common. They are frauds because they cannot do what they claim to do. What they actually do is look at a selection of the costs that you can do and a selection of the benefits that you can do.
But then the only interesting thing is the principle of selection, because it isn’t a comprehensive comparison. Long story short, if you do any serious investigation, then you cannot evaluate the efficiency of any economic system and the people who claim that it is the most efficient are giving you the use a technical term total bullshit. And they ought to be called on the carpet for doing that.
There is. It really is kind of childish. CBS did the report 60 Minutes back in May of last year, and in that report, they showed that the Defense Department of the United States is a place that doesn’t have enough ammunition because the company is producing defense equipment, you know, planes, ships, missiles, guns are engaged in. And you can see the statements there from all the relevant officials.
Price gouging and the price gouging is not modest, but price gouging is outrageous. And they give you the figures. They’re a price that’s 100 times what it ought to be or more. Here is the irony. It’s not that Russia can produce what we can produce. My guess is the United States cannot produce Russia. Let’s remember the GDP with all the problems which we have discussed about what the GDP means.
But the GDP of the United States is 21, $22 trillion, and the GDP of Russia is one and a half trillion dollars. We are talking about vastly different industrial systems. And the reason why the United States doesn’t have enough ammunition and by the way, that is part of the reality of why Russia is doing as well in the war in Ukraine as it is.
It’s not because they produce more or better, it’s because they don’t have and this has going to affect a lot of Americans if they take this seriously. They don’t have the level of corruption that we do. We have outdone them. And you know what this is like. This is the same story that has afflicted every empire in human history.
This is the story of why the Romans could not defeat the barbarians in the fifth century. It’s why medieval kingdoms fell apart. It’s not because they couldn’t produce enough knives and guns and spears and all the rest of it, but that the internal mechanisms of the system made it no longer functional and bullshit like efficiency calculus is part of the mental corruption, if you like, these make-believe categories.
We look back on the Middle Ages and we smiled to one another when decisions were made by kings and queens who consulted their advisers, who read the appropriate passage in the Bible to find the answer. We think we’re better than that. The Bible, we say, was a book. There were lots of books. I picked that one. Yeah, well, the notion that you can do the right thing by following Jesus is exactly on a par with the notion that you can do the right thing by choosing the official alternative, as if you were in a position to do that.
I used to tell my students all the training in the world will not enable you to leap over the Empire State Building. You just can’t jump over it. So you don’t bother training to do what you know you can do. Why do we train people in cost benefit analysis? It is a mirage. It is an ideological exercise in order to sanction whatever decisions are made for altogether different reasons by pretending they have been authorized by an objective outside absolute, totally true arbitrator.
Well, in medieval times that was called God. Today we call it efficiency analysis. It is the same fantasy.
Michael Hudson: Well, I think that you don’t have to look at the future in order to make projections. I think efficiency is in the eye of the beholder. Boeing, for instance, is much in the news. And Boeing found it very efficient.
Instead of making airplanes that were adjusted to new fuel-efficient engines, it found it more efficient to make airplanes and crashed to the executives. That was efficient because they could use their money instead of changing the engineering around, instead of building a new airplane. They could use the revenue that they were getting simply to do for stock buybacks and to pay out of dividends.
So that was very efficient, you know. And in terms of prices, of course, you can forecast prices if you’re in a monopoly position and you can charge whatever you want. You decide what price you’re going to charge. It’s at your will. And you can you have control over costs, especially it’s the government. That’s what the Pentagon capital system is.
That I think was really what the interview was talking about under Pentagon capitalism. I think a decade ago it was making a toilet seat for $20 and charging 30 $500 for it. But now they’re even more egregious overruns. It’s very efficient if you’re a Boeing or another military contractor. It’s not efficient for the whole economy. So, I think the really the real question, since our talk is about capitalism versus socialism is what’s efficiency under capitalism and what’s productive and productivity?
Well, the textbook presentation of industrial capitalism says it’s very efficient and it was efficient in the 19th century. It was more efficient than feudalism. And that was really what industrial capitalism set out to be. To cut it, not to raise the costs of Pentagon capitalism and what you’re talking about, but to cut costs in it and cut the economy’s overall costs by getting rid of the landlord class.
So instead of paying land rent to a hereditary aristocracy, you would use that as the tax base. You would essentially get rid of monopoly rent and you’d get rid of financial rent. In other words, what made capitalism efficient was that it was moving toward socialism and it was moving toward socialism by having the government take the lead in providing basic needs for the what?
For the cost of living and for the cost of doing business so that the employers didn’t have to pay them. These costs were to be paid essentially by progressive taxation of the wealthiest property owners and the wealthiest finance shell operators. And I think as we discussed the last time, the income tax in America in 1913 fell, only on the wealthiest 1%.
So, in the 19th century, industrial capitalism certainly looked productive to the extent that it was supporting a mixed economy, a private public economy that was moving towards the government, producing all of the communications, education, health services, transportation that could otherwise be monopolized or that labor would have to pay for and hence the employers would have to pay for.
So, the question is, you know, what went wrong or what went wrong was that the the rent recipient class fall back and they fought back for the last century, ever since World War Two and especially since the 1980s, we don’t have industrial capitalism anymore. Sometimes it’s called monopoly capitalism, but I prefer to call it finance capitalism because banks are the mother of monopolies and it’s the financial sector that has promoted monopolies because they can efficiently make money much, much easier simply by charging whatever they want and not having to take the customers into account, not by producing good materials.
Efficiency today is a race to the bottom. If the race to the bottom in employment, it’s a race to the bottom. Inequality. It’s a race to the bottom for Boeing making airplanes that sudden that don’t really have much oversight and regulatory control and they their doors blow open and they crash. So, again, we’re living in a world where the whole concept of efficiency changes and productivity is no longer simply the physical productivity of output per man hour.
It’s how do you create wealth and you create wealth and being productive in the way that Goldman Sachs had said that Goldman Sacks Partners or the most productive workers in the United States because they make the money and they make the most money financially, they make the most money by taking over companies, breaking them up, smashing them down, and then slowly industrializing them.
So today, the most efficient capitalism is post-industrial capitalism or finance capitalism. You say it’s corrupt and they say, no, we’ve just made politics a free market. And if Boeing and other military spending people have the ability to back the campaigns of the congressmen on the military, on the military committees and the monopoly committees and if they don’t back what we’re doing, if they criticize us, we’ll just use the free market to back their political opponents in the next primary election. So, again, what is efficiency? It’s no longer what it used to be.
Richard D. Wolff: There’s a point that Michael made that is recognized, at least in the textbooks in economics. It’s one of those topics that you blow through in 10 minutes of some lecture and never return to it, because it is embarrassing if you return to it, since it invalidates most of the rest of the semester’s work.
It’s a distinction between private profitability and social profitability or private costs and social costs. And the argument is really very simple. Let’s take a situation where a capitalist decides it is, quote unquote, more efficient. I am going to buy this new machine, and that will allow me to fire 50 workers because the new machine can do what those 50 workers used to do.
So, our capitalist compares the machine only costs 100 and the money he saves by firing 50 workers is 200. So, he’s ahead. If he buys the machine and fires the workers. So, he does. There’s a net gain to him of 100. The difference between the money he had to lay out for the machine and the money he saved from firing the work, though, is simple, very logical.
Now the question, are we done? Have we now seen an efficient act, as are capitalists pursuing the profitable outcome made the right decision? Well, to do that, we’d have to look at the costs and the benefits. And let me tell you about the costs. They are not just the buying of the machine by Mr. Capitalist. The costs are everything that happens to those 50 workers, their spouses, their children, the neighborhood they live in, the real estate values of the homes they occupy, the viability of the stores they used to patronize.
I could go on. We know from a thousand studies that those 50 unemployed people will have higher rates of alcoholism, spousal abuse, mental physical injury and illness. All that costs society is going to have to bear those costs. The doctors, the social workers, you know, the difficulties, the fired workers children are now going to have in school because there’s turmoil at home, because a mother or father or out of work, nobody can sit it because capitalism refuses to take any responsibility for those 50 workers.
We in the world of analysis, thinkers, professors, whatever we are, we are supposed to somehow blindly go along with complete bullshit that we are finished when we compare the cost of the machine that automates with the loss of those jobs. And the minute you don’t do that, the minute you admit that their social costs are not exhausted by those private costs that are counted by the capitalist, remember, he only counts what he has to pay for.
The only thing he has to do is pay for the new machine. He doesn’t have to pay for the mental health counseling of the children, of the fired workers. Not his responsibility. So, for him, that cost does not exist. But for those of us that are interested in the community as a whole, the costs do exist, and a system that constantly pretends otherwise is going to mean making one decision after another.
That is the end of vision, because if you look at all the costs, they far exceed the benefits. And here’s what’s worse the benefits flow to one part of the community and the costs are borne by another part of the community, making it a political explosion of what’s going on here. Automation is profitable all to the employer class, and it is an enormous burden and cost to the employee class.
And because of that, it comes back and bites the employer in the rear end as well. It is a social economic disaster, and if you were honest in economics, you’d know that, and you wouldn’t teach the rest of the course on the premise that profit as an incentive is some successful mechanism. It isn’t. It’s idiotic.
Michael Hudson: Well, when you talk about social costs, you’re really talking about the long run costs in the sense of what are the results of this automation you’re talking about.
But finance lives in the short run, and if you have corporations controlled by the financial sector, they live in the short run and they don’t care about financial costs. And even more they try to make the government pay the cleanup costs. You can take for instance, oil for fracking. It pays for the oil frackers to pump chemicals into the ground to force the gas or oil up to the surface.
And the result is to pollute the water supply so you can light a match to the water that comes out of your tap and it catches on fire. For the oil companies and for the financial for the banks and the financial investors, this is a very this is high productivity you can take. And if you have the financial sector writing the laws that shape the marketplace, you have something like the Trans-Pacific Partnership.
That said, suppose you have an oil company that pollutes the land. For instance, of Ecuador or in Kazakhstan. If a government passes a law saying now the oil company has to pay the cleanup costs of cleaning up the pollution that it’s caused in the waterways or in the land, they have to reimburse the company for the entire fund because that’s an external economy.
Well, what you’re talking about, Richard, is, though, the external economy is society, so that if a government imposes a cost that benefits society at the cost of the American foreign investor or any other foreign investor, that’s against the law legally and no government and end up receiving any money for the clean-up costs that it doesn’t have to immediately pay.
Right back into the company. So in effect, the role of government is to protect the polluters and to protect what you call profits, and I call economic rent, because increasingly, the profits of oil companies and mining companies and monopolies are unearned income. They’re not they’re not producing value. They’re producing a right to charge whatever you want to charge so that you don’t have to project the value of something in terms of the costs, the labor costs and the raw material cost.
Again, you’re getting a free lunch without working, without producing value just by collecting rent. And of course, the GDP accounts, the national income accounts calls all of this earnings. But they’re not really earned income, they’re not profits. Again, they’re economic rent. And that’s the kind of rent seeking economy that we’ve come into. It’s a tunnel vision of the economy.
You call it corrupt. The economics are corrupt. They’re really tunnel vision. They don’t want to take in the social costs because that would reduce the returns to the financial owners of the companies that are imposing these costs on society at large.
Richard D. Wolff: If I could add, I agree completely, but I want to take it kind of another step, if I could. There is a bizarre phenomenon going on here that we should understand.
When Michael says that the government is called in to clean up, the government is called in to protect the government is called in to serve, whether it’s the cap, the employer class as a whole or a subdivision of it that gets into a dominant position like finance capital in recent decades.
Here’s the remarkable thing about that. Not only is the government called in to bail out the failed capitalist system. Let’s all remember in 2009, all of the major banks in the United States, the big ones were bankrupt by the definition of liabilities relative to assets. They were busted. They could not. They didn’t trust each other to give each other overnight loans the way they normally do every day because they weren’t confident that Bank of America or Citibank or Wells Fargo would give back in the morning what was lent to them the night before, because they might do on Lehman Brothers or a Bear Stearns or any of the others that folded.
Okay. Okay. Here’s the wonderful part about that. At the same time that the government is the servant, the faithful, desperate servant of the employer class, it develops an ideology which says that capitalism is a perfect system, except when the government messes up. We call these people because they like the label libertarians but have nothing to do with liberty.
It’s an ironic Aldous Huxley kind of inversion of the word meaning. This has nothing to do with liberty. This is a hustle. This is a person selling you a major interest in the Brooklyn Bridge. Blame the government. Brilliant. Every flaw that capitalism has. You can now admit and use it to beat up on the government with the effect that all the government is left with the responsibility of doing is bailing out capitalism’s failures.
Because otherwise it has been beaten to death with demonization as if it were the problem. Most of the people who will become powerful in the United States if Donald Trump wins the election, it will be libertarian infused policy makers who are going to act on this lunacy with, by the way, the predictable results, which are not pretty.
Michael Hudson: I’m glad you mentioned the concept of liberty and libertarians.
You’re absolutely right. Libertarianism supports a centrally planned economy, much more centrally planned than a mixed economy. More centrally planned than an economy like China. But the central planning is done not by elected government officials, but by Wall Street and the financial sectors. So when people say they’re a libertarian, they say they want liberty from government regulation so they don’t have to follow rules to protect society.
They want liberty from being taxed so that it’s labor and the productive sectors that are taxed, not the corporate sector and the financial sector that owns the sector. So, the question is liberty from whom? And this is what again, the language has been inverted from what it was during the heyday of industrial capitalism from Adam Smith and John Stuart Mill and Marx into just the opposite.
The way to respond to these guys is, again, the meaning of words. And that’s what made George Orwell discussion of double think and double speak so great.
Richard D. Wolff: Enormously important, this topic, because these are not just pathological behaviors. These are not just the objects of what Michael and I can say critically.
These are symptoms of a system that is done, that is overreach, peak, that is in decline. Holding on to these nonsensical ideas becomes irrational because the system is spinning out of control. Here you have a again, I’m going to use Ukraine, even if it provokes some people. On one side, the United States, the G7, Britain, France, Germany, Italy, Canada, Japan and the United States.
I come blind to GDP and again, without lauding that statistic, it’s just a very rough measure. But a combined GDP, by my count, about $32 trillion in a war in Ukraine with a country, Russia with a GDP of one and a half trillion dollars. This is a joke. What kind of war is this? This is David and Goliath.
Only their day that we’re Goliath is ridiculous. And the fact that it isn’t that the Russians have actually won the war, at least so far, tells you that something is terribly amiss. Mr. Zelensky is explaining that they don’t have enough ammunition. They’ve used up the shells, the tanks, the missiles, not just from the United States, but from Britain, France, Germany and so on.
What in the world is going on? How does a one and a half trillion-dollar economy find itself inadequately producing, what, $32 trillion worth of economy is? Right. Something is crazy here. And I think that is where people ought to take this kind of thinking. If a university is teaching people that there is an efficiency, you learn how to count costs and benefits.
This is the exact modern equivalent of having taught medieval scholars how to count the number of angels that dance on the head of a pin. Angels have no dimensions. The head of the pin is very small. But how many angels can very small accommodate an infinity if they have no dimensions? Those And then what? Debates about this.
And we think it’s funny, but I can assure you in the future there’ll be people who look back on this nonsense about efficiency and the nonsense about libertarianism shaking their heads in disbelief that reasonably educated adults got caught up in this sort of stuff.
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‘But a combined GDP, by my count, about $32 trillion in a war in Ukraine with a country, Russia with a GDP of one and a half trillion dollars. This is a joke.’
Actually it is worse than this. it is not only the economy of the US that should be reckoned with but also the economies of about 40 other countries. So that would include near all the 31 NATO countries who are fighting Russia along with US Allies such as Japan, South Korea, Australia, etc. Then the figure gets even more lopsided.
A minor correction: In ppp terms, the appropriate measure for comparisons, Russian GDP in 2022 was $5.3 tr. , according to the World Bank.
https://www.imf.org/en/Publications/WEO/weo-database/2023/October/weo-report?c=223,924,132,134,532,534,536,158,546,922,112,111,&s=PPPGDP,&sy=2007&ey=2022&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
October 15, 2023
Gross Domestic Product based on purchasing-power-parity (PPP) for Brazil, China, France, Germany, India, Indonesia, Japan, Russia, United Kingdom and United States, 2007-2022
2022
Brazil ( 3,837)
China ( 30,762)
France ( 3,696)
Germany ( 5,370)
India ( 11,901)
Indonesia ( 4,037)
Japan ( 6,145)
Russia ( 4,770)
United Kingdom ( 3,717)
United States ( 25,463)
Interesting. When one looks at the World Bank Data for GDP PPP Current (https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD?most_recent_value_desc=true), the top 3 are the same – China, US, India – but then it is Japan $5.7T, Russia $5.326T and Germany now 6th at $5.323T.
Even PPP metrics have their problems since it is not easy to evaluate comparable baskets and since it is expenditure and not outcome based….e.g. in healthcare, where the US spends nearly as much as the entire GDP of Japan! For what outcomes?! You can look at lifespan, infant mortality etc., or even, look at the “hard” features – physicians per capita, hospital beds per capita…..
https://data.worldbank.org/indicator/SH.MED.BEDS.ZS?most_recent_value_desc=true
This is a well informed group, but people might still be surprised at some of the countries in the top 20….
When the bulk of your GDP is rents the metric is no longer a reliable proxy either for industrial production nor military capacity.
The discussion of late-stage capitalism as parasitical on government plus the lunacy of libertarian “ideology” in later paragraphs is excellent. It may seem like a repetition of what we collectively already know, but the opinions here are still considered “way out there.”
And as Wolff and Hudson then describe them, libertarians conform to my definition, “White boys who don’t want to pay taxes.”
The Libertarian Party may have spruced itself up with new figurehead Angela McArdle, who is an attractive media worker still working out her fundamentalism. She went to fundi-adjacent Biola U.
And the libertarians, let us not forget, want to repeal the Code of Hammurabi as too progressive. It’s all a fantasy world: (from the Wiki entry):
Pity that the right wing “libertarian” hypocrites have hijacked the word and folks equate “libertarian” with right wing libertarian. There are also left-wing libertarians.
The right wing libertarians want “freedom” TO pillage, exploit, brainwash, bribe and reduce the majority of the population to debt peonage, for their own narrow selfish interests of course. At the same time, they don’t want to pay for anything, they want to benefit from infrastructure etc. as long as they can be parasites and not pay. .
Left libertarians (aka anarcho-socialists) want freedom FROM kleptocracy, debt peonage, exploitation, debt peonage etc.
For more on this, I like this website that explains the TWO-Dimensional political spectrum and commonly accepted terms and descriptions based on POLICY, not rhetoric.
http://www.politicalcompass.org
One important bug of profit driven weapon industries, and all capitalist industries in general, is they forget about end users real necessities. More importantly in the case of Western countries, the end users aren’t that many, and mostly underpaid, unfit, obese etc. Because capitalism doesn’t bother about the human factor, generally seen as “human resources”. Just another commodity. Aurelien has talked extensively about the bad state of Western militaries and does a good recap on how we have gotten there.
I don’t suppose you have any links from Aurelian to share on that matter?
try this :-
https://aurelien2022.substack.com/p/the-wrong-stuff
Not investing in shell production might be a smart decision actually – in Ukrainian war barrel artillery is increasingly displaced by drones, FPV and other
Short range FPV drone costs about $400, 5-7km range. It is superior to dumb shell and comparable with $35000/40km guided Krasnopol shell, except for shorter range. Lancet also costs ~35000/40 km. Drones do not require expensive and vulnerable artillery to fire, and are their own spotters.
Unlike shell factory, drone factory can easily be repurposed to civilian purposes.
You can operate only a few drones within the range of each other, due to command channel separation needs, you need 1-2 men to operate the drone for the duration and one $400 drone can carry basically a hand grenade. A modern artillery system can deliver 450 times more explosives to the target in 1/20th of the time from 6 times as far.
I doubt very, very much that a $400 drone can carry more than a hand grenade, and even that with much shortened range (downwind). No way or form comparable to a Krasnopol. Actually usable drones are much more expensive, likely more expensive than a few 152mm shells.
Even if we’re flooded with videos from FPV drones hitting people and positions, the artillery and mortars still cause the majority of the casualties on both sides. Even when the current relatively stable front line is the optimal environment for the FPV drones.
Where drones are actually making a difference is giving a tactical advantage in group level operation by enabling to “look behind the hill” and also allowing for remote mine clearing for combat engineers.
Yep. A drones is a glorious anti-tank (and perhaps anti-trench) weapon, but that much was basically known already as tanks are their most vulnerable from above.
Artillery is for area denial and saturation “bombing”. The M198 in the US arsenal for example can maintain 2 shells a minute for as long as there is crew and ammunition. And for all that time anyone in the target area will experience hell.
Being, um……the way I am, after extensively following the equipment and tactics used in Ukraine, Syria, Afghanistan, etc., and with my other proclivities, I’ve found that the cheapest you are going to get away with paying for a drone capable of dropping any kind of payload, even as “light” as a hand grenade is about $2500. This does not include some modifications that must be made, but that can typically be done with access to a 3D printer. This price also does not include a monitor (a cell phone, basically). The more effective drones being used are actually dropping mortar rounds, which are significantly heavier than a grenade. Drones capable of this type of lift are closer to $10k. What many people also do not understand is that a regularly used drone, even in good weather and conditions requires maintenance and parts, and has a fairly short lifespan- typically measured in weeks or even days if constantly carrying payloads. Managing regular drone operation is a fairly high skill occupation and when operated in a combat environment, they are not all that cheap, although they are extremely effective and immensely increase the effectiveness of even small units, right down to a lightly armed 4 man fire team, while also greatly increasing mission survivability- and this last fact is why militaries, when faced with an attritional combat environment have embraced them.
Fwiw, I can also tell you that even the tiniest drone with thermal optic capabilities will set you back at least $8k, and this is what you would need to operate a drone used to find targets in the dark, or under cover of smoke, etc.
Just figured I would share that info, since I have done the research- and these are prices direct from China via Alibaba. The least expensive you will find.
Adding AI to the mix would have to jack up the price even further I would guess-
https://www.youtube.com/watch?v=43w1PVmaHfI (27:16 mins)
Thank you!
Both Dr. Hudson and Richard Wolff lament the fact that there (apparently) aren’t any holistic, comprehensive criteria with which to evaluate the next investment in productive capacity, because the externalities and future events can’t be predicted.
OK, that’s likely true given the complexity of life. What criteria are you proposing to use instead? Is it time to spell them out (name them) so we can apply them?
About two months ago NC posted another dialog involving Dr. Hudson, wherein he contrasted the economic policy of China with that of the U.S., and he advised the U.S. to socialize key sectors of our economy. He reiterates that position above, quoted here:
Fine so far; I can readily imagine the immediate and substantial positive impact on national efficiency (resources spent .vs. benefits received at the national level) from this policy. Good so far.
In this same (month ago) post, Dr. Hudson took issue with the Chinese because they did not seem to have a particular economic philosophy they were following. They were borrowing with both hands from any economic philosophy which delivered the results they were after at the national policy level (econ, social, environmental, etc.). He called that Chinese economic policy “ad hoc”.
In the comments section of that thread, I asked:
“What are the Chinese requirements for economic policy? What are they optimizing toward?“.
That question went unanswered, and I think it deserves more dialog. Clearly the Chinese are doing a lot right, and it’s not just that they’ve socialized the banking function. They are making highly targeted investments (not just money, but people’s time,. materials, political capital, etc.) in strategic directions and sectors.
What is driving those Chinese economic policy decisions? In any design process the _first_ thing you ask yourself is “What are we trying to _get_?” That’s how you decide which design to implement: the one that best meets the requirements.
What are the design requirements for our next economy? What must that economy do for us?
So if we’re to pick an economic strategy that “is helpful”, we need to know what “helpful” is, at enough specificity as to guide the incremental investment decision.
The follow-on question is “what are the metrics (measurements) we should apply in order to determine whether our actions (investments) are actually taking us toward or away from the desired outcomes (the “requirements”).
I think the dialog set out above by Dr. Hudson and Mr. Wolff is a giant step in the right direction. They’re getting at what’s fundamentally busted.
I hope to see more of this discussion in the future, because it might provide a tangible, concrete, well-defined target for us to shoot at. We don’t seem to have that at the moment.
If you haven’t already, I also suggest reading Dr. Hudson’s piece I linked to above. That was a great dialog.
I’d suggest Bhutan’s Gross National Happiness index as a good starting place for targeting metrics. The implied criticism of GDP as a measure in the above dialog is appropriate given its favoritism for the rentiers.
Dr. Hudson took issue with the Chinese because they did not seem to have a particular economic philosophy they were following. They were borrowing with both hands from any economic philosophy which delivered the results they were after at the national policy level (econ, social, environmental, etc.). He called that Chinese economic policy “ad hoc”.
In the comments section of that thread, I asked:
“What are the Chinese requirements for economic policy? What are they optimizing toward?“.
[ Really important comment.
Xi Jinping repeatedly describes Chinese policy and purposes, and answers what are Chinese requirements and objectives. Xi’s descriptions and responses are as often turned away from and even ridiculed by Western analysts. ]
CA: I think I need to read what Xi says. Do you know of any English language summaries I can access on the Internet?
When I did my search, I couldn’t find anything in Xi’s own words, and nothing that was more comprehensive than a 1-page magazine article.
Much appreciated, if you happen to see this and respond.
About end users.
I started a ‘real’ business 3 years ago, a bike rental service. I say ‘real’ because I have real customers, that can (and do) ride on my bikes.
I get every other day a call about ‘derived’ services: improve my SEO score, use a platform to reach more customers, use insurance services, have connected bikes, …
None of those do something really useful. There are just some lame excuses to rip off a bit of rent from the services I produce.
While there is a lot of ‘scientific’ litterature about the financial sector, its products and its derivatives, I don’t know if similar studies exist about such ‘derivative’ services (distinct from subcontracted services), which do add to GDP but are of no real use.
Thank you, that is a really important reality check. Most of the services accompanying real services are ephemeral and extractive.
All of this talk, as usual, is about what is wrong with the economy, when it is the governmental, political, intellectual, and social segments that are failing. The capitalist corporations are doing what they are supposed to do, make a profit for capitalists – the 1%. The economic world is not supposed to regulate itself. The national system is failing because the governmental/political segment is not doing its regulatory job. The fundamental problem is deregulation. The corporate world has flaws that need to be addressed. But the American economy is relatively successful, certainly by the definitions used by the corporate world.
The fundamental problem is and has been, that the political parties have become for profit corporations. The political parties have ceased to have any intention of doing the job for which they exist, regulation of the economy and the culture. There is no likelihood of successful rehabilitation of the corporate economy unless the political parties are recognized as the true problem, stated repeatedly to be such, and addressed in a revolutionary manner.
Great post. Yes, the regulatory function isn’t being done as it should.
“Regulation” implies a goal. What’s the goal? Here in the U.S., the goals of regulation seem to be rather vague, right? Is the goal corporate profits, standard of living for the many, environmental viability? What combination or rank-ordered list is the one we’re executing?
Please don’t say it’s all about corporate profits for the 1%. Our entire society is fully engaged in running the current economy as hard and as mis-directed a manner as it is. We’re all involved, not just the 1%.
Now let’s consider revolution as our remedy. And after the “revolution” happens, will the goal be more clearly stated? More achievable?
I say not. Look at the experience other countries have had with revolution. Things are generally worse afterwards, and for a long time afterwards. Dogma and competing oligarchic / ruling factions still screw things up. Putin has stated many a time he’s not for revolution, but incrementalism. And Putin has (and had) a front-row seat.
I think that’s why China is currently opting for the “ad-hoc” approach; they didn’t like what the dogmas had delivered out. So they eschew dogma, and go for “what works”.
China seems to be pretty at setting policy (“set direction, expressed as goals, which might otherwise be called “requirements”), and then regulating and intervening as necessary to enforce that policy. Emphasize “policy” _and_ regulation.
That’s why I’m so keen to discover and consider that “policy” the Chinese are setting and enforcing. Is it partially applicable elsewhere?
We are nearing the end of an American revolution currently, a neoliberal revolution. The capitalist based neoliberal philosophy is replacing the original American/democratic/agrarian based philosophy. But, capitalism is not a good philosophy. Economic capitalism is a good economic strategy that functions as an important component of the American mixed economy. Political capitalistic philosophy is a fundamentally bad political ideology. Cultural capitalistic philosophy is an even worse idea. Economic capitalism, political capitalism, and cultural capitalism are very different components of the neoliberal philosophy, a bad hybrid ideology.
I was not suggesting a national revolution. We desperately need a revolutionary restructuring of our political/governmental system and the culture and philosophy that produced the current system.
We appear to need a structural change. That can only be called revolution as if it only serves the current beneficiaries and not the 99%, then who’s affecting the change? and why? How is it the focus is on arguing symptoms, not causes?
Where we find ouselves is around increasing stratification and economic inequality based on social construct and corporate capture, along with justice and injustice based on wealth and connections. Our way is failing. Many can see it and those who benefit use their power to keep the plates spinning and avoid sentiment from changing too much to maintain the status quo.
What are we optimizing for today? It’s pretty clear that we are enjoying the success of our system. Not enjoying? Start with the structural assumptions.
For instance: free markets require transparency to operate efficiently and fairly. IF fairness isnt a goal, why not? Is there a benefit from having more information? Imagine buying – or selling – a house when the recent selling and listing prices, time on market, lot size, square footage etc. aren’t available in a consistently and reliably measured and easily analyzed format? How would one determine a price? How would that price be fair? How much woukd be guessing? How much more efficient would the person who had more knowledge be in making such decisions? How easily would a low knowledge person get screwed? Who is usually low know,edge and who usually has more knowledge? When the system is operating to limit the information available to the entire market, who benefits? Who has the incentive to limit information? Is it the same group operating the system? Is that the definition of corruption?
I rarely hear about information transparency in our increasing technological and database driven society. Couldn’t that perhaps be a primary role of government? How is it we don’t hear this idea screamed from rooftops? Maybe those who would most benefit have no rooftops to scream from?
I was also surprised to see MH advise “Libertarianism supports a centrally planned economy…” That’s not what I have learned so another change of definitions, perhaps? Or a poor transcription?
Please endeavor to read more carefully. Prof Hudson completes his thoughts about “libertarian” central planning: ”…the central planning is done not by elected government officials, but by Wall Street and the financial sectors.”
This system is what Sheldon Wollin called Inverted Totalitarianism. We Americans must submit to de facto central planning dictated by the financiers of Wall Street, not government bureaucrats in Berlin, Moscow, Rome, Beijing, etc. Our government serves Wall Street, not vice-versa as under traditional totalitarianism.
American “libertarianism” is not based on the idea of individual freedom, but on granting unrestrained power based on wealth alone. One dollar, one vote.
your addition makes it more clear – thank you. the inversion continues!
I think that’s why China is currently opting for the “ad-hoc” approach; they didn’t like what the dogmas had delivered out. So they eschew dogma, and go for “what works”…
[ Respectfully try, “I think that’s why China is currently opting for the “pragmatic” approach; they didn’t like what the dogmas had delivered out. So they eschew dogma, and go for “the difference in lives the truth of an idea makes”…
There we have socialism with Chinese characteristics. Xi Jinping repeatedly describes this, but is as often dismissed in the West as a Chinese applied philosopher. ]
CA: thx for the input. I used “ad-hoc” because that’s the term Dr. Hudson used. I agree that the word “pragmatic” might be better for this context.
Can you provide some insights on what “Socialism with Chinese characteristics” might be? I realize that might be a simple question that requires a long answer, but if it’s possible, pls provide a thumbnail sketch in a paragraph or 2.
That would be much appreciated.
Our management culture has gotten very good at doing the wrong thing more efficiently, especially by automating processes that were not good to begin with. Although they also do process re-engineering or some similar highfalutin’ term, which ends up compounding leftover bad processes with new bad processes.
Even automating decent processes or doing them more efficiently has real risks on the resilience side of the equation. You can make your processes much faster and cheaper but also more brittle and subject to sudden unfavorable events. The whole “supply chain” inflation angle of the COVID crisis was one example.
The processes by which the Pentagon and Congress fund defense projects are a big part of the reason our capabilities have degraded, with weapons systems being funded for some number of years, then put on hold or cancelled, then restarted, then sent back for redesign, etc., which bakes a lot of high cost in before you even get to the outright corruption and price gouging. And outsourcing parts of the supply chain here again makes the whole operation of industry brittle and unresponsive to sudden changes in requirements and externalities.
Because ammunition is a relatively low-margin item.
Apologists for Ukraine war funding claim the US is weakening Russia at less than 5% of pentagon outlays.
They hide the point that their 5% is taking a much larger % of things like ammunition stocks which are not easily replaced.
Ammunition stockpiles are built over many years of building inventory at a slow rate. The stockpile is meant to deliver shells while the arsenals ‘mobilize’ to high rate deliveries.
I suspect no one thinks US should go high rate on 155 shells because this Ukraine war won’t remain after the election.
About 40% of pentagon expenditures go to contractors: R&D, procurement of systems, materiel and things, and growing portion of actually maintaining (contractor logistics support) weapon systems in the “field”. This opens to corruption as stated above.
The pentagon runs a monopsony, where the power of the buyer is sundered by corruption (some of the DoD civilian employees have been replaced by contractor admin support who do not look out for the soldier or taxpayer) and politics.
F-35 for example cannot be killed [because it needs a new engine] because all the jobs in varying congressional districts!
Ammunition, is a unique monopsony. All three services use conventional (not nuclear that is DoE who runs huge contractor operated facilities) ammunition! There is one program executive (PEO) for conventional ammunition, all three use that office.
The PEO ‘owns’ a small number of gov’t owned contractor operated (GOCO) ammunition plants. These plants assemble ammunition, e.g. shells. When PEO ammo needs to buy shells they go out under a bidding process and the contractors running a GOCO can bid. That does not include the supply chain for parts that go into the shell….. I suppose the intermittent winners of each order build their unique supply chain.
There is a lot of politics and the remote location of some GOCOs (need land to contain explosions/accidents) challenges the human resource aspect.
De-industrialization may have harmed the GOCO supply chains….
Pentagon capitalism is not very capitalist!
I almost didn’t read this post — Michael Hudson is here at his clearest and most concise.
Under the system of Inverted Totalitarianism that developed from looting the redundant U.S. Cold War infrastructure, the financialization of everything including politics, and the abandonment of profit in favor of rent extraction, the United States is no longer a capitalist system. That massive U.S. and E.U. GDP number is illusory — it isn’t based on production; it is based on looting.
The former KGB-man Putin came into power after a decade of Summers/Harvard B.S. looting of the bones of the USSR. He is first and foremost a cop who appears to see his role as policing capitalism. It would surprise the majority of Americans who still refer to the “Soviets” but Russia today is a mixed capitalist economy. Their arms-makers can make a fair profit, but they aren’t allowed to loot by the cop in charge. Their primary focus is production not extraction.
Over the past few nights I re-watched The Godfather films. Coppola has admitted that his intention making these films was a critique of the direction of American capitalism. He was prescient. Petty mobsters like Biden and Trump — or big ones such as Milken and the Drexel High-Yield Alumni — seem to have taken a different lesson from watching his films. Reagan/Clinton libertarian Inverted Totalitarianism is simply the rule of lawless mafias.
I agree: the Godfather films, Goodfellas, the Sopranos are more accurate depictions of how business is actually done in the US.
My half-joke (or no joke) is that instead of US politicians, banks, lawyers, insurance cos, health care system etc., I would rather deal with the Mafia because they are more honest. They make no claim of democracy, human rights, rule of law or other such claptrap. “Nothing personal, strictly business”.
The Mafia would keep its word, but as Vladimir Putin said, the United States “is not agreement capable.”
It’s not as much about policing capitalism per se, as it is about – be it Russian Empire, Soviet Union or Russian Federation – the government retaining the ability to raise an army of several million men quickly.
That has been the very basis of Russian security thinking since the 16th century. Whatever the political or economic system, the central government has to control the production chains of the arms industry. That’s the way it has been since Ivan IV who invited foreigners to build him state arms factories.
And it’s not as much about looting, as for economics of scale. If you know you’ll end up manufacturing millions of units of any weapon (i.e. the 3-line rifle M1891 [a.k.a. Mosin-Nagant] reached 37 million rifles produced), you want them to be designed cheap and fast to make and yet suitable for the purpose.
During the Yeltsin years the Russian military industrial complex survived mainly by refusing to follow the reformations and existing in a what was called “virtual economy” – the factories gave each other loans with money they didn’t actually have which was then used as a collateral to get either stuff or real money to retain the employees and keep the factory floors warm. This was possible because they were still huge, government owned enterprises with actual political influence in Moscow, so everybody trusted that the network of mutual debt would eventually be settled.
Just watched a film by the late John Pilger, about the privatization push for Britain’s NHS ((https://johnpilger.com/videos/the-dirty-war-on-the-nhs). In essence, a highly-valued social service is being devoured by the money men, using the American model for healthcare.
The Brits are suffering from the same privatization and deregulation manias that are plaguing the US. It always amazes me that so many Americans, who are hanging on by a thread, are attracted to the snake oil salesmen, e.g., Republicans in Congress, who can’t wait to cut their Social Security, MediCare, etc. The neo-Liberal takeover, which really gained a head of steam in the Reagan years, is truly a con-job for the ages.
And while our ‘civilization’ is fast approaching a Climate Change catastrophe, or a nuclear Armageddon, our focus is on more military intervention. Can’t these idiots in Washington, Wall St, etc, see the handwriting on the wall? Humanity, and the planet, are fast running out of time. The Buddhists call this folly the Three Poisons: Greed, Anger, and Ignorance. We have an abundance of all three.
Thanks for mentioning John Pilger, he was one of the best of the best, and many miss him already. His support for fellow Australian, Julian Assange was unwavering, while most other journalists threw him under the bus. His documentary Palestine Is Still The Issue is great to watch, even more than 20 years after he produced it. That goes for his other great docs.
https://www.google.com/search?client=firefox-b-1-e&q=john+pilger+palestine+is+still+the+issue#fpstate=ive&vld=cid:8aaf8b42,vid:39EjqBrJBAc,st:0
Pilger will indeed be missed. Almost all of his films are available:
https://johnpilger.com/filmography
>>>Can’t these idiots in Washington, Wall St, etc, see the handwriting on the wall?
Maybe not. The March of Folly by Barbara W. Tuchman is my go-to suggested reading on political folly or insanity. You can see the similarities from the book’s examples from the past with today’s insanity and get an understanding of what is happening now. Unfortunately. But it really is a very good read.
Mr Hudson clarifies very difficult concepts for me.
The zenith of this sort of capitalism alays me is to imagine the largest company in the world with xxxx thousands of employees.
The board of the company is offered a small windmill that will sit in their board room and produce gold endlessly.
The price of the machine is the company’s assets and all employees outside the boardroom.
Will they make the deal?
On Wolff’s opening about efficiency: The current global economic order efficiently transfers wealth upward. In order to do that, they can’t, in reality, be worried about consequences.
Mr Hudson clarifies very difficult concepts for me.
The zenith of this sort of capitalism to me is to imagine the largest company in the world with xxxx thousands of employees.
The board of the company is offered a small windmill that will sit in their board room and produce gold endlessly.
The price of the machine is the company’s assets and all employees outside the boardroom.
Will they make the deal? (And then will the board be whittled down to 1? )
Current Capitalism in it’s purist form.
Great discussion with Drs. Wolff and Hudson, they seem to doing more talks together recently.
Just to summarize: the institutional corruption and financialization in the US political, financial and economic systems, brought about by concentration of wealth/power, is becoming more and more obvious.
US politicians are legally bribed and money is legally equated with “free speech”: the oligarchy buy them off relatively cheaply – a great investment if there ever was one. The politicians are paid to further interests of the MICCIMAT, MIC (or whatever we call them now) and the other interests of oligarchy (BigFinance, BigTech, BigOil, BigPharma etc.). The “national interest” is thus only the interests of the bribe-masters.
The Pentagon cannot be audited, and it looks like TRILLIONS cannot be accounted for. The institutional corruption is infamous now.
It appears that “national defense” now means looting public resources, regardless of the quantity or quality of the products produced, or end result. The Iraq war is a great example: Stiglitz and others have estimated the total costs to be 2-4 Trillion $. and we know where the money went, audit or no audit.
On top of all that, we have a decaying nation where the young people have diminishing future outlooks, increasing debt loads, acts of despair are increasing rapidly, mental illness, drug addiction, ill health and obesity. The US military falls short of recruiting goals because of obesity and these other factors.
https://rollcall.com/2023/10/18/military-obesity-rates-soar-compounding-recruitment-challenges/
The US ability to project military power abroad appears to be diminishing rapidly, when we take all these factors together.
So far as I can ascertain, nobody actually addressed why, or how, Russia outproduces the West in artillery ammo. North Korea is good at it as well. And what was discussed by the two economists, although interesting in and of itself, was undermined by Wolff’s ongoing insistence that Russia’s GDP was only 1.5 trillion dollars — he was wrong by a factor of three at minimum.
My way of looking at economies (and bias as to the uselessness of economics as a “science”, when it’s just a series of outright guess based on some obvious to anyone fundamental ideas plus dubious assumptions that Wolff points out, all of which is gentrified by mind-bending inappropriate mathematics to stun the hoi polloi’s objections) is to imagine them as a tall recently-poured glass of beer. The liquid at the bottom represents actual creation of wealth from the raw material input to finished products output. The aerated foam is people selling financial paper to each other, and millions of jobs not directly related to physical production, like the armies of people in public administration and other activities with no physical output — however, the “effort” of these clerical people has apparently to be measured and added to the GDP pile. Who said it should be so? Economists, one presumes, justifying their existence. Since such effort is subtractive and parasitical on the wealth that actually is created, then adding it to output is silly. 180 degrees out-of-phase in fact. You cannot live off paper-pushing, but need farmers, miners, factory workers and what have you, to allow society to support the lives of those who produce diddly squat of physical value. Such jobs are only nice-to-haves in society, but not necesssary to its operation. See the USA in the second half of the 19th century: not very many Masters of Public Admin trotting around the corridors of government in those days I’ll be bound, opining away on social matters and getting in the way of progress with “planning”.
The West is the poured-beer foam above the liquid to the max — that’s your high fixed overhead costs Hudson goes on about so often in his US versus China comparisons. The West is choked by myriads of people living off the fat of the land producing nothing of real economic value. They essentially leech off the efforts of the productive citizens of the land. Financial types lead the disconnect between reality and who gets what share of the pie, having hornswoggled the population with nonsense for decades. They live off productive people’s backs, and insult them into the bargain for being doofuses.
Looking at things in my simplistic way, I assume Russia is essentially bereft of societal hangers-on, is mostly liquid beer with little foam ballooned above it, and thus its real physical economy is more comparable to the US’s taking into account the over two to one population difference. And it likely does better than that because the West shipped off its factories to China to profit off cheap labour. There’s your ammo production capability difference writ large.
What I really cannot understand in the GDPs of various countries proffered up above, is how India’s is so large. Makes little sense to me — if it were true, India should have 40% of the Chinese standard of living, but who believes that is actually the case? Not me. I believe India is likely a bureaucrat’s paradise, and thus very foamy.
Heard a good line last night on an old Dr Who episode: “The more advanced the technology, the more susceptible to primitive attack.”
This from a tongue-in-cheek sci-fi series of more than 40 years ago.
Warning, I’m going to blow my horn here: I anticipated this, to the outrage of some friends, shortly after the war began when there was all that hoohaa about western sanctions. I put my successful prediction down to my understanding of the nature of our so-called modern economy in no small part due to reading this blog, among other sources of information. btw, excellent question and article.
New bar joke:
Q: Why does Russian produce more ammunition than the US?
A: Because she kept running out of ammunition according to the US.
For those of you that understand French:
Interview with Jacques Sapir, French economist specialized in Russia, with heaps of detail about the evolution of the Russian economy. Really, really worth the watch.
https://www.youtube.com/watch?v=qaXBtE0xApg&t=4560s
I love Michael Hudson readings and find great wisdom in all of them. I have spent good 25 years of my life in eastern Europe in the time of the socialism. My memories are quite strong, and not negative at all. Almost all of the oldest population have positive reflections, although we did not have much of the goods and technologies of the advanced west by that time. We used to have very cheap electricity, free education and health, no drugs, no unemployment. Roads, dams, houses were built. Every vilige had its school and medical centre. When things changed and the capitalism came, hospitals started to getting closed, schools shut their doors and people became unemployed. Really hard times. Mass migration by young people to the west. This was proclamed as a vistory of capitalism and a failure of the socialism. Why actually happened in this way? Was it a victory of the financial capitalism? Looking at China nowdays, I can imagine my country advancement if we have gone the same way and avoided the assets stripdowns and looting that occured after 1991.
Our reader, GM, who grew up in Eastern Europe, argues that communism was much better for the bottom 95% than capitalism. But the top 5% included bureaucrats who interacted with Europeans and could see how much better off people of comparable education and status were (if nothing else, the suits and the shoes). They were the ones who were really pushing for a teardown of the system.