Michael Hudson: Trump’s Contradiction-Riddled Strategy to Preserve US Hegemony

Yves here. I am highlighting Michael Hudson in the headline because in general and here, I find his analysis to be of merit. Hudson contends that Trump does have a US plan to rescue US hegemony, but its components are so self-defeating as to warrant a new favorite Trump label, “crazy”.

Originally published at Dialogue Works

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, June 5, 2025, and our friends Richard Wolff and Michael Hudson are back with us. Welcome.

RICHARD WOLFF: Glad to be here.

NIMA ALKHORSHID: Let’s get started with Lindsey Graham and his latest visit to Ukraine. Not only Lindsey Graham, Blumenthal, and Mike Pompeo as well, they went to Ukraine. Here is what Lindsey Graham said:

LINDSEY GRAHAM: Russia said that Ukraine doesn’t have good cards. Well, Russia is much bigger and has a lot more people. I get that. But the world has a lot of cards against Russia. And one of those cards that we have is about to be played in the United States Senate. In America, you have more than one person at the card table. We have three branches of government, and the House and the Senate are poised to act. What would change our mind? If Russia came to the table, agreed to a ceasefire, and earnestly.

NIMA ALKHORSHID: Richard, one of those cards that he’s talking about is 500% secondary tariffs on Russian energy, which we know would influence China, India, and eventually Europe. Your take?

RICHARD WOLFF: Well, Lindsey Graham has been a bloviating senator all his career. This is all theater. He has been all theater. He is all theater.

He has gathered together the many other members of both houses who, like him, are thespians at heart and politicians only secondarily. This is showmanship. That’s all. It’s something that he has decided will improve his standing down there in the American South, where he comes from and where he gets elected by people who approve that kind of theater, even as their actual situations decline.

We are no longer living in the world that appreciates that theater. What he doesn’t understand as he invokes the world is that in view of the world, the very behavior he proposes is considered the actions of a rogue nation, a nation that is willing to threaten, disrupt global trade for the whole world. This is not admirable. This has nothing to do with bringing cards to a table. This is bullying behavior, and it is doubly offensive because the bully isn’t in charge anymore.

The Chinese know and the Russians know, having spent the last 15 years building themselves up, growing their economies much faster than the United States, and much faster than the United States and its G7 allies, that they now have in their BRICS alliance people from whom they can buy, people to whom they can sell, and those people are more than half the population of the world and have shown in the Ukraine war that they can absorb whatever it is that the United States and Western Europe wish to do in interfering with the trade of Russia.

When Russia couldn’t sell its oil and gas to the Europeans, did they collapse the way the Europeans promised? No. Did the ruble disappear the way the Europeans promised? No. Did the levying of much more than a big tariff, a literal embargo? We’re not going to buy your oil and gas. We’re not going to let you use our SWIFT international payments system. We’re going to seize $300 billion of assets back in your currency that you have kept in Western institutions.

And so all of these things, which in total are a bigger effort against Russia than what Mr. Lindsey Graham now proposes, they all failed. So I got news for Mr. Graham. His proposal, if it were adopted, will not only fail to hold back Russia and China in the way all the previous sanctions and limits and tariffs have failed, but will enhance the already badly damaged reputation of the United States. And I mean, enhance it as a rogue, as the biggest single threat to global trade and global economic development in the world, which for the United States is a very bad sort of self-destructive behavior.

MICHAEL HUDSON: Well, Richard, you call America a rogue nation. Madeleine Albright called America the exceptional nation. And that’s America’s strength being a rogue nation. Think of it as a rogue nation, not with atom bombs, which it won’t use, but with the ability to create chaos. And what Graham is threatening is we can create chaos in Europe and other countries by imposing this enormous tariff on countries that trade, that obtain their gas from Europe instead of from us.

And we can impose similar chaos on countries that trade with China and its companies, Huawei. I think there’s already threats against that. Companies that use China’s international payment system to avoid the U.S. dollar. The aim of this chaos is to create an entirely new world order whose rules are the reverse of the economic order that America created in 1945 when it was the world’s leading creditor nation and also the world’s leading industrial power after in the wreckage of World War II.

Now, the situation is just the reverse. The United States is the world’s major debtor nation, mainly to other governments, and it’s also a deindustrialized nation, the most trade-dependent nation of all. And so, what the Republican administration, with the full support of the Democrats, is trying to do is: how can we make a virtue of all of this?

How can we somehow use our ability to create chaos to threaten other countries with these huge sanctions, denying them access to the American market, denying them military protection, such as the United States had offered in World War II, and instead making them prone to fighting with Russia, as we’ve seen over the attacks by Ukraine on Russia with full backing of Britain’s MI6 and Macron and German’s support?

So, what Lindsay Graham was doing was bragging about America’s strength in the ability to confront other nations with what the United States can do to smash the whole international set of rules if they don’t adopt the new rules that the Trump administration is trying to impose.

RICHARD WOLFF: Well, let me respond. Maybe we disagree here. I agree with what you’re saying. Everything makes perfect sense to me, but I see it in a context that this is the behavior of a desperate government going down, and in the language I learned as a kid, trying to take everybody down with it.

Or using whatever you might call the last card, if we’re going to stay with that metaphor, the last card they can imagine playing because they’ve run out of all the other cards that they used to have available. They don’t have it available. The irony is the nuclear weapons they built up, they can’t use, and the rest of the weapons they don’t have anymore. And so they’re stuck with this sort of situation.

I see it in that, and I don’t think it can work. I think it’s desperate not only because it is so disruptive and it is so chaotic and it is so risky, but it’s also desperate because I don’t think the conditions are there. And I think that more and more of the world sees that. And, you know, for this kind of a major bluff to work, you can’t be seen as bluffing. And I think what the world sees here is bluffing.

And that when he does it one day and undoes it the next day, the notion that this could be bluffing becomes a virtual certainty. He wants to get some concessions so that he looks like he’s dominant in some way. And so, by yelling 500% and actually settling later for 10%, he can make some claim that he got something and he looks better for the evening television.

But, you know, that only works for a while until everybody realizes that’s what you’re doing. And that’s what we have now. You know, the signs that are accumulating that we may have both stagnation starting in the second half of this year and inflation getting going in the second half of this year. Well, you know, those are signs that this is a very risky line of action.

And you have to ask the logical question: why would you be doing this? And after we make the cracks that the whole world is making, that he’s unstable or he’s looking to make money or he’s looking to get attention, all of which have their grains of truth, you still have to ask the question, why in this way would this man act at this point? And there, I think, the desperation of the American empire’s decline is the answer.

MICHAEL HUDSON: Well, let’s talk about this bluff then. There’s method behind the madness. And they actually have a plan. It’s a mad plan. You’re right. Other countries can see through it. But let’s walk through exactly what their plan is, because they’ve spelled it out in detail. And it’s worth going over, I think.

When Trump and Rubio acknowledge that we’re entering a multipolar world, I think what they mean is that Europe, Asia, other continents are now all on their own in the sense of every country for itself. And to Trump, that means the United States is going to act for itself, in its own interest, to try to be the winner.

And what its interest is, is actually creating a new world order in which other countries somehow can be locked into dependency on the United States—even though we’re no longer a creditor nation, even though we’re no longer a trade surplus country, and even though we’re making other countries militarily endangered, not protecting them anymore.

I think that Trump’s strategy is to save the U.S. economy and its foreign policy from having to bear the loss of its financial and trade dominance that led it to create the post-1945 order in its own interest. That order lasted 80 years, and it’s now changing. And they actually have a plan, and they’ve outlined the plan for what they want to do. And I think, of course, it’s a bluff—but let’s go over exactly why it’s going to fail.

Instead of the United States offering financial support, it’s now demanding that the rest of the world support its own financial position and even its domestic reckless budget deficit. And other countries are supposed to oppose China and Russia by joining a new Cold War—to prevent China, Russia, and the BRICS countries from shaping a new world economic order. That’s the guiding strategy.

And I think the first aim of the global majority that the United States is opposing is to avoid the use of the U.S. dollar, as you pointed out, for their mutual trade and investment, and as a vehicle for saving their foreign exchange reserves in the form of holding Treasury securities and lending to the United States government.

This balance of payments aspect of the current crisis is, I think—certainly to me—the key. The United States doesn’t have atom bombs, but as I said, it does have the trump card—and Trump’s ability to create chaos. And as the old joke goes: if you owe the bank ten thousand dollars and you can’t pay, then you’re in trouble. But if you owe the bank 10,000,000, or a hundred million, or a billion dollars—then the bank’s in trouble.

Foreign central banks are holding U.S. securities and those of its federal agencies. They have a problem: how can they secure the value of all the savings they’ve mounted up since 1971, since the U.S. went off gold? All of the world’s central bank savings are already in U.S. dollars. The United States owes them so much money that it’s now using its debtor power—instead of its creditor power—as a means to control them by threatening chaos.

Trump is trying to fight to create a new illusion that somehow will give the illusion of solvency—if other countries agree to new worlds. Well, the fact is, the United States could pay other countries if it were willing to follow the policies that it and the IMF have demanded of Global South countries for the last 80 years.

Namely you pay your debts by selling off your public infrastructure, selling off your raw material rights, increasing taxes on income and wealth so that this money will not be available to consumers to buy imports. That’s how you generate a balance of payments surplus to pay your creditors.

Well, the United States has a double standard and again says, “We’re the exceptional country.” It’s not going to do what the old economic order forced the Global South countries to do.

The United States could roll back its military spending—which has long been the major component of its balance of payments deficits ever since the Korean War in 1950. It could cut back its new foreign investment. And it could begin selling off its existing investments in Europe, Asia, other countries, to pay its creditors. That’s exactly what the IMF and the United States insist that Argentina and other debtor countries must do.

But the United States is refusing to do these things, and that’s what makes it an outlaw country when it comes to the rules of traditional financial debt settlement. It’s using its strength as a debtor—no longer as a creditor—and that’s what’s turned the world upside down. And it’s used this to somehow be able to create a moral order in which it can convince at least its satellite rulers—people like Merz and Macron and Starmer—to continue to sacrifice their economies to support this new U.S. economic order.

RICHARD WOLFF: Okay, but let me respond by saying I don’t think he can do these things domestically or internationally. That may be the plan, that may be the method in the madness. I understand that argument, but I don’t think it’s doable.

And I think the desperation is again visible in coming up with a plan like that for which the world is no longer willing to be treated that way. And I think he’s learning it at every turn. The Chinese are not bending. No matter what, you know, let’s remember he had tariffs a few weeks ago in the neighborhood of 140 or whatever it was percent. And that made no difference at all.

You know, he just had a meeting with Xi Jinping, if I understand, yesterday, a telephone call having spent the last 10 days asking for one. That’s not the behavior of somebody who is terrorized by what you’re proposing or what you’re threatening.

The Chinese took the time and the care to produce an economic miracle, which includes an alliance that is crucial to them precisely because it creates enough of a world market for them to buy from and sell to that the United States’ abilities that we won’t let you here. Okay, don’t.

I want to remind people over the last week if I’m not mistaken all the leaders of Europe were on their knees cutting deals with the Chinese. They’re desperate too, and they are the ones because of their subordination, their inability to act independently from the United States anywhere is now hobbling them. They are learning that the cost of being subordinate to the United States can be very high. They were writing nicely for several decades; they were able to be social democratic to their own working class because the United States saved them from spending money on defense.

But the United States can’t do it for the reasons Michael just summarized. The United States is throwing the Europeans right under the bus. We’re not doing this anymore. You’re going to have to do it for yourself. Yes, but we can’t do that and be the social democratic societies we were developed over history to be.

And if you make us impose an austerity, then you will see that the “menchamps?” in France and their equivalents everywhere else will take the power in Europe because they can ride your inability. The Germans, we are spending $80 billion on defense. Oh, really? How’s that going to play in their own country? Not well.

Mr. Merz has a very thin majority. Mr. Macron has no majority. And Starmer has pissed away the little bit of bump he got because the conservatives were so awful. They now face the reality that another Trump-like figure, Farage, may become their next lead.

I mean, these are societies in advanced levels of decay. So I don’t think the United States can do most of what it is they’re threatening to do. I don’t see it. I don’t see them able to get the rest of the world to go along with this desperate effort now that they’re a debtor nation, now that the rest of the world has caught up or exceeded them.

They’re not in a position to dictate and they don’t understand it. They have the biggest military. They are very rich. It’s very hard for them, as it was for the British before them, to understand that they are now going back to what they were: a small, offshore, wet island off of Europe. That’s the British Empire’s resting place. And the United States is going its path to a decline from its peak.

And all you have is a desperate leadership that wants, on the one hand, to pander to the public awareness by pretending the decline of the empire isn’t happening, while at the same time taking these extraordinarily desperate, chaotic, disruptive steps in a final, last effort to do what isn’t anymore available to them to do. And this is a recipe for real trouble, mostly here at home.

MICHAEL HUDSON: Richard, you’re elaborating my points. Of course, I agree with that. What I’m doing is explaining: if you look at exactly what the U.S. plan is in detail, you see exactly why it won’t work. Of course, it won’t work. And when you look at the details, there actually is a plan, and it is so crazy that it won’t work.

And that’s what I want to explain exactly why it won’t work. For instance, we mentioned, I think, last week, Treasury Secretary Bessent’s proposal that foreign countries stretch out the maturity of their Treasury IOUs for 100 years.

That’s pretty illiquid. That’s like saying we can’t pay within my lifetime or the lifetime of my children. It’s pie in the sky. In other words, you lend us the money, write it all off. You can pretend that it’s money. You can pretend that it has value. Let’s have a pretend new economic order. That’s what the American policy rests on.

Pretense, of course, not the real thing. It’s the pretense of every Ponzi scheme dynamics, where debts grow and grow and grow, and all it requires new entrants into the scheme. More and more foreign central banks will hold the dollars. More and more countries will invest their trade surpluses and balance of payment surpluses in the dollar to somehow give the illusion of solvency, but it’s not going to exist.

Well, what the plan of Bessent and the Treasury wants is that other countries are going to commit their accumulated international savings, all of what they’ve saved since 1971, to back U.S. unipolar military and foreign policy hegemony. And this foreign support aims at the United States to pursue this massively polarizing tax shift from financial wealth onto labor and industry.

That’s the Republican plan. Huge tax cuts for the wealthiest, 10% of the population, all the rest of the population, labor, industry, agriculture, has its taxes go up. So the foreign central banks and the dollar-based international order, they’re enablers to America’s attempt to maintain its unipolar control of world diplomacy behind the Cold War that Lindsey Graham and others are trying to back. So far, Trump has not criticized Lindsey Graham. Other people are. Well, this solution of somehow saying U.S. Treasury bills are never to be paid. They’re a sort of permanent floating debt.

At the same time, Treasury and Trump are telling its allies that to be able to pay down its debts, if you really want us to pay them down, then you have to enable us to export to you and earn the money. That means that, sure, you can enable us to pay you by letting American industry replace your industry.

Your German car companies and technology companies can relocate to the United States. And if you relocate here, we can export and then we’ll be able to export to you. Your industry is going to have to be wound down, which of course it will be if you can’t get Russian energy anymore and have to depend on our energy, you know, move to the United States where everything’s less expensive.

Well, the whole idea that somehow the United States can use its deindustrialization as a weapon, it reflects a false line that it’s taken in development really since the 1990s. The United States is trying to say we can maintain our trade supremacy by focusing on monopoly goods, on information technology, military technology, social media platforms. And these were considered the high value added industries.

And the idea was the United States says, well, we don’t need blue collar manufacturing. We don’t need labor-intensive industries. And in fact, shifting, offshoring our employment to Asia is going to help hold down our domestic wage levels and all of that.

Well, all of a sudden, something very strange has happened. All of a sudden, if you look at what is happening with China today, amazingly enough, the United States has become dependent on low-wage industrial economies. All of this industry that is outsourced to China and other countries is now threatened with being blocked by Trump’s tariffs. And the United States doesn’t have the ability to produce these goods itself, even to the point of making screws to screw down the keyboards of the iPhones that are made by Apple.

So nobody expected the United States to become more dependent on low-wage industries that instead of where China and other countries have almost caught up with the information technology, with the dollar transfer systems, not needing the dollar, not needing the SWIFT, with all of these things. And this has turned the whole traditional idea of international advantage upside down.

The United States can’t reindustrialize to somehow earn the money to pay off its foreign debts, because the Chinese economist Liu Feng has pointed out that industrialization requires having the whole broad spectrum of industry, including the sectors that the United States has looked down on, like textiles. And even what the United States considered low-wage industries before, all of a sudden China is robotizing all of these.

And so now you’re having products that were made by low-wage manual labor made by robot factories. The United States hasn’t developed anything like this. The United States all of a sudden finds itself dependent on the smallest things that are key for its supply chains, as you and I have discussed before on Nima’s (show).

These supply chains for screws, for steel, for various inputs, not to mention the rare earths and everything, which China is not going to reduce its national security limits. So the United States has a skewed pattern of production. It’s focused on the internet, the information technology, but it doesn’t have the most basic industries that are needed to earn the money to somehow move its trade into a surplus to pay off its debt.

So the trade problem is hand in hand with the insolvency problem. And the fact is that other countries are broke. And here’s what faces other countries. Here’s the choice. Are they going to say, okay, we’ve been sucking – we’ve followed a blind alley that we’ve put all of our savings in the United States. Are we going to just accept the loss and go and create and join the global majority in a new restructuring of their economies?

Or are we going to say we can’t afford the disruption of a year, a two-year or three years, and we’re going to have to remain dependent on the United States because otherwise, the value of our foreign exchange reserves is essentially blocked.
Our ability to trade with China and Russia is blocked. And we’re locked into a dependency on trade with the United States that has to be a deepening and deepening loss for us because the United States plan, when you look at it, is so fallacious in its assumptions, so badly structured, that of course it won’t work. That’s really the political choice that’s facing Europe and the whole rest of the world.

RICHARD WOLFF: Let me add a couple, if I can, Nima and Michael. In recent days, looking at literature about the automobile industry, I came across a number of comments in which people who are not involved in the kind of conversation we’re having, whose focus is much more narrowly concentrated on the international automobile business, are projecting, several of them, that the relocation of automobile industry will in fact not be to the United States, but to China.

Why? Because of what Michael just said. They have all of the components, including the rare earths, which are crucial for those batteries without which the electric vehicle doesn’t function. And if you are going to move to the United States, and if the United States isn’t going to be able to get them from China, you’re moving to your own destruction. You cannot do that.

You’d be much better advised to build your automobile, your Volkswagen, or your Peugeot, or your Fiat in China, where you can be sure of access to the rare earths without which you can’t build a car anyway. So that’s one thing. Here’s another one: the history of monopoly in capitalism.

Let’s remember what it is: it’s when the producer of something can capture the market in the sense of becoming the only mono seller, poly, mono poly, the only seller. Why? Because then you can not only make the profit built into the surplus you get from your worker, but you can jack up the price above cost and get what’s called a monopoly revenue on top of it.

But the very existence of that, for example, in the high-tech industry in Silicon Valley, and this is the history of capitalism: the minute you get a monopoly revenue, you become the object of envy and competition from everybody else because you’re getting outlandish rates of return. And so the flow of capital is to try to get a piece of that since it’s much more profitable than to staying in the competitive areas of the economy.

So now we have DeepSeek, we have the Chinese who have demonstrated that when you have tried to copy, you can do it. Huawei can produce the relevant chips. So can the other companies. If the United States is developing a strategy that has the quality of depending on the monopoly position that its high-tech industries achieved for a while, then I’ve got news for them. You’re going to lose it.

The monopolists always do. General Motors and Ford once had a monopoly. They don’t anymore. And you’re not going to keep that monopoly here, which means your strategy, which assumes a certain monopoly position, is a strategy built on sand that is ebbing away. The Chinese are working on that too.

And by the way, not only the Chinese, but others. And so this is not only risky for all the reasons we’ve adduced, but it’s risky in terms of where the actualities of international capitalist competition lie. The Chinese have a dominant position in rare earths and crucial industries, not just the automobile industry, air traffic, airplanes, defense, those are also requiring rare earths. Now, will the United States make an effort to get new sources?

Sure, they will. May they succeed? They may. But we are now, the more and more we talk, the more and more, hopefully, you’re all picking up on the conditions, the many, many conditions that suggest that the strategy being pursued now is, well, it is so risky that I believe the word desperation captures it.

MICHAEL HUDSON: Yes, it’s desperate, and that’s why I’m trying to spell out what its strategy is so you can see just in detail how desperate it is. And it gets worse and worse. I think you could say for the last two centuries, most of America’s technological innovation, maybe not most, but much, has been from immigrants, from individuals, scholars, scientists, technical labor fleeing the fight for freedom in their own country to come to the United States.

Well, the United States, I think there are 250,000 Chinese students in the United States. And now the United States is acting to block these students. Well, China has been complaining, as other countries before it have, about the brain drain.

They’re saying, well, you know, we have these, we’ve spent all the effort in raising these students, sending them to school in China. And now they’re going to the United States for graduate studies, studying the STEM curriculum. And now they’re deciding to work for American companies being trained there.

And so we’re losing a lot of our own technical labor because look at the American high-tech industries that are developed largely by Chinese labor. Well, Trump has said, we don’t want any more brain drain from China. We want to send the Chinese back to China so that they will be able to work to help develop Chinese technology, not American technology.

And not only that, but the one key, most apart from foreign brain drain to the United States developing technology, is government-subsidized research and development. Everything from the Manhattan Project for the Atom bomb to so much development has been government subsidy to universities to develop pharmaceuticals, technology, internet technology that the government then gives to the private sector is a gift to create the monopoly from this vast government spending, government-subsidized technology.

This is all being cut back from Harvard to other universities. That’s what Elon Musk did. Don’t subsidize government research and development. Concentrate research and development in China and Asia, not in the United States. We’re not going to be doing that anymore. And the reason is that many people, many of the scientists who wanted to develop technology, also want peace instead of war.

And if any of them say we’re for peace for any war, well, all of a sudden that is caused, I won’t get into the Zionist problem, but the students who are expressing political views other than the U.S. official foreign policy are being blocked from the United States, sent back to their countries. So the United States has cut off the two major sources of what was providing us technological advantage: immigration and government subsidy of university research and development.

RICHARD WOLFF: Yeah, I would like to stress that and also to take it a step back into the very economic structure. The Chinese version of modern economy is about 50% private capitalist enterprise, both Chinese and foreign, and 50% government-owned and operated enterprises.

That’s what they mean when they say they’ve got socialism with Chinese characteristics. The Soviet Union was much more government. The United States and Britain are much more private. The Chinese is a hybrid that is different and has to be highly controlled from above because you’ve got these two horses that don’t run in the same way in the same direction.

But the genius of what they’ve done, which explains why they’ve been growing two to three times faster than the U.S. for every one of the last 30 years, is because whatever the private profit motivation cannot accomplish because of its limits, the government can. The other half can make the investments that aren’t governed by a short-run profit calculus.

And the irony of what Michael just said is that in the United States, a modest, too small version of that was the government subsidizing the university to do some of that long-range, not-profit-dominated research. The idiocy of what’s being done to cut back the government support to get rid of the immigrants who are often the driving force of much of it.

That is a concession to the backlash of 30 years of globalization and neoliberalism. The liberals are every bit as responsible for that, the Democrats, as the Republicans. They were all cheerleaders for globalization, for liberalization, for automation and relocating jobs and all of the rest of it. And now they see the backlash that puts a guy in power who has to do all of the things necessary to hold on to his demagogic base.

So, yes, of course, he has to tell a dozen countries in Africa that they’re not welcome to send anybody to the United States. This is grotesque to deport immigrants. What are you doing? 10 million in a country of 330 million makes no difference. It’s irrelevant. What are you doing? You’re pandering, of course, but the pandering, without which he can’t be president, is going to have and is having real negative, self-destructive economic effects.

And I noticed in the last few days that whether it’s from Goldman Sachs or Bank of America or Ray Dalio or Jamie Diamond, there is a growing chorus of very big businessmen who are saying, uh-oh, this is spinning, from their perspective, out of control.

MICHAEL HUDSON: Well, you made the very important point that China’s government is shaping its technology. And the United States is a more centralized planning economy than China, but it’s been planned by the financial sector for its own financial purposes. And China never had a financial sector because when Mao’s revolution occurred, they didn’t have a financial sector and the government had to itself provide the money and credit policy.

And the credit system is designed to finance tangible capital investment in research, development, industry, factories, machinery, education, and infrastructure, as opposed to the United States.

My friend Carlos Sanchez has his Karloff’s gymnasium, where he’s been publishing reports by the Chinese officials explaining exactly what makes their planning so different. And they point out that in the 1930s, all the way to the 1960s, when I went to school, we all had to read Gardner and Mean’s reports on the separation in the United States between financial ownership of industry and management.

Finance would, the financial sector would finance industry, but leave the corporate leadership to CEOs who were engineers or marketing specialists, not financial specialists. But all this began to change in the 1980s.

And all of a sudden, the financiers made themselves the managers of companies instead of the industrial managers. Instead of having the purpose of the companies to increase market share, to increase output, to increase production, the purpose was simply to make wealth by financial means, as we’ve spoken before, by stock buybacks, by paying out dividends, by increasing the price of stocks instead of lowering the price of production for what they’re doing.

And you had financial capitalism replace the dynamic of industrial capitalism. And so the Chinese call this industrial socialism. It’s not really industrial capitalism that evolved into finance capitalism. It’s government supportive industry not to make profits and economic rents for the 10% and the 1%, but for the entire economy to benefit.

That’s what makes socialism different. from capitalism ultimately. And in the 19th century, as we’ve said, everybody expected industrial capitalism to evolve into socialism. That’s not what happened. And instead, it’s been China and its fellow socialist economies that have picked up this idea of using industry, agriculture, and most of all, money and credit creation to increase the productivity and living standards of the economy, not to centralize wealth in the hands of the 1% and 10%.

That’s really the conflict of economic systems that is behind this whole new Cold War between the United States and Europe on the one hand and China, Russia, Iran, and the BRICS countries on the other. All of this attempt to somehow maintain U.S. hegemony with this crazy gerrymandered logic of finance and trade chaos that I’ve mentioned.

It’s all to somehow maintain the finance capital system as part of the Cold War against the industrial socialism that really was, I think, it’s the destiny of civilization to go in that direction. The United States is not part of that direction in which the rest of civilization is going in.

RICHARD WOLFF: If I could, Nima, I want to pick up on this last point of Michael, because I think basically it’s more important than anything else we’ve said. Here is the crucial thing that Michael just did. He connected the dilemmas of the United States relative to what is going on in this case in China, not to the ‘Chinese want to be the next empire’ or the ‘Chinese want to replace the Americans as the hegemony.’ None of that.

What he did was to link the different positions and, therefore, the different prospects of the United States, on the one hand, and China on the other, to the organization of their economic systems. In his case, he stressed the difference between the industrial and financial sectors, let’s call them, of the economy.

I would argue, just to expand it, that’s what ought to be the discussion. Why did the Chinese grow two to three times faster than the United States? Why have they caught up technologically? Why have they made the best electric car at a time when the electric car is going to be the means of transportation for the next 50 years, likely, etc. And that’s – we get then to the question: what can a society do that has a 50-50 split between public and private enterprise, that has one governed by the profit motive and the other one by a different set of notions and calculations?

Wow. That would be, then we can’t do that in this country because that questions the capitalist system that we have, puts it immediately in second place, having to justify why in the world would you hold on to a society that has organized its industry and its finance in the way we have, given that there’s another way that has worked much better.

That is so frightening as the proper question that we have to get rid of it. We have to make this a struggle of personalities, of the Communist Party against it, irrelevant. The fundamental question is: how did you organize your economy to get this result? And if it weren’t an ideologically unbearable question, it would be the one we would all be discussing now. That’s the irony of all of this.

MICHAEL HUDSON: What has made China so different is why did America deindustrialize? And it deindustrialized because of financialization. And China has avoided financialization because it doesn’t have the financial interests. And when you had the Secretary of the Treasury Bessent a week ago saying China has to not only open its markets, what we really want is China has to let in American banking. Let us finance your industry. Well, you know that China is not going to do that because if you let American finance banking do to China what it did to the American economy, it’s going to hell.

RICHARD WOLFF: Yeah, and absolutely. You know, there’s an old saying that capitalists, capitalism will disappear because and when the capitalists will be selling to their executioners the rope with which to be then executed. When the – starting in the 1970s, when large numbers of American capitalists saw the opportunity for a quick profit by relocating their businesses into China, and they sat down and the Chinese said, “We will give you cheap labor and we will give you access to our market, which is growing much faster than yours. And in exchange, we want your technology.” When that deal was struck voluntarily by American big business, you had the beginnings of the process whose conclusion we are now discussing.

MICHAEL HUDSON: Okay, that is basically our theme for the last half year that we’ve been saying. And of course, the United States is now trying to convince China to sell us the rope to hang it militarily by the rare earths that are key for our military armaments against it, which is why China says you’re blocking us on national security grounds. We’re going to show you national security grounds.

Well, let’s see where the American economy is in six months, as you said earlier. Let’s just see what happens. Where are we going to be?

RICHARD WOLFF: I think we’re going to see a lot of it much sooner than six months. I really do believe the pre-tariff inventories have now been exhausted. The tariffs are going to show up in reduced imports. Already, this last month’s balance of trade is sharply different from the previous years in one variable: declining imports.

Okay, if you attach a tariff, that’s what you get. And they haven’t even hit yet in many cases. So, you’re also seeing the greed of our capitalists who know that in a world full of discussions of tariffs, they can raise their prices and claim it has to do with tariffs, and no one will know. And they thereby escape blame for raising their prices to make more profits.

And when you, and they have also, as you remember, the dollar has shrunken eight or nine percent since Mr. Bush took office. So, you have the diminishing value of the dollar and the tariff. You’re really hitting the American imports with a one-two punch that’s going to show up starting now.

MICHAEL HUDSON: I’m saying, okay, we’re going along with you. You know, we’ll accept all of your tariffs. You know, we’re not going to bargain with you. We’re not going to argue. We’re just going to, you impose your tariffs. Let’s see what economy breaks first.

NIMA ALKHORSHID: Yeah. Let me just put one of our audience have he has some sort of comment on here is what he said. He said, “Nima, please ask Professor Hudson and Wolff to teach an economic curriculum online. He would be willing to pay for that.” Yeah.

RICHARD WOLFF: Well, let me say in response that I have thought about that. I’ve thought about that because we, Michael and I and Nima have thought about doing something with the transcripts of these programs now for over a year.

And I have thought that, given the reaction I see to what we do here, that in effect, Nima is taking us through a kind of course in economics in which a series of related questions are posed each time, and that as the statistical reality unfolds in front of us, and I look at some different reports from those that Michael looks at, we are able to come together and enrich one another’s grasp of what’s going on, and it becomes a course in the immediate economic reality that we’re all living through.

So, I mean, I appreciate that you see that too. It’s one more voice pushing us to think about that.

MICHAEL HUDSON: There is a common denominator between Richards and my intellectual and political backgrounds.

RICHARD WOLFF: Yes, yes. And it has to do with the initials K and M.

NIMA ALKHORSHID: Thank you so much, Richard and Michael, for being with us today. Great pleasure, as always.

RICHARD WOLFF: Same here. See you soon.

NIMA ALKHORSHID: Bye-bye.