The Way to Avoid Tearing Society Apart

KARL FITZGERALD: Welcome, everyone. Welcome to another quarterly Patreon session with Michael Hudson, Professor Michael Hudson, author of over a dozen books, including his latest, The Temples of Enterprise. My name’s Karl Fitzgerald. I’ll be your host today. I’m an economist based in Australia that has changed three taxes, protecting communities from speculative overreach.

Michael, the role of property continues to expand. You sent me a great e-news that we often reference, Mr. Matt Stoller and his BIG newsletter.

This software algorithm ‘RealPage’ that coordinates rental increases. This led to some FBI dawn raids. What do you think about this form of price fixing?

MICHAEL HUDSON: Oh, that’s right… To try to coordinate rents. That’s been happening in quite a few different countries. They’re trying to make sure that landlords do not lower the rents just to get customers. They want them to hold out and say, if you want housing, you have to pay the high prices that we’re charging. And we want to make sure that all the landlords are acting together as a monopoly to prevent any housing that people can basically afford at what used to be 25% of their income and is now up to 43% for renters, 43% for buyers and over 50% for many renters now. So yes, they’re trying to increase the price of housing.

And of course that helps price American labor out of the market, which is just one more reason that Americans are buying imports and de-industrializing. So you would think that supporting Stoller’s criticism of the landlord’s monopoly would be to help the economy, much as David Ricardo’s critique of the pro-landlord Ricardo Corn Laws in 1815 was aimed at making English industrial labor more competitive and not make industry flourish in other countries. Certainly.

When you think of those rental price increases, is affordable housing and the right to shelter the frontier to our freedom? There’s not much affordable housing being built today. Most of the housing is for very wealthy people, not simply mansions, but real palaces for the billionaires and the multi-millionaires that are developing. There’s very little housing for the people. Although I must say, the subway I took a subway today from Manhattan to here, and the subway is certainly the new affordable housing here in New York.

KF: Right. Patreon’s – fire in those questions. Usually we’ve got a few coming through by now. So please use the Q&A panel here on Zoom. That would be great. Michael, the Temples of Enterprise now has been released. So congratulations on that.

It describes the most basic features of Western economic organization of money, interest bearing debt, markets, land tenure and enterprise. What role did the temples and the palaces in the Near East play in creating these sort of foundations of modern life?

MH: Well, the Temples of Enterprise are a collection of my academic articles, beginning with the 25 years that I was associated with Harvard’s anthropology department, which included its archaeology department. And my field there was in Babylonian economics.

What I had wanted to do in the six colloquiums that I organized through Harvard, bringing all the specialists that we could find in Sumerian, Babylonian, Assyrian, Judaic and Iranian societies, was I wanted to find out how the economic practices of modern civilization developed. Money, exchange, prices, and land tenure, and the relationship between the public sector and the private sector, which turned out to be really between the temples, the palaces and the family based community on the land.

What I found out was that there was a whole break in civilization, that the money and the way in which Middle Eastern civilization was organized from the third millennium, right down to the end of the first millennium BC, was a completely different form of civilization. I won’t say that it’s socialist, but it was a palatial dominated economy with a ruler aiming at keeping the economy in overall balance and preventing economic imbalance, preventing dependency.

What that worked out in practice was that the Near Eastern civilization aimed at preventing an oligarchy from developing, and especially a creditor oligarchy from developing, and expropriating the landowners and the self-sufficient population on the land, and essentially taking over the government itself. And what I found was that around 750 BC, when the Near East finally began to trade with Greece, Italy, and the West in general, the West developed a completely different form.

There was no divine kingship, there were no palace rulers empowered to cancel the debts and redistribute the land to debtors who had lost them to creditors, and to restore economic balance.

What I found was that the economic models that the Babylonians, certainly the Sumerians before them, taught their students were more sophisticated than any model used in the West today, any model by the National Bureau of Economic Research, because they realized that there were two basic dynamics in any economy.

There was a dynamic of tangible growth, the growth of herds, the growth of the economy, of population, and that was an S-curve. And they worked out the mathematics of the S-curve so carefully. They had quadratic equations and all the mathematics that usually isn’t taught until college these days. And original translators thought, well, this must be just a statistical report of herds growing, but it turned out to be the training, the training that scribal students had.

Well, in contrast to this S-curve, they had to plot the exponential growth of debt. And the question was, how long does it take debt to double at a given interest rate? Well, for commercial debts at that time, which were fixed at 20 percent, they were fixed to double in five years. And if they double in five years, that worked out to one-fifth a year, or 20 percent. They didn’t use the decimal system. They used the 60-based system. Well, what they found was that if the economy grows at an S-curve and debts grow this way, that there’s going to be a disparity. What do you do with the disparity?

In today’s world, if the debts grow faster than the economy, the economy goes bankrupt and the debtors forfeit their property to an increasingly wealthy oligarchy at the top of the pyramid. The Near East could not have afforded that. If you would have let the land end up, you could call it the peasantry. The families on the land lose the land to the creditors. Then they would have to spend their labor time working for the creditor, not on building public infrastructure in the off-season and not serving in the army.

Any Bronze Age society that would have followed modern economic models would have collapsed. You could say ‘de-industrialized’, but in their case, they would have de-agriculturalized and de-industrialized, just like the United States is doing today. They realized that the economic market did not provide economic balance. The marketplace of finance and the real economy tended to get out of kilter and had to be restored periodically. Not with a set number of years, but whenever there was a new ruler, there would be a clean slate, an underarum, basically a jubilee year.

The Babylonian word for the clean slate was underarum, which the Hebrew language picked up as derur, when the Jewish exiles returned from Babylonia and rewrote the Bible in the modern form that it is. Well, it’s just amazing. You’d think that in the United States, I began to work out my own models of economic growth. And again and again, any model you make of the United States economy or any Western economy finds that debt is growing faster and faster.

Look at the global South countries, look at Latin America, look at Argentina, and look at Africa. The debt is growing so rapidly that what are they going to do? If you don’t cancel the debts and write it down, you’re going to let the International Monetary Fund come in and impose austerity on you. And the austerity is going to prevent development of the labor force, prevent industrial capital investment, prevent infrastructure development, which is needed for an industrial economy, and you’ll end up in a collapse.

The ancient Near East was able to avoid this kind of collapse. That’s what’s so remarkable. And it really worked out into a different philosophy of civilization. And the reason that this is so relevant today is the world is once again splitting into two civilizations right now, the US and Europe, the West, which basically is run by the financial sector. They finance sort of an international cosmopolitan financial sector that has been dominating economies ever since the late feudal period.

And you have the BRICS Plus, dominated by China and also Russia, where the monetary system and the credit system is a public function. It’s the Bank of China that creates the credit and decides what the economy needs financing for in order to grow. And when a company, whether it’s an industrial company or a real estate company, when they can’t pay, the Chinese don’t say, well, you’re broke. I guess the creditors can take over and it’ll no longer be a public function. It’ll now be a private function. The Chinese can write down the debt.

Essentially, they can use bankruptcy on a national level. And I think in the discussions now that they’re having with the other BRICS countries, they are trying to create a system of international credit where the creditor nations, probably right now China is a dominant one because it’s going to be investing in the Belt and Road Initiative, building up transport infrastructure and other financing infrastructure in other countries.

They’re not using credit in order to bankrupt the country, bankrupt this labor, reduce it to proper labor and take over the government like occurs in the West. They’re treating it either as an equity investment or they say this is a long-term investment and you don’t have to repay us until the infrastructure that we’re putting in enables you to create the money to pay us back, pay for the infrastructure that we’ve advanced to you.

In some ways, this is very much like the line that Islam tried to start out with, saying we don’t want to have any kind of a debt relationship or usury. There was no difference in ancient languages between usury and interest. Any charging of interest was called usury. And instead, Islamic function said all credit should be in the form of equity so that if the debtor cannot pay, then the creditor has to share in the loss. It’s not just a bad debt, it’s a loan gone bad. In other words, a bad loan.

So, you have Islam, because it comes from the Middle East, retaining this whole millennia-long tradition of the Middle East of keeping money as a public enterprise and not permitting the debt and financial system to polarize society. The attempt is to prevent society from being polarized between the 90% and the 10% or in America between the 99% and the 1%. This is what other societies and civilizations were able to avoid.

Western civilization has not adopted this overriding regulatory authority that was common for the survival for all Bronze Age and Near Eastern societies for three millennia.

KF: Well, Michael, I haven’t heard you talk much about Islam. Are there any other economic tools in the Koran that we should know about?

MH: Just the laws of interest that they have, their rationale for preventing interest. That’s the main thing that Muhammad had pushed for. At the time that Muhammad developed Islam, there was a revulsion throughout the entire world, including the Roman world, all the way to Persia for austerity. There was almost a revulsion against wealth and its excesses.

They saw that wealth was addictive, that wealthy people tended to seek power over debtors, over people who are not wealthy, and the result was to tear society apart. The way to avoid tearing society apart, they thought, was to prevent wealthy families from developing. By the Renaissance, even theologians like Orisma said, what are we going to do about wealthy families in the city?

If a city lets a wealthy family develop, then maybe the city should exile the family. This certainly was a discussion in Florence, Italy, where you had wealthy families developing. Already in Dante’s Inferno, you have this discussed. What do you do to prevent wealth? Well, the main way to prevent wealth in a world where most wealth was achieved by financial means, not by innovation and creating new industry and adding to production, but purely as a predatory zero-sum transaction, the way was to prevent wealthy families.

Wealthy families tried to avoid this by saying, well, we give money to the poor. That’s what the church said, give money to the poor. But in order to consult, to avoid and prevent their societies from having these corrective checks, the Roman Catholic Church emerged at the time of St. Augustine, and especially by the time of the Crusades. The role of the Roman Church was to destroy, to wage war against all of Christianity. This was made very explicit in the 11th century by the papal dictates that said, we have to rule all other Christian groups.

The Crusades were fought against Christians, primarily. First of all, the big enemy already in 1052 was the Eastern Orthodox Church. Along with Antioch and other Eastern churches, Rome declared war on them and tried to excommunicate them. But the most vicious Roman Catholic war was against Germany, which would not let Rome take over, against France, the Cathars, and against Sicily and Southern Italy, where either the Orthodox Christians from Constantinople had colonies or which were Islamic.

Until Roman Catholicism, there were all the different religions were living together. In Jerusalem, for instance, there were Christian churches, Islamic churches, and the Orthodox churches. There was no hatred of people with a different religion. It was Christianity that said, well, we have to have an oligarchy taking over, and that oligarchy has to support the church.
Rich people are great.

The one thing that they, above all, the Christian fight was to distort and mistranslate the Lord’s Prayer. This is what my book ‘and forgive them their debts’ was about. When Jesus said, forgive them their debts, he meant debts. The contemporary translations into Greek made it very clear that it was debts. All of the surrounding Christian discussion was obviously about monetary debts. St. Augustine said, no, it’s not about financial debt at all. We can’t say cancel the debts because they’re the rich people. They’re our church. They’re our bishops. It’s sin, especially sexual sin. All of a sudden, they changed the whole function of religion away from economic balance, getting rid of the creditors – to sex.

There was still a dislike of usury in the Christian church. The church councils kept promoting the sanctions against usury, and especially they didn’t want church people to make interest-bearing loans.

But then came the Crusades. The Catholic church said, in the 11th century, they said, how are we going to conquer other countries and essentially kill everybody who disagrees with us? They were like ISIS today. And they said, well, what they did was they didn’t have an army. And you remember when Stalin choked in World War II, Churchill, I think, said, well, you know, what are you going to do about the Catholic church? And Stalin said, well, how many troops does the Pope have? Well, this was the problem in 1050, 1075. And so, the church began to make deals with warlords, especially the Normans, the Northmen, who had invaded Southern Italy just as mercenaries working for rivals. And they said, the first one was in Sicily, in Southern Italy, you know, we’ll make you king if you pledge to make your land a fief of the Pope. So, they backed Robert Huiscard, the warlord leader, and made him the king. And then a few years later, they had William, the conqueror. They said, we will make you a conqueror, and we’ll back you in conquering England, and we’ll have the church back you if you pledge to make England a fiefdom of the Pope, and pay us Peter’s Pence, pay us the tribute, just like our friend Robert Huiscard did.

So, if you look at what the Roman Papacy did, it’s very much like the United States backing client oligarchies throughout Latin America, and through the rest of the world.

Or, for instance, in Ukraine even, to create a country, an economy that is willing to turn over its economic surplus to the United States. And the book that I’ve been writing for the last few years, the third volume in my trilogy, I was going to call it The Tyranny of Debt, but I think I’ll call it A Political History of Finance in Western Civilization. I have to think of a more catchy title, but that’s basically what it is.

The whole way, the way in which the modern West has been shaped by the fight of Rome against all the other Christian churches to take over, and essentially, it was Rome that introduced the revival of interest-bearing debt to finance the warlords that it was setting against countries that would not permit Roman financial and fiscal control of their economies. And so, this was really the shaping, the force that had shaped the last thousand years of Western civilization.

And people have, economic historians, have left out the debt issue completely. They’ve talked about monetary history, they’ve talked about the growth of finance, but they haven’t looked about how finance shaped the whole constitutions of governments and the radical change that occurred in the 17th century. I won’t get into more details now because we’re supposed to talk about the modern economy.

But anyway, the reason for studying the ancient Near East is to say that, contrary to what Margaret Thatcher said, there is an alternative. The economy does not have to polarize. Letting the markets work their magic does not have to lead to economic polarization and impoverishment. It didn’t do that for thousands and thousands of years. Other societies created them. Western civilization has not. That’s the difference between Western civilization and other civilizations. And you’re seeing that split today, this year.

That’s the whole split that’s going on now between the US and NATO countries, and China, Russia, and the BRICS Plus economies.

KF: Well, that’s some sort of precis, Michael. Thank you for that oversight. And I really do hope the progressive church movement is picking up on this incredible volume of work you keep producing. And who knows, maybe even some historians. But back to the Temples of Enterprise. I just want to ask this last question before we get onto our Patreon’s questions.

What was it about ancient Mesopotamia that led to its economic takeoff? You mentioned it had a need for foreign trade and that its temples and palaces organized this trade along with temple workshops to produce handicrafts for trade, and that this was the origin of commercial enterprise with the economy operating on credit.

MH: There were two kinds of credit. In their law, they had different words. There was commercial credit that was denominated in silver by merchants who would take the textiles and the other handicraft works that Mesopotamia produced. And what Mesopotamia needed was stone and metal and things that were not available in its soil. Its soil was very rich, sort of like Ukraine’s soil. It was all deposited over the millennia by water, basically, coming in and delivering rich soil. But that soil, because it was alluvial, didn’t have a metal or wood, hardwood or stone. And so all of that you needed, they call it the Bronze Age, but the bronze required the organization of trade in order to get tin and copper to make the bronze. And silver is sort of a sanctified metal that was used for church decorations and prestige.

Well, Ukraine, I’m sorry, various Sumerian cities like Uruk, there was a huge expansion. And how was it going to get this metal? Well, you couldn’t just go out and conquer countries and say, we’re going to take over your mines because if you conquered them, and we’re talking about going hundreds of miles away, they’d fight back and it’s very expensive to try to run an empire. So they had to do it by peaceful trade.

So the temples and the palace would encourage an entrepreneurial merchant class to take a consignment of wool or weavings or clothes or carpets to these countries and to exchange them for metal and whatever the Sumerians needed. So in order to do this, the first market you had to create had to operate in some kind of prices and weights. How are you going to, if you’re going to have silver, how are you going to make sure that it’s pure silver? Well, it wasn’t really pure, it was a seven, eight silver, and it had to be alloyed. And how are you going to weigh it?

The market had to be created by a central administrative authority. You couldn’t just go and say, well, give me a lump of silver and we’ll trade a lump for grain or clothes or whatever you want. It had to be in a standardized form. And the standardization, not only of weights and measures, but also of purity had to be sanctified in order to be able to punish counterfeiting as a violation of the sanctified social order.

Well, all of the markets had to be created. There was no such thing as the Austrian method, just free individuals saying, well, I’m going to have some silver and I’m going to trade you in the market. If it weren’t regulated, you would have fake silver, it wouldn’t be weighed, there would be just pure anarchy and barter. And so you had to have an alternative to this, and that had to be centrally administered, which is why every society in antiquity, from Sumer to Babylonia, to Greece, to Rome, produced their coinage or their monetary metal in the temples. That’s why the word money comes from the temple of Juna Moneta in Rome that minted the coins during the Punic War.

So, I had to look at, well, how did they create a system that was all interacting? And I realized that the means of thought in Babylonia and through the entire Near East, if you’re thinking of a policy, you have to think of how the whole economy interacts with each other. You look at the economy as a system.

Well, that’s what’s lacking in economic analysis today. They don’t look at the economy as a system, or if they do, it’s a system that excludes debt, that excludes finance, that treats the whole system as if it works just on current exchange, there’s no future, there’s no discussion of, well, what’s going to happen when the system gets out of balance? How do we restore balance?

This had to be the means of survival of any society or economy that is just taking off back in the third millennium, the second millennium, and the first millennium BC. And that’s why it’s so important to see how other countries coped with these phenomena.

How do you organize debt? Well, what are the, when does it have to be repaid? You had talked about silver debt, but what about the debts of the population as a whole? Well, they were not denominated in silver, they were denominated in grain, or possibly you could say in wool, which was a product, because there was herding also, in addition to nomadic herding is addition to grain production. So, you had a whole different interest rate, you had different loan conditions for agriculture, but all of the agriculture sometimes has a drought, or sometimes the crops fail.

What do you do when crops fail? And inevitably, you’re going to have years in which there’s a drought or there’s a flood, or the crops fail. Well, the Babylonian laws of Hammurabi said, if the crops fail, nobody has to pay the debt. Most of the debts were owed to the palace or temples or their bureaucracy for advancing inputs or food or cattle to the cultivators. Well, if the debts can’t be paid because of a natural phenomenon, then okay, it’s a bad loan. You go back to how it was before.

Nobody, you’re not going to wreck society and debt the population on the land simply because the crops failed. You want society to be more important than just leaving it up to the risk of nature. So, what the Mesopotamians did was a means of handling risk in a way that it did not destroy society by transferring property and labor and personal freedom to a creditor class.

All these destructive tendencies are exactly what occurred in Rome and Greece and subsequently Europe and the United States. That’s how Western economies work.

KF: Excellent, Michael. Excellent. Yeah, as we’re back in time, Karl Sanchez asks, how did the Chinese differ in development from West Asia back in those times?

MH: I really don’t, I know very little about the Chinese economy. They did not place the merchant class on top. Mercantile trade was pretty much looked down upon throughout the entire world and every economy all the way to China said, how are we going to prevent the merchant class from really taking over? How do we keep it in its place?

So, there was always throughout Asia, the whole society had an idea of maintaining social balance and that sort of social spirit had become almost a national character, even though there were many changes of government and China went through the awful century of British domination of the opium wars, that spirit of looking at society as a system and saying, we must maintain balance and avoid impoverishing the people. The whole basis of Chinese philosophy was you have to maintain a prosperous peasantry and population in order to survive, to have an army, to defend yourself so that they have to be well fed, well clothed, to be productive.

You wanted the population to be productive, self-sustaining, and not reduced below basic living standards. There was, you looked at support of a business, of living standards, having your own means of self-support on the land, your own housing, your own basic needs, including health and various things that the government or society would supply. All of these were human rights.

These human rights did not exist in the West. That’s really the difference. There are no human rights. They wanted a free market. The free market means basically you kill everyone who supports human rights because that interferes with the freedom of the wealthy to do, as the Romans said, whatever they want with the poor.

KF: Shomgosh asks, the economic dynamics of debt forgiveness in the ancient Near East society sounds like the intent of Keynes’ Bancor system that may form the basis of the BRICS settlement system. When applied to countries rather than human subjects, do we not have to spell out certain rules of behavior for the participants, e.g. thou shalt not chronically try to consume more than thou produce? Are the set of such rules that lead to a stable, balanced world economy clear and available?

MH: The BRICS countries, China and all the rest, they’re now trying to reinvent the wheel and develop all this. It’s not really debt forgiveness. The technical word that ethereologists use is debt remission. The big question that the BRICS have is debt among countries. The immediate task they’re going to have is if you’re going to have a reorganization of trade between China, Russia, the BRICS, and they’re not going to trade with Europe and America because Europe and America doesn’t want to trade with them.

The pretense in America is that it’s trade with China that has bankrupted America and de-industrialized America. The reality is America has de-industrialized itself by replacing industrial capitalism with finance capitalism. But what the BRICS countries are doing is if we’re going to trade among ourselves, there are going to be imbalances. We’re going to have to reorient all the trade patterns that have developed and were based largely on trade with the United States and Europe as the wealthiest part of the world.

We’re going to have to trade with each other and give up the European and American market. That means that the wealthy countries are going to have to not necessarily null debts right away, but if it turns out that after 10 years or so the countries that are receiving infrastructure development and tangible investment, not financial loans but tangible investments, the debts will have to be cancelled. China, Russia, Iran have decided that it’s worth having this. It’s worth writing down the debts to countries that can’t pay in order to have an international, a global system that is an alternative to the NATO Western system.

As long as the NATO Western system is militarily aggressive and attacking, it is simply a national self-defense of East Asia, China, to have to join together to create something of mutual aid. I think that’s what you should think of it as in the sense that even Calden described mutual aid. That’s how Calden said all of the great civilizations have taken off by having in place a system of mutual aid instead of letting the systems deteriorate or decay into an exploitive system of mutual exploitation and antagonism instead of mutual aid.

The BRICS plus countries are now in the process of trying to create an economic system of mutual aid written into the laws of how are you going to transact trade without dollars into another alt currency that will be centrally produced. You’ll have their own kind of a central bank. In a way, it’s very much like what John Maynard Keynes proposed back in 1944 against the American designs for the International Monetary Fund, the Bancor, a system of credit.

So they’re trying to figure out how ‘are we going to define this new Bancor credit for trade between China, Russia, and the African countries, Brazil, Latin American countries, how are we going to have a new international unit of trade?’ That’s what’s being developed this year and will be developed next year when China replaces Russia as the head administrator of the BRICS. Francis Zott asked, if it was somehow determined that the US’s national debt was unable to be paid and therefore could not be paid, and as in antiquity that debt would be cancelled, how would that be done in the USA?

Would the debt holders be able to take legal action to stop such a decree? And why would that force all of the debt holders to be convinced to be left holding the bag? Thanks for your attention. The United States can always pay its debts because its debts are in dollars. If you’re Argentina, you can’t pay your debts because your debts are in dollars and you can’t print the dollars. America can always say, of course, we can pay the debts, here are the dollars. And they’ll say, well, you know, we want you to repay the bond that we have. And the Americans will say, sure, sell it on the market or if it’s matured, cash it in and we’ll give you the dollars for it. Here, now you have a bank account in dollars.

So it doesn’t have to write down the debt. But what it will do is say, if we’re at war with a country that’s not a democracy, like Ukraine is a democracy, and Israel is a democracy, if you’re not a country with a democracy willing to basically follow orders from Washington, then we’ll do what we did to Russia. We’ll just seize the debt you have in American banks, our satellite European banks, and we’ll just cancel it. Especially, let’s say you’re Saudi Arabia. And Saudi Arabia says, well, you know, ‘we’ve just joined BRICS and we’re going to support our Arab brothers and trying to get the United States out of the Near East because you’re bombing our people. You’re taking, you know, you’re genocidists in the West.‘ That’s what Christianity is, basically. That’s what your Judeo-Christianity is. And we don’t want that.

‘So we’re selling our treasury bills and the stocks and bonds that we have in America. We’re going to buy gold or we’re going to buy assets outside of the dollar area.’ Well, the United States will say, well, we told you back in 1974 that you could charge whatever you wanted for your oil. You can make as much money as you want on your oil. But if you don’t turn over all your oil earnings and send them to the U.S. economy to hold government bonds or buy U.S. stocks, that’s an act of war.

‘Well, we’re at war with you now. We’re just going to cancel all of your holdings of stocks, bonds, and governments.’ That’s not a debt cancellation. That’s just confiscation. Confiscation is different from a debt cancellation. That’s how you should think of what America will do. And especially now if the BRICS countries say, well, we cannot develop our economies as long as we have all these dollar debts that we incurred by making the mistake of trusting the West, trusting the IMF, trusting the World Bank to help us develop to pay it off. That was all a lie. That was all junk economics. And yet, not only did they convince our government for junk economics, but if we had a government that didn’t follow this, they overthrew them. They had a coup d’etat and a regime change. These debts are odious debts, and we’re not going to repay them.

Well, the United States was going to say, well, okay, you don’t pay the debts you owe to dollar bondholders. We’re going to just confiscate, due to you, what we did to Venezuela. We’ll confiscate all the assets you own in the United States and Europe. So there’s going to be a separation, really, into two civilizations. The Western dollarized civilization trading among itself as it winds down, and the rest of the world’s 85% global majority that’s trying to actually grow and develop in the face of global warming and all of the other problems that we have.

KF: Karl Sanchez asks, ‘could an eventual post-Milai Argentina be fixed by applying MMT?’

MH: Wait, could a post-Argentina?

KF: The new leader, I’m not sure I’m saying his name right, Milai, M-I-L-A-I.

MH: No, it’s going to be pure anarchy, and the idea of trying to redollarize the Argentinian economy will be that the government is not able to create the money to finance its own infrastructure development, its education, its healthcare, its roads, and all of the other things that are basically public and part of the natural public sector. And the Argentinian economy will collapse internally, just like it did last time it tried to dollarize the economy.

KF: Okay. Jesse Boyd asks, Michael, great to see you. I see you’ve been working with Jill Stein. What do you think of the Greens? Can they really change the system while working within it? Should we be voting for Greens or overturning the system?

MH: I worry the Greens everywhere tend to subvert revolutionary fervor and change. Change it into… I don’t think there’s revolutionary fervor in the United States now. The United States is what Lenin would have called a pre-revolutionary situation. And Lenin always warned against naive premature trying to change an economy or political system where you just were too marginal to have an effect. I think the way of changing the United States will be to watch itself continue to de-industrialize and polarize while it sees that there is another system in the world.

They’ll say, why is China growing and getting more and more prosperous while we’re getting poorer and poorer? What is it doing that we’re not doing? There has to be a change of consciousness in the economy as a whole before there can be a revolution from outside. And ironically, as it seems, most of the reform movements all the way from the first millennium on, when you had private wealth develop, if you look at who were the biblical, the Judaic prophets, they were not outsiders. They were pretty well-situated, prosperous individuals. You had to be prosperous in the 7th or 6th or 5th century in order to be able to develop a whole alternative doctrine.

There’s not that kind of reform movement in the United States or in the West. The wealthy system from which used to be the reformers are all in Davos with the World Economic Forum. I don’t think Jill Stein has any wealthy billionaire backing her party. Her campaign is probably the last one that you can imagine in American history that actually is funded by small donations. In order for her even to have the role of a spoiler, she has to get on the ballot.

The Democratic Party, along with the Republicans, but mainly the Democrats, have tried to make sure that no third party can get on the ballot at all. The RFK Jr. has made many signatures pretending to be Jill Stein, pretending to have all his signature ballots when, do you support a third party? And the people who signed for RFK said, of course we support a third party. They’re thinking of Jill Stein, but he covered up. There was no indication. It was all false pretenses that he did. He was able to get these signatures, but he had a billionaire supporter, a multi-billionaire supporting him.

Jill Stein has to spend her time campaigning locally, going around largely New York, but also other states to try to mobilize people, raise money on a fairly small scale, just to get the signatures to get her on the ballot. Well, what if she gets on the ballot and she pulls maybe 7% of the vote? That’s my aim is for her to get 7%.

And that will deny the Republicans, either Trump or Biden, the automatic presidency. It’s all going to go into the House of Representatives at that point. I think Jill Stein and I agree that there cannot be progress in the United States without destroying the Democratic Party as the alter right-wing political form. The militarist group, the financial group, basically the Wall Street billionaires and the military-industrial complex. Even if it costs supporting a Republican, you’ve got to get rid of the Democratic Party as controlled by the National Committee.

Legally, the Democratic Party doesn’t have to pay attention to who’s elected at all or who’s nominated. It’s all set in a small room of a small group of committee men that represent the military industry, the banking sector, Wall Street, and the oil industry. So, if it’s thrown into Congress, this will be a turmoil where probably neither Biden nor Trump will be elected unless a lot of so-called progressive Republicans, if that’s not an oxymoron, join the Democrats in supporting some other candidate.

Well, they still can’t do it without Jill Stein saying, well, if you’re going to want my support in a coalition government, here are the reforms that we want. That’s what we’re playing for. We’re not expecting to become president and redesign the economy because to do that, you’d need the Congress, you’d need the Senate, you’d need the Supreme Court, and you can only have that action at the margin as sort of a campaign just to show, yes, there is an alternative.

That’s her basic campaign, to show that there is an alternative, but the duopoly between the Republicans and the Democratic Party are blocking such an alternative today.

KF: It’s just such a tragedy, America has first passed the post-voting systems alongside Canada and the UK, if only preferential voting was part of the system. Is there any movement of note in that space?

MH: None whatsoever. And the problem is really the American Constitution. The Constitution was written by slave owners with the purpose of preventing any movement to free the slaves. That was the number one concern that shaped the Constitution. The way that they did that was to restrict federal power and have state power.

That’s why all the slave owners supported state power and why the anti-abortion groups today say, well, we want the state rights. The federal government can’t say that everybody has a right to abortion. Every state has a right to ban abortions, just as every state used to have the role to defend slavery, promote slavery, and oppose abolition. This prevention of any national ability to reform through the government, when Biden tried to cancel student debts, the case went to the higher courts and the court said, no, the federal government has no right to cancel student debts because that would hurt some of the states opposing. Any state can say, well, we insist in not forgiving student debts.

So you have the whole Constitution blocking economic progress and blocking socialism in a way, not only socialism, but what used to be called industrial capitalism. It blocks any reform policy coming from the government. So what’s needed is a constitutional convention.

The right-wingers, Wall Street, the oil industry, the military-industrial complex, have spent 30 years trying to define, let’s make a new Constitution and it’ll be just as rotten as the Roman Constitution was in preventing democracy. The only people who’ve discussed constitutional reform are saying, how can we lock in an oligarchy so that it can never be challenged by any kind of democratic underclass? That’s what’s locked the United States into the political tunnel vision that it has, and essentially prevents it from avoiding continual de-industrialization and economic polarization.

KF: John Douglas says, thank you for your time, Michael. I have Temples of Enterprise at home, along with most of your other books. I’m reading Pollyanni’s The Great Transformation right now, off your recommendation. I’m really digging it. Is there a good follow-up you could recommend? Also, when did you first read it and what impression did it leave on you?

MH: Well, I want to know what impression. One thing I’d like to know from the listeners is, of the people who’ve read that book or my other books, what’s your reaction to it? What do you get out of it? I’m curious to know. And in terms of what do you do for a follow-up? Well, the follow-up would be The Collapse of Antiquity.

Basically, that’s what happened after Temples of Enterprise and the Mesopotamian takeoff.

It’s amazing to me that there is no group that is studying the political evolution of society from the vantage point of how has it treated the debt dynamic. As I told you, they talk about monetary history. How much did the coins weigh and how much silver did it have or gold? They’ll have financial history. How did you have banking? But there’s nothing about what are the political impact of debt and how did the creditors end up gaining control of government to shape governments in a pro-creditor way and the answer is they didn’t.

The governments wanted to get the money to wage war on each other so that Catholics could fight Protestants and the royalty could all do what royalty does, go to war with their neighbors and try to conquer their systems. They all needed to raise money and that meant they had to redesign the whole state. The modern state emerged in the late 17th and 18th century as a means of committing the entire economy to pay the creditors for the war debts that they were taking up. Before the 17th and 18th century, national debts were royal debts and the king might owe the debts.

The king of Spain, the king of England, that would depend on the royal domain which was shrinking and shrinking as they sold it off to pay the debts or their power to tax which was weakening as you had domestic parliaments fighting back against the royal power to tax like you had in 1215 with the Magna Carta. You had a whole transformation of the state by creditors in order so that states could borrow and lock in their debts and avoid having the debts wiped out which would happen in national bankruptcies such as the Spanish bankruptcies of the 16th and 17th centuries.

KF: I think John Douglas was talking about Polliani’s book, The Great Transformation. When did you first read it and what impression did it leave on you and what would you recommend as a follow-up book for him to read after Polliani?

MH: I liked the book when I read it and in fact our group was the successor of the Polliani group. Polliani worked through Columbia University and we had our third Harvard colloquium on essentially debt and economic renewal in the ancient Near East was held at Columbia. Well certainly Polliani’s daughter Carrie Polliani who viewed our group as going beyond following the tradition of Polliani. He was a Hungarian socialist in Vienna fighting against the Austrian reactionaries and right-wing and he did not focus particularly on that cancellation. Carrie and her co-editor Radhika Desai published a whole sort of final memorial volume of Polliani a few years ago. I have the article on money and Polliani’s treatment of money and how our group is built on that treatment.

Polliani was certainly a step in the direction where our Harvard group has taken off. So yes it’s always good to trace the back and but also just to trace the history of the 19th century and economic history. You could begin almost anywhere, certainly. Polliani and his group are very helpful although the research that they did has been very largely superseded in the last half century or 75 years.

KF: We have a question on the financial markets basically seem to be going sideways. What do you think is propping them up at this time?

MH: I work in the financial sector and every economist I listen to seems to be favoring a soft landing or a higher for longer type scenario.

KF: Do you have any opinion about what the trigger for a downturn could be? Well this is what I’d wanted you to ask a question and I’ll give an example of what happened today in New York.

MH: Today (it’s been announced), there have been plans for the last few years to introduce congestion pricing in New York. In other words cars that came into Manhattan were going to have to pay $15 to get into the central city, the very center of it, where all the pollution occurs. It has taken me 50 minutes to get just the two miles across Manhattan in midtown!

New York is a very polluted city.

Governor Hochul had promised to support the congestion pricing but then she changed her mind. She said look I’ve talked to the lobbyists and we got to cancel congestion pricing because congestion pricing would make it more expensive for automobiles to bring the workers into the offices.

And if they’re no workers in the offices, if the workers say well instead of paying $15 to add to our daily weekday transportation to get to work we’d rather work from home. Well that means already in New York City there is a 40% vacancy rate in commercial office buildings. Well just imagine with congesting pricing if this goes even lower? The mortgages on all of these …. many many office buildings in New York are falling this year, next year into 2026.

There’s about to be hundreds of billions of dollars of defaults on these mortgages.

So Hochul said well the purpose of this congestion pricing was to raise a billion dollars to save the subway system from the decay that it’s had because the subway’s metropolitan transit authorities spent all the money on developing stations in the wealthy neighborhoods of the upper east side in New York City, not on the rest of Queens, Brooklyn, Staten Island.

Today I had to take, I came back from Manhattan to where I live in Forest Hills at one p.m. The train was standing room only, absolutely packed on the E train. And it was also packed.

The homeless situation – America does have a homeless policy – it’s sleep in the subways. So there were people sort of stretched out over whole chairs there. Well the mayor of New York was elected after serving on the board of directors of Citibank and he applauded Hochul’s cancellation of the congestion pricing by saying this would be a disaster for the banks.

What’s more important, transporting New Yorkers to work or saving the banks? ‘Well the banks are the most important thing because they’re my campaign contributors, they’re where I work for.’ He didn’t say that, I’m sort of translating the subtext of what he was saying. And so you’re going to have essentially New York’s environment polluted and spurring the emigration of labor from New York. People are not living in Manhattan. The average rent in Manhattan now, average, is $4,500 a month.

Well you can imagine why New York is no longer the industrial center. It used to be, 75 years ago, it was an industrial economy. Electronics, dairies, all sorts of things, all of that has been gentrified now and driven out. So the question was, is there going to be a crash? Well the crash is probably going to be on real estate debt, starting with commercial real estate and spreading to domestic, personal, family real estate. That’s the weak part of the system.

Also threatening the solvency of banks is third world debt repudiation, saying we can’t afford to pay the debts. That’s going to upset things.

Finally, the insurance industry is now stopping insurance basically in Florida and the whole Midwestern tornado system. The costs of insurance are vastly increasing. The price of living in a home that you own that’s going to lead to debt arrears. You’re having in the United States debt arrears going up for everything. Student loan debt arrears, up. Credit card debt arrears, up. Automobile debt arrears, up. All these entail penalty rates that are higher than the interest rates. And you’re having the whole economy basically impoverished by the debt overhead, which again only Jill Stein’s campaign is talking about. The economists are not talking about it. You have political hacks like Paul Krugman saying, I don’t understand why Americans, when their polls say the economy isn’t doing well. Look, Biden has cured inflation.

Well, who gives a damn if he’s cured inflation, the economy is doing great. Look at all the billionaires that are being created. We have to be doing great or we wouldn’t create so many billionaires. Imagine this.

Why are people saying the economy is lousy? It’s lousy because they can’t afford to live without going deeper into debt. They can’t afford to break even and buy the essentials without running into credit card debt or taking out a equity loan against their house, putting their house even more deeply in debt. They’re living, trying to break even on credit and they’re falling further and further behind.

Krugman says debt doesn’t matter because we owe it to ourselves. So it all ends up in zero. That’s net. There’s no net debt. The debtors owe to the creditors and that it’s a wash. You have the economic curriculum which does not discuss a debt.

As I said, you have to go back to Babylonia to look at when the debt dynamics are really described. So the economy is driving blind by not looking at the debt issue that is leading to the defaults and the break in the chain of payments that is leading to the problems that will at a certain point cause a crash.

Nobody I know can explain why the stock market is going up so much, except that it’s the enormous amount of private capital that was accumulated in the wake of Obama’s bank bailouts. Since 2008, almost all the growth in wealth has accrued just to the 1% of the population. I’d say 80% of the growth in wealth is all centered at the top.

There’s so much money that they’re buying out whole companies by buying the stock (stock buybacks). So the stock market booming is not a sense of health. It’s a reflection of the polarization and the inequality and the takeover of the industry and the entire real estate agriculture as a result of the wealth that was led to develop essentially by not doing what Nicholas Erisman said in the 16th century, you better drive all the wealthy people out of the country or the city.

His point of view was a city back then. But right now, America is letting a wealthy class develop and the wealthy class does not seek to develop the economy as a whole, but to make money for itself by impoverishing the economy as a whole. So America’s idea of wealth is to impoverish the economy.

It’s the poverty that creates the wealth at the top. The poverty of debt creates the credit of wealth at the top. It’s all an economic system. You’d think what this would be, what economic models are all about, but that’s not what they give Nobel Prizes for.

KF: Some great stuff going on in the chat here. And Diana has been leading the way there, firing in too much stuff for me to decipher. But she says, “I wish I could buy Michael dinner and listen to him all night long.” Michael, I’d love to see you out to dinner with some of your Patreons. It’d be a fascinating discussion.

MH: I’m afraid of COVID. I’ve stopped going out to restaurants because of the COVID spread. So my wife and I haven’t gone out for dinner really since early 2020. So not dinner. It can be Zoom meetings, but I haven’t gone on an airplane. I have even stopped going to China and I’m doing everything in China on Zoom instead of flying back and forth as I was before.

KF: Francis Zott asked “If the USA is headed for an economic disaster, is gold a viable hedge for individuals? What other actions can be attempted to cushion the future problems that the USA and its vassals will be facing? Foreign stocks, any suggestions? If you think the West is collapsing, then where are you going to emigrate to?”

MH: I was told that I have a green card in China if I want, but I’m probably going to stay here because this is where I know everybody. It’s my society. So I don’t know. There really isn’t any safety if the world’s getting unsafe. I mean, look at the threats of atomic war now. I think the United States, the Biden administration has made a calculation.

I think they agree with my analysis. They say, yes, the West is going down and China and Russia are going out. Now that means that if we don’t bomb them now and go to war with them now, a year later, they’re going to be even stronger and we’ll be poor. And 10 years later, they’ll be much stronger and we’ll be poor. If we’re going to atom bomb the world, we better do it now. There’s never going to be as good a time to go to war as now. And they’re trying to do everything they can to provoke Russia and China into the war.

This is why the Democratic Party is evil. And Biden is the embodiment of evil. And along with Secretary of State Blinken and Sullivan, these people should be treated as war criminals. They should be shunned.

Yet there’s no revulsion in the United States against them and what they’re doing. They want war. They’ve made a commitment to it. The Global Economic Forum in Switzerland says you need war because the world’s overpopulated. If we don’t have war, at least we can spread disease, global warming, and that’s going to wipe out much of the population that’s living on the seashore, Bangladesh, Miami, all of that. They really want to cut down the population and they think that war or disease or everything that the Book of Revelation talks about is the solution, not a disaster.

KF: Dina Lebowitz asks, on behalf of Flora, I’ve been studying FDR-era Secretary of Labor, Frances Perkins, and her role in the New Deal. She studied with Wharton Professor Simon Patten, (who studied econ in Germany in the 1870s, 80s) before getting her MA at Columbia University in econ and sociology in 1910. Any comments on what, besides pulling the country out of depression, she (Frances) was trying to accomplish? Was she trying to move the USA economy closer to the German model?

MH: Yes. Killing the Host has a long chapter on that. Yes, that’s exactly what was happening. Simon Patten had been educated in Germany. Almost all the founders of the American Economic Association in the 1880s had studied in Germany. The whole idea of the economic model was the German economic model. The American officials who were studying productivity in the government were German emigres. The education system was developed by a German. Yes, they were very explicitly following the model.

Patten was trying to do that and decided. What he found was that the free traders were so hopelessly narrow-minded. We know where they ended up with the Chicago School and people like Krugman. He said, he didn’t want to call it economics anymore. He founded the Sociology Association. He said, we’ve got to talk about sociology. We’ve got to put economics in an overall social context to think of it as a system. That’s what anthropology was supposed to be, too. Before the University of Chicago did to sociology and anthropology, what had it done to economics and made it tunnel vision and just a study of status instead of long-term how societies evolve.

KF: Karl Sanchez says there needs to be a new branch of study, political anthropology.

MH: Yes. Anthropology is the study of man, meaning man society. And forgive the sexism, anthropo there. And it was a study of the whole, how is a whole society evolving together?

You can’t just look at the market. You look at the political system that shapes markets. You look at the political system that determines who is in charge of shaping the market and in whose interest. Anthropology originally was developed to do that. That’s what I was trying to do at Harvard in the Peabody Museum, where I was associated with and which had sponsored all of the volumes of our colloquia on how money developed, how land tenure and real estate developed, how debt and debt cancellation developed, how economic accounting developed, and how labor evolved.

KF: Patreons – Michael asked an important question earlier that he would be interested in what the impact of any of his books has had on your thinking. So if anyone wants to raise their hand, Virginia will bring you up on the screen and you can talk with Michael, because its always good getting that prompting, that feedback to Michael. You really enjoy that feedback.

MH: So that’s what I thought these things were supposed to be. I thought these meetings would be back and forth and there’d be some kind of feedback, not just me pontificating.

KF: Here we go. Karl Sanchez has raised his hand. So hopefully Virginia can get someone up. Always more fun when others come on screen.

Virginia: Yep. I just promoted him to panelist.

KF: Okay. He’s getting his camera organized, hopefully, and he’ll come on board in just a second. That’s good. Maybe another question while he’s doing that. It takes a while. That’s it.

How do you see Viktor Orban, Hungary’s PM? Is he doing anything? Viktor Orban, how do you see him as a prime minister in Hungary?

MH: Wonderful. He’s very realistic. I’m waiting for him to withdraw from NATO and join the Shanghai Cooperation Organization. He’s very well balanced and not a neoliberal and doesn’t want to sacrifice his economy in the crazy war in Ukraine.

My friend Steve Keen was just working in Budapest at the Central Bank for two or three months this summer. No, just this winter, I guess. Your summer. He has glowing reports of how well things work in Budapest.

KF: Matthew Connors asks, this is a side note of a question, but I’m curious if Michael’s familiar with Chinyu Achebe’s ‘Things Fall Apart’. The main character’s father was a debtor and the Igbo culture so well presented in his novels that has very interesting things to say about wealth and debt.

MH: Yes, it was long. I’ve forgotten it now, so I can’t comment specifically, but yes, I remember that. I thought that was a good book.

V: Carl, we have two people up on camera. Do I just have to remove Michael’s spotlight so that they can be?

MH: Sure. I know what I look like. They can speak just as I am, I think, so let’s start off with Karl. Over to you.

Patreon Karl Sanchez: Thank you. I want to go ahead and say thanks to Michael Hudson for redirecting my historical studies.

MH: Wait, who is this?

KS: This is Karl Sanchez.

MH: Oh, yeah, that’s what I thought. That’s what it sounded like. So am I coming through loud enough there? Okay, so maybe not.
KF: Michael, maybe you need to turn up the volume on your computer.

MH: Oh, the volume’s okay. It’s like it’s in a tin can. I can turn up the volume here.

KS: I’m in a tin can. Okay. What I was going to say there is I just want to go ahead and thank you for thank you for changing my historical direction. The study that I had embarked on historically was to go ahead and primarily focus on the New Deal and the Depression era to go ahead and dig into that because it was a transformative era.

But in reading your, first of all, your Superimperialism and then other books after that, I got into the idea of, well, I want to go ahead and discover why it is, why we’re at the way we are now. What caused us to become what we are today? Why the neoliberal empire of today?

Well, the New Deal. Why the outlaw U.S. empire today? So your books that trace the rise of the initial reaction to the classical economists in the 1880s was really key because that told me that, aha, that’s where the change came because of what was happening in Europe. The English changed their system, their way of doing it, and that infiltrated across the ocean and changed the way that the overall political economy of the United States changed with the rise of Woodrow Wilson and World War I and all the subsequent stuff after that.

So your scholarship led to my change in my scholarship direction and my research. And so today, what do I do today? Well, I’m focused a lot on contemporary events because of what I see happening in Russia and the Russian economic development. So I’ve been doing a lot of that and focusing on that. And you know that because you read my sub stack.

So it’s like what Putin said to the heads of the world media yesterday in St. Petersburg. He told them that, you know, matter of factly that the U.S. was destroying its own financial system. He said that point blank to everybody there. He said the U.S. dollar, you know, Biden and his policies are destroying the system here. And he thinks that they’re doing that on purpose.

Which was very interesting, you know, for him to go ahead and make that. It wasn’t really a speculation. I think it was being more matter of fact in his declaration there to the media heads there. So that was one of the interesting revelations of that. So if we have a system now where the and you speculated on, you know, what Biden wants to maybe go to war now. Well, I don’t think that that’s going to be very good for the U.S. because we don’t have any weapons that can beat the Russians.

So the point was, is that, you know, you want to get feedback on, you know, the effect of your scholarship on your own readers, on us. And it’s I would just let you know that it’s certainly had a profound impact on what my academic direction took. And I’ve been a ceaseless promoter of all your works. And it was one of the, you know, as soon as you went on the Patreon and wanted to get promotion, wanted to get support, I was one of the first people signed up. So here’s to us. And I understand you’re not wanting to leave New York. That’s quite all right. Maybe I’ll make it out there one of these days.

MH: Well, thank you, Karl. I certainly, all of your work has paid off very well in providing the translations that you do on your subtstack. I always look forward to reading it. And certainly what you wrote today, your summary of President Putin’s comments are very valuable.

You begin by mentioning the New Deal. What made the New Deal possible was it occurred in a crisis. And certainly, the socialists all said, Roosevelt saved capitalism. And it took a crisis to enable him to put in place the Agricultural Development Act that was a basis of creating the largest increase in farm productivity and of any industry in history. He put together all sorts of social protection agencies, which are now being dismantled. And what Putin has done in Russia, in redesigning it was also the result of the crisis that the neoliberals had created through the medium of Boris Yeltsin.

I’m thinking today, I thought the other day, how do we think of the role of Biden? Is Biden America’s Boris Yeltsin, destroying the economy? I think the crisis we’re going through today is very different from that of under Roosevelt, or under Putin, because under Biden and the Democrats today, the crisis is being used not to revive the economy, not to reform it by putting in place social protections and mutual aid, but to lock in Wall Street control and military control of the government, essentially to replace elected government with Wall Street and the military, along with some of the leading monopolies, it’s the billionaires.

Somehow they’re recreating in America, they’re using the crisis to create all of the worst characteristics of the Roman Empire. So, that’s the big difference. And the reason it’s worthwhile reading the reports of the interviews by President Putin or Foreign Minister Lavrov, which are just so wonderful, is you realize that, you know, here they’re in the process of creating a more successful society, just like Roosevelt tried to do in the New Deal. You’re seeing it actually being created as they explain just exactly what they’re doing, and exactly how their policies, not only Russia, but China and the BRICS, are different from the neoliberal policies of the West.

Since there isn’t any policy yet of domestic reform of the US economy, at least you can watch how the Russian economy is dealing with the crisis caused by neoliberalism for itself, and how China is dealing with what really was a carryover of neoliberalism in the way in which it’s financed, its real estate sector and the local, provincial and local financing, as opposed to federal financing.

So, you’re seeing a new alternative society being created. And that’s the virtue of watching what’s happening in these developments. And certainly, the Russians are more explicit in explaining what they’re doing than I think that even the Chinese or others.

You can just see exactly why the world is splitting into two different, you could almost say two different civilizations, or whether civilization is being rescued from the detour that Western civilization took 2,000 years ago. So, yes, I think that’s where what you said anthropology comes in. You have to look at economics on the civilizational level. And if you do that, you see that there are so many different ways of dealing with the economic and financial tensions that are tearing the American society apart, that it doesn’t have to be this way.

KS: Yep, definitely does not have to be this way.

And the Russians, they’re very transparent. It’s not just communication to their people. You know, they’re doing as much of this stuff as possible to go ahead and communicate it to everybody else. I think it can be distilled down to this was pretty simple.

He said this several times in his talk yesterday, and that it’s all about the promoting of people’s interests and satisfying the interests of everybody, the common people, the citizens of countries, versus satisfying those of the oligarchs and the top 10%, just a small segment of society. So it’s, I call it people-centered development, but it could be called a form of socialism or something like that, too. But labels are one thing. It’s the results of what’s being done is what, you know, matters in the long term. So we continue to watch and see what it does. The program he put forth to be his legacy after he retires in 2030, the goals for 2030 to 2036 are very ambitious. They’re there, they’re going to be read. And it’s like I said, they’re, them and China and their joint declarations are very transparent. And you can read what they’re trying to do.

KF: Yep. We got to, we’re almost at the two hour mark. I think we got to stop at the two hour mark.

MH: Do we? Okay, we got 20 minutes.

KF: I saw John Chadwick. Yeah, John, we’ll see your questions. Haven’t seen you on screen before. So good to have you here. Fire away when you’re off mute.

John Chadwick: Okay. I was listening to, I follow all sorts of people, probably that you follow. And of course, Ben Norton, he just had a couple of great shows on Mexico. Now, what was very interesting was how AMLO had such an incredibly high favorability rating, 80%, just incredible. And then the lady that just got elected, Shinbaum, I think is her name. And she’s going the same route.

Now here I’m in Canada. So we’re the Northern neighbors and Mexico is the, are the Southern neighbors. And I think, you know, it sure would be nice if we were turning more down the road of Mexico and Mexico is working on re-industrializing and working with China. And he has all sorts of details, all the things they’ve done to alleviate poverty. So it’s just such an incredible turnaround. And then I think of Malay and Argentina and all these other different countries. I follow Brian Burletic. He covers a lot of Southeast Asia and how, you know, the United States has a lot of non- nations that interfere with the politics.

MH: I don’t have much hope for Canada. I think it has problems that the United States have. The Liberal Party is really an extension of the U.S. military, basically, and Wall Street. The banks dominate Canada, and dominated it long before the American banks really became so influential in the American economy. The five Canadian banks were taking over.

JC: Yes, yes. I’ve read all that from your website. Absolutely. I know all that stuff. But let me get to the point. The point is, have you ever found any patterns as to why some countries are more likely now to turn around? Like Ben Norton said, Mexico, the U.S. has a tremendous influence on their media. Just as our media is completely captured, we have a third party called the NDP, the Socialist Party that was born from the start of Medicare. It had a really great origin, but the mainstream media will just destroy them and say, any of the ideas that you put forth are just not going to work.

Somehow, Mexico and AMLO, I guess I question, is it the leader? Is he an amazing leader? Or are there conditions in Mexico? What turns a country around? Is it a leader or are there economic or other conditions that cause it to turn around?

MH: A precondition for turning around is to think of themselves as a national identity independent of the United States. Canada has always looked at itself as just a follower of the United States. Literally in time, when I worked for the State Department in Canada, we did a study of Canadian perceptions. I was trying to think, how do we improve the Canadian educational system and nurture the film industry?

Canada was one of the leaders of documentary films for a long time. How do we encourage that? The answer was a feeling of having a national identity so that it could become something independent of the United States. Certainly, controlling the media, the media control is very important. In the 60s, I loved the Canadian Post. That was, I always looked forward to that paper. All of that really is the corruption basically spreading from the Liberal Party.

Whenever I’ve gone to Canada, all I hear from the locals from British Columbia all the way to Montreal has been about how corrupt the political and economic process is there. I don’t know what the solution is to that. It’s a different kind of an economy. It was never really an industrial economy. Some Canadians explained to me that because it was so settled largely by Scottish and British and Irish population, they were all sort of interactive people population.

They went into trade, into merchandising or into mining. They didn’t go into industry. It’s a whole different concept. Back in the, I think, early 1970s, when I was in Canada, they had a whole argument over national identity. Were they white Anglo-Celtic Protestants?

It wasn’t an economic identity basically at all. It was really sort of a cultural interpersonal identity. All that has sort of been engulfed. What we found in the polls that we did was that Canadians thought that they were going to be just three years behind America. Whatever was happening in America, that was going to be Canada in three years. The result is that the Canadian society didn’t work. Think of it as an oyster producing pearls.

Almost all the American comedians and actors come from Canada. How do you cope if you’re growing up in Canada? You’ve got to become a comedian because otherwise you just get very depressed. Jim Carrey and Mike Myers. We’ve had some great Canadian actors. I agree that our media and we have a duopoly. It’s almost a mirror of the United States’ duopoly. It’s the French and the English. We have the French in Quebec. It doesn’t matter when you look at the national newspapers. It’s gone.

Like Jeffrey Sachs says, I can’t even look at the New York Times and the Washington Post. I’m the same way. I can’t look at the Globe and Mail or the Toronto Star. It’s such extreme propaganda that we’re just so sunk. I try to point out so often on Twitter that the banks are the enemy, essentially.

Everyone thinks, oh, our banks are stable. Our banks are the good guys. They’re making all these billions of dollars off these inflated mortgages. No one understands this financialization. No one has a concept of what’s going on. I think it’s absolutely hopeless here. That’s why the internet is so good. The internet is the escape.

I appreciate your material. Thanks for your comment.

KF: Thanks, John. Let’s go to Flo. We’ve got John Douglas coming up next.

Flo: Sure. Hi, John. I would like to say hello to another Canadian. I’m up in British Columbia.

I have a question, I guess, about the Belt and Road Initiative, but a quick comment on that. It’s become so clear to me what you’ve been saying, Michael, about the junk economics, the doublespeak, the diverging economies. Now that I can see what they mean when they’re talking about a healthy economy, I was just reading a Bank of Canada press release a couple of weeks ago on the state of the economy.

It’s like what you were saying, John. Everybody loves to harp on how strong the banking system is. They say, oh, we have the stress tests. Because obviously, our banking system is majority mortgages. I think it’s at 78 or 70% or so of all bank lending is for mortgages. Now they’re pulling all these little tricks to make it easier for people to continue to service their debt. It’s all about servicing the debt. That’s how they measure the health of the economy. There’s way extended amortization rates now.

Some are 70 years, I’ve seen. It’s not so typical, but it’s just indefinite debt peonage for mortgages. Naturally, it’s mortgage lending. It’s just incredible. Yes, maybe our banks aren’t as vulnerable to the systemic risk that is more apparent in the U.S. banking system, but that does not mean that for the majority of people that life is any easier or better. That’s where I think there’s a big disconnect. I’d like to hear more comments on that if you have any thoughts.

My question about the Belt and Road Initiative, I was in a bit of a debate with someone. They were basically saying that the Belt and Road, it’s China doing the same kind of a thing as the IMF and World Bank development loans, but at a lesser rate of profit.

I was like, no, my understandings are very structurally different, but I did struggle to specify in what ways. I was wondering if you could talk a bit about the specific ways that the model is different in the Belt and Road from the IMF model.

MH: Well, if China were to simply say, well, we’re going to be the new IMF and the World Bank, what reason would African countries, South Asian countries, South American countries have to join it? They say, we want an alternative. We don’t want to go down that road. China is obligated to use its wealth as a form of mutual aid in order to create a new, more than a block, a new civilizational alternative to the West. That’s how it’s really looking.

It’s a socialism versus barbarism. It cannot afford to use its investment as a means of exploitation as occurs in the Western financialized economies. Instead of making loans or financial investments, it’s actually creating tangible means of production, tangible increase in productivity and productive powers to sort of redesign how a national economy with its resources, with its labor, with its educational institutions and its population, how it can be enabled to be productive and self-fulfilling in a way that is not occurring in the West with its, I guess what my friend David Graeber called shit jobs or bullshit jobs.

China could not simply, no country would accept a replication of the neoliberal Western policies. That’s why they’re joining the BRICS and why more and more countries are joining it because they realized not only is the economic philosophy different, but as a military block, it’s an alternative from joining the US war block. It’s almost think of it as the peace block versus the war block.

V: Well, quick follow up to that.

What would you say if someone says that’s all just kind of propaganda or that’s what they would like you to believe? Well, if that weren’t the case, then why would other countries wanting to be joining?

MH: Other countries are leaving, are aiming to withdraw from the IMF, to withdraw from the World Bank, to reject that whole approach. That’s why they’re joining the BRICS because they want an alternative and the alternative has to help them in the short term as well as the long term or else they’d be voted out of power domestically and by the US media and China would not be able to create this alternative to the Western civilization along with Iran, Russia, and all the others.

There has to be the choices between a multipolar and a unipolar society as they’ve said again and again and again. They have to respect, aim at national self-sufficiency and basic economic rights and human rights to survival, rights to housing, rights to an education, rights to all of the basic needs that the Western model is not designing.

V: I think that’s what all these meetings are, the accelerating intensity of meetings between the BRICS leaders with each other. You can see they’re trying to effectively drop a constitution or at least a prolegomena to a constitution.

So we know that when the IMF makes loans or negotiates loans, there’s structural adjustment. A country that wants to borrow has to cut back on any public services, social services. Basically, they have to institute an austerity budget. Does China insist on anything like that?

MH: Obviously not, because it does itself. The whole Chinese revolution was to provide an alternative to that. They managed to do it in China and they would like to help other countries follow the same kind of model. But that entails, above all, financial independence from the dollarized West. It means they have to transact trade and investment and saving in their own currencies or in a group, their own currencies that have some kind of standardized relative value and so that credit and investment and trade can take place alternatively to the conditions that trade and investment and savings with the West had to do.

That’s what we’re talking about. That’s what makes it a different civilization. A different economy is a different civil basis for how to create an economy is the question that any civilization faces.

That’s the question that is faced today by the global majority, the 85 percent, saying there is an alternative to what the Western NATO 15 percent neoliberals say is natural. We’re not at the end of history. We’re at the beginning of a new history, a revival from the Western detour from civilization that occurred 2,000 years ago.

KF: Lovely. Diana’s counting down the minutes that we’ve got left here. I noticed John Douglas has his hand up. We haven’t seen him on screen before. Virginia, can we get him up? Here he comes. It’s much better when people come on screen. Let’s try and get this happening earlier.

V: John didn’t want to come on screen, but I just unmuted.

Go ahead, John.

Hey, Michael. I’m a big fan of your books, Red Killing the Host and Forgive Them Their Debt, Super Imperialism. I really like Karl Polanyi talking about how the goal of wealth creation is really to increase your social standing in order to help other people. I know you answered this question just now a little bit, but I don’t know if everyone else had a similar thing. We got all these articles saying, China’s on the brink of collapse. They’re totally doomed. Their population is aging out, everything. Really, the discussion is like what you said, that banking is a public utility over there.

I wanted to get your opinion on the Evergrande collapse and their reaction versus the 08 and how we responded.

MH: I think the whole idea, the whole way in which Evergreen evolved was the fact that China had a philosophy of ‘let a hundred flowers bloom’. We’re not going to try to be centrally located, centrally planned like the Stalinist economy was.

We’re going to let each of the local regions and cities take their own control. The mayors, local mayors in China were very important. Those decisions were made 50 years ago, 70 years ago, but now it’s clear that the problem that developed was how are you going to get local cities to sell financing? Well, the way that they were financing themselves was to sell real estate or real estate, let the ability to hold real estate tenure to the real estate developers and Evergreen and other companies made money this way.

They began to develop largely with borrowed money. Chinese began to look at having a house as the means of saving. Certainly in Chinese society, the whole idea of getting married was the girl had to find a boy whose family would give them the house. That’s what it was explained to me over there.

Well, the result was that as China became more prosperous, housing prices were going up. The reason Chinese put their money into real estate was they saw that it was going up and it was the rising real estate prices that became the heel of the Chinese economy. Most of my discussions in China are saying you don’t want housing prices to go up.

If the cities and local districts of China would have based their revenue on a land tax, as the price of housing goes up, it’s really the price of land that’s going up. If they would have had the land tax, which is what the Chinese advocated in Sun Yat-sen advocated in the early 20th century, you would have prevented the whole inflation of housing prices that was largely a financial phenomenon, but also a fiscal phenomenon because there was not a revenue sharing between the central government and the cities because they didn’t want centralized controlling.

Well, now that they’ve seen the experiments, they’ve seen which ways of development worked and which ways didn’t work, it’s time to reintroduce this. Well, if you introduce a land tax now and prices for buildings can go up, but not the price of the land, if that’s going to happen, then a lot of the financial institutions, the private banks are going to go under. That probably is a policy that would return China to the original idea of having money and credit as a basically public function. T

That’s the discussion that is the most critical in China today. You could say no more Evergrande, they should say no more housing price inflation as if you’re getting rich when your house price goes up. The house price goes up and that just makes it harder and harder and harder for the population to get housing.

Housing is a basic need. It’s a basic human right and the way to provide this right is not to inflate the price of housing, but to prevent it from going up by treating the rising site location, the rented location that increases as economies become more prosperous, as cities are built up with more and more amenities, as transportation is increased and so to affect the economics and livability of various locations, you have to go back to the classical economists of the 19th century, Adam Smith, John Stuart Mill, Marx, all of them talked, Simon Patton, they all talked about land rent as being the key challenge that societies had to deal with along with interest bearing debt.

The influence of Shanghai and the neoliberal Chicago school of financialization had worked against all of this and now China’s trying to put it back together. They’re really trying to reintegrate the economy and Evergrande was a sign of the disintegration and economic polarization coming from not solving the question of how are you going to treat land rent and consequently the cost of housing and doing business throughout the whole economy. How do you avoid China ending up looking like the US financialized real estate sectors ended up leading to the crash that we talked about at the beginning of this show?

KF: Wow, thank you for answering. Excellent, well there we are, we’ve just run over two hours, so thank you Patreons, thank you again for your support, really means a huge difference to Michael and all his team. A big thanks to all the real progressives as well, thanks Virginia, John and crew in the background, great to have your support as well to help us along and yeah, great to get to know more of you on screen and yeah, love to see a bit more of that interaction going.

Those Financial Times articles Michael is posting are really good, so good to see the discussion there and be good to see some of you posting your work on Patreon as well.

So there we have it Michael, well done, another fascinating discussion and really looking forward to that transcription, that overview you gave at the start was just brilliant, thanks everyone.

MH: Okay, thanks a lot. Okay, I’m going to have dinner now.