In Quest of a Multi-Polar World

Michael Hudson and Pepe Escobar resume their conversation about a global monetary system that appears headed for divorce. 

Pepe Escobar in conversation with Michael Hudson 
At The Henry George School of Social Science

Michael Hudson: Fifty ago, I wrote Super Imperialism about basically how America dominates the world financially and gets the free ride.

I wrote it right after America went off gold in 1971, when the Vietnam War, which was responsible for the entire balance of payments deficit, forced the country to go off gold. And everybody at that time worried the dollar was going to go down. There’d be hyperinflation. And what happened was something entirely different.

Once there was no gold, America strong-armed its allies to invest in U.S. Treasury bonds because their central banks don’t buy companies. They don’t buy raw materials. All they could buy is other central bank’s treasury bonds. So, all of a sudden, the only thing that other people could buy with all the dollars coming in were U.S. Treasury securities.

And the securities they bought essentially were to finance yet more war making and the balance of payments deficit from war and the 800 military bases America has around the world. And the largest customer, I think we discussed it before, are the Defense Department and the CIA that looked at it [Super Imperialism] as a how-to-do it book. Well, that was 50 years ago.

And what I’ve done is not only re-edit the book and add more information that’s come out, but I’ve picked up the last 50 years and how it’s absolutely transformed the whole world. And it’s a new kind of imperialism.

There was still a view 50 years ago that imperialism was [essentially] economic. And this is the view that there’s still a rivalry for instance, between America and China or America and Europe and other countries.

But I think the whole world has changed so much in the last 50 years that what we have now is not really so much a conflict between America and China or America and Russia, but between a financial system economy run by finance and an economy run by governments — democratic or less democratic, but certainly a mixed economy.

Well, everything that made industrial capitalism rich, everything that made America so strong in the 19th century, through its protective tariffs, through its public infrastructure investment all the way down through World War II and the aftermath. We had a mixed economy in America, and that was very balanced. Europe had a mixed economy. Every economy since Babylon and Rome has been a mixed economy, but in America you’ve had since 1980 something entirely different. That was not foreseen by anybody because it seemed to be so disruptive.

And what that was, was the financial sector saying we need liberty and by liberty, meaning we have to take planning and subsidy and economic policy and tax policy out of the hands of government. And put it in the hands of Wall Street.

And so, libertarianism and free market is a centralized economy that is centralized in the hands of the financial centers, Wall Street, the City of London, the Paris Bourse. And what you’re having today is the attempt of the financial sector to take the role that the landlord class had in Europe, from feudal times through the 19^th century.  It’s a kind of resurgence.

If you look at the whole last 200 years of economic theory — from Adam Smith and, Henry George and Marx, onward — the whole idea was that everybody expected a mixed economy to become more and more productive and to free itself from the landlords, to free itself from banking to make land a public utility.

That was the tax base to make finance basically something public, and government would decide who gets the funding and thus, the idea of finance in the public sector was going to be pretty much what it is in China. You create bank credit in order to finance capital investment in factories. It means the production of machinery, agricultural modernization, of transport, infrastructure of high-speed trains of ports and all of that.

But in the United States and England, you have finance becoming something completely different.  Banks don’t lend money to factories. They don’t want money to make means of production. They make money to take over other assets. Eighty percent of bank loans are mortgage loans to transfer the ownership of real estate. And of course that’s what created a middle class in the United States.

The middle class was able to buy its own housing, it didn’t have to pay rent to landlords or absentee owners or warlords and their descendants in England and Europe. They could buy their own. What nobody realized is that if you borrowed the money to take a mortgage, there’s still an economic rental value that is not paid to the landlords. It’s paid to the banks. And so, in the Western civilizations in America and Europe, the banks have played the role that the landlords played a hundred years ago.

And just as the landlord is trying to do everything they could through the House of Lords in England and the upper houses of government in Europe, they’re trying to block any kind of democratic government. And the fight really is against government that would do anything that is not controlled by the 1 percent, by the banks. Essentially the merger between finance insurance and real estate; the FIRE sector. So, you have almost a relapse of capitalism in the West back into feudalism, but feudalism with a financialized twist much more than it was in medieval times.

The fight against China, the fear of China is that you can’t do to China, what you did to Russia.  America would love for there to be a [former Russian President Boris] Yeltsin figure in China to say, just give all of the railroads that you’ve built, the high-speed rail, the wealth, all the factories to individuals. And let the individuals run everything and, then we’ll lend them the money, or we’ll buy them out and then we can control them financially.

And China’s not letting that happen. And Russia stopped that from happening. And the fury in the West is that somehow, the American financial system is unable to take over foreign resources, foreign agriculture. It is left only with military means of grabbing them as we are seeing in the near East. And you’re seeing in the Ukraine right now.

Pepe Escobar: Well, as an introduction, Michael that was perfect because now we have the overall framework — geo-economic and historically — at least for the past 70 years.

I have a series of questions for you. I was saving one of these for the end, but I think I should start really the Metallica way. Let’s go heavy metal for a start, right?

So considering  what you describe as a new kind of imperialism and the fact that this sort of extended free lunch cannot apply anymore because sovereigns around the world, especially Russia and China, I tried to formulate the idea that there are only three real sovereign powers on the planet, apart from the hegemon; Russia, China, and Iran, these three, which happen to be the main hub and the main focus of not only of the New Silk Roads but of the Eurasia integration process, they are actively working for some sort of change of the rules that predominated for the past 70 years.

So my first question to you would be, do you see any realistic possibility of a, sort of a Bretton Woods 2.0, which would imply the end of the dollar hegemony as we know it, and petrodollar recycling on and on and on, with the very important presence of that oily hacienda in the lands of Arabia. And do you think this is possible considering that President [Vladimir] Putin himself only a few days ago reiterated once again that the U.S. is no longer agreement- capable?  So that destroys already the possibility of the emergence of the new rules of the game. But do you think this is still realistically possible?

Michael: I certainly do not see any repetition of a Bretton Woods because as I described in Super Imperialism, the whole of Bretton Woods was designed to make American control over Britain, over Europe total. Bretton Woods was a U.S.-centered system to prevent England from maintaining its empire. That’s okay. To prevent France from maintaining its empire and for America to take over the sterling area and, essentially with the World Bank, to prevent other countries from becoming independent and feeding themselves, to make sure that they supported plantation agriculture, not land reform. The one single fight of the World Bank was to prevent land reform and to make sure that America, and foreign investors, would take over the agriculture of these countries.

And very often people think of capitalism, certainly in the sense that Marx described in Volume One, capitalism is the exploitation of wage labor by employers. But capitalism also is an appropriation of the land rent, the agricultural rent, the natural resource rent, the oil and the mineral rent. And the idea of Bretton Woods was to make sure that other countries could not impose capital controls to prevent American finance coming in and appropriating their resources, of making the loans to foreign governments so that governments would not create their own money to promote their own social development but would have to borrow from the World Bank and the IMF, which essentially meant from the Pentagon and the State Department, in U.S. dollars.

And they would dollarize their economies and the economies would all be sucked. The economic rents from oil, agriculture, mining would all be sucked into the United States. That kind of Bretton Woods cannot be done again. And since Bretton Woods was an idea of centralizing the world’s economic surplus in a single country, the United States, no, that can never be done again.

What is happening? You mentioned the world of free, free lunch, and that’s what was a theme of Super Imperialism, when America issues dollars, for these all end up in central banks and they hold the dollars as a surplus. That means what can they do? All they can do is really lend them to the United States. America got a free lunch. It could spend and spend on its military, on bumping up corporate takeovers of other countries. The dollars have come in and foreign countries couldn’t cash them in for gold. They had nothing to cash them into. And all they could do is finance the U.S. budget deficit by buying Treasury bills.

That’s the irony now, what has happened in the last few years in the fight against Russia and China is America has killed the free lunch because it said, okay, now we’re going to have sanctions against Russia and China. We’re going to all of a sudden grab whatever money you have in foreign banks like we grabbed Venezuela’s money. Let’s go, we’re going to excommunicate you from the bank clearing system. So, you can’t use banking. We’re going to put sanctions against banks that deal with you.

So obviously Russia and China said, okay, we can’t deal with the dollar anymore, because the United States just crammed them. And if we do have dollars, we’re just going to hold everything in reserves and lending to the United States, the dollars that it’s going to spend building more military bases around us to make us waste our money on monetary spending. And so, America itself by the way, in fighting against China and Russia, has ended the free lunch.

“In America you’ve had since 1980 something entirely different. That was not foreseen by anybody because it seemed to be so disruptive.”

And now, Russia and China as you pointed out, are de-dollarizing, they’re trading in each other’s currency. They’re being the exact opposite of everything that Bretton Woods tried to create. They’re trying to create independence from the United States.

If Bretton Woods is this dependence on the United States, a centralized system dependent ultimately on Wall Street financial planners then, what China and Russia are trying to create is an economy that’s not run by the financial sector, but it is run by, let’s say, industrial and economic engineering and saying, what kind of an economy do we need in order to raise living standards and wages and self-sufficiency and preserve the environment, what is needed for the ideal world that we want?

Well, in order to do that, you’re going to have to have a lot of infrastructure. And in America, infrastructure is all privatized. You have to make a profit. And once you have infrastructure, a railroad or electric utility, like you see in Texas recently, it’s a monopoly. Infrastructure, for 5,000 years, Europe, the near East, Asia was always kept in the public domain that goes, if you’ll give it to private owners, they’ll charge a monopoly rent.

Well, the idea that China has is, “OK, we’re going to provide the educational system freely and let everybody try to get an education.” In America if you have an education, you have to go into debt for the banks for between $50,000 and $200,000. And whatever you make you’re going to end up paying the bank while in China, if you give free education, the money that they earned from the education will be spent into the economy, buying the goods and services that they produce, and the economy will be expanding, not shrinking, not having it all sucked out into the financial banks that are financing the education, same thing with the railroads, same things with the healthcare.

If you provide healthcare freely then the employers do not have to pay for the healthcare because that’s provided freely. In the United States, if the  corporation and the employees have to pay for healthcare, that means that the employees have to be paid a much higher wage in order to afford the healthcare, in order to afford the transportation that gets him to work, in order to afford the auto loans, in order to drive to work, all of this is free, or subsidized in other countries, who create their own credit.

In the United States and Europe, governments feel that they have to borrow from the wealthy people in a bond and pay interest. In China they say, “we don’t have to borrow from a wealthy class. We can simply print the money.” That’s Modern Monetary Theory. As Donald Trump has explained in the United States, we can print whatever we want. Dick Cheney said, deficits don’t matter. We can just print it.  And of course, Stephanie Kelton and my colleagues in MMT at Kansas City for many years have been saying.

“The economy has been saturated and Reaganized and the result is a fight of economic systems against China and Russia.”

The banks fear this because they say, “Wait a minute, Modern Monetary Theory means it’s not feudal monetary theory. We want feudal monetary theory. We want the rich people to be able to have a choke point on the economy that you can’t survive unless you borrow from us and pay us interest. We want the choke points.” That’s called economic rent.

And so, you have the West turning into a rent-extractive economy, a rent-seeking economy. And you’ll have the whole ideal of Russia, China, and other countries being the ideal of not only Marx, but Adam Smith, John Stuart Mill, Ricardo. The whole of classical economics was to free economies from economic rent. And the American economy is all about extracting rent through the real estate sector, the financial sector, the health insurance sector, the monopolies and infrastructure sector.

The economy has been saturated and Reaganized and the result is a fight of economic systems against China and Russia. So, it’s not simply that, there’s a fight between who makes the best computer chips and the best iPhones. It’s: are we going to have a fallback of civilization back into feudalism, back into control by a narrow class at the top of the economy, that 1 percent? Or are we going to have the ideal of democratic industrialization that used to be called socialism but it was also called capitalism. Industrial capitalism was socialism; it was socialized medicine, it was socialized infrastructure, it was socialized schooling. And so, the fight against socialism is a fight against industrial capitalism, a fight against democracy, a fight against prosperity.

[See previous coverage:  The Consequences of Moving from Industrial to Financial Capitalism]

That’s why what you’re seeing now is a fight for what direction civilization will go into. And you can’t have a Bretton Woods for a single kind of organization because the United States would never join that civilization. The United States calls a country trying to make its labor force prosperous, educated and healthy instead of sick with shorter lifespans, they call it communism or socialism.

Well, it can call it whatever it wants, but that’s the dynamic we are talking about.

Pepe:  Well, you put it very, I would say starkly. The opposition between two completely different systems, what the Chinese are proposing, including, from productive capitalism to trade and investment all across Eurasia and beyond, including Africa, parts of Latin America as well. And the rentier obsession of the 0.01 percent that controls the U.S. financial system. In terms of facts on the ground, are we going slowly but surely and ominously towards an absolute divorce by a system based on rentier, ultra-financialization, which is the American system, not productive capitalism at all.

I was going through a small list of what the U.S. exports, it’s not much as you know, better than I do. Agricultural products but always privileging U.S. farmers.  Hollywood, we are all hostages of Hollywood all over the world. Pop culture? That’s not the pop culture that used to be absolutely impregnable and omniscient during the ‘60s, the 70s, during the Madonna, Michael Jackson era in the ‘80s, right? Infotech. And that’s where a big bet comes in. And this is maybe the most important American export at the moment because American Big Tech controls social networks all over the planet. Big Pharma. Now we see the power of Big Pharma with the whole Covid operations, right?  But Boeing prefers to invest in financial engineering instead of building decent products. Right?

So, in terms of a major superpower, the hyperpower, that’s not much, and obviously buyers all over the world already noticed that. So, China is proposing the New Silk Roads, which is a foreign-policy strategy, and a trade, investment and sustainable development strategy. [It’s] applied not only to the whole of Eurasia, but Eurasia and beyond to grow a great deal of the Global South and that’s why we have Global South partners to the New Silk Roads — 130-and-counting as we speak.

So, the dichotomy could not be clearer. What will the 0.001 percent do? Because they don’t have anything seductive to sell. To all those nations in the Global South to start with; the new version of the Non-Aligned Movement, NAM, the countries that are already part of New Silk Road projects, not even to Europe and this, we could see by the end of last year when the China-European Union agreement was more or less sealed. It’s probably going to be sealed in 2021 for good.

And at the same time, we had the Regional Economic Comprehensive Partnership, RCEP, with the ASEAN 10, my neighbors here, the Association of South East Asian Nations, China, Japan, South Korea, Australia, and New Zealand. So, when you have the China-EU deal, and when you have RCEP, you have China as the number one trade partner on the planet, no competition whatsoever.

And obviously every one of these players wants to do business with China. And they’re privileging doing business with China to doing business with the U.S., especially with a country that once again, according to President Putin, is non-agreement capable. So, Michael, what is your key geo-economic view of the next steps? Are we going towards the divorce of the American financialization system and the Eurasia-and-beyond integration system?

Michael: Well, you you’ve made the whole point clear. There is incompatibility between a rentier society controlled by the finance and real estate interests and military interests and an industrial democracy.

Industry in England and Europe in the 19th century — the whole fight for democratic reform to increase the role of the House of Commons against the House of Lords in England and the lower house in Europe — was a fight to get labor on the side of industry [and] to get rid of the landlord class. And it was expected that … capitalism [would then be] free of the landlord class, free of something that wasn’t really capitalism at all, it was a carry-over from feudalism. Once you free capitalism, you wouldn’t have this overhead of the idle 1 percent, only consuming resources and going to war, anymore.

And then World War I changed all of that . … Already, in the late 19th century, the landlords and the banks fought back, and they fought back largely through the Austrian School of individualism and the English marginalist and they called it freedom. They call it free markets. Free market meant giving power to the monopolists, to the oppressors, to violence. A free market was where armies can come in, take over your country, impose a client dictatorship like [Gen. Augusto] Pinochet in Chile or the neo-Nazis in the Ukraine. And you call that a free market.

The free world was a world centrally planned by the American military and finance together. So, it’s Orwellian, and the dynamic of this world is shrinking because it’s polarizing and you’ve seen with the Covid pandemic in the United States, the economy has polarized much more sharply than ever before between the 1 percent, the 10 percent and the rest of the economy.

Well, as opposed to that here, you have economies that are not run by a rentier class, that do not have a banking class and the landlord class controlling the economy, but a partnership. The kind of thing you had in Germany in the late 19th century, government industry and labor, all working together to design how we provide the financing for industry so that it can provide not only industrial capital formation, but public funding for us to build infrastructure and uplift the population.

What China is doing is what made America rich in the 19th century, what made Germany rich. It’s exactly the same logical engineering plan. Now, this plan because it’s based on economic expansion, and environmental preservation and economic balance instead of concentration, this is going to be a growing economy. So, you’re having a growing economy outside of the United States and a shrinking economy in the States and its satellites in Europe.

“What China is doing is what made America rich in the 19th century, what made Germany rich.”

Europe had a choice; either it could shrink, and be American, or it could join the growth. Europe has decided unanimously, we don’t want to grow. We want to be constant. We want our banks to take over just like in America. That’s a free market because Americans have found out, and I’m told by American officials we just buy the European politicians, they’re bribable. That’s why when president Putin says, America and Europe are not agreement capable, it means they’re just in it for the money. There is no ideology there. There is no idea of the overall social benefit. The system is “how can I get rich, and you can get rich by being bribed?” That’s why you go into politics. As you can tell in America with the Supreme Court law saying politics can be personally financed.

So, you’re having two incompatible systems and, they’re on different trajectories and if you have a system that is shrinking like the West and growing in the East, you have resentment.  People who obtain their wealth in crooked ways, or without working — by inheritance, by crime, by exploitation — they will fight like anything to keep that. Whereas people who actually create wealth, labor, capital, they, they’re not willing to fight, they just want to be creative. So you have a destructive military force, in the West. And, basically a productive, economic growth force. And in Eurasia, the clash now is occurring largely in Ukraine. You’re having the United States back the neo-Nazis.

Pepe: The old Nazi movement!

Michael: It’s the same swastika-carrying group that threatened Russia in World War II. And this is like waving a red flag before a bull. Putin continues to remind the Russians. We know what happened with the 22 million Russians that died, in World War II with Europe coming in. We’re not going to let it happen again.

And you can be certain Russia is not going to be sucked into invading the Ukraine. The United States has its military advisers in the Ukraine. Now, the Vineyard of the Saker has a very good report on that. America’s trying to needle Russia into fighting back against the terrorist groups and Russia has no desire at all to. There’s nothing that Russia has to gain by taking it over. It’s essentially a bankrupt country.

The United States is trying to provoke a response so it can say Russia is attacking the West.  The result will probably be that Russia will very simply provide arms to the Eastern Ukrainians to fight back the invasion. And you’re going to have a wasteland in Western Ukraine and Poland. And this wasteland will be the new buffer state with Europe. Already you have, maybe 10 percent of the Ukrainians having moved to Russia and the east. [Another] 10 percent are now plumbers in England and Europe, working. They’re beginning to look like Latvia and other neo-liberalized countries. Neo-liberalized countries? If you want to see the future, look at Latvia, Estonia. Look at Greece. That’s the American plan. Essentially, an emigration of skilled labor, a sharp reduction of living standards, a 20 percent decline in population. And although it may appear to have more income, all of this income and GDP is, essentially, interest collection and rents to the FIRE sector.

All the American GDP growth is essentially payment to the bank, to the landlords and the monopolist, it’s not, the population, the employees are not sharing in the GDP. It’s all concentrated at the top. They make a desert, and they call it growth.

It hasn’t changed.  Rome was a predatory economy held by military force that ultimately collapsed and America is on the same trajectory as Rome. And it knows this, I have spoken to American policymakers and they say, “you know, we we’re going to be dead by then. It doesn’t matter if the West loses. I’m going to get rich. I’m going to buy a farm in New Zealand and make a big bomb shelter there and live underground, you know, like a cave dweller.”

The financial time frame and the predatory rentier time frame is short term. The Eurasian time frame is long-term. So, you’ve got to have the short-term burning what wealth it has as opposed to the longer-term building up.

[Consider the Biden Covid relief measure.] They call it a stimulus bill, but if you’re starving, if you haven’t been able to pay your rent, if you’re six months behind in your rent and you get enough money to pay the landlord, at least one month back rent, that’s not a stimulus, that’s a survival.  And it’s a one-time payment. This kind of stimulus checks that America’s sending out are sent out every month in Germany and parts of Europe.

“All the American GDP growth is essentially payment to the bank, to the landlords and the monopolist.”

The whole idea in Europe is: OK, you have a pandemic, you have business interrupted. What we’re going to do is we’re going to have a pause. You don’t pay the rent, but the landlords are not going to pay the banks. And the banks are not going to be in arrears. We’re just going to have a pause so that when it’s all over people will go back to normal. Well, China and Russia are already pretty much there and where you are [in Asia], and especially in Thailand, are already back to normal.

But in America anybody who’s renting or who’s bought a house on mortgage credit or who has credit card debt or personal debt or automobile debt they’re way behind. And all of these stimulus checks are just being used to pay the banks and the landlords not to not to buy more goods and services.

All they’re trying to do is, is get out of the hole that they’ve been dug into in the last 12 months. That’s not a stimulus that’s a partial, desperation payment. This problem never existed in other civilizations. You have the whole tradition of Greece, Babylonia that’s what my book Forgiving the Debt is all about. The whole idea is when there is an economic interruption, you have an interruption, you don’t have people into debt. You wipe out all of the arrears that have mounted up. You wipe out the tax arrears, the rent arrears, the debt of payment arrears. So once the crisis is over, you can start from a normal position again.

There’s no normalization in America, there’s no normal position to start. You’re starting from a position, even more behind the financial problems than you were when you went in. The foreign economies of China and Russia don’t have that kind of problem, they don’t have any kind of deficit. So, the West is beginning with 99 percent of the population deeper and deeper into debt to the 1 percent.

Where is that whole polarization between the 1 percent and the 99 percent? It doesn’t exist certainly in China and in Russia, Putin is trying to minimize it, given the legacy of the kleptocracy that the neo-liberals put in he’s still trying to deal with that, but you really have that. It’s a difference in economic systems and the direction in which these systems are moving in.

Pepe: I’m really glad that you brought up Ukraine, Michael, because this, let’s say U.S. foreign policy, even, before Trump and now with the new Biden-Harris administration, basically more or less what it boils down to is sanction sanctions, sanctions, as we know, and provocations, which is what they’re doing certainly in Syria with that recent bombing.

And, in the case of Ukraine and Donbass, it’s absolutely crazy because NATO so-called strategists, when you talk to them in Brussels, they know very, very well about each state or whatever they weaponize and financialize to profit Kiev to mount some sort of offensive against the Donbass and even if they would have like 300,000 soldiers against like 30,000 in Donbass.

If the Russians see that this is going to get really heavy if they intervene in directly, with their bombing, with their super missiles, they can finish this story in one day. And if they want it, they could finish the whole story, including invading Ukraine in three days, like they did in 2008 with Georgia and still they keep the provocations, loosely acted on by  people from inside the Pentagon.

And so, we have sanctions, we have nonstop provocations, and we have also a sort of introducing a Fifth Column — elements inside or at the top of government — which brings me to, and I would love to have your personal analysis on the role of Mario (Goldman Sachs) Draghi now in Italy, which is something I had been discussing with my Italian friends. And there’s more or less a consensus, among very well informed, independent Italian analysts that Draghi may be the perfect Trojan horse to accelerate the destruction of the Italian state, which will accelerate the globalist project of the European Union, which is absolutely non-state centric.

Let’s put it this way, which is also part of the Great Reset so if you could briefly talk to us about the role of Super Mario at the moment.

Michael: Well, Italy is a very good example to look at. It had strings for a long time. When you have a country that needs infrastructure, that needs public, social democratic spending, you need a government to create the credit. But when Americans and specifically the University of Chicago free market lobbyists created the European, the Eurozone financial system, their premise was that governments cannot create money. Only banks can create money. Only banks owned by the bond holders can create money for the benefit of their owners and bond holders. So, no European government, first of all, can run a budget deficit sufficient to cope with the coronavirus or with the problems that have been plaguing Italy for a decade. They can’t create their money to revive employment, to revive infrastructure, to revive the economy. The European Central Bank only lends to other central banks.

It’s created trillions of euros just to buy stocks and bonds, not to spend into the economy, not to hire labor, not to build infrastructure, but just for the holders of the stocks and bonds. The 1 percent or 5 percent of the population gets richer. The function of the European Central Bank is to create money, to save the wealthiest 5 percent from losing a single penny on their stocks and bonds.

And the cost is to impoverish the economy and to basically make the economy end up looking like Greece, which was sort of the dress rehearsal for how the Eurozone was going to just essentially reduce Europe to debt dependency, just like in feudalism everybody had to have access to the land by becoming a serf.

Well now you’re in debt peonage. It’s the modern, finance capital’s version of serfdom. And so, in Italy we’re going to need government spending. We’re going to need to do in our way what China’s doing in its way and what Russia is doing in its way. We’re going to have some kind of government program. And we can’t have the economy being impoverished just because the University of Chicago has designed a plan for Europe to prevent the euro ever from being a rival to the U.S. dollar. If there’s no European central bank to borrow, to pump euros into the world economy, then, only dollars will be left for central bank reserves. The United States doesn’t ever want a rival. It wants satellites and so that’s what it’s basically turned Europe into. And I don’t see any response outside of Italy for an attempt to say we can’t be a part of this system. Let’s withdraw from the euro.

I know that the Greeks, when I was in Greece years ago, we all thought can’t we join with Italy and Portugal and Ireland and say look, the system isn’t working. Everybody else no, no, the Americans will just simply get us out of office one way or another. And in Italy, of course, if you look at what happened after World War II, the great threat was Italian communism.  You had the Americans essentially say well, we know the answer to communism, it’s fascism and, you saw where they put the money. They essentially did every dirty trick in the book in order to fight any left- wing group in Italy, just as they did in Yugoslavia, just as they did in Greece, wiping out the partisans, all the leading anti-Nazi groups from Greece to Italy to elsewhere. All of a sudden they were all either assassinated or moved out of office and replaced by the very people that America had been fighting against during World War II.

Well, now Italy is finally coming to terms with this and trying to fight back and you’re having what’s happening there, between Northern Italy and Southern Italy. You’re having the same splits occur in other countries.

Pepe: Yeah. Well, I’m going to bring up, perhaps an even more extreme case now Michael, which is the case of Brazil, which at the moment is in the middle of an absolutely out of this world mix of telenovela and Kabuki theater that even for most Brazilians is absolutely incomprehensible. It’s like a fragmentation bomb exploding over and over again, a Groundhog Day of fragmentation bombs.

In fact, it’s completely crazy. Lula [former President Luiz Inácio Lula da Silva] is back in the picture as well. We still don’t know under which terms, we still don’t know how the guys who run the show, which are the Brazilian military, are going to deal with him or instrumentalize him, et cetera.

I bring up this case because … essentially it has convulsed Brazil completely and large parts of Latin America. It is a telenovela with one cliffhanger after another, sometimes in a matter of minutes, but it encompasses all the basic themes of what really interests the 0.01 percent, which we can identify for instance as a class war against labor which is what the system in Brazil, since the coup against Dilma [Former President Dilma Vana Rousseff] has been waging. A war against mixed economies, economic sovereignty, which is something that the Masters of the Universe of the 0.01 percent cannot wage against Russia and China. But that was very successfully waged against Brazil and implemented in Brazil. In fact, in a matter of two years, they completely devastated the country in every possible sense, industrially, sociologically, you name it…

And of course, because the main objective is something that you keep stressing over and over again, unipolar rentier dominance, in fact.

Brazil, I would say is the extreme case in the world not only in the Global South, but in planetary terms of let’s say the last frontier of the rentier economy, when you manage to capture a country that was slowly emerging as a leader in the Global South, as an economic leader. Don’t forget that a few years ago, Brazil was the sixth-largest economy in the world and on the way to become the fifth. Now it’s the 12th and falling down nonstop and controlled by a mafia that includes not by accident, a Chicago Boy Pinochetista, Minister Paulo Guedes, who is implementing, in the 21st century, something that was implemented in Chile in the ‘70s and ‘80s. And they were successful. Apparently, at least so far.

Brazil is so disorganized as a nation, so shattered, so fragmented and atomized as a nation that basically it depends on the re-emergence of a single political leader, in this case, Lula to try to rebuild the nation from scratch. And even in a position where he cannot control the game he can interfere in the game, which is what happened, like you know, … when he gave a larger-than-life press conference, mixed with a re-presentation of himself as a statesman and  said, “Look  the whole thing is shattered, but there is some light at the end of the tunnel.”

But still he cannot confront the real Masters of the Universe that have allowed this to happen in the first place. So just to give an example to many of you who are not familiar with some details of the Brazilian case, and it involves directly the Obama-Biden scheme or the Obama-Biden larger operation.  When Biden was vice president in 2013, in May 2013, he visited Brazil for three days and he met with President Dilma.

They discussed very touchy subjects, including the most important one, the absolutely enormous, pre-salt oil reserves, which obviously, the Americans wanted to be part of the whole thing, not by accident. You know what happened one week later? The start of the Brazilian color revolution, in fact, and this thing kept rolling and rolling and rolling.

We got the coup against Dilma in 2016, we got to the Car Wash operation landing Lula in jail. And we got to the election of [President Jair] Bolsanaro. And now we are in a place where even if the military controls this whole process, even if Bolsanaro is becoming bad for business will he become bad for the rentier class business, for the 0.01 percent in the U.S. that has all the connections in their new, large neo-colony in the tropics, which has enormous strategic value, not to mention, unforeseen resources, wealth resources, right? So, this is an extreme case and I know that you follow Brazil relatively closely. So, your geo-economic and geopolitical input on the running telenovela I think would be priceless for all of us.

Michael: Well, this problem goes back 60 years. In 1965, the former president of Brazil came to New York and we met. He explained to me how the United States essentially got rid of him because he wasn’t representing the banking class. And he said that they built Brasilia because it’s apart from the big industrial cities, they wanted to prevent industry and democracy and the population from controlling the government.

So, they built Brasilia. He said maybe they’ll use it as an atom bomb site. It certainly doesn’t have an economic thing. Well, fast forward, in 1980, after Mexico defaulted on its foreign debt in 1972, nobody would invest in Latin America. And by 1990, Brazil was paying 45 percent interest per year to borrow the dollars to be able to finance its deficit, which is mainly flight capital by the wealthy. Well, I think I’d mentioned before here, I was hired by Scudder, Stevens and Clark for the Third World bond fund. Forty five percent: I mean, just imagine that. That’s a fortune every year. No American would buy it, no European would buy it. Who bought it? The Brazilians and the Argentineans bought, and I get it, they’re the government, they’re the central bankers. They’re the president’s family. They’re the 1 percent, they’re the only people that are holding Brazil’s dollar debt.

So when Brazil pays its foreign dollar debt, it’s paying to its own 1 percent who are holding, who are saying well, we’re holding it off shore in the Dutch West Indies where the fund was located for tax-exempt purposes and pretending to be American imperialists, but actually being local imperialists.

Well then, just towards the end of Lula’s reign, the Council of Economic Advisors brought Jamie Galbraith and Randy Wray and me down for a discussion. How do we, you know, we’re, we’re really worried because, Lula in order to get elected, had to meet with the banks and agree to give them what they wanted.

They said, look, we can see that, you know, you have the power to be elected. We don’t want to have to fight you in dirty ways, but will let you be elected, but you’re going to have to do the policies and certainly the financial policies that we want and Lula made a kind of a devil’s agreement with them because he didn’t want to be killed and he wanted to do some good things.

So, he was sort of like a Bernie Sanders-type character. Okay, you have to go along with a really bad system in order to get something good done, because Brazil really needs something good done. Well, the fact is that even the little bit he did the finance couldn’t take because one of the characteristics of financial wealth is it’s addictive. It’s not like diminishing marginal utility. If you give more food to an employee or to a worker you know, at the end of the meal, you’re satiated, you don’t want much more. If you give enough money you know, OK, they buy a few luxuries and then, OK, they save it. But if you give more money to a billionaire they want even more and they grow even more desperate. It’s like a cocaine-addicted person and the Brazilian ruling class wanted it so desperately that they framed up and controlled the utterly corrupt judiciary.  The judiciary in Brazil is almost as corrupt as it is in New York City.

Pepe: More, even more.

Michael: They framed them up and they want totalitarian control. And that sort of is what free market is. Totalitarian control by the financial class. That’s freedom for the financial class, if the freedom to do what they want to do to the rest of the economy, that’s libertarianism, it’s a free market, it’s Austrian economics.

It’s the right wing’s fight against government, it’s a fight against any governments for long enough who resist the financial and real estate interests. That’s what the free market is. And Brazil is merely the most devastating example of this because it takes such a racial term there. Not only does Brazil want to make a fortune, tearing down the Amazon, cutting up the Amazon, selling the lumber to China, turning the Amazon into soy production to sell to China. But for that, you have to exterminate the domestic population, the indigenous population that wants to use the land to feed itself. So you see the kind of race war and ethnic war that you have, not to mention the war against the blacks in the Brazilian slums that Lula tried so much to overcome.

So you have a resumption of the ethnic war there, and on Wall Street, I had discussions with money managers back in 1990. Well I wonder whether that’s going to be a model for what’s happening in the United States with the ethnic war here.

Essentially, it’s a tragedy what’s happening in Brazil, but it’s pretty much what happened in Chile under Pinochet which is why they have the Pinochetistas and the Chicago boys that you mentioned.

Pepe: Absolutely. Coming back to China, Michael, and the [recent] approval of the Five-Year Plan, which is not actually the five-year plan. It’s actually three five-year plans in one because they are already planning 2035, which is something absolutely unimaginable anywhere in the West. Right?

So, it’s a different strategy of productive investment, of expansion of social welfare and solidifying social welfare, technological improvements.  I would say by 2025 China would be very close to the same infotech level of the U.S., which is part of “Made in China 2025,” which is fantastic. They stopped talking about it, but they are still implementing it, the technological drive in all those standard areas that they had codified a few years ago. And of course, this notion, which I found particularly fascinating because it is in one sense socialism with some Confucianist elements, but it’s also very Taoist: The dual development strategy, which is inversions and expansion of domestic investment and consumption and balancing all the time with projects across Eurasia, not only affiliated with the Belt and Road, with the New Silk Road, but all other projects as well. So, when you have a leadership that is capable of planning with this scope, amplitude breadth and reach, and when we compare it to the money managers in the West, which basically their planning goes, not even quarterly in many cases, it’s 24 hours.

So our dichotomy between rentier capitalism, financialization, or whatever we want to define it, and state planning with the view of social benefit is even starker in fact, and I’m not saying that the Chinese system can be exported to the rest of the world, but I’m sure that, all across the Global South, when people look at Chinese policies, long-term, how they are planning, how they are developed and how they are always fine tuning what they developed and discuss…. As you said in the beginning, this is a frontal shock of two systems and sooner or later we’re going to have the bulk of the Global South including nations which nowadays are still American vassals or satrapies or puppets or poodles, et cetera.

They’re going to see which way the wind is blowing. Right?

Michael: Why can’t the Chinese system be exported to the West? That’s a good question…. How would you make American industry able to follow the same productive path that China did? Well for one thing the biggest element in workers’ budget today is housing, 40 percent. There was one way to get rid of it, get rid of the high housing prices that essentially, or whatever a bank would lend. And the banks lend essentially the economic rent. There’s a very simple way to keep housing prices down. You tax the land rent, you use your tax system, not on taxing labor, that increases the cost of labor, not increasing capital, that leaves less, industrial capital, but your tax of the land and the real estate and the banks.

Well, suppose you were to lower the price of housing in America from 40 percent to 10 percent like China has, and this is the big element in the cost structure difference. Well, if all of a sudden people only had to pay 10 percent of their income for housing, then all the banks would go under because 80 percent of the bank loans are mortgage loans.

The whole idea is that the purpose of housing is to force how many buyers and renters go into debt to the banks so that the banks end up with all of the lend rent that the landlord class used to get. This is what’s preventing America from being like China. What if America would try to develop a high-speed railroad like China?

Well, then you need the right of way. You’d need to have the railroads go in a straight line. … They need a right of way and it doesn’t have a right of way because that conflicts with private property and most of the right of way is a very expensive real estate.

So, you can’t have high-speed rail in the United States, like in China.  Suppose you would have a low-cost education. Well then, you get rid of the whole means of siphoning off labor’s income to pay for education loans. You could go, suppose you had private healthcare and prevent Americans from getting sick like they do in China and Thailand, where you are.

Well, then the health insurance companies and the pharmaceutical companies wouldn’t be able to make their rent. So you could not have America adopt a China type industrial program without what would be really a revolution against the legacy of the monopoly of private banking, of finance and all of the fortunes that have been built up financially really in the last 40 years since 1980.

Pepe: So, what’s going to happen in the, let’s say, short to mid-term in the U.S.? Michael, we are seeing the corrosion of the whole system, not only externally in terms of foreign policy and the end of the free lunch, but internally with those 70-million-plus “deplorables” being literally canceled from public debate, the impoverishment of the middle classes, with over 50 million people in America who are practically becoming literally poor. And obviously the American dream ended a few decades ago, maybe, but now there’s not even a glimpse of it, that there could be a renewal of the  American dream. So we have a larval civil war situation, degrading on a daily basis.  What’s the end game in fact? And what exactly does Wall Street, the American ruling class —the guys who have those lunches at the Harvard club — what do they ultimately want?

Michael: Well, what you call a disaster for the economy, isn’t it a bonanza for the 1 percent?  This is a victory of finance. You look at it as a collapse of industrial capitalism. I look at it as the victory of rentier finance capitalism.  You’re having probably 10 million Americans that are going to be thrown out of their apartments and their homes in June when the moratorium on rents and mortgages ends. You’re going to have a vast increase in the homeless population. That will probably represent an increase in people who use the subways. Where else are they going to live? And all of this, there’s an immense amount of private capital firms that have all been created in the last year of just wealth accumulations and they’re saying there are going to be such great opportunities to pick up real estate at bargain prices, all of this for the commercial real estate, that’s broken, all the buildings and the restaurants that have to be sold because they can’t meet their mortgage payments and their rents, all the houses that are going to be under, private capital can come in and do what was done after the Obama evictions.

We can do what Blackstone did. We can buy them all out for pennies on the dollar. So, for them, they’re looking at their own 20-year plan. And their 20-year plan is to grab everything!

Michael Hudson is an American economist professor of economics at the university of Missouri Kansas City and a researcher at the Levy Economics Institute at Bard College. He’s a former Wall Street analyst political consultant commentator and journalist. He identifies himself as a classical economist. Michael is the author of J is for Junk Economics, Killing the Host, The Bubble and Beyond, Super Imperialism: The Economic Strategy of American Empire, Trade Development and Foreign Debtand The Myth of Aid, among others. His books have been published translated into Japanese, Chinese, German, Spanish and Russian.

Pepe Escobar, born in Brazil, is a correspondent and editor-at-large at Asia Times and columnist for Consortium News and Strategic Culture in Moscow. Since the mid-1980s he’s lived and worked as a foreign correspondent in London, Paris, Milan, Los Angeles, Singapore, Bangkok. He has extensively covered Pakistan, Afghanistan and Central Asia to China, Iran, Iraq and the wider Middle East. Pepe is the author of Globalistan – How the Globalized World is Dissolving into Liquid War; Red Zone Blues: A Snapshot of Baghdad during the Surge. He was contributing editor to The Empire and The Crescent and Tutto in Vendita in Italy. His last two books are Empire of Chaos and 2030. Pepe is also associated with the Paris-based European Academy of Geopolitics. When not on the road he lives between Paris and Bangkok.

In Quest of a Multi-Polar World