Have you wondered why US foreign policy never seems to change irrespective of which candidate or party resides in the White House? Or why it seems that the route to riches in America is through looting? Or why it seems that we’ve entered a new Gilded Age, with vast inequality, enormous monopolies, and our so-called public servants captured by the rich?
You’re in luck for in this weeks episode I’m going to connect these seemingly unrelated topics and see if we can’t make some sense of this crazy old world.
So much of our society is constructed from narratives. Freedom, democracy, ideology, religion, law, politics, government, language, money and economics. These are all made up conceptual constructs from the narratives we’ve decided are true and real.
Making sense of these narratives is crucial in regard to our economy, and especially to the creation of money. For example, we’ve become so disconnected from money and credit that we allow Wall Street to create it for us at an enormous cost.
To embark on a counter economic narrative it’s imperative to have a trusted guide. As far as heterodox economist’s go there’s no one better than Michael Hudson.
Michael Hudson is an American economist and professor of economics at the University of Missouri, Kansas City and a researcher at the Levi Economics Institute at Bard college. He’s a former Wall Street analyst, political consultant, commentator, and journalist.
Hudson is the author of J is for Junk Economics, Killing the Host, The Bubble and Beyond, and Super Imperialism: the Economic Strategy of American Empire (He released an updated version in 2003).
Hudson first wrote Super Imperialism, about how America dominates the world financially, and gets a free ride, back in 1971. It was a small printing without a lot of buzz. The largest customers were the CIA and the Pentagon who viewed it as a sort of how-to manual.
At the time the US was trying to wind down the Vietnam war – which was responsible for the entire balance-of-payments deficit, and which forced the country to go off gold. And everybody at that time worried the dollar was going to go down. There’d be hyperinflation. But what happened was something entirely different.
Once there was no gold to settle U.S. balance-of-payments deficits, America’s strong armed its allies to invest in US Treasury bonds, because central banks don’t buy companies. They don’t buy raw materials. All they could buy is other government bonds. So, all of a sudden, the only thing that other countries could buy with all the dollars coming in were US Treasury securities. 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.
The Super Imperialism Hudson describes is the basis of the US empire, one that we seized from Great Britain at the close of WWII. Reading it today clarifies why the Biden administration has continued to maintain cordial relation with the Kingdom of Saudi Arabia (KSA) despite their penchant for dismembering critics. It also explains why the US is bound and determined to accelerate a new Cold War with Russia and China.
Maintaining the dollar as the worlds reserve currency and preserving the US’s financial hegemony is paramount. US foreign policy flows from this crucial dynamic. The KSA, as the worlds largest producer of oil, is required to price its oil in dollars. Russia and China were supposed to follow the Washington Consensus, and allow crooked comprador’s, backed by US financial interests, to seize control of the commanding heights of their respective economies, rather than forge their own economic path. Especially galling to US planners is the attempt by both countries to create a alternative economic arrangement that eschews dollars.
Hudson also describes how Super Imperialism has wrecked havoc here at home. This is where Hudson is so invaluable in cutting through the deeply misleading and harmful narratives about money, credit and the economy. Hudson’s key insight is that our economy has devolved from a productive one to an extractive one. He reminds us that all economies are planned, but the US economy is planned by Wall Street, who is focused on looting our once productive economy and putting American citizens into debt.
For instance, the banks and hedge funds who created the 2008 Wall Street Crash continue to be the big winners, thanks to the Federal Reserve policy of Quantitative Easing. The losers are the working-class Americans who were encouraged to borrow recklessly, while being blamed for the crisis.
The problem is that our society, with its focus on hyper individualistic striving, creates and rewards manipulative sociopaths and psychopaths and promotes a system which rewards a lack of empathy. This focus, to no ones surprise, has produced an extractive economy with gross inequality and a political system captured by an unaccountable oligarchy of greedy sociopaths.
Thus we get a domestic economy dominated by finance, focused on extraction rather than production. It’s systemic, where the rewards are tilted with the looters lionized as “masters of the universe”. My own senator is emblematic of this dynamic. Even as he “earned” his fortune by buying companies, firing the workers and loading them up with debt, so that he and his partners could walk away with millions, he’s celebrated as a savvy businessman and statesman of integrity. Of course it didn’t hurt that he was a critic of Trump, but that’s another story.
By allowing finance to come to dominate our economy we get a situation that Hudson describes as neofeudalism. “What you’re having today is an attempt by the financial sector to take on the role that the landlord class had in Europe, from feudal times through the 19th century. It’s a kind of resurgence of feudalism.”
We also get an extremely dangerous foreign policy with its desperate attempt to maintain financial dominance even at the risk of world war.