Clio the cat, ? July 1997 - 1 May 2016
MICHAEL HUDSON: Well, there are two kinds of monopolies. Now, what you describe, Marx is describing monopolization under industrial capitalism, but some monopolies are natural monopolies. That’s what governments have kept in the public domain like the postal service and other things.
And within industrial capitalism, already in the 19th century, the American laws and presidents said, banks are the mother of trusts and the antitrust laws in the United States that began to be passed in the 1890s realized that the bankers were organizing industry into trust, that this monopolization was not simply the workings of the marketplace that Marx described, but it was actually done in a predatory way by the banks buying up all of the steel companies and making the steel trust, buying up credit to merge all of the copper companies and making a copper trust to make sure that there was not competition. So that while neoliberalism promises to be a doctrine of free competition to everybody fighting to lower the price, it actually is to prevent competition by monopolizing the entire economy so that you can charge high monopoly rents.
As you’re seeing, this is what the legal cases today in the United States, the one good thing that Biden has done, which he’s very embarrassed at having done and doesn’t talk about it is the antitrust laws. You’ve had the antitrust ruling against Google. You’ve had a whole set of antitrust rulings that are being revived today to try to save the economy from being monopolized.
And this is something that Marx did not anticipate, the degree to which industrial capitalism would lose the fight against finance capitalism and essentially not defend its interest, but would be co-opted and somehow evolve into this basically anti-capitalist financialization and neoliberalism that is so economically self-destructive that there’s very little way that you can look at, this is a dynamic of the laws of motion because it’s the law of stopping motion, a law of degrowth, not growth.
RADHIKA DESAI: No, I must say on this point, I would slightly disagree with you, Michael, because the thing is, it’s important to remember that antitrust is actually one of the keystones of neoliberalism.
Let me explain what I mean. So, first of all, let me agree with you, what you were saying earlier, that in the United States, banks like J.P. Morgan played a leading role in essentially the cartelization, the monopolization, the trustification of the economy in the late 19th and early 20th centuries. And of course, Hilferding across the water was talking about similar trends in Germany where banks were playing a central role in aiding the monopolization of capital. But while banks aided it, this was a natural tendency of capitalism.
What Marx pointed out is that at this point, once you arrived at the monopoly phase, it was time to shift to socialism. Indeed, many people laugh at Hilferding because Hilferding said something like, you only have to nationalize six large Berlin banks in order to essentially take a bulk of the German economy into public ownership. But he was right because these banks, through their activity in aiding monopoly, had indeed created that sort of economy. He wasn’t talking about the banks of today, which have very little to do with production. At that time, particularly in Germany, they were very different types of banks.
So, banks were certainly aiding the process of monopolization, but what Lenin called monopoly capital, what Hilferding called finance capital, and what Buharin called the nationalization of capital were all referring to the same thing, that all the major capitalist societies were now dominated by big monopoly corporations. Marx thought that this was the time for socialism.
Antitrust law, therefore, arrives at this point to help the neoliberal defenders of capitalism to try to maintain the appearance of a certain minimum level of competition while actually continuing to have the monopoly structure of the capitalist economy. If it’s not monopoly, then it’s oligopoly, and the competition is largely in name. And it is really, at this point, you go from justifying capitalism in terms of competition to justifying capitalism in terms of consumer welfare.
Because remember now, the fate of capitalism is not being decided in the market as it once was in the competitive phase, but in the courtrooms of antitrust law. So, the whole purpose of antitrust law is to try to mask the fact that capitalism is now past its sell-by date and we have to do something much more radical. And this has been true now for about a century at least.
MICHAEL HUDSON: Okay, you’re talking about structural monopoly of how the economy is structured as opposed to just the competition within a given industry. So, we’re talking about monopoly. I agree with what you said. We’re just talking about two different kinds of monopoly. The structural monopoly of how wealth is made and then the specific industrial monopolies in particular industries.
RADHIKA DESAI: And you know, Michael, though, at the same time, what you were saying earlier, and I think this is absolutely critically important, is very true. Today, what we are seeing is that big monopoly corporate capital is preying upon, of course, first of all, in the days of more robust development of capitalism, even as it was entering in the monopoly phase, what we witnessed was that often the natural monopolistic activities, whether it was transportation or utilities or what have you, were actually often performed by the state. So, you had a fair amount of state ownership, whether it was at the municipal level or the state level or the federal level, you had a fair amount of state ownership.
Now, what we are seeing is the attempt by capital on the one hand to privatize those natural monopolies that were hitherto created and maintained by the state, for the purpose of private profit. And then also, of course, preying upon every other monopoly on which they could try and get their hands, whether it is health services or water provisional utilities or transportation, education, you name it, the private capital has got its fingers in every one of these spies.
And its purpose is not productive expansion, but rather the purpose today is to skim off the incomes, the ever shrinking share of incomes that are actually made by producing something. And these are largely made by workers, by smaller enterprises, and so on and so forth. And this is what is done through the entire structure of indebting the economy, whether you are indebting households or you’re indebting businesses or you’re indebting governments. And this is the way in which today’s financial monopoly capitalism is skimming off income.
But there is one other thing that I also want to introduce in here, which is that-
MICHAEL HUDSON: You should make one point at a time, not two points.
RADHIKA DESAI: Sorry, I will wait, I will wait, you go ahead.
MICHAEL HUDSON: Okay, what you said is what I said earlier in our discussion. I said, most wealth under neoliberalism is made by privatizing the public domain. And the fight between socialism and neoliberalism is who is going to provide for natural monopolies and basic needs? Who will provide healthcare, education, communications, transportation? Are these going to be public services provided at a low cost for everybody? Or will it be essentially privatized and monopolized, as you say, so that these natural monopolies are going to be able to become vehicles to squeeze out economic rent.
And economic rent is really the key objective of neoliberalism. Not so much profits, but monopoly rent. So neoliberalism denies that there’s any distinction between monopoly rent and profit. As opposed to classical economics that made a very clear distinction. There are rent recipients and profit recipients. And they’re antithetical, not together.
RADHIKA DESAI: And the reason why it’s so important to make this distinction between rent as unearned income, versus wages and profits as having at least some kind of earned element in it, is the simple fact that this, it draws attention to where production is involved. But of course, neoclassical economics is habituated to not focusing on production at all.
But yeah, okay, so I entirely agree with you. And I just wanted to say that in order to understand why we are in this position today, where you say the purpose of all capital today, especially in countries like the United States, seems to be to essentially prey upon and earn rents from these monopoly activities and so on. How did we come here?
Well, I just want to throw in one further thought, which is that, what I was saying earlier, that Marx was expecting that once capitalism arrived at this monopoly phase, that people would realize that it was important to socialize it, et cetera. Now, of course, neoliberalism came along and neoclassical economics came along and started producing these inherently false, and I would say that they were bad faith defenses of capitalism.
But nevertheless, all their efforts could not prevent the cataclysmic crisis. So what Arnold Mayer called the 30 years crisis of 1914 to 1945, from erupting, which involved inter-imperialist wars, which involved Great Depression, and finally, nuclear weapons, the Holocaust, and what have you. All of these things happen, and by the end of this period, I would say that most people were convinced that capitalism, really, that the world was going to move away from capitalism, that capitalism had shown the destruction that it would cause, the misery that it could cause, and that the world was not going to stand for it. People like Keynes or Polanyi expected that the world would move radically leftwards.
But then you got the golden age of capitalism, and most people attributed that golden age of capitalism to capitalism itself, sorry, the golden age of world growth, I should say, they attributed it to capitalism. They said, you know, people like Keynes or Polanyi were wrong, and others who thought that, you know, the capitalism would end in the post-Second World War period, they were wrong. Capitalism had regained its mojo and everything was fine.
But in reality, what we can, what becomes very clear after 40 years of neoliberalism, is that the real source of growth in this period, after three decades after the Second World War, lay in the fact that monopoly capitalism was heavily regulated, was ringed around with the institutions or with socialistic institutions and practices, whether it is the practice of macroeconomic management for full employment, the creation of welfare states, the expansion, massive expansion of domestic demand, etc., and all of these things, these socialistic measures, these are what account for the dynamism of capitalism.
Why can we see that? For the simple reason that after this model got into crisis, not because of the socialistic measures, but because the underlying system remained capitalist. After the crisis of the 70s, when the governments of these countries took the turn to neoliberalism and rolled back many of these socialistic measures, you did not get a revival of capitalism, but the transformation, the morphing of capitalism into the system that you were describing, Michael, as preying upon, you know, public enterprises, privatizing them, and essentially using the state as a (unclear) from which to make unearned profits.
MICHAEL HUDSON: Well, there’s also another factor that we haven’t discussed yet that gave the appearance of capitalism having a golden age after 1945, and that is that every country emerged from World War II almost free of debt, because the Depression had basically wiped out debt, and during the war, consumers were not going into debt because there was nothing they could buy. Corporations weren’t going into debt, and after the war, there were no reparations on the defeated parties as after World War I, so you had every economy beginning with what in Germany was called the economic miracle, a debt-free society.
Now, there were many business cycles after 1945, but each cycle started from a higher and higher debt level, and this rising debt increased the power of creditors and the bringing to power of Thatcher and Reagan and neoliberalism in the 1980s was largely a result of all of this growth in creditor power that resulted from the growth of debt, meaning of savings in the hands of the creditor class that found its counterpart on the other side of the balance sheet in debt by labor, by corporations, and by government, so the governments essentially were prone to a debt squeeze.
You had, since the 1980s, the International Monetary Fund telling countries, well, you have to pay your foreign creditors, and the way you’re going to pay your foreign dollar holders, basically, you’re going to have to sell off your infrastructure to monopolize it. It was debt that forced the privatization of monopolies throughout the global south, largely through the IMF and the World Bank, so you had a neoliberalism that was not only debt-based, but also, as we’ve discussed in our earlier broadcasts, that this is a U.S.-centered phenomenon because after World War II, the creditor-oriented system was really based on the U.S. dollar and U.S. government debt, which essentially was debt run up by balance of payment deficits to pay for America’s military control, and that is what neoliberalism leaves out.
Neoliberalism is wrapped in the iron military fist of 800 American military bases to make sure that there is no alternative. If you’re going to have no alternative, you need to enforce neoliberalism militarily, and that globalizes neoliberalism in the way that we’ve been talking about.
RADHIKA DESAI: I agree with what you say, but I would confine all of that to the neoliberal period because why does debt rise so exponentially in the neoliberal period? It rises exponentially in the neoliberal period because, first of all, the income of workers is being squeezed because there’s an attack on unions and, of course, there is a massive outsourcing and so on and so forth, so you get a squeeze on workers’ incomes and if workers need anything, then in that case they have to be indebted.
Secondly, although of course there are a lot of cutbacks of government spending as far as social spending is concerned, on a whole lot of other outlays, government spending does not decrease. Government spending does not decrease in terms of helping industry, subsidizing industry. Government spending does not decrease in terms of military activities. In fact, it increases on all these fronts massively, so government expenditures do not decrease.
Meanwhile, every government, especially every Republican government in the United States, tries to outdo the previous one in giving tax cuts to the rich, so the tax structure becomes increasingly regressive and therefore, of course, there is a debt crisis of governments and, of course, households, that is to say, yeah, I mean, and businesses are also increasingly indebted because as businesses are taken over by bigger businesses, the bigger businesses or financial interests that take over businesses are only interested in borrowing as much as they can on the basis of the collateral that that business provides, so they burden every business with as much debt that it can possibly take in order to essentially appropriate dividends and profits for themselves.
So in all of these ways, neoliberalism has led to a massive increase in debt and this is itself, to me, a result of the fact that freeing capital, freeing monopoly capital from the burdens of state regulation and social obligation, has not restored to capitalism any kind of productive mojo. It has only set capital, monopoly capital, free to prey upon the earned incomes of the rest of the world, so a tiny elite has as a consequence been getting ever richer at the expense of the vast majority of working people in the world.
MICHAEL HUDSON: Well, I think the protector of monopoly capital was basically the financial interests and there was an exponential growth of debt beginning already in 1945. There was a build-up of pressure of increasing wealth and concentration of financial wealth that enabled the financial class to really take the lead in protecting monopolies and playing a catalystic and ultimately controlling role in the monopolization. So you have to look at this interaction between the financial sector and the rest.
RADHIKA DESAI: Well, I’ll say two things. Number one, I would say that first of all, if you look at, if you chart the amount of debt in the world, yes, sure it was increasing in the post-second world war period, but there is absolutely no doubt that it goes, I mean, it may be increasing like so, but then it spikes up in the neoliberal period in very noticeable ways.
MICHAEL HUDSON: Yes, because it was created.
RADHIKA DESAI: Yeah, exactly. And on the matter of the United States dollar and the dollar system, the fact of the matter is that again, the amount of debt the United States incurred as a result of the operation of the dollar system compared to what we have today in terms of the sheer amount of debt, not just the US debt to the world, which is a small part of it, but just the explosion of debt of all sorts. Again, it is out of proportion and this explosion of debt and the financial markets upon which it rests and the speculation to which it has given rise to, these are the things, not just the US’s current account deficit that accounts for the indebtedness of the world. The US’s current account deficit, big though it is, is a small portion of the largest structure of indebtedness.
MICHAEL HUDSON: Okay, you made an important distinction that is often left out of account. You’re absolutely right. When I talked about compound interest increasing exponentially, that’s interest on debt that is already in place. But what you’ve just mentioned is the very important fact that most debt isn’t simply the accumulation of interest on past credit, it’s actually the creation of new debt by banks simply creating bank money. And that’s exactly what’s happened. That was the explosion, the creation of bank money, which in a way you could call it the privatization of the monopoly of credit creation. And the credit creation was created, as you just pointed out, out of all proportion to the productive use of credit or to the means of production. It wasn’t created to create new means of production, but to buy existing means of production to take them over and monopolize them, downsize them and financialize them.
RADHIKA DESAI: No, exactly. And you know, Michael, this has been such an absorbing discussion, but I also noticed that we have only been through a fraction of the points that we wanted to go through. But let me just start bringing this hour to a close. We may do another session on the same subject, but let me start bringing this hour to a close by mentioning just one important thing that I think we should put out there, whether or not we do another hour on this.
And that is that precisely because neoliberalism was never an accurate theory of how the economy works or even how the capitalist economy works, precisely because neoliberalism, although, you know, was incapable of delivering the kind of prosperity that it was promising. As a result of that, it has been shifting shape about once every decade. So once every of each one of the four decades that we have seen, we have seen a slightly different type of neoliberalism. And as a consequence, the current debate, the current announcements of the demise of neoliberalism are also not going to lead to… are also, you know, the reports of the death of neoliberalism are greatly exaggerated.
MICHAEL HUDSON: Well, you’re right. Neoliberalism in practice doesn’t work. And yet, if it doesn’t work, and it’s junk economics, what it has done to conceal the fact that it doesn’t work is to redesign the whole picture of the economy that’s depicted in the national income accounts and the GDP accounts. And it actually depicts this unproductive, predatory, rentier overhead as if it’s a product, a product, as if rents are a product. That’s it.
RADHIKA DESAI: No, absolutely. So on the one hand, it sort of tries to create the illusion of growth. You know, right now, everybody’s saying that the United States is growing. But how much of that growth is purely financial growth? So that’s absolutely right. And as I say, we must talk about this as well.
But I just wanted to finish the point. So in the 1980s, you got classic neoliberalism, you know, markets good, states bad. And this is what’s going to lead to prosperity. By the end of the 80s, this was no longer so. Then in the 1990s, you got a different neoliberalism. This was the neoliberalism of globalization. It was enforced not by right wing, new right governments like Reagan and Thatcher, but by new labor and sort of, you know, Clintonite, you know, third way governments like Clinton and Blair and so on and so forth.
And what did they say? They did not deny that neoliberalism was very punishing for ordinary people. And they said to their mostly working class support base, they said, we would love to raise your wages, we would love to increase welfare, we would love to have, you know, better environmental protection. But you know what, our hands are tied, our hands are tied by globalization. Globalization is this unstoppable juggernaut, that’s not going not going to, you know, we’re going to have to bow to it. By the 2000s, you’ve got jobs.
Two more, three more points. So by George Bush, Jr, you got the US as an empire. And by this time, Europe was suffering from euro-sclerosis, and Japan was not doing well. So the United States economy, especially with the housing and credit bubbles was made to look, you know, with great difficulty, of course, but made to look like it was somehow a very dynamic economy. After 2008, you got the massive period of austerity. That was the neoliberalism of the 2010s. And now we are going to see a new version of neoliberalism.
MICHAEL HUDSON: Well, you’re talking about the conflict between illusion and reality. And in the United States, all of the polls show that consumers, workers, consumers are the neoliberal word for workers, say that they’re much worse off.
And President Biden keeps saying, how can you be worse off? Read Paul Krugman in the New York Times, and he said GDP is up. Well, GDP is up, but all the GDP is occurring to the monopoly class, finance, insurance, and real estate, not to the workers. So when they talked about a boom with GDP up, that’s again for the neoliberalized rentier economy.
So the way to make a transition, I guess, from what we’re talking about now to our future broadcasts, is just ask yourself, would China have been better off if it would have abandoned its socialism and adopted the U.S. neoliberal model back in 1990 with Clinton? Should China have just said, well, Russia invited the neoliberals in to just close down all of our industry and give everything in the public sector to the ruling class and the gangs for free? Would China have been better off if it would have followed the Russian Boris Yeltsin’s plan in the 1990s and the Clinton plan in the United States and the Obama plan? Or would it have been better off being socialism? Once you ask that question, you begin to say, what is neoliberalism leaving out of account?
RADHIKA DESAI: Well, exactly. And so, you know, I mean, bang on, you know, I don’t think that the rest of the world is going to do and, you know, the rest of the world is going to benefit by imitating what the U.S. is doing.
But in the U.S. itself, you know, this idea that somehow Bidenomics is going to, you know, is now talking about industrial policy and it is going to essentially constitute the rejection of neoliberalism. This is all complete nonsense.
You’d only believe it if you thought neoliberalism was about free markets. Neoliberalism has never been about free markets. It has always been about hiding the fact that capitalism is now in its senile monopoly phase. Instead, you keep talking about competition as though it’s going to revive it. But in any case, it has always been about preserving the power of an ever-shrinking monopoly, financialized monopoly, capitalist elite.
And in this form, Bidenomics, with its massive subsidies to corporations, etc., is just another version of that. In my book, Capitalism, Coronavirus and More, I call what we are now about to see pseudo-civic neoliberalism. That is to say, our governments will tell us the people must have X, Y, Z goods which are free or very cheap. And they will subsidize massively the production of these things, whether it is vaccines or various forms of green technology or transportation, what have you.
And the governments will essentially give vast subsidies to private corporations to produce these things, which they will sell at high cost to government. And government will then allegedly make it available to us, either for cheap or for free, at least in name. But the fact of the matter is, we are going to pay for it through our taxes. And we are also going to pay for it because the goods and services we get will be so shoddy that they will probably not be worth having. So this is the kind of pseudo-civic neoliberalism that we are about to witness. What is being called Bidenomics is not at all the advent of a new post neoliberal age, but merely the fifth form that neoliberalism will take in its fifth decade.
MICHAEL HUDSON: So neoliberalism is the new Cold War turning into a hot war, basically. It’s a globalized Cold War.
RADHIKA DESAI: I guess, Michael, you might want to elaborate very briefly on it.
MICHAEL HUDSON: Well, in order to maintain the system, you can’t have a rivalry to neoliberalism. There must be no alternative in the United States. Why is it fighting against China? China is an alternative. Russia is an alternative. If the world sees that the US and NATO, Europe are shrinking, and Eurasia is going way ahead, then there obviously is an alternative, and people are going to ask, what makes the Eurasian multipolar development so different from the world that the United States is trying to create, a neoliberal, financialized, privatized world ruling by force and by client military oligarchies?
RADHIKA DESAI: You’re so right. In a certain sense, this new Cold War is the Cold War. I think it’s like the old Cold War. It’s the Cold War between, on the one hand, those countries that refuse to accept that capitalism is past its sell-by date, and on the other hand, countries that know this and are willing to experiment with all sorts of interesting ways of creating economies that are actually going to work for people. I think that’s the divide we are increasingly going to see.
So that really means, you know, perhaps another program which we must do is, really, we should talk about the international manifestations of neoliberalism over the last four decades, and how they have changed, and how they have brought us to this point of this new Cold War.
But for now, I guess we will say goodbye, and looking forward to seeing you, perhaps not in two weeks, but certainly in early January. So look forward to that, and thank you very much. Bye-
The last working-class hero in England.
Kira the cat, ? ? 2010 - 3 August 2018
Jasper the Ruffian cat ? ? ? - 4 November 2021
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