High Finance & Investment Colonialism By Michael Hudson Archived Message Posted by Keith-264 on September 4, 2023, 9:41 am http://informationclearinghouse.info/57799.htm “Imperialism: How the struggle of both classes and nations creates our world” RADHIKA DESAI: Hello and welcome to the 16th Geopolitical Economy Hour, the fortnightly show in which we discuss the political and geopolitical economy of our times. I’m Radhika Desai. MICHAEL HUDSON: And I’m Michael Hudson. RADHIKA DESAI: And we are recording this show on the last day of what may well be remembered as a historic BRICS summit, defying no end of gleeful predictions in the Western press about the BRICS’ irrelevance, disunity, mendaciousness, authoritarianism, and whatnot. The five major countries that today constitute the BRICS, despite their relative poverty, constitute a larger proportion of the world economy, measured by PPPs, that is to say purchasing power parity. And they have been able to come together and do some amazing things. The Western media, for example, has been trying to drive a wedge between China and Russia on the one hand, who are said to be eager to expand the BRICS, and India and Brazil and South Africa on the other, who are said to be reluctant to do so. But despite all the predictions about the disunity and the fracas that would ensue with China having placed the inclusion of new members of the BRICS on the agenda, the fact of the matter is that the BRICS meeting has closed today, the BRICS summit in Johannesburg has closed today with the inclusion of six new members. So that’s Saudi Arabia, the United Arab Emirates, Iran, Ethiopia, Egypt, and Argentina. Given the large number of West Asian and North African members here, we can begin to wonder what this is going to do to U.S. influence in what’s generally called the Middle East. The BRICS countries have not only admitted these new members, but they have also agreed to set down the rules and procedures by which a large number of new members will be inducted, because as you know, dozens of other countries have expressed an interest in the BRICS. So it’s quite possible that the BRICS may well become the institutional foundation of the world majority, as the global South and Russia are increasingly being called. They have done more things. The Western press has also sought to portray these countries, the BRICS countries, as little more than a bunch of autocracies or very iffy democracies. But in fact, despite such propaganda, what we’ve seen in the BRICS summit is that they have been focused on presenting a very different vision of the world order, one bIased on development, on people-centered development. And this has been expressed in a direct confrontation with the Western conception of the world order, which has, of course, been dressed up in the garb of human rights and democracy, but for decades has brought only poverty and exploitation to much of the world. MICHAEL HUDSON: Well, in many ways, this was a preliminary meeting just to set the stage for what’s going to come. And at this stage, I think all the BRICS can do is to make arrangements among themselves. And the easiest thing to do, as we’ve discussed before, is to trade in their own currencies and to arrange currency swaps before trying to create a new kind of bancor other means of credit financing. But the real problem is going to be the relationship between the BRICS and the West. How can they create a new international order that we’ve been discussing while they have to pay all of the neocolonial burden of their foreign dollar debt and the foreign ownership of their oil and mining rights and public utilities? How can they enforce climate cleanup costs on foreign oil and mining pollution? The current international law says that the companies have a right to sue any government for a new tax on multinational firms or new regulations. And so it means the government has to pay all of the cleanup costs, all of the external diseconomies. And essentially, they’re put into an even worse locked-in position today than they were in the colonial period. So how can they defend themselves from this kind of US-sponsored order and the regime change for countries that try to create an alternative to it? All that’s going to have to wait for the future BRICS meetings. And we really can’t even begin to discuss that now. We’ve discussed what we thought in earlier episodes of this. RADHIKA DESAI: Absolutely, Michael. I mean, the kinds of problems you’re talking about, I mean, the BRICS agenda is really a very, very big and tall one. So all we can expect at the moment is that the BRICS have only made a beginning, but a beginning they definitely have made. Like you say, you’re talking about the international monetary system and the financial arrangements. And the fact of the matter is that, again, the Western press was sort of brimming with stories about how difficult, if not impossible, it would be for the BRICS to do anything that would dent the position of the dollar. But as you know, de-dollarization is not only ongoing, but the BRICS are very aware of the need to carry it forward. And this meeting, the summit has also closed with an agreement to set up a commission to discuss exactly what steps the BRICS countries may realistically take to begin to disentangle itself as an organization, as a grouping of countries from the tentacles of the dollar system, which have proven so adverse to their interests. In addition, the BRICS countries have also put forward a peace plan for Ukraine, once again, emphasizing the need to negotiate. And this could not form a starker contrast to the West and the manner in which it has continued fueling a conflict for its own completely short-term interests and the short-term interests of their corporations. So in all of these ways, the fact of the matter is that the BRICS summit are presenting an alternative, an alternative that’s not just about the institutional arrangements and the technicalities, but it is an alternative vision of the world order. On the one side, you have imperialism and economic subordination, which is what the West is offering. And on the other side, you have a world order which is based on cooperation, on peace, and above all, on development. So as we were watching all this, Michael and I thought what we should really do is we should take a deep dive into the basics of what we are doing, into the basics of geopolitical economy, into the basics of our perspective, which in fact is very different from what is on offer in the mainstream media and even in many sections of the left, which is going to also, however, be going to also allow you to sort of see through the smoke and mirrors created by the dominant approaches. So the term geopolitical economy, as we see it, encompasses political economy, that is to say an understanding of the domestic structures of a society, economy, and polity altogether, as well as the manner in which these domestic structures determine how every country relates to other societies in a pattern of international relationships because it’s what a country is like inside that determines how it relates to countries outside. That’s why it’s important to distinguish, for example, between the foreign policies of imperialist powers, such as the United States or Britain or France, from the foreign policies of other powers, whether it’s China or even some powers, say like India or Brazil, which are not exactly socialist, but nevertheless, they do not have the same imperial background. So we see international relationships as being rooted in domestic relationships. And the term geopolitical economy is therefore not just about the international, but equally refers to the domestic, not just about nations, but also about classes. MICHAEL HUDSON: Well, the reason for all of this that Radhika and I have been discussing is that all economies today are facing similar financial problems, especially the linkage between bank credit and housing debt, problems of local financing, public financing, because states and provinces can’t create their own money and credit in the way that a national government can do. So these domestic problems interact with the international economy. And that’s what we want to focus on today. At present, that means interacting with the US-centered dollarized neoliberal economy, which is subject to rules set by the International Monetary Fund and the US State Department. And we’re going to focus on how these domestic problems interact with the way in which the global economy is structured. And that analysis is going to explain why a new international economic order is needed to prevent the global majority from having to go down the same financialized, debt-burdened economic polarization that has pushed the United States and the European economies into the post-industrial stagnation that they’re now in. RADHIKA DESAI: Absolutely. In one sense, you know, one of the things, Michael, that what you’re saying reminds me of is that we talk about the world splitting into two camps. On the one hand, the camp of the old imperialist powers, and on the other hand, the camp of the world majority. But these camps are not just essentially the same thing, just pitted against one another. On the contrary, they represent qualitatively different models of economic development. And key in this difference is, of course, that the world majority is increasingly beginning to reject the model of neoliberal, financialized capitalism. And this has been one of the key objects of our debate. So what we want to do is essentially, I suppose what we are saying about geopolitical economy is it’s really just a sound materialist and historical way of trying to understand that the world is structured into a hierarchy of nations, a hierarchy originally created with the beginnings of capitalism and the imperialism that went along with it. So how the world is structured in a hierarchy, but also how this hierarchy reflects the internal class relations of each country. So what we’re gonna do in this show is we want to set up exactly the main ways in which our perspective differs from what other people’s perspectives, the mainstream as well as certain left-wing ones. And the best way to do it was we thought of some dozen principle ways in which our perspective differs. So we thought we would just go through them, so one by one. So the first one is the way we think about things, we don’t think that some nations are irrelevant, only classes matter or what have you, or that classes don’t matter, only nations matter. We put both nation and class into a single perspective. Don’t you think so, Michael? MICHAEL HUDSON: Well, there’s been a whole shift in the way people are thinking. Back in the 1960s, when I was talking to liberals and to the left-wing and Marxists, they opposed nationalism. They were just coming out of World War II when they thought the lesson of World War II was if you have nationalism, you’re going to have rivalries and that they’re going to go to war, like Germany did and like the European countries did, England in World War I, and they thought the solution was going to be an international order where everybody will be one happy family, as if getting rid of nationalism would cure the rivalries. And what nobody really anticipated so clearly was that there has been an internationalism, but it’s been a unipolar internationalism that is leading to war, is the United States has basically declared war on the whole rest of the world with 800 military bases, interfering with one country after another. And it’s been waging war almost the entire time since 1945, or at least since 1950, maybe a few years it hasn’t been at war. So the fact is that today’s internationalism and globalization is a war economy. And the military spending by the United States has forced other countries to divert a lot of their economic surplus and government revenue towards military defense, instead of putting in place the infrastructure that they’d all been expected to do after World War II. And they’ve also become very dependent on trade in oil, in food, monopolized technology, computer chips, pharmaceuticals that are controlled by the United States as an economic weapon to replace the overt military colonialism of Europe with a financial and international investment colonialism, all that’s backed by an enormous amount of military spending. So normally we would say that what’s happened in the world is reflecting national self-interest. And that’s what everybody expected after World War II. They thought that, well, economic self-interest is going to determine the shape of the world. But what American neocons imagine is a policy that serves their self-interest turns out to have led to de-industrializing the United States economy. Because the US self-interest is to reduce its living standards, to cut back wage levels, to polarize the economy, and to define America’s self-interest as transferring as much money as possible into the wealthiest 10%. So instead of the US self-interest being the self-interest of the 99% labor, it’s a self-interest of the financial class. And that has determined the international policy that led to inviting China into the World Trade Organization to essentially use inexpensive Chinese labor as a fight against the US living standards. There is a class element in all of this. Bill Clinton started it all with his anti-labor moves and that linkage between international interest that sort of conceals the class interest. And the question for the BRICS is going to be, what is your national self-interest as it affects the class interests? RADHIKA DESAI: Michael, you’re quite right to go back to the post-second World War period because in a certain sense, what you see happening in the post-second World War period, the reason why, for example, nationalism gets such short shrift, particularly in the Western discourse, is that that’s the moment at which essentially the United States, in the interest of its own empire building, is trying to discredit nations. It’s trying to say that everybody should join in its own cosmopolitan vision of a single world order in which nation states sort of step back. They don’t intervene in economies anymore, which allows the most powerful nation state, namely the United States, push the interests of its corporations without any restriction from other countries. Of course, the United States did not get what it wanted, but the discursive discrediting of nationalism had to do very much with that. And of course, the fact that there had been two world wars in the recent past helped the case that the U.S. was trying to make. Of course, the two world wars were not just caused, they were not just caused by nation states. They were also fought by nation, those nation states were also fought by other nation states. So there were nation states on both sides. So, but nevertheless, somehow the United States tried to equate nationalism with Nazism and that sort of thing. But in reality, there was another fact of that moment in history that would not allow nations to go away. And that was the decolonization of the countries that had been colonized by the various European powers. So this decolonization essentially put a positive spin on nationalism because what these newly independent countries were going to do was they were going to essentially have left leaning, socialistic forms of development in which the state, representing the vast majority of the people, many of whom, the vast masses that had fought for independence and so on. The state representing the interests of these people would try to fashion a form of development that would serve the interests of the whole community. So it’s not just that, say, for example, that China or Vietnam became communist, but also countries like India or Mexico or Brazil or what have you were all pursuing forms of many African countries. They were consciously pursuing forms of development that was supposed to be in the interest of the vast majority of the people. So in that sense, there was both a certain type of cosmopolitanism, which was in the service of the continuation of imperialism in a new form, what Kwame Nkrumah called neocolonialism, was standing side by side with the positive interpretation of nations and nationalism. MICHAEL HUDSON: Well, the U.S. sponsored kind of internationalism really is finance capitalism. And nationalism tends to be industrial, because you want to build up your independence. You want to be self-sufficient in food. You want to be self-sufficient in basic essentials. And you need governments to take control, basically to provide the public infrastructure, the natural monopolies, communications and health care and education. You want to build up your productivity by technology, and often this requires protective tariffs and capital controls and subsidies to new capital investment, research and development. And that involves the government lowering the cost of production and the cost of living by providing basic needs. And finance is not really a class. Somehow finance is not a class in Marx’s sense, because it’s external to the economy of production and consumption. And all classes, everybody’s a saver and a debtor. All labor is financialized, just as the industry is financialized. And the infrastructure has been financialized instead of socialized, as people had expected in the 19th century. So in that sense, finance works from outside of the economy, including the international economy. And Marx explained in Volume 3, the dynamics of finance and its debt creation are mathematical and external to the dynamics of the real economy of production and consumption. So what’s unique today, and this was not anticipated in World War II, is that finance can actually replace industrial capital as the main resource allocator, the main central planner, away from government. And the problem with all this, of course, is that finance capitalism tends to minimize the role of government. So as to replace it and to shift economic planning into its own hand, Wall Street and other financial centers, and its means of control are via international financial organizations like the IMF, the World Bank, the SWIFT system, the Bank for International Settlements, and even the International Criminal Court that criminalizes any attempt to withdraw from this financial system. RADHIKA DESAI: Right, and so one of the things that, you know, in trying to talk about nations as well as classes, domestic as well as international, that we often run up against is this idea that somehow Marx thought that, you know, capitalism was inherently internationalist and sort of worldwide, cosmopolitan, shall we say, global, shall we say. And of course, socialism should be that way. So nations are to be completely, you know, they’re sort of a regressive atavistic thing which we should try to suppress as much as possible. But this, in fact, is not true. You know, what, Michael, you were saying about how it is necessary for the state to play a major role in development, Marx understood that very well. So there is this very important saying, you know, Marx is supposed to have come down in favor of free trade in the debates on Corn Laws, but it was a very conditional type of kind of endorsement of free trade because Marx thought that, you know, if free trade hastens the development of capitalism, then maybe we should have free trade. But in the same set of writings in which he endorsed free trade, he also pointed out the following. And this is where it’s a quote, “If free traders cannot understand how one nation can grow rich at the expense of another, we need not wonder. These same gentlemen also refuse to understand how one class can enrich itself at the expense of another.” So this is a very clear placing of class and nation together in the same frame. One classes exploit other classes and nations exploit other classes. So it reveals that Marx is very aware of the structures of imperialism. And equally, as we’ve talked about many times, Marx was also very aware that in order to develop, states must play a major role. They must implement tariffs to protect their infant industries from competition against which they are not yet able to stand up. They must create the credit conditions and the financial conditions for the expansion of productive enterprises and so on. So already for the development of capitalism itself, the conditions that are required so require state intervention that any notion that there is such a thing as free market capitalism, etc., goes out the window. And of course, the other thing that geopolitical economy also points out is the reason why even in capitalist countries, states always must play a central role is because capitalism is inherently contradictory and you cannot have a capitalism, you know, continue for any length of time without the state playing a major stabilizing role. So that is why with the development of capitalism, you don’t just get the development of classes, you also get the division of the world into the modern nation state system. So class exploitation occurs, but so does national exploitation, because essentially the early developers, the early capitalist developers inevitably also become imperialist because the capitalisms are contradictory. They try to subordinate other territories, which then, that subordination helps them to deal with the contradictions of their capitalism, whether it is to find outlets for excess commodities and capital or to acquire cheap labor and cheap raw materials, which capitalism needs evermore as it expands. And so finally, what this also shows is that because capitalism prompts imperialism, nationally focused development becomes the essential prerequisite of any form of development for many countries, which is why quite early in the history of capitalism, we’re looking at the early 20th century, so really about a century or a century and a half from the beginnings of industrial capitalism, you already have the appearance of the first socialist challenge to capitalism in the form of the Russian Revolution. So in that sense, these are countries that are essentially saying we cannot have subordination to to imperialist, capitalist, imperialist countries. We do not have any prospect of developing capitalism. So we are going to develop on a socialist path already. MICHAEL HUDSON: Well, if you recognize the reality of imperialism, this implies an entire different body of economic theory. And I had to begin teaching economic theory in 1969 at the New School, and I really hadn’t studied it all the way through my graduate courses because most universities found it just too silly to teach. The free trade theory assumes that everybody gains from trade and that all trade is voluntary and it’s all a choice free market and that an absence of tariffs is going to make economies more equal and more competitive. And that’s just the opposite of how the world economy actually works, because the real effect of free trade is that the dominant countries all became dominant by protecting their industry. First, Britain and then the United States and Germany in the 19th century were highly protectionist. And once they had government subsidized industry, they then told other countries, don’t do what we did. Don’t have government protection. Just buy in the cheapest place. We will give you food and industry and everything that you need much cheaper because we already have the capital in place and you don’t. And the result is that there was a polarization of the economy. I describe all of this in my book, Trade Development and Foreign Debt, which is a history of basically not only free trade theory, but how it was controverted again and again by British, German and American economists. All of that is now expurgated from the classical curriculum. And the real result of free trade is when countries are forced into a trade deficit, their currency is going to decline and then they have to go to the International Monetary Fund that comes in and it imposes austerity and specifically anti-labor policies. The IMF’s role is to aim at what Bill Clinton aimed at when he invited China into the World Trade Organization. You want to keep a pool of labor, what Marx called the reserve army of the unemployed, not in the United States, but in the non-industrialized countries that basically are kept devaluing the price of labor throughout the world. And that turns the phenomenon of U.S. centered imperialism into a global class war. RADHIKA DESAI: Right, Michael, so shall we go on to the next point we want to make, which is that we should, that geopolitical economy permits us to understand class and national exploitation together, just as we put class and nation together in the same frame, we also put class and national exploitation in the same frame. And this is exactly so. You have class exploitation within a country that produces a certain kind of class power within a country. So at the international plane, what geopolitical economy explains is that the attempt by some powerful countries to subjugate other countries creates the structures of imperialism. So you have to understand the two together and both forms of exploitation, that is to say, class exploitation and the exploitation of other nations, produce contradictions because capital essentially, contradictions mean that capital would like usually to have its cake and eat it too, to have something and its opposite. And it can’t always have that. So within a country, class exploitation produces a resistance from the working class. It produces crisis of underconsumption and overproduction. It produces crisis of falling rates of profit and all these things. And internationally as well, international exploitation also produces resistance to it, which is why you have, for example, the formations like the BRICS or Struggles for National Independence, as we had in the early part of the 20th century, the non-aligned movement and today the BRICS and all these institutions, they’re not perfect. They are far from adequate to what is needed, but they are steps in the direction of resisting imperialism and imperial exploitation, just as trade unions and political parties are steps towards resisting class exploitation. MICHAEL HUDSON: So our ongoing discussion of the BRICS and the U.S. sanctions and the U.S.-NATO war against Russia and China is all about what policies countries can take to liberate their economies and their governments from the U.S. attack. The U.S. called any government protection interference, as if the United States does not interfere. Any defense is called interference and a distortion of the market, as if the market is set by U.S. central planners on Wall Street and in the State Department to create a world in which the United States will suck all of the surplus from the rest of the world into its own economy, as if this is natural. And if you recognize that the essence of this unipolar U.S. strategy is finance, that that’s not necessarily military. Obviously, they’re going to grab the oil of Syria, grab illegally the oil of Iraq. But it’s by finance that they can operate much without the military overhead. Well, then this is why we focused on de-dollarization and what that means in practice, starting with the most obvious policy, simply avoiding the use of the dollar and pricing trade in their own currencies, making swaps. The question is, how are they going to go on to the next stage? That’s really going to be how it involves restructuring their domestic economy as well as the international economy. RADHIKA DESAI: Yeah. And, you know, taking imperialism seriously also, I mean, the reason why we emphasize this is that in so much of the dominant discourse, you have, imperialism is completely erased. Like, for example, I was listening to all the commentary on the BRICS in the mainstream press. And as I was listening, I thought, OK, so these people are comparing BRICS and the G7 and BRICS and the G20 as though there is no history of imperialism, as though the G7 is not, in fact, a collection of the former imperialist countries and still would-be imperialist countries that are trying to to control the world. So in so recognizing imperialism requires jettisoning all those sanitized expressions. For example, instead of talking about U.S. imperialism, people use terms like U.S. hegemony. The U.S. has never achieved anything like hegemony, as I’ve argued in geopolitical economy. But what we do have are ceaseless attempts to try to achieve that, which have been very destructive, which have caused ceaseless wars around the world and so on. You have terms like globalization. I find it so appalling that the term globalization became so popular, not just in the mainstream, but also among many who call themselves critical and even Marxist scholars. Why is that? Because they use terms like globalization or rather by using terms like globalization, what we are completely forgetting is that this is an attempt to force the rest of the world to open up to the imperialism and corporate power of the West. All the free trade and free markets is not necessarily for the West. It’s there to open up the rest of the world’s economies, the poor countries, so that they are available as markets and investment outlets, but equally importantly, as sources of cheap labor and raw materials. And for example, also the use of the term globalization also means that you have to say that from the late 20th century onwards, you got a second wave of globalization, whereas in the late 19th and early 20th century, there had been a previous wave of globalization. ctd.... Message Thread: High Finance & Investment Colonialism By Michael Hudson - Keith-264 September 4, 2023, 9:41 am Re: High Finance & Investment Colonialism Pt 2 - Keith-264 September 4, 2023, 9:42 am   Searching