Ep 248 - RP Live Presents: Inside a Failed State Q & A with Michael Hudson
Oct 28, 2023
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Michael Hudson, an expert in US political economy, discusses topics such as healthcare, de-dollarization, and the impact of economic policies on the working class. He emphasizes the need for a change in economic philosophy and highlights the government's ability to create money for social programs. Hudson explores the difference between the production and consumption economy and the financial sector of assets and liabilities. He also touches upon the challenges faced by labor unions and the revolutionary nature of capitalism.
The United States should consider financing basic needs like healthcare through government funding instead of leaving them privatized.
The government has the ability to create money and can finance healthcare without borrowing or raising taxes, ensuring universal coverage and prioritizing citizens' well-being.
Dollarization limits a country's sovereignty and economic control, making it dependent on acquiring US dollars and vulnerable to US monetary policies, while adopting a sovereign currency provides greater autonomy.
Deep dives
The Impact of Privatization on Re-Industrialization
The United States cannot re-industrialize as long as it keeps privatizing essential services like healthcare and education. Privatization leaves these basic needs to be paid for by individuals, rather than being subsidized by the government. This economic philosophy stems from anti-labor economists who designed the system to prevent Europe from becoming an independent economic power. Germany's economic philosophy, influenced by University of Chicago economists, focuses on shrinking demand, which hinders Europe's economic growth. However, this approach fails to address the rising healthcare costs and the adverse effect on labor wages. The United States should consider financing basic needs through government funding instead of leaving them privatized.
The Role of Government in Financing Healthcare
Public healthcare has historically been recognized as a conservative idea, as it improves labor productivity and reduces healthcare costs for corporations. The United States needs to shift its approach to healthcare financing. Instead of burdening individuals with high healthcare costs, the government can finance healthcare in the same manner it finances wars. Governments have the ability to create money, just as banks create credit. By printing money or creating credit, the government can fund healthcare without relying on borrowing or raising taxes. By adopting this approach, the United States can ensure universal healthcare coverage and prioritize the well-being of its citizens.
The Financial Implications of Dollarization
Countries like Ecuador and Argentina, which have embraced dollarization, face significant challenges in terms of economic control and independence. When a country adopts the US dollar as its currency, it loses the ability to create its own money and the government becomes dependent on acquiring dollars through exports or selling public assets. Dollarization limits a country's sovereignty and its ability to finance its own economic growth. This dependence on dollars can lead to a reduction in domestic spending for healthcare, education, housing, and infrastructure. It also makes the country more vulnerable to the monetary policies and decisions of the United States. A move away from dollarization and the adoption of a sovereign currency can provide greater economic autonomy and control.
The Fictitious Nature of GDP and Inflation
The measurement of GDP is flawed as it includes components that contribute little to the real economy. GDP growth is often driven by financial and real estate sectors, rather than the production and consumption of goods and services. For example, an increase in housing prices is considered a positive contribution to GDP, even if it doesn't directly benefit individuals or the overall economy. Similarly, inflation caused by monopoly pricing and increasing financialization is falsely counted as economic growth. This fictitious GDP growth and inflation further exacerbate the wealth inequality and fail to improve the well-being of the majority. The focus should shift towards measuring and prioritizing the well-being and economic security of the population.
The History of Debt and Debt Cancellations
Michael Hudson, an economist and author, discusses his work on the history of debt and debt cancellations. He explains that throughout history, debt cancellations have been used to prevent economic polarization. Hudson emphasizes the role of debt in shaping societies, from the Bronze Age to ancient Judaism. He also highlights the financialization of economies and the rise of the banking system, which was accompanied by the erasure of biblical teachings against usury. Hudson's research sheds light on the relationship between debt, power dynamics, and the financial system.
Understanding Marx's Analysis of Debt and Money
In this segment, Michael Hudson addresses the misconceptions about Marx's analysis of money and debt. He argues that modern Marxists often overlook the financial aspects of the economy outlined in Marx's volumes two and three of Capital. Hudson emphasizes that Marx understood the dynamics of interest-bearing debt and the institutional character of finance. He also criticizes the failure of contemporary Marxists to analyze class power and power dynamics. Hudson's work on debt and economics provides a comprehensive understanding of Marx's theories and their relevance in the modern world.
This week’s episode is another webinar from our RP Live series: Inside a Failed State, with Michael Hudson.
Michael prefers a Q&A format. Attendee questions revolved around US political economy, domestic and global. He discusses topics such as healthcare, de-dollarization, and the impact of economic policies on the working class. He emphasizes the need for a change in economic philosophy and highlights the government's ability to create money for social programs.
A common Hudson theme is the difference between the production and consumption economy, or what he calls the real economy, and the financial sector of assets and liabilities, of loans and debts, which is superimposed on the real economy.
“Money is spent in the real economy, but bank credit is spent really just to increase the debt overhead in the economy — the overhead of mortgage debt, of corporate debt, and speculative debt.”
A Michael Hudson episode always sparks lively, sometimes contentious, comments. His insights on finance, politics, and class power dynamics give fans and detractors alike something to chew on.
Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City. Support him at patreon.com/michaelhudson
