20 May 2025
Donald Trump’s version of peace often looks more like surrender. His economic deals with Ukraine, Japan, and others reflect a transactional logic: profit over principle, dominance over diplomacy. Economist Michael Hudson explores how Trump’s foreign policy blends militarism with monetization, weaponizing the dollar, exploiting allies, and redefining national security to mean whatever suits the moment. The result? A crumbling world order and allies reconsidering their loyalties in the face of American unpredictability and economic aggression.
GLENN DIESEN: Hi everyone and welcome. I am very pleased today to be joined by Professor Michael Hudson, a very prominent economist and also author of some of the truly great books on political economy. So, thank you for being back on the program.
MICHAEL HUDSON: Well, thanks for having me, Glenn.
GLENN DIESEN: Well, what is interesting with Trump is he comes off as a peace president, at least in his campaigns. That is, he condemned the Forever Wars in the Middle East and, to his credit, he was one of the few who were able to criticize the Iraq War and still stay alive. He also provoked NATO for provoking the war in Ukraine, which suggests that, you know, we recognize our own fault, at least as a path to compromise and peace.
On the other hand, often one can’t help but notice that the criticism is defined by them being very expensive. It begs the question whether or not he is a man of peace, or if he simply wants a better return on investment.
Again, if you go through his different speeches, all the way back to the 1980s, he keeps making the point: We help to protect the world. It costs us too much money. They should pay us.
So do you see this, what do you read into this? Do you think he’s merely, do you think he wants to reduce the empire, or simply get a better return on investment?
MICHAEL HUDSON: Well, Trump’s plan for peace is really very simple. He wanted a cease-fire on terms that Russia would surrender virtually to NATO. It would stop fighting. Germany and England and France would move their troops in. The Ukrainians would continue to attack, and set up missiles already to attack Moscow, and essentially escalate the war and seize Ukraine. Russia would lose.
He has a similar peace plan for Gaza. As he said, kill them all. Then there will be peace. There won’t be anyone to fight anymore.
And his idea for peace with Iran was similarly simple. No enrichment. Let the inspectors in. So they will know everywhere where you have a potential military or enrichment site so that the Americans and Israelis can bomb them and destroy you and bring a regime change.
His idea for peace is the most aggressive plan that any American president would dare have come. But he knows that most voters in the United States are against the war in Gaza. Most voters are against the war in Ukraine. And so his idea of peace is: “We’ll just defeat all the enemies and we’ll have peace.” That’s pretty crude, but that’s it in a nutshell.
His plan to make America great again is similarly simplistic. I hesitate to say what his actual plan is because if I try to make sense out of it, you’ll see that it doesn’t make sense. And you’ll think that I’m not making sense.
So, if you can ask particular aspects of the plan that you see, then I will discuss them and why they will either work, or not work, or how they will work.
GLENN DIESEN: Well, you brought up an interesting one. We don’t have to go into that one, on the Middle East, which is kind of interesting because if you want peace or profit, then, of course, ethnically cleansing all of Gaza, and make it a Middle Eastern Riviera, it obviously puts the economics over anything that can be considered just peace.
But I thought perhaps we could focus on the deal the United States is making with Ukraine. That is the minerals deal. I guess the premise of the thing, which is now signed, of course, is that Ukraine signs over control over a lot of its, or half of its, natural resources. And this would make American and Ukrainian interest inseparable now. And this would ensure that America would always be there for Ukraine. This is the security guarantee Ukraine really needs. How do you read into this?
MICHAEL HUDSON: Well, the idea of actually getting Ukrainian resources — and Trump has mentioned specifically rare earth — was a fantasy from the beginning, as all of the scientists and economists have noted.
His idea was that if you can take the number one resource that he said: “We want this Zaporozhye [Zaporizhzhia] atomic plant to be under American direction.” Well, that will simply control who gets the electricity. Obviously, the electricity would be sent westward to Ukraine, not eastward to Russia, and the plant would be used, basically, as a monopoly.
Regarding rare earth, the mining of the rare earth is so expensive that there is no economic benefit for having rare earth. The only advantage, the so-called miners would be American troops masquerading as if they were miners.
I think if there’s anything to be grabbed in Ukraine, the Ukraine that’s left after Russia finishes its military operations, it’s the land itself. And already the Oakland Institute here in America have outlined how many American investors have been buying up Ukrainian farmland. So, basically the Ukrainian economy that’s left is already going to be owned largely by foreigners, not by Ukrainians.
So the whole idea is a surrender.
And the way in which Trump has organized this economic consortium to invest and divide up the profits is Ukraine puts up the resources and presumably spends some of the money to develop. The Americans will spend money, but the American contribution is counted to include all of the value of arms that the United States sends to Ukraine. These are the vastly overpriced arms for American aircraft, missiles, and tanks. And the cost of these armaments that America is sending is so large that, basically, Ukraine will not have very much share in any profits that the agriculture, or mining, or other resources have.
And Zelinsky himself — when the plan was first announced — said that this is Ukraine’s patrimony. It has to be used to finance the reconstruction of Ukraine. And he gave almost an eloquent denunciation of why this wouldn’t work.
So I think this was all a fantasy to begin with.
Trump likes to indulge in fantasies, especially where he somehow has a part of all of this benefit. One can imagine part of the investment being a new hotel in Kiev, Trump Hotel. It seems such a distraction that it hardly plays a role in what’s really happening in the world.
GLENN DIESEN: Yeah, it is strange, the things that grab the news, for example, Trump getting a new plane on this trip to the Middle East. But some of them are quite significant in terms of the [?] pointed out the transactional approach, that is, the Europeans are also discovering if you agree to buy a lot of American energy or weapons or something that well, it gives good sales to the United States, then it’s easier to win over Trump, and you get more favorable impacts on foreign policy.
But at some point, it also appears to push back and alienate some countries. That is, Japan, for example. I have never seen Japan since the war grow a backbone against the United States, to actually stand up. The language they’ve used now is quite different, in terms of saying that they don’t want to be extorted by the United States. Again, being a bit confused as well, I think, about the U.S. approach that is asking the Japanese, “What are you willing to give us?”
What do you make of this transactional economic relationship — if not extractive — and how does this affect the partnerships? Because one could also, of course, extend this to Taiwan, to some extent.
MICHAEL HUDSON: Trump has explained what he means by a transaction. He said, “America has to win and get the better of any transaction.” He’s promised not to have any transaction in which the United States doesn’t win, and its adversaries — the whole rest of the world — lose.
This is his negotiating tactic and how he got rich all along, usually by double-crossing his allies, his suppliers, his contractors, and, of course, his banks, whom he didn’t pay.
His transaction approach is a very aggressive approach to other countries. In the case of Japan, he’s pretty much locked in the 25% tariffs against Japanese auto exports. This means that Nissan and Toyota, other countries are not going to be able to make the car exports that they have before. This puts the Japanese car companies in trouble.
I think Japan all along — from my experience dealing with CEOs of Japanese companies — has always had a Plan B for what to do if the relationship with the United States doesn’t work. And Plan B has always been, well, if it doesn’t work for the U.S., we’ll turn to China. I think Japan has actually begun to pursue talks. I would assume that they’ve been talking to the Chinese and said,
“Well, if we’re not able to export our cars to the United States anymore, obviously we’re being blocked from our exports. We do have a lot of dollars. Supposedly reorient our economy to yours? Is there any way that Chinese aims and Japanese aims can dovetail?”
I think Japan does have, one of its companies has, an auto plant in China. They may very well be talking about some kind of trade realignment. I have no idea, but I know that that has been the Japanese approach many years ago when I was there. And I would assume pure geo-economic self-interest is going to lead them to think, well, if we’re locked out of the U.S. market, where are we going to go?
And where is the most logical place for them to go? Neighboring Asia. So I think they’re thinking of that.
Their explicit threat was, “Well, we are the largest holders of U.S. Treasury securities.”
And as you’ve noticed yesterday the Treasury securities on 30-year bonds almost hit 5%. That’s been unprecedented for many decades.
When Trump says “we” — meaning the Royal “We” (Trump) — intend to drive the dollar down, thinking that this will make American industrial exports more competitive with a devaluation, somehow this tells investors, well, if you hold U.S. Treasury securities — and they’ve already gone down 5% or 6% since Trump took place — if they go down another 6%, that means any interest that you get on the U.S. bonds is going to be wiped out in your own currency terms by the depreciation of the dollar.
This is not a way of attracting foreign investment into the dollar.
There always is a desire for safety, but there’s also a desire for income.
And basically, Trump is telling other countries, “Well, you’re not going to be able to make income, in your terms, off the dollar, but there will be safety here because one of the demands that we are making on our tariff laws and our bilateral negotiations is we’re going to blacklist any country that joins the BRICS or any other group that seeks to have an alternative to the dollar.”
So this is part of his overall aggressive system.
It’s as if Trump has declared an economic war and a financial war on other countries, to go along with the de facto monetary war that he’s been promoting under the guise of the label of peace — war for peace, or like we call it, the Defense Department, not the War Department anymore. That’s really the fantasy.
So I think that not only Japan, but also Korea… I think the Japanese have been talking to Korea that has a similar problem in its automobile exports to the United States. And same thing with their computers and electronics.
What can we do with electronics? What can we do to cope with this U.S. trade aggression? And who knows what they’re trying to come up with. But I think they’re looking for an alternative, and when you begin to look, you usually find a way.
GLENN DIESEN: Yeah, I’m somewhat skeptical of the decisions that have been made since ‘Liberation Day,’ when he was liberating the U.S. from, well, God knows.
But it is curious though, because often it’s pointed out that the dollar, it’s the cleanest of all the shirts in the hamper, suggesting, yes, the dollar’s full of flaws, but there’s no good alternatives.
But in this effort to weaken the dollar to make American industry more competitive for exports, obviously it must have been predictable that this would undermine the standing of the U.S. as the reserve currency — because you want a strong dollar, if you want that as a reserve currency, but you want it weak at the same time to have this export-driven economy.
But does this strategy, weakening the dollar — in other words, making your shirt more dirty — does that success depend upon making the rest of the shirts in the hamper even dirtier, by threatening the BRICS?
I’m sorry, there was maybe too many analogies, but is it possible for the U.S. to weaken its dollar without eliminating alternatives?
MICHAEL HUDSON: Well, you use the word “predictable.” You can predict it, and I can predict it, but suppose you’re working within the Trump administration in the Treasury or the State Department. If you were to make the predictions within the Trump administration of the sort that you and I make, you would be told that you’re not on the team. “This is not a prediction that is helpful for us. Could you rethink your prediction?”
Or if you say the U.S. is going to lose, the boss will say, “Is there some reason that you want the U.S. to lose? Do you have some prejudice leading you to want the U.S. to lose? Why would you look at ways in which the U.S. could lose? You’ve got to get on our team.”
So, even if somebody could think to themselves, and go through the logic that you and I, and your other guests, have been describing on your program, this is not a plan for job advancement within the U.S. administrative bureaucracy.
So, Trump has emerged as such a bully, with such vindictiveness against people who criticize him, that there isn’t really an alternative voice by people saying, “Well, what if this doesn’t work?” Or: “What are the possible shortcomings? What could go wrong with all of this?”
So, I think much of what is happening is, to use the words that the New York Times begins almost every article with, “Nobody could have expected…,” “To everyone’s surprise…”
To their tunnel-visioned reporters: Who possibly could have expected the tariff plan and the economic plan and the budget plan to go so wrong?
Well, it does go wrong, and it shouldn’t have been hard to see, if you take into account other countries acting in their own self-interest in response to what the Trump administration and the Americans do.
But the Americans… it’s as if everything Trump does is thinking, well, here’s what we will do — and other countries really don’t have a chance to respond because if they do, we’ll just impose sanctions on them, punishing rules — we’ll hurt them in one way or another.
That’s the only thing that Trump and the U.S. foreign policy, in general, have to offer: “We will hurt other countries that take steps that do not conform to the American policy of unipolar control that we want.”
And I guess that’s called hubris.
GLENN DIESEN: Yeah, I always make the point that this is such a temporary strategy because you can, of course, threaten someone not to diversify away from dependence on you. But again, when the weapon you use to threaten is their dependence on you over time, it’s a little bit like BRICS, you know. If BRICS de-dollarizes, America will punish all the members of BRICS. But, of course, you don’t want to be too dependent on the United States.
So, I think this was already from the 90s predicted as how unipolarity, or global primacy, would end. That is, the more the declining hegemon would be required to use its administrative control over the international economy more aggressively to prevent the rise of competing centers of power. But when the declining hegemon uses — or abuses — its privileged position in the international system, it would only create incentives for the rest of the world to begin to diversify away from the declining hegemon, and even collectively balance it.
So this is why I always thought it would be a good idea for the United States to accommodate, in some way, to have a preferable position in a more multipolar economic system. But those hopes, of course, they’re long gone by now, I think. But it would have been much more beneficial, I think.
Once you develop an adversarial relationship between the U.S. and China, the US loses, China loses, and eventually the world loses as well. But on that topic of China, it doesn’t seem like everything is only Trump on this issue. That is, a lot of the policies of Trump, of course–
MICHAEL HUDSON: Before you ask the China policies… I want to comment on what you just said. Here’s the problem. Trump really believes that other countries are individually dependent on the United States and, as he says, desperate to make a deal.
He said that Russia’s economy is falling apart because of the efforts of war, it’s in a stalemate and it’s desperate to make a deal to rescue Putin from this strain. This was the theory that the Rand Corporation wrote up at the beginning of the NATO war against Russia a few years ago. And Trump really believes that the war has depleted Russia and it’s desperate for a deal.
Before he renegotiated the tariffs with China, he said China is desperate to make a deal with us. Look at the unemployment that its exporters are having, now that we’ve closed the U.S. market to its toys and dolls, and all of the other things that he talked about for China.
It’s as if he thinks it’s desperate, whereas China’s growing way ahead and the American economy is shrinking.
And the same thing with Europe and the global south countries. He believes that other countries need the U.S. market and they do not have an alternative. This is like Margaret Thatcher used to say: “There is no alternative.”
Well, of course there’s an alternative and they’re looking for it. You mentioned de-dollarization briefly. I think right now it’s very hard for Japan, China, and other countries, to actually begin reducing the dollars that they already have. It looks like they’ve held their dollar holdings fairly rapidly. However, they are not going to accumulate any more dollars. That has tapered off and the new balance-of-payment surpluses that they’re making, they are not recycling to the U.S. Treasury. They’re either buying gold, or they’re investing in each other, in one way or another, making loans or currency swaps.
But it is obvious that, while they say, well, we’ve been on the hook in the past because we did need the U.S. economy, but it doesn’t look now like the U..S economy is going to be growing very much and offering either trade opportunities or investment opportunities.
So, what do we need dollars for except to hold our savings? And if we hold our savings in them, the value of dollar-denominated savings in euros, or yen, or other currencies, is going to be down.
So, it’s not only that other countries do not need the U.S. market, they see that there isn’t any there, there. There isn’t any U.S. market to have hopes of developing.
That applies not only to China, but to Russia, the BRICS, Europe, to all the other countries. I think they’re all in a similar reaction: How are we going to replace our former dependence on the United States now that essentially we don’t have the U.S. market or the U.S. economy as an investment vehicle anymore? How do we go it alone?
GLENN DIESEN: It’s the bubbles which form, in terms of no criticism of the economic decisions. It’s something deeply concerning though, but this goes a little bit outside the realm of economics. I notice the same.
China obviously can diversify away from the United States, they can’t be able to pressure them. Then you’re often told, “Well, that’s what the Chinese want you to think, so you’re supporting them.” Same with the Russian side, arguing they can diversify with our sanctions. We can’t diversify from them. That’s what Putin says.
As if your loyalty depends on joining their delusions about where the economic power lies.
I very much agree that Trump, to a large extent, launched this economic war under his first presidency. But it’s also true that Biden really doubled down in terms of banning the chips, which again, was sort of a clear signal to China, that we’re prepared to try to destroy your economy, we won’t accept your further growth. This is quite dramatic.
Again, the message hasn’t been lost on the Chinese. I know Trump tries to balance it off now: “I love China,” you know, before he goes on bashing them. But this is only what Trump has said.
How much do people overestimate in the U.S. how much the world dislikes China? Because it seems that it’s often treated as USSR 2.0. But again, the way I hear often Washington speak about China, I don’t hear this language anywhere else, even in Europe, which tends to repeat whatever Washington says on the Chinese issue. They’re much more soft-spoken.
To what extent, do you think, the U.S. overestimates or assumes that the world shares all their hatred of China? Maybe hatred is not the right word, but this distaste for China.
MICHAEL HUDSON: Well, when you say what does the U.S. think, it at all depends who you’re talking to. Suppose you’re talking to NVIDIA, the chip maker, you can see that the attempt by Biden to block NVIDIA’s export of chips to China has led NVIDIA’s leader Huang to say, “Well, we’ve just been deprived of one-third of our market, which is in China. If we do not have the Chinese market to sell our chips to, because they’re being blocked, two things will happen.
Number one, they will develop their own chips. That’s the effect of sanctions. When you sanction a country, it doesn’t just suffer and go without your sanctioning. It always develops its own attempt to be self-reliant in whatever is sanctioned against. Russia, when it was sanctioned against agriculture, developed its own vegetables and dairy industry. China’s doing the same.
China was forewarned years ago about the Biden strategy, which — you’re right — Trump is continuing and China already took steps to begin developing independence for its own key industries. Also, how do they themselves achieve a monopoly power of control that, if anything, it’s the United States and other countries that are dependent on China for rare earth magnet materials, for all sorts of electronics and chips, and all the things that we’re reading about.
The administration, as we discussed earlier in the show, imagines: We will take an action, and other countries, China does not have a response.
But, of course, China has a response.
Number one, it is trying to redirect its exports to other countries. It may not be exporting dolls or toys to the United States, but it has labor in assembly lines. You can see that the party leaders and the industrialists are thinking, what can we use this labor for if not to make handicraft and industrial exports to the United States?
Well, they’ll see what other countries need for their development.
And they want to develop the internal market.
One of the problems that China had with its internal market was when you provide more money to the wage-earners, either they save it up for their retirement, meaning supporting their families, when their families get older.
Or they bought cars. The first thing that a family would do to increase its economic status through consumption was to buy a car. So, China seems to have, if anything, too many cars. It’s very difficult to drive a car in Beijing, or other Chinese cities.
China’s response was to say, “All right, we’re going to develop such a good public transportation system that people will not need cars.” They have a wonderful subway system, and, of course, they have the high-speed trains among cities. They’re trying to provide an alternative for that.
But China’s trying to think, “What can we give our own population, with all this labor, that they need? If not our own population, populations in our neighboring countries have to do.”
They are planning to retool their factories in accordance with whatever trade arrangements they can make with neighboring countries, with the global south countries, and other countries. They have enough dollar reserves and other foreign reserves available that they can afford to take an interruption in their trade balance and other investment balances. They can afford the time to just wait out the nine months — or I guess it’s three months now that Trump has said he’s going to negotiate with other countries trade deals, where any trade deal he makes with any country, starting with England a week ago, is the country has to agree not to trade and invest with China. The country has to agree to join the American alliance and try to isolate the Chinese economy.
Well, what this means for England and Europe is they isolate themselves from contact with the Chinese economy, and they give up the most rapidly growing market in the world East Asia in order to tie their trade and investment future with the shrinking market of the United States and its European and other satellite economies.
This is a deal that is not in the interest of most of the European population, but it may be in the personal political interest of leaders like Starmer in England who owe their position to the American meddling in the English and the European political processes to promote the leaders that support a unipolar American world, not independence for their own countries and their own voters.
GLENN DIESEN: I think this effort to pressure countries into a new bloc politics, that is, us versus them, it so strongly goes against the interests of all countries though, because real opportunities, when you have many centers of power, as you see from countries across the world, their aspiration is to diversify their economic dependencies so they don’t become excessively dependent on the U.S.
So, if they fall into this U.S… “Agreed, we’ll cut ourselves off from the Chinese, depend only on the U.S.,” then these countries will be owned by the United States.
As you said, during the Cold War, it would be one thing if you were linked to the undisputable dominant economy. But these days, as you said, to link yourself to the losing horse and cut yourself off from the rest of the world is not ideal.
I guess this also where China has some advantage because it’s also not imposing ultimatums on countries. China hasn’t really told any country that either you’re in a trading relationship with us or America, you can’t choose. It just seems as if this would be a losing bet.
Is it the assumption that they’re living still in the past, still the 70s or 80s? It’s evidently where this comes from.
It was my last question, about the actual alternative which might appear. Often BRICS is presented as the main institution which could facilitate a different economic architecture. Of course, it has its problems — a common currency, I don’t see as possible, for example. What do you see in the potential of BRICS? Or do you think it’s already had its day in the sun?
MICHAEL HUDSON: The distinguishing feature of what Trump has done in the last few months is irreversible. “He has now changed the world in a way that it cannot go back.
I don’t think Trump realized this.
His mode of negotiation was to make a big threat: “We’re going to do this. The threat is to cause chaos in other countries, trade and investment.” Then he said, “Well, that’s what I’m asking. Let’s hit somewhere in the middle. Let’s compromise. We’ll work back from there.”
His threats are meant to frighten people into: “What are we going to do?” Then they’ll feel, “Oh, at least we made Trump back down.” When he knows that the demands he’s making at the very beginning are the opening position.
That’s how real estate dealers deal: “We’ll offer a low price for the building. You want a high price.” And then they settle in the middle.
That’s not how international diplomacy works.
Other countries have realized that Trump is actually quite serious in imposing chaos on other countries if they don’t surrender their policy, basically. They now realize that they must have an alternative, that they’re not going to be able to go back to the world as it was a few months ago before ‘Liberation Day.’ Reversibility has led them to talk together.
I’ve talked to quite a few people associated with the BRICS movement. The problem is, what is their program going to be? You need to have a strategy. How are you going to reorganize your trade and investment?
They really don’t have a doctrine like classical political economy in the 19th century. Adam Smith, John Stuart Mill, was all a plan: How do we develop England, Britain, as an industrial power?
Well, we have to get rid of the landlord class.
Well, we have to get rid of monopolies.
The Germans said, “Well, we have to move banking away from usury-type banking. We have to use banking to industrialize the economy.”
Classical economics was their plan forward.
The BRICS don’t have a similar doctrine of how to go forward in trade. One problem, I’m told, is that most of the economists they hire to come up with a trade and investment plan, are American-trained economists, who are not trained in terms of an alternative to neoliberalism! That’s what American academic economics is all about these days. It is itself sort of tunnel-visioned.
And there’s been nothing so far by the BRICS countries that is a whole doctrine of how are they going to develop. Not even an analysis of what made China able to grow so fast and modernize its economy and raise its living standards, so fast.
Well, the key, to me, that China has done is it’s followed the original strategy of industrial capitalism in creating a mixed economy, a public-private economy. And the role of the public sector was to prevent monopolies from increasing prices and making the economy less competitive. And they did this by keeping transportation, communications, education in the public domain, and as the American economists explained in the 1890s, the role of public investment is a fourth factor of production.
But it doesn’t aim at making a profit.
The purpose of public investment in infrastructure is to provide its services either freely, or at least on a subsidized basis, or at cost. You don’t want to privatize natural monopolies, like transportation and communication, because if you do, the private owners are going to charge monopoly rents and they’re going to load down these monopolies with private sector costs that governments don’t have and they’re going to charge such high prices that your economy, if it’s privatized, is going to end up like Margaret Thatcher’s England.
Instead of like the United States was in the late 19th and early 20th century with a wonderful infrastructure supplying services at low prices that enabled American industry to undersell other countries because American industrial employers did not have to pay their labor force enough money to afford buying monopoly goods, or paying high housing rents as they do today, or having to pay high debt service as they do today.
Well, I haven’t seen any BRICS discussion about what is it that made the United States, Germany, other countries, right down the China, so much more economically efficient that they got rid of the economic overhead. And the answer, if you’re a classical economist, is they freed their economies from economic rent. They tried to free them from land rent, they freed them from monopoly rent, and they freed them from the financial overhead of credit.
China has kept its money creation and banking system basically in public hands. And that means that China does not have a domestic financial sector that makes its money by financial means instead of by funding, creating money to actually finance direct investment in everything, from real estate to railroads to other infrastructure.
Well, this is what Germany did in the late 19th century. In many ways it’s what the United States did. There’s been no discussion of why the industrial leaders of the world a century ago became so successful that they turned their industrial trade surplus into a financial surplus to become the leading creditor nations, as well as the leading industrial nations.
There’s been no discussion of value and price theory that was the key to classical economics.
Price was the excess of charges over and above value, and the difference was rent. Rent was in addition to the cost of production. Land rent was made by landlords in their sleep, as John Stuart Mill said. The same thing with financial investors: they collect interest in their sleep.
The objective of China that calls itself “socialism with Chinese characteristics,” you could say it’s industrial capitalism with Chinese characteristics. And that is because industrial capitalism from Britain to Germany to the United States was evolving into socialism. The public investment that Europe and the United States made in infrastructure is what today would be called socialized transportation, socialized education, socialized whatever you’re doing.
And the idea of this socialized public investment was required by the industrial capitalists because it lowered their wages cost, it lowered their cost-to-production, and it created a low-cost economy and low-priced economy because it was a rent-free economy enabling them to undersell other countries.
Well, I don’t see any movement among the BRICS countries to say, well, we can’t really develop if we have an American- and European-owned banking interest that seeks to make financial profits from our industrialization.
We want the financial returns to be recycled into new tangible investment to increase capital formation, factories and education and public services and living standards, just like the West did, and just like China’s done.
I haven’t seen any statement like that, and that’s because I think the economists in the BRICS have not studied classical economics.
There was a counter-revolution, a century ago, against classical economics led in America by John Bates Clark and in Europe by the Austrians, British utility theorists, saying, there’s no such thing as economic rent. Everybody deserves whatever income and wealth they have. There’s no unearned income. The landlord plays a productive role.
If you look at the American gross domestic product statistics, most of America’s GDP isn’t really product at all. It includes interest charges, including late fees. That’s considered as a profit, if you’re behind in your payments to a bank and you’re charged a late fee, and end up paying 29%. That’s a profit. Land rent is considered a productive service. Monopoly rents are included as production.
The whole idea of how do we make our GDP grow, if you’re a BRICS country and you don’t make a distinction within GDP — what’s really a product and what is not a product — then you’re not going to have the guidelines that the Chinese followed, and before them, the American industrialists, the German industrialists, the French and everyone else. That’s the problem. They’re trying to reinvent the wheel without realizing that a lot of the theoretical work was already done in the 19th century with the original emergence of industrial capitalism and classic economics as its doctrine to guide how to become a competitive industrial nation.
That kind of discussion, I don’t see happening today.
GLENN DIESEN: It’s something I was missing too. I was hoping for more of an economic discussion within BRICS about to what extent, for example, the Hamilton, List, Witte economic model of industrial capitalism, would prevail. But yeah, so far, not so much.
Michael Hudson, thank you so much for your time. I appreciate it.
MICHAEL HUDSON: Thank you for having me to discuss this matters, Glenn.
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