Symptoms of decline in liberal capitalist democracy showing from South Korea to Germany.
Cross-posted from Michael Hudson’s blog
NIMA: Hi, everybody. Today is Thursday, December 5th, and our friends, Michael Hudson and Richard Wolff are back with us. Welcome back.
RICHARD WOLFF: Glad to be here.
MICHAEL HUDSON: It’s good to be here.
Let’s get started, Richard, with what’s going on in South Korea.
RICHARD WOLFF: Well, I should begin by admitting freely that I am no expert on South Korea. I do not speak that language. I have never been there. So please understand that I’m relying on public information in what I suggest.
I’m interested in it, and I think we all should be, because its connection to what is going on in the larger part of the world. And by that, I mean the decline of the American empire, the decline of American capitalism, are very major influences on what has happened.
And here’s how it works.
But before I go into it for South Korea, let me show you the analogies in terms of what’s happening much closer to home.
A government yesterday collapsed other than South Korea. That was the French government, which disappeared, which was voted out of office. Strictly speaking, a “no confidence.” A overwhelming majority of members of the French parliament, government, the Assemblée nationale, voted no confidence in Macron’s choice of prime minister.
Also, starting on Monday of this week, 120,000 Volkswagen workers in Germany went on strike. About nine of their major plants are going on strike. And it’s most important for me to tell everybody what the strike is over. The Volkswagen company wishes to close two or three of the nine plants that they maintain there, which would mean thousands of people losing their jobs.
In addition, it wants to cut wages 10%. And these are described by the head of it as necessary for the survival of Volkswagen, which is, if not the largest corporate employer in Germany, it’s certainly one of them.
All right, let’s look at this. The reality is that in France, Germany, most of Europe— the United States, for its own reasons and for its own advantages, has subsidized their budgets in their country.
And it has done so by providing a defense umbrella, basically telling them all that they don’t have to worry about spending all that much money on defense. The United States will do that.
This, of course, becomes a subsidy to American military production, but we put that aside for the moment.
Every government then in Western Europe (and by the way, I’m telling you this because it all applies in South Korea)— these governments are subsidized to a significant extent by the United States. The United States gets benefits from doing that. This is not largesse. This is not charity. This is not selfless money-giving, nothing of this sort.
But it enables the leaders of these governments to be able to deliver pretty good services to their people without taxing the way they would have to if they had to maintain a defense appropriate to their situation without a subsidy.
But the decline of the American empire is eating away at the ability and the willingness of the United States to do this kind of subsidy. And that means more and more, step by step— and this is before Trump, it has nothing to do with Trump. Trump only says it a bit more loudly. But other than that, nothing new.
What you are doing is you’re putting a squeeze on the politicians in these countries. One source of support for them, their position in the American empire is declining because that empire is declining. It can’t do what it did before.
You can see it literally because a major part of the victory being won by Russia over Ukraine is because the collective West, led by the United States, literally cannot deliver any more weapons because they don’t have them. They haven’t produced them.
So all of these budgets are in trouble. The United States is running record level, multi-trillion dollar deficits. They’re not enough.
The Germans, who used to be the wonderful example of having a national debt lower than your GDP, now have a national debt, 20 percent higher than its GDP, with no end in sight.
When the United States empire shrinks, all of its elements are squeezed because the United States tries, of course, to offload the burden that it can no longer carry.
Mr. Trump, if one is to believe him, is about to tell the Europeans, you want a war in Ukraine? You pay for it. I’m out. I quit. I’m not doing it. I can’t do these things. I just won’t do it.
Now we come to one little corner of the American empire. South Korea. The only time I have seen the behavior of the president of South Korea, the one who unilaterally declared martial law and is therefore up for being impeached by his own parliament two days after he made that effort, right? Stunning.
The only other time I’ve seen him is when he visited the White House, some months ago. And during his visit, the president of the United States, Mr. Biden at the time, asked him what his favorite song was. I didn’t make this up. Go look it up. You’ll find it. And the man says the name of an American song.
Think about what it means if you’re the president of South Korea and you tell a questioner that your favorite song is not South Korean. I mean, whoa, the first rule for a politician, don’t ever do such a thing. But he does it. And then the president of the United States says, well, we would all like to hear you sing it.
And I’m watching this on my computer screen. And the president of South Korea does a good— I know this song. It’s a very famous song. He does a really pretty good job of singing it with all the verses in English and in tune, you know, does a good job. Okay. This is a man who is very close to the United States, as he keeps saying. And as Mr. Biden celebrates him for that. Okay.
He found himself, literally weeks after this event, he found himself unable to deliver to the United States the kind of support it wants and that he wants to give them because of their alliance, because of the defense umbrella that the United States provides, in his case, against North Korea and against China, by which they are surrounded, basically.
They don’t have a very good relationship with Japan, because of what Japan had done to Korea over the last century or two, which is a story for another day. Okay. So he couldn’t do it. There is a rumor. That’s all it is. I have no knowledge of it. But there’s a rumor that the United States asked South Korea to produce and ship to Ukraine 155-millimeter howitzer shells, artillery shells
Shows you, this is an empire on a shoestring. They can’t do it from the United States. They can’t do it in Europe. They have to go 10,000 miles to South Korea. So he wants to ship, to honor his alliance, his place in the American empire. He wants to honor it.
But he’s got a problem. The majority of people in the parliament of South Korea are left of center. They will have none of it. There will be no shipment, and you can’t move without it. But he decided he was going to move.
In other words, his loyalty is not just to American music. His loyalty is to do what the Americans want, whatever that really is. I don’t know what it really is, but it is symbolized by the possibility that it’s artillery shells. But whatever it is, he can’t get it through his own parliament.
So what does he do, this member of the democratic American empire? He throws democracy out the window. He unilaterally, you got to get, you got to read the proclamation. He closes the parliament. He dismisses all the people in the parliament. He declares martial law, which gives him an immense array of powers, including shutting down the press, closing the borders.
It’s only, only, only because the left-wing party called out its supporters, and they have the majority of people, clear majority. They even have a majority of seats in the parliament, but they have a clear majority.
Called them into the streets and said, okay, we’re gonna, now we’re gonna see what you can and cannot do. They couldn’t, they sent crack troops from the army to do this at the parliament building. And the left-wing representatives went out. They brought the non-left-wing, the centrists, the rightists, with them.
And all of them told the troops, you can’t do this. And the troops had that wonderful moment of truth. Which way are you gonna point that gun? And they didn’t, they couldn’t, and they stopped. And at that point, of course, it collapsed. And by the way, who collapsed it? The president, the minister of defense.
That’s important because the most collaboration between the United States and South Korea is in their military. The United States trains their military, equips their military. It’s all that. So, obviously the military knew. And therefore, obviously the Americans knew, however long this was planned.
But it is actually about the declining American empire. And it is very similar in its core explanation for the collapse of the Macron government in France. And the fact that the German government is two millimeters from collapse already because of the war in Ukraine, the sanctions, and the impact of that on the German economy.
You know, no one bets on Mr. Scholz being the German Chancellor much longer.
And the strike by VW. I mean, the writing is on the wall.
But in all cases, the Germans can’t do, they can’t do for their people, if they’re going to have a war like this, if they’re going to carry their own defense. Where’s that going to come from?
They’re already borrowing way beyond what they’re normal. And that’s very nerve-wracking. You know, Americans have to remember, Germany lost two world wars, had the worst inflation in modern economic history in the 1920s. That’s only a hundred years ago. That’s in the mentality of people.
I heard stories. My mother was living in Berlin at the time of the great inflation, the 1923-24. Her grandfather came rushing home with bags full of money, which he would give like a relay runner to his wife, my grandmother, who would run, I don’t mean walk, run to the store to spend that money, because by the evening it would have lost two-thirds of its value. That’s how fast prices were rising.
Americans have never had anything like this kind of an experience.
This is what the phrase runaway inflation really means. The Deutschmark collapsed.
A country with that in its DNA, lost the wars. It is now in a terrible, terrible place, which is why you see the rise of a right-wing again, which is remembering that part of its history and glorifying, you know, a MAGA fantasy the way we do here, but also the rise on the left, both in the Die Linke, which we had before, and now around the former co-chair of the Die Linke, Sarah Wagenknecht.
So, I think to South Koreans that this is a sequence of symptoms of decline becoming visible, tangible. You know, we talked about it on this program in terms of more the abstract way, its causes and its evolution.
What we’re now seeing is its symptomatology, its literal presentation in shaping daily life. And I think that’s what you saw in South Korea.
MICHAEL HUDSON: I think that Richard’s got the dynamics exactly right, and that’s what’s going to shape the future. All I can do is provide some of the background for that.
From the 1930s to the 1940s, all the way until 1950, the United States had a huge balance of payment surplus, especially after 1945 when the war ended. The U.S. just sucked a lot of savings out of Europe and other places. It was a flight capital haven.
In 1950, a historic change occurred. Since 1950, when the Korean War began, the United States balance of payments for the first time moved into chronic deficit. Every single year of the 1950s, the 1960s, and the 1970s, the entire U.S. balance of payments deficit was military spending, as I’ve described in my book on Super Imperialism with all of the charts.
And the largest U.S. military outpost was in South Korea, which remains today the largest military outpost.
So when Richard talks about the, until now, the U.S. Cold War spending supporting Korea, all of these troops in Korea have spent U.S. dollars to buy Korean goods and food and all of the other services they have, supporting Korea’s balance of payments.
Korea remains a key element of the U.S. empire’s balance of payments.
I went to Korea in 1974 with Herman Kahn to meet with the president there as advisors.
And Herman explained to the president, who like all of Korea’s presidents were dictators, that actually, this was the road to democracy because he pointed out that all of the European countries began as a royal states or religious states, that there had to be a centralized government power and autocracy in order to create and design a democracy, certainly to do one American-style in Korea.
So he explained to Korea and to the American press that Korean dictatorship was a part of the movement towards democracy.
Well, after that, I asked about the balance of payments in Korea and they took me to a pharmaceuticals company, looked at the assembly line there.
They were all women and they went to a factory. All the workers were women. And I asked, you know, why is that? And they said, well, in Korea, it’s a very male-dominated country. The men are paid four or five times what the women are.
The reason Korea is able to make so many of its exports to the United States and to Europe is because they’re made by women, female labor, that is subsidized by the fact that the husbands make enough for the whole family because of the male/female disparity there. A light went off in my mind that their whole international competition was based on male supremacy over women.
And you can see how all of that has unfolded. It was an authoritarian country. Well, basically, this was back in 1974. This was 50 years ago. Obviously, there has been an increasing protest against authoritarianism in all forms, not only gender-based, but also based on the United States.
As the United States protectionism is increased and as Chinese competition in electronics and automobiles has increased, Korean businesses are being squeezed, just like Volkswagen is being squeezed in Germany. So this is forcing them to decide.
We’re about to have Donald Trump come into office. He’s going to be further protecting American industry, and that includes against the Koreans. How are they going to operate their economy, plus having to bear more and more of the Cold War costs, just as Europe is being told to bear the Cold War costs?
They have to make a decision.
And you can imagine there’s a rising group within South Korea, saying, do we really want to be part of this constant war with North Korea, especially when they’re getting so many bombs and so much more military power? Do we want to develop a closer relationship with China and the BRICS because that’s our market?
In other words, what’s going on in Europe, Germany and other countries? Where is their major market going to be? The Koreans have seen what’s happening in Europe and how they’re being sacrificed for the United States. The question is, do they want to be sacrificed in the same way?
Or do they want to say, well, Europe wasn’t able to turn toward Russia and China because America told them not to. But can we afford to make that same choice that Europe did and face the same problems with our leading chaebol, the dominant monopolies? China’s not only is it an autocracy, but it’s an oligarchy of the big chaebol, the monopolies that they have there that are being threatened by U.S. trade policy.
And I would be surprised if the Chinese diplomats are not talking with Korean diplomats and say, look, we can make a win-win. Why don’t you shift our market? We’ll support you. We will tell North Korea your enemy isn’t— you don’t have to worry about South Korea. Focus on Japan, which we can all agree we hate.
And I think that’s the dynamic that you’re seeing now. And I don’t know what the United States can do because, as Richard said, it’s losing their power.
I do think that Richard’s point about Korea sending shells to Ukraine must absolutely infuriate Putin and the other BRICS members.
But at the same time, this has created this social and political crisis that I think the inherent dynamics favor Korea’s moving, being driven by U.S. policy out of the U.S. economic orbit.
RICHARD WOLFF: By the way, as just an additional point that what Michael said reminded me of.
The chairman of VW, when interviewed over the last couple of days about the strike at VW in Germany, mentioned repeatedly, Chinese competition. It’s beginning— and notice that Michael points out that the South Koreans also have to worry about Chinese competition. I see the point. I understand it. And we knew that.
But I also think it’s becoming a very convenient ideological crutch, a way to avoid dealing with what is actually happening, in which China’s development plays a role, no question. And it is a competitive challenge, no question.
But it’s not the reason all of this is happening. That’s crazy. This is all happening because the evolution of China is part of a decline of another empire.
Now, it’s fashionable. And my guess is Mr. Trump is going to ride that horse as far as he can to make it all uni-causal. It’s all about the China who wants to rule the world. I mean, that’s a convenient trope. We we did that with the Russians. They all commies wanted to rule the world. And so that justified almost anything still does. And so this is an easy switch. And the fact that it has a grain of truth makes it that much more useful as an ideological hammer with which to try to focus the upset that this is causing.
I mean, when the chairman of VW says it, nobody in China came up with a “cut the wages 10%.” I mean, this is silly. But he then becomes merely the messenger. The cause is external. He just delivered word that it has to happen. And that’s how the media in Germany, the compliant media, they are also handling it this way.
The other irony is the critics of all of this, those who are worried about where Germany is going to end up in all of this, those critics are quick to point out whatever may be said about China.
It’s also this war in Ukraine that denied (audio drops out) which was cheap energy. Imagine how it must play out in a German capitalist’s mind.
The cheap oil and gas that used to come in limitless quantities from Russia, which offset the fact that China was increasingly encroaching on the market that Germany fed. Remember, Germany is an export economy, machinery and high tech. That’s what Germany is famous for. Okay.
China is competing with them. China is also a major market. And in that market, Chinese competition sooner or later is going to prevail. So they have to look at this as the worst nightmare that the country that is their greatest competitor is about to get the cheap energy without which Germany could never have done it in the first place. This is a double punch in the face.
You’ve got to pay a fortune and watch what you can no longer buy, find its way to China to fuel even more, more efficiency, lower prices, because they’re getting cheap energy out of all of this.
It must drive the Germans crazy, and it produces, right below the surface in Germany, I see it all the time, remarkable statements by leading forces in Germany that their biggest problem isn’t China. It’s this business in Ukraine. They want that over. They want that done. They want to start having meetings with Russia about resuming cheap energy, and they want those meetings to start early last week.[Video Clip starts]
ANNALENA BAERBOCK: The promise to people in Ukraine, we stand with you as long as you need us. Then I want to deliver no matter what my German voters think, but I want to deliver to the people of Ukraine. And this is why for me it’s important to be always very frank and clear. And this means every measure I’m taking— I have to be clear that this holds on as long as Ukraine needs me.
We are facing now a winter time where we will be challenged as democratic politicians. People will go on the street and say, we cannot pay our energy prices.
And I will say, yes, I know. So we help you with social measures. But I don’t want to say, okay, then we stop the sanctions against Russia. We will stand with Ukraine. And this means the sanction will also stay in winter time, even if it gets really tough for politicians.[Video Clip ends]
MICHAEL HUDSON: Well, the United States has doubled down on European-German politicians to say, not only fighting Russia, you’ve only cut off one arm. We’re telling you to cut off both arms. You can’t trade with China either. They’ve placed all sorts of export controls on Germany against the export.
And you’ve had the German leaders, Scholz and others, go to China and saying, there’s something unfair here. You’re exporting more to us than we’re exporting to you.
And I think we’ve mentioned this in one of our earlier shows. China said, well, there are all sorts of things that we’d like to buy from you, like the Dutch chip engraving agreement. You’re not allowed to sell us anything that could technically be used for war. We can’t even buy shoes from you because soldiers might wear those shoes. So you’re defining any export to us as potential war. And of course, we’re not buying from you.
And if you continue to make arms to sell to Ukraine, we’re not going to sell you the raw materials that you need to make these arms. And the Germans, like Baerbock, Scholz, all of the German leaders, except for Sarah Wagenknecht, and the Alternative for Germany, have said, that’s fine. Our loyalty is to the United States because Europe is ruled by NATO. The political system of Europe, European countries, is ruled by NATO politically. And that means by the ultra-right-wing, I won’t say neo-Nazi, but the people like von der Leyen, who’s in charge of NATO. So what we’re seeing, what passes for German politics is really the U.S.-dominated NATO politics. And that’s told Europe to commit economic suicide.
So the dynamic, I think, that we began [this show] by talking about, [regarding] Korea having to make a choice, which civilization do you want to be a member of, is exactly the same fight that’s occurring in Germany and the rest of Europe.
RICHARD WOLFF: Yeah, I would only add that we’re watching what I think is the swan song, the final duet between the political leaders of Europe and the United States. I understand that those people grew up in what [one might call] a Manichaean universe, a universe of the devil on the one hand and God on the other, and they’re in an endless combat for the souls of all the rest of us.
And so that the world was neatly divided, the evil communists, Russia, all of that, and the democratic, liberal goodness of the West. And they made their decision.
It happened to be good for their career, it happened to be pleasing to their parents, and so they committed themselves to be the loyal bearers of this wonderful God-connected side of the great battle. And they’re ready to fight. They’re ready to fight, first of all, to the last Ukrainian.
But, they’re also willing, and notice her language in Baerbock. She doesn’t care about the Germans. And, you know, “my constituents” … What? Yeah. Then she… then she sticks in that adjective, democratic. We democratic politicians, almost in the same breath that she says how we are going to be challenged.
What is… what could she possibly mean? You just told us you don’t… you will not be told what the German people want by the German people. By the way, the polls in Germany, and I want to mention this, are increasingly making it clear that German people, in huge numbers, see it as Ukraine versus them. They don’t see it the way she does.
And when she says, I’m going to do what the Ukrainian people want, the latest Gallup poll. I believe I mentioned this on a previous show, but the latest Gallup poll, November of this year, for the first time, Gallup measures public sentiment in Ukraine. For the first time, the percentage of respondents in the Ukraine-Gallup poll who want the war to end and negotiations to begin, went over 50%. It’s now about 53, 54%. So if you want to play games, she can do what the Ukrainians want. Unfortunately, it’s the opposite of what she’s about to do.
Nor could she care less. “I’m going to deliver weapons.” She’s famous in Germany. I read the German press. She’s famous in Germany. She’s by far the most anti-Russian spokesman in the cabinet of the German government. You know, she’s on the left of that government. She’s a Green. She comes out of the Green party, but she’s more pro-war than are many of the conservative politicians.
The traditional Christian democratic parties, which is where the conservatives mostly are, in Germany. And as Michael has pointed out, it’s the far-right, Alternative für Deutschland, and Wagenknecht and the far-left, that are the anti-Ukraine war forces in the country, and that are big enough to make an enormous difference in their politics.
But I think you’re watching the twisting and the turning, the odd remarks like the one you captured in that video, where these politicians are now. Let me put words in their mouth. It’s not them, it’s me. Here’s the word I would put in their mouth. The secret conversations I would imagine they’re having.
Oh my god, Hans or Fritz. Oh my god. Have we bet on the wrong horse? Is it time to really re-evaluate the alliance with the United States? Is it, or are we at risk of being taken down with their empire? Europe already had lost its own empire. Now it is at risk of being smashed further down by having hooked itself up to another empire that died.
And no one displays that better and more than Great Britain.
MICHAEL HUDSON: Well, Richard, you’ve just made a very smooth segue. You begin by talking about Europe’s feeling about Ukraine, but the Ukraine war is over. It’s an American war now. It’s America’s war against Russia. And so I think the Europeans are following your segue and saying what they thought. And on the surface was the war of Ukraine. It’s really the U.S. side, the U.S. Cold War against Russia. That’s exactly what it is.
And the problem is that if you look at the career of Baerbock and the Green Party, I used to work closely with Ramsey Clark. And he was protecting the Green Party at the time that the United States was trying to overthrow it and throw its leader in jail.
And the United States, specifically the National Endowment for Democracy and other non-governmental organizations, began to look around for people, basically pro-Americans to give grants to, money to, in order to create a group of politicians who would know what side their the bread was buttered on and turn to the U.S.
And just yesterday I had a post-mortem with Jill Stein, who’s been on this show, about what happened to the Green Party here. She said the U.S. government has been, FBI and other national security agencies have been trying to flood the Green Party here in the same way they did in Germany with people who offered to be volunteers.
And she said, we don’t know whether they’re crazy people or whether they’re plants. There’s no way of knowing, but it’s obvious what they want to do is take control of the party.
Well, that’s exactly what happened to the Green Party in Germany that began as one of the left-wing alternative parties there and was turned around by the U.S. subsidy and the U.S. takeover in the same way that the U.S. took over the British Labor Party with Tony Blair and others and back to the right-wing parties in France and Italy and other countries.
So finally, the Europeans are realizing the political system has been poisoned by the American-oriented politicians who’ve been nurtured by the U.S. as sort of a fifth column. And they’re realizing that the political system has been corrupted. What do they do about it? That’s what they’re trying to figure out.
And of course, the U.S.-backed German government says maybe we should ban the Alternative für Deutschland.
So in order for us to support the Nazis in Ukraine and the Nazis in Israel and now the Nazis in Syria, Idlib and ISIS, we have to call the opponents of Nazism Nazis and close them down. That’s the irony that you’re seeing in Germany now.
And how long can this tension remain without an institutional crisis transforming the whole structure of European politics?
It’s not just that the Europeans could somehow vote to support rapprochement with Russia. I don’t think there can be much of a rapprochement. I think Putin is correct when he says it’s going to take 30 years for us to be able to trust them again and to begin to make a trade with them again.
How can Russia trade with them for oil when without Europe giving them back the $300 billion that they’ve stolen? There are just too many, too many splits for a short-term easy takeover. It requires almost a social revolution of one form or another to make this transition that you’re talking about from joining the U.S. empire to joining the global majority of civilization.
RICHARD WOLFF: It also makes one wonder. Think about the last few years of American politics in which the defeat of Hillary Clinton by Trump was then excused or blamed, if you like, on the outrageous interference in American politics by the Russians. Remember the Russiagate and all of that.
There’s something stunning going on here.
The country foremost in the world in systematically using its dominant position coming out of World War II to become the world’s policemen, to become the funder of political parties all over, in country after country, manipulating their politicians, manipulating their elections, manipulating their media.
It’s been exposed in congressional hearings. It’s been exposed in an immense literature that anyone can see.
Yet this country, exposed as the manipulator abroad par excellence, presents itself to the world not as the performer of such interventions, but as the victim. We were, they did, can you imagine? They interfered.
And no matter how difficult it was to find the evidence to show this, it didn’t matter. Who cared about the evidence? There were enough people, and it was wonderful for the Democratic Party, therefore didn’t have to question its own politics, didn’t have to question its own dependence on its own donors, none of it.
It could blame the Russians for which the Democratic Party had become famous throughout the Cold War anyway. This all came second nature. They dusted off the same speech that they had given in the 1950s and 60s, adjusted the dates and gave it again.
It’s stunning when you realize that that’s, that’s almost the epitome for me of the Madison Avenue advertising idea of politics. That whatever you’re doing, write it up as mom, the flag, and apple pie.
You know, every advertiser knows that your job is to take the money from your client and then to say only the best things about the product, you know, about the defects of the product, [stay silent]. And if the truth of the matter, it’s not enough to hide it, then make up virtues in your product and make up flaws in the product of your competitor, which happens all the time, every day.
We all know it. We take it in now in routine. We don’t see it. But the minute we stop and ask, we see it. Politics is, of course, taken over years ago by Madison Avenue. That’s what a political race is. My advertisers versus your advertisers. But we should be aware that it comes in here.
That it’s the advertiser who says, I can portray this as us being victimized by them. I will do what’s necessary to portray them as the victimizer. And I will do what’s necessary to portray me as the victim. The fact that for the previous half century, I have been victimizing it. I can push that out of the picture, out of the conversation, and keep it focused. That’s the commitment of an advertiser.
That’s why we had, even in this election, lots of speculation revving up again. Who are the Russians, or the Iranians, or the Chinese manipulating?
I remember reading about the currency exchange rates.
It became obvious, the minute you do any history, that governments are always manipulating their exchanges. The idea that there’s an exchange rate, and then there’s the manipulated one, as if you knew what the difference was. That’s the game. You don’t. You can’t.
And to free the exchange rate from manipulation is the equivalent of going to heaven on a special boat. That’s not going to happen either.
MICHAEL HUDSON: Well, Richard, you’ve described the final stage of the U.S. Cold War. It’s about the narrative. Who’s going to win the narrative? It can’t be won on the battlefield by the United States.
It can’t be won economically by the United States because it’s de-industrializing. All they have left is the narrative, and the advertising. And the narrative always ends up in a fight between good and evil. The whole world now is saying, who is the good and who is the evil? What kind of society is a good society?
Is it the de-industrializing society pushing war everywhere and trying to engage in regime change and color revolutions? To say, we win, you lose, as Donald Trump would say. Or is the good, mutual, multilateralism, win-win, mutual benefit? What is the good and evil?
The United States says, we are democracy, we are good. Democracy as in Ukraine. Democracy as in Israel. Democracy as in what we’re trying to do with the ISIS terrorists to overthrow Syria. Democracy is in our plans for war with Iran. That’s the “good”. The “evil” are countries defending themselves against our interference because we’re doing it for democracy. And that means American first.
That means we win. How many people can untangle their brain to recreate a reality-based economics and political view of the world. That’s what we’re going to be seeing in the first year of the Trump administration.
RICHARD WOLFF: By the way, in Germany, one of the things I discovered, talking to some of the people I know, is that a kind of inflection point was reached when the underwater pipeline from Russia, the gas line, was blown up. For them, for them, this was an act that only an advanced, technologically sophisticated society could do.
It’s completely, you have to have machinery and, and so it, the German love of irony and sarcasm has produced an endless array in which it is said, and so that was the great achievement of Western technology, was to blow up the pipeline that brought them the energy that enabled them to have that advanced technology.
That self-destructive, contradictory behavior is a sign of where we are, you know, just, and they’re bitter that they don’t have the gas that would have come through the pipeline at this moment. It’s killing them.
And to, and to think not only that the Russians, they can’t get it anymore, but that literally it can’t come because they blew up the, it’s really, for the German mentality, that really is too much. You’re taking one step too much.
MICHAEL HUDSON: I don’t know the German mentality is very flexible.
RICHARD WOLFF: Yes, as all mentalities are, but the German word is “zu viel”. “Too much” is “zu viel” and that, and that’s the punchline to a series of stories about that pipeline.
For those who know German, “in the end, it was too much.”
NIMA: Just before wrapping up this session, Richard and Michael, we had Donald Trump talking about BRICS countries, if they’re not willing to use U.S. dollar, he’s gonna put tariffs, a hundred percent tariffs on all of them.
And if we assume that he’s gonna do that, which is impossible, in my opinion, but what would be the repercussions of these type of actions on the part of the United States, for the people in the United States and in the West?
MICHAEL HUDSON: Well, the United States has prevented Russia from using dollars by excluding it from the SWIFT system.
And the United States is preventing other countries from using dollars for trade with China in a broadening array of components. And if a foreign country imports from or exports to China, any computer or other product that has a single element produced in the United States, that country will be sanctioned.
So on the one hand, Trump is saying, we’re not going to let you use dollars for change. On the other hand, if you don’t use dollars, you’re our enemy. So it’s not only Europe that can think of two opposing truths simultaneously. It’s Donald Trump. Where can this go? I don’t think it’ll go anywhere.
I think that Trump will have sanctions against China. But the fact is that Russia would say, we’d love to use dollars. Give us back the 300 billion you’ve taken. We’re happy to transact our foreign transactions in dollars, as long as they’re as good as gold, as long as they’re an international thing.
It’s the United States that won’t let other countries use dollars.
RICHARD WOLFF: Well, I think what you’re seeing is a number of things on different levels. Donald Trump, more than other presidents, is a creature of Madison Avenue. His whole life is an endless projection of a great businessman.
You know, he’s had, I don’t know, what is it, a dozen bankruptcies. He’s a great negotiator. He can’t negotiate his way out of a paper bag. It’s silly, right? He’s just a, he’s a showman and he’s showing. So that always means you have to work at multiple levels. So part of this is showman.
He won the presidency in part because he’s protecting the American working class from all that befalls it, all that is eating at it. He’s going to bring us back prosperity. He’s going to bring back to white men their good jobs. He’s going to bring back to white men their social position of being the breadwinner and blah, blah, blah.
Going to subordinate the minorities and women the way they were in the good old days. All of that. And, and I’m going to threaten you. You don’t do, you don’t respect the dollar. I will smite you. This is, this is perfect Madison Avenue imagery. And the media are there to project the image, which they do. Okay.
When it comes to economic policy, not so much, because no one knows quite what to do with this. You know, you have 50 years of developing a U.S. umbrella for quote unquote, relatively free trade. Okay. Typical. The British did that at a comparable point in their empire too.
If you’re big enough and strong enough and dominant enough, then in a free, in a free session, you prevail. The minute you can’t prevail that way, out the window goes your commitment to the free market. You can see that now. Mr. Trump is, he could care less.
He just got a new secretary of treasury who mouths the crap about freedom and privatization and everything that Trump isn’t doing. But he picked the person who will be acceptable to the financial community. He’s one of them, a hedge fund hustler or whatever exactly he was or is.
So at one level, this is all performance.
But now at a second level, if he actually does some of it, it will hurt two groups: exporters whose stuff is hit with a tariff. Exporters in other countries whose stuff is hit. Possibly exporters in this country who will suffer a retaliatory tariff. You know, the Chinese respond, as do others with retaliation.
Mr. Trump and the media have to keep that story kind of quiet, because that looks like the policy has got a cost to it. And that will hurt, but you can’t have, you can’t have that. So, for example, I don’t know if people watching this program know, the Russians have seized all kinds of American corporations, their assets in Russia. Because the United States stole from them. Okay, we’ll steal from you. So a lot of American companies have lost their assets there, or they’re in limbo until this gets resolved.
Well, the same thing, there’ll be retaliatory tariffs. There already are retaliatory tariffs that are hurting Europe, that are hurting the United States, in China and elsewhere.
Best example: Trump famously is going to protect us from the invasion of the immigrants. And he built a wall. Did that wall stop immigration? Not at all!
In the four years after the wall, during the time the wall was built, Mr. Trump could say, “Well, the wall isn’t finished.” Okay? Then when Biden came, he made it crystal clear, the wall makes no difference. Immigration zoomed up with the wall, relative to what it had been without a wall. I mean, this is silly. It’s just silly.
But that silliness has to be kept quiet. The advertising mentality is so deep that a product has to have only good qualities. That’s why you never hear an advertiser say a word about anything negative. The philosophy is: say nothing! Even though human beings know, it is never always good. There’s always something.
That’s what you get here. And if we do have tariffs, a lot of them, then they will raise the price. You know, it’ll worsen the inflation. The last month or two, the inflation declined, stopped effectively. So we are already at the point where once January comes, if he does the stuff with tariffs that he says he’s going to do starting on the 20th of January, well then the inflationary numbers will show up in February and March. I mean, it’ll happen right away.
And there are companies that are already doing things that you can see.
I mean, there’s a horrible story, but it needs to be told about one of the largest health insurers in the United States. Anthem, Blue Cross Blue Shield. They announced that starting February 1st, they are assigning a certain number of hours of anesthesia that will be allowed and covered for every operation.
So that if you have a complication and your operation takes more than the allotted hours, one of two things will happen. They’ll wake you up out of your anesthesia and ask you if you would like to be put back under anesthesia, and then they will charge you for however many hours that is. Try to think about this.
Or you’ll make a commitment beforehand, or you’ll only get six hours covered of the 10 hours that your operation required, and then you can make a claim, they say proudly. And they will adjudicate whether some or all of your claim for anesthetic hours will be covered by your insurance. Notice, they’re not reducing the premium.
The premiums are staying the same. It’s just the number of hours covered. This is an inflation. Your anesthesia, the price just went up. That’s what this is. And, you know, how many companies seeing what’s going on are going to get out ahead of the inflation? You know, if you ever study inflation, inflation is self-canceling.
I raise my prices 5%. But if all the people I buy my inputs from raise their prices by 5%, I’m not ahead. So, time is of the essence. I’ve got to raise my price before all the others do, which is a guarantee that it’ll go faster than it otherwise would.
Anyone who studies this knows this, but you have the American public that can be told all of this, and the tariff is viewed how?
That’s why the president had to say, China will pay the tariff we put on Chinese goods.
And to this day, polls show that a big majority of Americans think that the tariffs are paid for by the foreigner, by the Chinese. No one has explained to them that that’s not how it works. But why would you do that? Why would you make that mistake? Because it’s advertised. You have to be able to say, tariff is good. It’s successful. It does the job. It can’t have a drawback. It can’t have a negative.
And I’m going to be interested, as an observer of clowns, how Mr. Trump is going to manage the absurd contradictions of the policies he announces.
MICHAEL HUDSON: Well, Anthem’s act on anesthesia worked pretty well for Bill Clinton. He said, “I feel your pain.” You can turn it around.
But regarding the tariffs, I think the situation is much worse than just tariffs. You’ve described how tariffs will increase the price of imports, but there’s already a sanctions war.
China has announced the other day that it’s not going to export a very broad array of essential raw materials and essential manufactured inputs that are necessary for American production to take place for computer chips, for computers, for cars, for washing machines, for all sorts of things.
We’ve discussed in the last few shows some of the sanctioned goods that China says America can use our gallium, our germanium, our rare earth elements, the whole array that we’ve been discussing to make military goods to fight in Ukraine. And just as America has, Blinken has gone to China and said, “Don’t export these goods to Russia. They can use them for military goods.”
The Chinese have turned the tables on the United States and said, “Well, absolutely right. We don’t want to export goods to any country making war because we’re against wars. So we’re not going to export to you the goods that would help you wage war in the Ukraine with all of your military applications. You know, can’t even sell your shoes. Your soldiers might wear them.” I’m exaggerating there, but that’s how broad the whole approach is.
So what this is going to do is cause supply breaks in the supply chain. And that will mean that these goods simply will not rise in price. They won’t be made. They won’t be available here.
So we’re talking about a breakdown in the supply chain. And essentially, companies are going to have to finance carrying charges for inventories. They’ll probably do here what Volkswagen did in Germany and say, “Well, we can’t really employ the labor force to continue to make products that require certain inputs that are only available to China. We have to wait until all of this is over.
Well, I’m sure that neither of us, I don’t know if anybody, has read the 200-page list of products and all of the special exemptions that lobbyists have put in to these trade blocks to prevent certain companies, especially if you’re a large contributor to the Republican Party, from being shut down.
But I think China has ways of getting around this. They’re not going to simply say, “Oh, okay, we’re going to send our raw materials and rare earths to Vietnam to send to the United States.” If they see some country simply or company increasing the degree of sanctioned products, they can have a pretty good idea about how to stop that.
So we’re talking about something much worse than tariffs since the rising prices. We’re talking about shutdowns of companies and layoffs. And, of course, there will be an inflation for goods that are not being produced. The price will not reflect the higher cost of production as a result of tariffs. It’ll be the whole scarcity of goods that are not being produced. That’s what the Americans are going to be facing after January.
And just as a footnote, when products start disappearing, then you’re going to see ramifications that nobody has even figured out what they’re going to be.
I mean, I’ve been going around the country talking to people about what it means that an electric vehicle, which is now best produced, most efficient, cheapest, highest quality, is a Chinese electric vehicle. So it happens. Well, those are not allowed here at 100% tariff. So it’s a kind of a case study.
But the ramifications of that are staggering. And they’re not just economic in the sense that a competitor of the U.S. can buy the best, cheapest truck for their business if they’re located in Canada. If they haven’t copied the U.S., I don’t know.
But his competitor, five miles away across the Canadian border, he can’t buy that cheap, high-quality, low-priced truck. And the competitiveness between them is thereby affected. How are you going to handle the losses of jobs here and there that come from this kind of behavior?
No one is explaining to the American people what the costs of all of this are. I mean, it’s extraordinary. It’s like the remark Trump made about how the revenue from the tariffs is going to allow him to cut taxes on corporations. I mean, it’s fantastic. You know, just, what? Do you know what kind of revenue is going to flow? You don’t.
I did like that he did it because, inadvertently, he taught the American working class, who doesn’t understand this. I know. I go to meetings. I explain it to people. They don’t seem to understand that there’s something remarkable about the leader of the Republican Party that has spent the last century presenting itself as the anti-tax party having an economic program whose centerpiece is the raising of the tariff tax. Hello? What is that about?
What happened to all that right-wing stuff that Michael and I have had to endure in our professional careers about, the government shouldn’t be picking winners and losers? What? What? The government shouldn’t be intervening.
We’re seeing maximum intervention by a Republican. It’s wonderful to watch.
It’s like Nixon when he was famously quoted as saying, “We are all Keynesians now.”
Richard D. Wolff
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