Following Tuesday’s video, here is more from this interview with Michael Hudson on Trump’s economic policies, from tax cuts and trade wars to infrastructure, privatisation, industrial policy, Wall Street versus Main Street and Artificial Intelligence and its effects on unemployment.
Another extract from the iconoclastic Michael Hudson’s J is for Junk Economics (p.109-110), in this occasional series:
“Government: From the Greek root cyber, meaning “to steer,” this social control function historically has been provided by public institutions at least ostensibly for the general welfare. Sovereign states are traditionally defined as having the powers to levy taxes, make and enforce laws, and regulate the economy. These planning functions are now in danger of passing to financial centers as governments become captive of the vested interests. The FIRE (Finance, Insurance and Real Estate) sector and its neoliberal supporters seek to prevent the public from regulating monopoly rent, and also aim to shift the tax burden onto labor and industry.
The recently proposed Trans-Pacific Partnership (TPP) agreement and its European counterpart, the Trans-Atlantic Trade and Investment Partnership (TTIP), would compel governments to relinquish these powers to corporate lawyers and referees appointed by Wall Street, the City of London, Frankfurt and other financial centers. The non-governmental court would oblige governments to pay compensation fines for enacting new taxes or applying environmental protection regulations or penalties. The fines would reflect what companies would have been able to make on rent extraction, pollution of the environment and other behavior usually coming under sovereign government regulations. Making governments buy these rights by fully compensating mineral and other rent-extracting businesses would effectively end the traditional role of the state.”
More on Adam Smith, this time from the pen of Michael Hudson in his excellent heterodox ‘dictionary’ J is for Junk Economics (p.28):
“Adam Smith (1723-1790): Traveling to France and meeting with the Physiocrats, Smith adopted their advocacy of a land tax: “Landlords love to reap where they have not sown, and demand a rent for its (the land’s) natural produce” (Wealth of Nations, Book I, Ch. 6, S.8). Landownership privileges “are founded on the most absurd of all suppositions, the supposition that every successive generation of men has not an equal right to the earth…but that the property of the present generation should be…regulated according to the fancy of those who died…five hundred years ago,” that is, the Norman conquerors (Book III, Ch. 2, S.6). Driving home the point, he adds: “The dearness of house-rent in London arises…above all the dearness of ground-rent, every landlord acting the part of a monopolist” (Ch. 10, S.55). Yet free market economists have tried to appropriate Adam Smith as their mascot, stripping away his critique of ground-rent and monopolies to depict him as a patron saint of deregulation and lower property taxes.
Regarding monopolies, Smith observed that almost every private interest represents its gains as a public benefit, as when CEO Charles Wilson proclaimed that what’s good for General Motors is good for the country. But in reality, Smith noted: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary” (Book I, Ch. 10, S.82).
Opposing the wars resulting from empire building and colonialism, Smith urged that the American colonies be liberated so as to free Britain from the costs of wars financed by public debts that taxed consumer essentials to carry the interest charges.”
I have posted before here and here on the neglected American School of Political Economy, which has been well-documented in the work of Michael Hudson. Below are brief bios of two of its members, taken from Hudson’s highly informative and thoroughly heterodox J is for Junk Economics (p.210 and p.176).
Their policy proposals were designed to encourage a dynamic and sustainable economic development path with benefits accruing to the broad population, and emphasized abundance rather than scarcity. The success of such policies in driving industrial and agricultural expansion in the US does not mean that they are necessarily applicable to today’s advanced economies.
The ASPE illustrated the importance of economic and social context, which would change depending on whether an economy is catching up with or occupying the technological frontier.
To take one example which remains highly relevant: in today’s America, and elsewhere among the richest countries, infrastructure spending has been squeezed thanks to the austerity drive, rather than used as a means to enhance prosperity following the economic crisis. This has surely been a serious mistake. Continue reading →
Plenty of economists, investors and others have been wondering what will happen to financial markets and the real economy as monetary stimulus in the form of Quantitative Easing is wound down by central banks from the US to the Eurozone in the face of stronger growth.
I will be writing more about it next week, considering the perspectives of critic Richard Koo among others, but here is Michael Hudson from, as ever, his iconoclastic and insightful ‘dictionary’ J is for Junk Economics (p.189-91): Continue reading →
Another extract, in this occasional series, from Michael Hudson‘s excellent J is for Junk Economics (p.86), this time on the definition of economics itself:
“Economics: The linguistic roots of the word “economics” stem from Aristotle’s Greek terms oikos (house or household) and nomos (rule). This often is trivialized as self-sufficient “household management”, in contrast to chrematistics, making money by market exchange and money lending. But economic organization and markets have always been wrapped in a political context as mixed economies. The paradigmatic “household” was the Mesopotamian “large house” (Sumerian and Babylonian é.gal), the temples and later the palaces in which accounting, weights and measures (including the origin of money), standardized interest and wage rates are first documented. Most merchants in Mesopotamia’s takeoff occupied official status in the royal bureaucracy, adopting management techniques from the large institutions. Prices were denominated for accounting purposes and for payment of debts to these large institutions, but were free to fluctuate outside of the city gates and outside of the temple and palace sector.
It thus is a travesty to narrow the study of economics to “markets”, defined simplistically as private sector households earning and spending their income on goods and assets. All markets operate in the context of public regulation, taxation and government spending to provide basic services, including those of the military and religious infrastructure.
Economic theory in modern Europe started as Political Arithmetic for royal management. The key concerns were money, taxes, and the trade policy needed to obtain silver and gold. James Steuart (1713-1780) called the latter “money of the world” and related it to population growth and immigration, colonialism and export production. Classical political economy shifted the focus of economics to domestic value, price and rent theory with a view toward political reform to check the power of landlords and other rent extractors.”