Global South

Michael Hudson, Prof Wolff: Cascading Policy Failures Undermine Empire

NIMA ALKHORSHID: Hi everybody. Today is Thursday, September 18, 2025, and our friends Michael Hudson and Richard Wolff are back with us. Welcome back.

⁣RICHARD WOLFF: Glad to be here.

⁣NIMA ALKHORSHID: Michael, you told me that you watched my talk with Scott Ritter about the defense budget, and all of that. What’s your point on that?

⁣MICHAEL HUDSON: Well, he picked up on my point that I’ve been making fifty years ago, that there’s a great difference between the balance of payments effect of America’s military spending and other countries.

Ever since the Korean War broke out in 1950, the entire balance of payments deficit for the United States, from the 50s, 60s, and the 70s, has been military spending abroad. The private sector trade and investment are exactly in balance over all these years. I published all of these statistics first for Arthur Andersen and then in my book Super Imperialism. And immediately, when my book Super Imperialism came out, Herman Kahn hired me for the Hudson Institute and said the largest buyers of the book were the State Department and the military — the CIA and the military. Immediately, the military gave a contract to the Hudson Institute for me to explain how going off the gold standard essentially enabled the United States to fund its balance-of-payments deficit, meaning its military spending abroad, by pumping dollars into the global economy and having these dollars end up in foreign central banks and be recycled.

Well, what that means is that America’s whole military spending for the last fifty years depends upon the dollarization system in other countries, using dollars as their monetary reserves in place of gold, and instead of their own currencies. That means that, as they move away from the dollars, there’s no way that the United States can finance its eight hundred military bases abroad and its military spending. Russia doesn’t have this problem. The military generals don’t study the balance of payments. And many of them are right-wingers that have a sort of crude monetarist Chicago School neoliberal view of money, without understanding that money is debt. And, specifically, monetary reserves are not only America’s treasury debt, but the monetization of America’s military spending.

Now, what Scott pointed out is that Russia doesn’t have this problem. China doesn’t have this problem because they’re not trying to create a foreign empire. They’re not trying to put military bases in other countries where they have to somehow spend their domestic currency, and buying local currencies, to do whatever military operations do there. So they don’t have the constraints that the United States have. And that’s what’s essentially leading the United States to say: we’re not only at war with Russia and China militarily, we’re at war with them financially. We don’t want the BRICS — China, Russia, Iran, and their other countries — to have an alternative of not using the dollar so that the dollars that we spend abroad for all these military operations are going to be somehow recycled to the United States.

That’s why you’re having Trump try to browbeat India, Japan, Korea, and Europe into somehow promising to recycle all the dollars to the United States. Why is he doing this? It’s not simply to pay tariffs so that the Treasury will have more money and can cut taxes on the wealthy even more. It’s so that the dollar will not be forced down so that there will be a huge inflow to support the dollar, basically, despite Trump’s hope of devaluing the dollar slightly, slowly downwards — as if that’s going to make American exports more competitive. The whole fight over the dollar isn’t really about U.S. exports being more competitive because the United States doesn’t have much industry to export. It’s really about the balance of payments, which is primarily military in character — not the trade deficit, not the investment deficit.

The government used to realize that. But again, Trump and his team just think of sort of running a protection racket: Either you spend your money to the United States — $350 billion from you, Japan, you promise to send here to invest — another $350 billion from you, Korea — or we’re just going to raise tariffs and deny you the U.S. market. The American strategy — and it’s a military strategy as well as an economic strategy — imagines that other countries need the American market, and they don’t have a choice but to support the dollar, and by supporting the dollar, supporting America’s ability to wage war and have military operations abroad.

They don’t realize that this is the whole thing. And yet this protection racket has essentially overplayed its hand. And last week, Korea said: Wait a minute. You just told Japan to pay you $350 billion, and you get all the profits from what they spend in — you get 90% of the profits and give us 10% — if there are any profits at all, you know, from the way you arrange it with your Hollywood-Pentagon bookkeeping.

You need America’s market; we can deny it, and that’s chaos for you.

Well, it’s not really chaos. They tried the same thing with China last week, and China protested and said — I’m sorry, they tried it with Korea last week — Korea protested and they said: We’re not Japan. We don’t have $350 billion. We’re much smaller. And you’re blocking our automobile exports from the U.S. market. We just can’t pay.

And then, Howard Lutnick, the Commerce Secretary, said: The Koreans either accept the deal, or pay the tariffs. Black and white: pay the tariffs, or accept the deal.

Well, yesterday, Korea’s foreign minister went to China. And there’s not a word in the paper about what they’re discussing. But you can just imagine. Korea realizes that Trump is going to insist: We need your money to continue our military spending abroad and to finance our budget deficit. We’re going to close the market to you. And Korea finally is saying, well — for Hyundai and for Samsung, all of its computer industries — what if we don’t have the U.S. market? Do we have a Plan B? And I suspect they’re talking about China. And they’re talking to China. And they’re saying, well, you know, if we walk away from the U.S. market, we’ll walk away from that factory in Georgia. Obviously, there’s such a reaction in Korea that we can’t afford it. If we walk away, can you figure out a way that we can work our industrial capacity in partnership with you as part of your Chinese new prosperity sphere?

And by the way, if we do that, will you help back us up when we tell the Americans to leave their military bases here? We don’t want their military bases if they’re going to hold us up and essentially declare: We’re treating you like a defeated power. Like we defeated you in 1951. There’s never really been an end to the Korean War. We’re still fighting you, just like we’re still fighting World War II against Japan. You don’t have a choice.

If Korea and Japan, and India all make a choice to say, well, we cannot afford access to the U.S. market on these terms. We can use the $350 billion — or Japan can use the same amount — we can use that $350 billion to subsidize our own industry and keep our employment and support our workforce, while we transition radical change, from orienting our trade with the United States and Europe, to orienting it with our new Asian partners.

That’s what it all is. And that commercial balance-of-payments consideration is a fundamental military consideration at the root. And that’s what really frightens the United States. It was the Vietnam War that forced the United States off gold in 1971. Its spending in Vietnam depleted the gold stock by spending so many dollars abroad that General de Gaulle, in France, and Germany, just cashed them in for gold. And America finally just stopped the drain.

Well, now it’s other countries that are preventing the United States from solving this drain problem by saying we’re not going to accept any dollars that are just the monetization of your military spending to surround us with military bases. We’re going to stop the financial bloodstream that’s funding your whole new Cold War. And this goes beyond the investment in missiles and the investment in boats. Other countries are not going to fight a war by invading any other country. And America cannot control another country, not even Ukraine, without troops invading it. And the cost of a military invasion, an infantry invasion, is very different from the domestic cost of sending missiles. China and Russia, Iran have no intention or ability to mount an army to send into other countries. All they have is missiles, basically. And that’s what the next few years of war are going to be all about.

⁣NIMA ALKHORSHID: Yeah. Go ahead, Richard.

⁣RICHARD WOLFF: Okay, another way of saying this is that the United States cannot afford the empire. The problem is, it can’t do it. In the early decades after World War II, the balance of payments — correct me if I’m wrong, Michael — saw export surplus from the United States, generating the capital and the money with which then to finance the seven or eight hundred bases around the world. And so you had the rest of the world dependent on exports from the United States, having to pay for them in the money that was then used to subordinate them militarily to keep this game going.

By the 1970s, this game was over because the Germans, the Japanese, and the Europeans had recovered from the war, as we knew they would. That’s what they were doing in the decades from 1945 to 1975. In that thirty-year period, the United States lost its preeminent position in the world economy as an exporter. It would either have had to stop because it could no longer finance its military adventures abroad by its export surplus, or it would have had to do what Michael so nicely described. It would have to have found another way, another way, and the dollarization making all oil contracts denominated in dollars — and hyping the threat of the Soviet Union, which the Europeans are copying today because they don’t know any other politics — this enabled them to then create the deficit program. They would make the United States a net importer, switch its own production out of the country, no longer needing these exports, no longer being able to afford them (they weren’t profitable enough to produce in the United States), and you replaced all the workers, either with machinery and with automation, or by exporting the jobs.

So, your end result was the story Michael just told. You could continue to finance your global military adventures, but now you finance them by means of imposing, if you like, on the world the need to hold reserves for their currency because the agreed relationship among currencies was gone. That’s what we had coming out of the Bretton Woods, and that’s what we ended when Nixon took us off the gold standard in 1971. So then, you have Michael’s story.

But let me do something we don’t do enough of. Let me tell you a little bit on this program about the limits to all of this. In order to sustain, now, when you have no exports and when the ability of the United States to import is shrinking every day, because the mass of our people is simply too poor — I mean, the statistic came out this week that the top 10% (if I have it right), the top 10% of the income distribution accounts for 50% of the consumer demand in our society. Alright, that’s another way of saying that the bottom 90% are piss poor. They can’t afford anything. Right?

Well, given that we depend on imports, that’s not a good basis for the future. We’re not running; we’re not going to be able to run the kinds of deficits that we used to. That’s my guess, at this point. Alright, what then is going to sustain the story Michael told? How are we going to pay for all of those bases? We don’t have the exports to do it, and we’re not running the kinds of deficits, nor is the rest of the world eager to accumulate dollars in the way that they were before — and that was true before BRICS became important. The decline of the dollar as a reserve currency is at least thirty years old. The Chinese once had $1.2 trillion. They have $750 billion. I know these are big numbers, but that’s a big decline. It’s not surprising, but it’s a big decline.

So for me, I’m beginning to wonder, how long can you keep this up? And when you add the degree to which military payments in this country are a Keynesian support of aggregate demand in our society, then you see he can’t afford a military, but he can’t afford not to have the military. And I suspect that’s the reason why Mr. Trump, who comes into office promising to stop the endless wars, has neither stopped them, nor has he been able to avoid proliferating more war. He attacked Iran, and he’s busily now provoking Venezuela, and taking extraordinary steps to do it. And giving carte blanche to Mr. [Benjamin] Netanyahu is extraordinary.

You know, we wonder, why would the government do these extraordinary things? And in a way, Michael’s story gives the beginning of an answer: that there’s more going on here than macro-management. That’s important. And there’s more going on than the balance of payments. That’s important. There’s also managing the military — the budget and the activity — when you’re so badly out of whack, you can’t beat the Russians in Ukraine. That’s what’s obvious. It’s obvious to the whole world. They can’t let go. What’s the matter here? Even in Vietnam, they understood: we’ve been defeated. And the Americans withdrew, and the Communist Party of Vietnam took over, and has remained the government ever since. That’s thirty-five years ago, right? That is extraordinary. What is it now? Maybe more than that. Fifty years ago.

Then they were defeated in Afghanistan, and they withdrew. Mr. Biden, in the end, did what the previous presidents couldn’t dare do, which is to say: this is hopeless. And so they’re losing. You know, Harper’s Magazine just came out this last week, and on the front page is the lead story of the magazine, which — here’s the title: Why does the American Military Keep Losing All the Wars? Wow, you’re now even able to ask, in a public way, the forbidden question. And if the rest of the world is worried about the United States economically, we have to remember it was also worried about it militarily, and that danger is receding, as we see what’s going on in the world. The desperation inside the United States, the fascistic turn that we are assaulted with every day is a reflection of all of these dead ends confronting the people who run this system.

⁣MICHAEL HUDSON: Richard, there’s a common denominator that links the dynamics you’ve just meant, and that’s oil and foreign investment in oil. Much of the build-up of the reason that there was a gold inflow to the United States from 1945 to 1950 when the Korea War broke out was not simply U.S. exports, it was the sale of oil by the American oil industry that was in control of the world’s oil. And for the last hundred years — and I’ve made this point before on our show, Nima — the cornerstone of America’s control of money, and the balance of payments and military coercion, has been oil, along with food and agriculture, because if you have the ability to monopolize oil, you have the ability to cut off other countries’ industrial potential — just like depriving Germany and Europe of Russian oil and gas has ended Germany’s and Europe’s industrial potential.

Now, that explains a number of things that you’ve seen recently. Not only has America continued to do everything that it can to isolate foreign purchases of Russian oil — the same thing with Iranian oil, it’s tightened all of the sanctions against it. And the reason that Iran was overthrown in [1953] was largely because it wanted to nationalize the oil and the Americans and British together — it was a British-Iranian oil company at that time — felt they were losing control of the oil leverage.

Well, fast forward to today, you’re seeing in the nightly news, every night here has been taking off with Venezuela. Why Venezuela? It’s not really drugs. Just like Israel claims that all Palestinians are Hamas, the United States claims that all Venezuelans — their fishermen, their population — are drug dealers. Well, the reason that the news leads off with blowing up a fishing boat every night, or another boat that has no seeming connection to drug dealing at all, is the United States is trying to create a narrative that this fight against Venezuela is a fight against drugs.

It’s a fight not only to regain control of Venezuelan oil, but, more specifically, to prevent China’s recent negotiations with Venezuela to invest in developing Venezuela’s enormous oil reserves under Lake Maracaibo. And imagine what the United States is worried about. Not only is China making itself independent of America’s allies’ supply and control of the oil industry from Russia, but now China can get its oil from Venezuela itself; and the fight in the Middle East, using the alliance of Israel with the Wahhabi jihadists, to create a disaster, there is to prepare the war for controlling Iraqi, Syrian, and, most of all, Iranian oil.

The United States still dreams of reestablishing its diplomatic, economic, political, and military control of other countries by controlling oil and food — that’s the other basic means of control: that America can impose sanctions on its food exports to starve other countries into submission to its policy, as it tried to do against Mao after the 1945 revolution, until Canada broke the blockade.

Well, right now, you’re seeing China voluntarily shift its imports for soybeans away from the United States to Brazil, to buy its soybeans there. And China has, until this year, accounted for 50% of all soybean production in the United States — and it’s 70% of soybean production in the case of North Dakota. All of a sudden, there’s zero demand from China for soybeans. And yet you have a perfect storm for American agriculture. You have the corn and soybean crop — a bumper crop this year because of the extreme weather — all of this crop is piling up. There’s nowhere to sell it. They don’t have enough storage capacity to put the soybeans and corn in silos. There’s a huge market now in big plastic bags to begin storing them in. This is a disaster, and the farmers are pressuring Trump to say, you know, you’ve got to be able to reestablish our market next year. We’ve been dependent on soybeans, and what can we shift to? We can’t shift to corn. People are not buying our agricultural exports anymore.

So not only has America lost its ability to use food, like it’s used oil, to starve other countries, denying them American exports, but it’s lost its agricultural sector. And the result is that land prices are collapsing in North Dakota and other areas. They’re falling because the farmers are not able to meet their debts. For the last 150 years, all of the financial crises in America, Europe, and the Northern Hemisphere have occurred in the autumn, in September and October. And there’s a reason for that. It was called the autumnal drain. It’s when farmers would have to borrow the money to move the crops to sell them for markets. Well, right now, that autumnal drain threatened to lead to a break in the chain of payments. Insolvencies, arrears, bankruptcies, and foreclosures, that’s what they’re talking about now in the American Northwest and Midwest: foreclosures on agricultural land that doesn’t have a customer. And there’s nothing that Trump can do about this now because the shift is irreversible.

Now that China is making a deal with Brazil, saying we cannot rely on America’s soybean exports any longer because Trump has weaponized every element of foreign trade. He’s weaponized the oil trade. He’s weaponized the agricultural food trade to try to make other countries dependent enough to shake them down for his protection racket. Well, we don’t need the American market. Thank heavens we have you in Brazil! So, the Brazilian farmers are reorganizing, replanting their agriculture, to shift into soybeans. Once they do this, if Trump goes back and tells China, okay, you know, you can depend on us again for our soybean exports, China is going to say, well, wait a minute, we’re not going to double-cross Brazil, where we’ve just made an agreement to trade with them and to trade in our own currency, not trade in dollars, but trade in our currency. Once we’ve made this shift, and the whole national economy (Brazil) has been shifting to dependence on our market, we’re not going to turn on a dime, like you do in the United States, and just say, okay, we’re going to change and have a new market.

A change is irreversible. You can imagine how the threat of America losing the ability to use food — soybeans, grain, wheat — and oil because of the moves by China and other countries to become alternative suppliers to the United States means that America’s lost the two leading elements, not only of its exports, but of foreign investments in oil and farmland that American investors have controlled. They’ve lost the ability to support the dollar. And by not supporting the dollar, it means not providing the foreign exchange that the United States needs in order to maintain its military presence abroad, that remains as heavy a drain today as it was during the Vietnam War that forced the dollar off gold to begin with.

So, when you put the military strategy and imperial strategy in the context of the balance of payments, you find the great constraint that confronts the United States. And that’s what my book Super Imperialism was all about. And as I said, the major audience was not foreign readers wanting to fight against imperialism. It was the Defense Department, State Department, and CIA that used it as a how-to-do-it book: this is how you have to look at the context of America’s military and non-military diplomacy.

⁣NIMA ALKHORSHID: Richard, before going to your comment, one other aspect of what Michael said is Donald Trump imposing tariffs on steel and aluminum that raise industrial costs, destroy jobs, and weaken America’s manufacturing capabilities.

⁣RICHARD WOLFF: Yes, and that’s a perfect segue. I want to take us to a slightly different aspect of this problem. It has now become clear, with each passing day — and Michael has given us the context — what the purpose is, on the one hand, of raising tariffs and, on the other hand, of using them as bargaining chips to get other countries to agree to invest money in the United States.

For example, in the last two or three days, there has been a flurry of statements coming out of England because Trump is visiting England, Britain, and big boasting of huge amounts of money — hundreds of billions of dollars that the British are going to invest in the United States, and vice versa — okay, a very interesting story. But let’s take a look at what the reality is. Number one: The purpose of the tariffs was to do something that now the country is desperate to do. I want to underscore this because I don’t think it’s very well understood: We are watching a Republican president leading a Republican party that, for a hundred years, has been the carrier of the notion that taxing is bad and the government shouldn’t tax anybody, that we are in favor of private enterprise, not state enterprise, and the government should not — blah, blah, blah, blah. And what is he doing? Imposing an enormous tax on the American economy. That’s what tariffs are: they are a tax.

So, we should wonder what would make ideologically driven conservative business people who hate to pay taxes, who have been supporting the Republican Party for a century to keep their taxes down, and have had that work well for them — why would they suddenly reverse everything and impose an enormous tax? Answer: they’re desperate. They have no other way to go. Their borrowing is out of control — let’s remember, in 1970, the total debts of the United States were a few hundred billion dollars. Today, it’s $37 trillion. That’s an increase that dwarfs production and prices — nothing goes like that. We have borrowed crazy. Why? Because we had already reached difficulties, that meant the government, to finance itself, couldn’t tax the rich who controlled politics and wouldn’t permit it, and had pushed the tax burden onto the mass of people so much that by the 60s and 70s we had tax revolts: that’s what they were called — in California, all over the United States.

And then began the solution. When the politicians cannot dare tax their donors, and can no longer tax the people, what do they do? They borrow, as if it were a magic alternative. And who do they borrow from? The corporations and the rich who lend the government the money they did not have to pay in taxes. This is “Schweinerei,” the Germans would say. This is pure fakery.

But now we get to where we are today. We’ve borrowed so much playing this absurd game. We got the rest of the world to get in on this, holding their wealth in the form of U.S. treasuries, and so on, that we have gotten to the point which was already reached under the short tenure of Elizabeth Truss in England, where the capital markets say: We’re not lending to you anymore. You’re not a reliable borrower. You have gone so far in your borrowing that we can see you’re getting close to that political point where your own people will not allow their taxes to be used to pay interest on debt, rather than to feed their children. And in that game, it’s the creditor who loses. We don’t want to lose.

Alright, so what is the U.S. going to do? Tariff. It will, in fact, put a tax; it’ll put it on businesses — because most of the tariffs are paid by businesses that import into the United States — and they will say to those businesses: It’s your job, you have to pay for this. It’s your job to figure out whether you can squeeze the foreigners to lower their price to offset the tariff, or you squeeze the American consumer via inflation, and solve the problem that way. But we, the government, are no longer squeezing the masses. You (irony: you, the business community), are doing it through inflation. That’s the effort.

Now you understand why Mr. Trump is eager to do the tariffs, but because they are resisted and because they are not generating anywhere near enough money to deal with this problem, he has the second half of it: He’ll bargain away the tariff that wasn’t doing the job anyway if you promise to move capital into the United States. Hence, Michael is quite right. It’s a protection racket: You have to help us because we are a flailing, declining empire, and the only way we can continue to protect you — that’s what they say to the Europeans — you’ve got to help us. You’ve got to give us all this money.

Keir Starmer, yesterday, in a spectacle as pathetic as any I’ve ever seen, boasts that the United States has committed to investing [$]150, or maybe even [$]250 — it’s a little fuzzy, [the] numbers — of money over the next ten years in Britain. And he says with real pride: it’s going to produce, we hope, 7,900 jobs.

So, I looked at the statistics. What’s the job story in England between August of 2024 and August of this year? They lost 127,000 jobs. He’s boasting of something that can’t offset even 10% of the decline of the British Empire — and it’s coming over ten years! That’s an admission of failure that’s been dressed up as an achievement.

Last point. If the rest of the world — to quote Michael — is being charged an entrance fee to sell their stuff in the United States — and that’s what a tariff is, you got to pay this if you’re going to sell stuff in the United States — that’s hurting the exporters around the world because their market is going to shrink. That’s elementary. They’re screaming bloody murder to their governments, who are therefore desperate to give them something to support this craziness that’s hurting them. And what do they give them? They give them these announcements: The United States will invest, if we invest in the United States. And that’s the bigger story. Suppose that works? Suppose that these leaders in Europe and beyond do, in fact, deliver hundreds of billions of dollars of capital investment in the United States? Frankly, I don’t see it. I see the United States becoming less attractive as a place to make investments, with [the passing of] each day.

But let’s assume I’m wrong; the money comes. Then, in those countries, austerity is already being imposed on the people in every one of the European countries. Now, only the rate of doing that is different, not the phenomenon. In that country, it will be possible for the radical left opposition — and for that matter, perhaps also the right opposition — to say what we would say here: We have leaders who have arranged that the money that might have been invested to create jobs in our country has, instead, been shipped over to that other country. And why? Because it has been smacking us with tariffs.

This is impossible. You will not survive politically when that is the program that you are effectively running.

⁣MICHAEL HUDSON: Well, Richard, let me give a particular example of the point that you just made that ties that together. I think an example can sort of walk the audience through. Your first point was the tariffs are a tax on consumers. Quite right. Well, what does America import that affects the farmers? Let’s go back to the farm example, because that’s where everything converges, more or less. America imports an enormous amount of fertilizer, including from Russia, but it also imports farm machinery. And one of the problems is that the collapse of the soybean market means a collapse of the income and the ability to buy new farm machinery for companies, like John Deere and Company — that has just laid off, I think, over 1,000 or 2,000 workers because the farmers don’t have enough money to buy new harvesting equipment. They’re trying to buy old harvesting equipment.

Much of this harvesting equipment is not only produced here by John Deere, but it’s produced in Germany. And America also imports harvesting equipment from Deere’s rival companies, also in Germany. Well, all of a sudden, they find their costs are going way up, as a result of the inability to get energy and steel. So, they are exporting, trying to supply the market here with the products that they produce in Germany.

And imagine the surprise that these companies suddenly have, that are saying this is a threat to their making any profits at all this year on their imports, because not only is the United States charging the 15% tariff on imports from Europe, but it’s saying you are liable for the 50% tariffs because you’re making your machinery out of steel, and out of aluminum — and we’re trying to support the American steel industry, and the aluminum industry, because that’s the only labor union that I can get that actually is going along with my pretense that my policies for the wealthiest 10% are really the policies for labor. I need to make a narrative symbolic act. And so, my symbolic act is going to sacrifice an all-American industry that makes its products out of steel and aluminum.

Well, you can imagine what this crazy political ploy has done. It means that Deere and Company, and other German exporters, all of a sudden, find that when they’re trying to provide the harvesting equipment that American agriculture needs, all of a sudden, the price has gone way, way up. And you pointed out, well, can they get around this by investing in the United States? Well, if they invest in the United States, they’re still going to have to import many of the parts that they use from other countries, because America doesn’t have the supply chain that’s necessary for all of the different things that go into harvesting equipment, just like automobiles. All of that, these tariffs have stifled the profitability of imports by companies, by raising the price so high that, as you say, either the companies absorb the cost, in which case they don’t make profits, and yet having a corporation is all about making a profit.

So, there’s a limit to what you can do. They’ll just stop producing, as Deere has stopped producing in some of its plants; or they pass it on to consumers, and the consumers are squeezed. The farmers are squeezed because not only is farm income going way down, as a result of Trump’s crazy weaponization of agricultural exports — when there is an alternative now that did not exist in the 1940s — but they’re broke and they can’t afford to borrow from the banks because the banks say: Well, you know, what are you going to pledge as collateral? Your collateral is your farmland, and the farmland prices are going down, and you’re already fully mortgaged.

By the way, Treasury Secretary [Scott] Bessent earns $1 million a year in rent for one of his landed properties in North Dakota, that’s used largely for producing all of this. This was accused of being a conflict of interest by Congress, and he has to sell this land by mid-December into a collapsing market. Well, you can imagine how happy he is. At least the Federal Reserve cut its interest rates the other day.

And the newspapers all said: Gee, with interest rates going down half a percent, that’s going to lower the mortgage rates for housing and for equipment purchases. But that’s a fantasy. Short-term rates went down yesterday — yes, by a quarter percent — long-term rates went up, because they said this is going to be inflationary. For the short term, you could lower the interest rates, but we’re not going to buy long-term bonds because living in the short run is going to lead to a huge inflation, just as you described, Richard — the inflation from cutting taxes on the rich, and stifling the rest of the economy by tariffs, and all of the other things that Trump’s doing — ending government support of all of the social programs and the medical programs and the educational programs that it’s been doing. You’re finding the American economy is turning into something just like you’ve described in the German and European economies. It’s almost economic suicide, except they don’t know that it’s suicide. There’s a narrative that’s being created of junk economics that pretends that all of this is going to work out. And it’s a cover story, trying to cover up the actual dynamics at work, which we’ve been talking about for the last hour.

⁣RICHARD WOLFF: I also think — you know, I don’t want to over-push it, but I do think that there is a self-delusion going on here — that the top 10% of the people play the stock market, they own the most of the shares, they are the CEOs, they’re related to them, and all of that; and for them, they hold on to a lot of their wealth. It’s the other 90%. And that’s why you get more and more of that old notion of a split economy, you know, that 10% of us live in a world of fancy restaurants and plenty of food, and all the rest; and the rest of us are the ones that are traumatized every time we go to the grocery store by what we can no longer afford.

Here’s a statistic to think about. Compared to the year 2020 — so five years ago — the price of beef in the United States has risen by more than 50%. You know, hamburgers are like a basic part of an American diet, at least for those people who can afford meat. Think about what it means that the cost of the hamburger has gone up 50%, more or less, since the year 2020. You’re seeing a division, which explains our politics, but it’s a division that I don’t think is sustainable — neither by the ideology here, which keeps promising that this situation will continue, even though the foundation of it, as we’re trying to show, is harder and harder. And I see some of these policies as a kind of wild Trump-type — if I can use the football metaphor — of the Hail Mary pass. You’re going to attack Iran? Maybe you can win. Maybe Iran disappears. Maybe the West can snatch all of the oil in Iran — and blah, blah. Until the Russians point out, you know, we have a deal with the Iranians. If you really come here, we’re going to have to fight with you. And one thing we can assure you, you’ll never get that oil.

What do we do?

Well, we go and fight against Mr. [Nicolas] Maduro, who can’t defend himself, at least not in the conventional sense. And we keep provoking, you know. We become judge, jury, and executioner of the hapless Venezuelans who take a boat ride 1,000 miles from the United States and get incinerated, with the whole thing being handled by the President — with no evidence at all that these people were doing something illegal for which even the punishment isn’t execution, and yet they were executed for the crime for which that’s not the punishment that’s legally — I mean, okay, these are fairly desperate acts.

And hoping that the Israelis will somehow be able to pull the rabbit out of the hat of the Middle East and become an acceptable dominant power? Really, you have got to believe in lots of magic to line up your policies in that way.

⁣MICHAEL HUDSON: You mentioned how the American economy is being squeezed by these, and a desperate thing. Part of the desperation is when you cut your policies into segments and not look at the interactions. One of the big factors in rising prices that Americans have to pay, in addition to the food that you’ve just mentioned, and the hamburgers, is electricity. And that’s gone way up, largely because Trump is pandering to his MAGA crazies, who insist that there’s no such thing as global warming. So again, Trump said: If we’re going to put all of our faith in controlling the world of the oil industry, I’m going to support the oil industry, and my MAGA base, by saying, stop all of the investment that we’re doing in wind power and solar power. So, he’s withdrawn the American government support for wind power, which had been increasing it, and he’s also ending the support for solar power because China has a great scientific advantage in producing solar power.

And the result is that opposing — global warming is a big factor in disrupting the economy, but also Trump’s support for trying to increase the artificial intelligence monopoly is projected as being largely responsible for an enormous increase in electrical usage. This is going to raise electrical prices. And already, the electric utilities in this country are raising their prices because one of the Trump policies — to please his 1% constituents, which we didn’t mention — is the electric subsidies that he’s been giving. It costs basically ten years to go through all of the public filings that you have to do, in order to get a new electric utility built to supply the energy for not only the rising computer and artificial intelligence industry, but for just the normal growth in electric utility, that’s especially coming from air conditioning to cope with global warming that’s increasing because Trump has withdrawn from the Paris Agreement and all the other agreements to try to stop global warming. Everything he’s doing is to exacerbate the cost-squeeze and the shortfall of things we need.

Well, electricity doesn’t play much of a role in the Consumer Price Index. Neither does rent: that’s not much in the Consumer Price Index. Or health care. All these things that are squeezing the budgets of the Americans that you just described are excluded from the statistics that the government’s talking about — thinking if you just don’t describe them, maybe we can convince people of our cover story.

And it’s as much of a fantasy as the American hot war against Russia, saying, well, we’re really winning in Ukraine because Russia’s economy is falling apart. It’s not falling apart because it’s a self-sufficient economy. It produces all of its own needs, instead of becoming import-dependent, thanks largely to the American sanctions that it’s imposed. By imposing sanctions on the rest of the world, America has enabled other countries to respond out of the need to become independent of the U.S. market.

So Trump has essentially created a situation where the rest of the world is independent. And as Trump copes with this, by making even more demands that are unrealizable in practice, the more he’s isolating the American and European NATO countries and their allies from the whole rest of the world. So, we’re seeing all of the convergence of all of these bad policies to support special interests — to support the oil industry, to support Wall Street, to support the banking industry, to support labor unions that support Trump — all of this is basically falling apart. And it’s causing the American economy to fall apart, slowly — a slow crash, but a crash that cannot be reversed without a radical change, not only in the economy, but in the whole Constitution, and the whole way in which the legal system and political system are responsible for this mess.

⁣RICHARD WOLFF: And last irony: As you can no longer blame the immigrants — since you’ve effectively stopped the inflow and reversed it to an outflow — you must find a new comparable scapegoat. And if you watch the internal closing-down of criticism that extends even to late-night comedians, you can see that building up the domestic left becomes the new scapegoat to justify why all of those things done by ICE to the immigrants didn’t work. There’s no huge resurgence of investment here. Not at all. There’s no resurgence of manufacturing. Not at all. It’s all smoke and mirrors and scapegoating, because that’s the sum total of where his first eight months have gotten him.

⁣NIMA ALKHORSHID: Yeah. Thank you so much, Richard and Michael, for being with us today. Great pleasure, as always.

⁣RICHARD WOLFF: Talk to you again next week.

⁣NIMA ALKHORSHID: Yeah, thank you.

Global South

Richard Wolff & Michael Hudson: Trump’s “The Big, Beautiful And The Ugly” (Updated with transcript)

The transcript is not available yet but this is Important (and fast!), so please leave enough time for it. The effect of the BBB is going to end the Dollar’s free lunch, says Michael. They’re running for the exits – We’re seeing the end of an Era! This bill is that important. (And this is only the start of it! I was wondering whether Michael would pause to take a breath ). Richard takes over and describes a ‘screaming’ devaluation of the dollar – the number he quotes is 17%. There is an ‘out of control’ ruling class who is grabbing as much as they can before it all disappears – a clear sign of a fast declining empire. Grotesque, says Richard – from the poorest people you take food and medical care. The gap between rich and poor is stupifying.

It sounds like hyperbole and that is what I thought, until I understood the game and realized, Grotesque and Stupifying is correct. We will see wealth initially in the 1% sector, (not food, or production or working people, or business, or healthy trade, but financialization).

Michael quotes Adam Smith: “Wealth is very often most apparent in countries going fastest to ruin.”

This ‘exceptional society’ is becoming better than a movie to watch, but it is deathly serious and this is a must listen to! I won’t spill any more fascinating beans. Thank you Michael, Richard and Nima for making the space!

Why would foreign investors do what Trump wants them to do?

Halfway through the sheer pace reduced. Take a good note of Michael’s explanation between China and the US (+ Europe), as a civilizational conflict.

Transcript

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, July 3rd, 2025, and our friends, Richard Wolf and Michael Hudson, are back with us. Welcome.

RICHARD WOLFF: Glad to be here.

NIMA ALKHORSHID: I want to start, Michael, with you and the “Big Beautiful Bill” of Donald Trump. We could manage to do something with the bill, but we know that the history between Donald Trump and Elon Musk — Elon Musk went against him — and what has happened in the aftermath. But when it comes to the bill, what is the importance of this bill for Donald Trump? And we know that he’s insisting on it. He’s somehow trying to do everything to get it passed. Your take on that?

MICHAEL HUDSON: Well, I think that Trump’s bill — the (Republican) Big Beautiful (Budget Deficit) Bill — along with Trump’s tariff policy will have the effect of ending dollar hegemony and will lead to a falling exchange rate of the dollar because Trump has said he wants the dollar’s exchange rate to go down, imagining that this is going to make America’s industrial exports more expensive.

The problem is it doesn’t have many industrial exports anymore. They’re all made abroad.

So it’s a fantasy that somehow lowering the exchange rate of the dollar is going to cure America’s trade deficit and enable much more profit to be made and hence taxes to be paid. So it’s all a fantasy. It’s amazing junk economics. And looking at the newspaper and media coverage this morning, it’s all about how so many Republicans say: We can never be re-elected after we pass this bill. We’re not even going to run next time our Senate term’s up.

And some of the House Representatives have said — [Thom] Tillis, he can’t run again because the cutbacks in medical coverage and Medicaid are going to hurt his constituency so much that they just give up.

So the effect is going to end — the dollar’s free lunch — this exorbitant privilege of being able to run huge military and trade deficits, without having to see its exchange rate decline and prices rise. Now you’re having a flight out of the dollar. The dollar’s exchange rate has gone down 10%. That’s the largest decline since Franklin Roosevelt devalued the dollar in 1933. They’re running for the exit. So we’re seeing the end of an era. This bill is that important.

And it’s been an era that enabled the United States to finance both its balance-of-payments deficit and its budget deficit by printing IOUs — Treasury bonds — that supposedly would never have to be repaid. Because (we’ve discussed on an earlier show) when the United States spends money abroad, mainly for military purposes, these dollars end up in the hands of foreign central banks. And what are they going to do? In the past, until right now, for the last 54 years, they had only one choice: to recycle them into safe U.S. Treasury bonds, or federal agency bonds that have yielded a little bit more.

But for the first time now, they’re running for the exits. That’s what’s happened today.

The Financial Times has a wonderful article about how investors are borrowing at a low interest rate to buy European junk bonds. And in the last week, as this bill has been working its way through Congress, investors have been doing arbitrage, borrowing low rates here, buying high-yielding junk bonds in Europe. And it’s a bonanza — but it’s all about making money financially, not industrially.

So you’re seeing that big financial funds in the U.S., as well as foreign investors, are beginning to worry that this artificial affluence by the dollar standard for international monetary reserves is coming to an end.

Today, the stock market’s up because stocks are what the wealthiest 1% are going to be spending their money on. Gold prices also jumped because they realize that while the stock market’s going up, the economy is going down. And interest rates rose for 10-year Treasury bonds because there are more sellers than buyers.

The Republicans continue to use this old trickle-down theory. They claim that giving more money to the wealthiest 1% is going to increase investment and employment.

But that’s not what billionaires do with their wealth. They buy more stocks and bonds and interest-bearing loans. They make money financially, not by building new factories and employing more people.

So the tax giveaway doesn’t really trickle down. It actually trickles up because this added untaxed income of the billionaires, the 1%, the 10%, is going to be used in bidding up stock market prices, bond prices, and real estate prices, all the more. That’s how you make a fortune in today’s finance capital economy.

And shifting taxes onto wage earners, which the bill also does, the wage earners are taxed more in order to help cover up some of the budget deficit resulting from this giveaway. Well, that will force them yet further into debt and having to pay yet more of their income to the banks as interest and late fees.

Well, we’ve just seen the highest returns are likely to be made abroad now. So giving more money is going to weaken the dollar, as both the U.S. and foreign investors bail out of the U.S. bond market, and out of the dollar itself.

And the result will be a devaluation of the dollar. And that’s going to raise prices because now you have to pay a larger dollar sum for imports that remain the same price in foreign countries, quite apart from Trump’s tariffs, which are also raising prices.

So Trump has managed to pick the worst of both worlds for the United States. It’s made the 1% richer, and it’s ended the whole era of easy growth for the United States.

RICHARD WOLFF: Let me comment on that, and take it a couple of steps further. It wasn’t very long ago (I’m talking a matter of months), when there was nearly parity between the Euro and the dollar. I checked this morning, and the Euro is now costing $1.18. Okay, that’s a devaluation relative to the Euro of 18%.

By the way, a devaluation of the dollar by 18% means that you have a situation where you have to give more and more dollars to get the European currency. It’s a statement to everyone in the world who has dollar assets, who holds anything denominated in a dollar — like a U.S. Treasury note, of which there are 700 billion in the hands of China, of which there are a trillion in the hands of Japan, and so on — are now worth 18% less.

That is a screaming message because, as Michael correctly says, that’s a devaluation at a speed that is frightening. That is a screaming recommendation to people to get rid of the dollar before they suffer worse losses. They’ve been doing that for the last year, and they’re going to continue to do it since there is no end in sight. And if Mr. Powell, or his successor, is going to lower interest rates because Mr. Trump is beating the drum to do it, it will make all of that likely worse. Okay, that’s the first thing.

The second thing: Let’s do a little history. The only meaningful economic act achieved by Mr. Trump in his first presidency was the tax cut of December 2017. Let’s remember, that was an enormous tax cut for corporations and the rich. It happened at the end of a 40-year period — mid-1970s to 2015 (40 years) — during which we have had a massive redistribution of wealth, from the bottom and the middle, to the people at the top.

Never, therefore, in the year 2017, never did an American corporate sector, or rich sector, need a tax cut less than they did at the end of a 40-year redistribution. Mr. Trump gave it to them anyway.

And that signaled an out-of-control ruling class that is simply grabbing as much as they can before it all disappears. A behavior very common in empires that are declining. The people at the top are in a position because they’re at the top to hold on to wealth. Everybody else pays the price of the declining empire.

So weak were the Democrats in 2017 that the only thing they could do was not to stop the tax cut, not to stop all the damage it did, but to put a proviso that it would end on the 31st of December of this year, 2025 — eight years into the future, then.

What did they bring Mr. Trump back into office for? To do the next logical step: to get rid of the little limit that the Democrats, in their weakness, imposed.

And that’s what this new bill does. It permanently fixes the cuts of 2017. It negates the sunset they were supposed to suffer at the end of this year, and they add a few more.

Therefore, the gross inequality of the last 40 years, which was worsened by the tax cut of 2017, will be further worsened by what we’re going through now. And in my opinion, that’s the biggest threat to social stability in this country at this time.

You are taking away medical support for poor people at the same time that you are giving the wealthy yet another… it is grotesque! As, by the way, even a significant number of Republican and Democratic politicians have been able to say: It is grotesque! You are taking away from the food stamp — the SNAP program — supports that they give. From the poorest people, you take food and medical care. This is like a cartoon come to life. And it is a severe additional inequality that the country suffers.

I did some work on the New York City — where I live — economic situation. The city of New York is the richest city in the United States, and the city of New York is among the ten poorest cities. Both statistics are correct.

How is it counted?

If you take a measure, the percentage of the people in the city who live at or below the poverty line, you can get a list of the ten poorest cities. New York City is among them.

If you ask about wealth, New York City is the richest city in the country. Listen to these numbers: 380,000 millionaires live in New York City; 88 people who have 100 million or more live in New York City; and 66 billionaires live in New York City.

How is a city as rich as that among the ten poorest cities in the country?

Because we live in a society in which the gap between rich and poor is stupefying. And that’s not tenable. That’s not tenable in any society, very long.

But in a society whose entire 20th century was devoted to saying: We are the exceptional society? We don’t have rich and poor? Everybody here is in the middle class? A society trained with that, dumped into what’s happening now, is a recipe for catastrophe.

And the poor people look, and they watch, and they see that there are special police called ICE who beat up and harass poor immigrants. How much of a step do you think it takes to wonder whether the next poor people they will be going after are the ones that were born here? Come on. We are training people.

I learned this morning — last point — that in Los Angeles, there is now a volunteer civilian patrol: local people who mobilize and drive their cars in and around the immigrant neighborhoods, with cameras, who have been trained by lawyers as to what immigrants’ rights actually are, and what ICE can, or cannot, legally do.

There it is, folks. There’s the escalation. We’re going to have an army on both sides. This is the end of whatever the consensus was that held this country together.

We are watching the people at the top desperate to become even wealthier than they already are. And this is their own undoing.

And they will all look back when Warren Buffett, himself one of our great billionaires, told us over the recent years that there’s something wrong, that his secretary pays a higher percentage of taxes on her income than he does on his.

MICHAEL HUDSON: Well, if any of you have taken an Economics 101 course, you’re taught in the first week that what Richard said could not possibly happen because all of the price theory is based on diminishing marginal utility. The idea is that wealth is like bananas. The first one tastes good, after about the tenth banana, you really get sort of sick of it. So the idea is that as people get wealthier and billionaires, they become satiated.

And if that really were how economies work, what Richard has described couldn’t possibly happen.

The irony is that the Greeks, and the Romans, and most of antiquity before that, realized that there was such a thing as wealth addiction, as money love. And the fact is that wealth is addictive, and they keep wanting more and more. It is insatiable and grows, exponential.

But I want to focus, my specialty has always been the balance of payments. And I want to explain why Trump’s budget is going to lower the dollar’s exchange rate. And that’s what affects the 1%, as Richard said, are the whole group behind the bill. Most of the media blames the deficit, as if this money is going to be spent into the economy to raise prices, instead of on stocks and bonds and bank loans.

But already in the 17th century (the mid-1600s), there was an argument, just like today. And the British economists said: Well, wait a minute. Rich people don’t buy goods and services, except for luxury Italian imports and luxuries, and luxury real estate. All this money gets recycled into more and more loans.

And from the vantage point of foreign investors and money managers, the most serious threat to the dollar’s exchange rate is Trump’s pressure on the Federal Reserve to lower interest rates. And he said that if Federal Reserve Chairman Powell does not lower rates, once his term expires next year, he’s going to handpick a successor whose loyalty to Trump will lead him to lower interest rates yet more.

And I want to describe how this policy is going to be an exclamation point beyond the dynamic that Richard has just been explaining. It’s going to have a twofold return.

First of all, as I mentioned, investors can make an easy arbitrage gain by borrowing lower interest rates here to buy high interest rates in other countries. They can do it freely. All they have to do is arrange at their bank: Lend me money at 4.5%. I’ll buy something yielding 6%.

And there’s been so much money flowing into junk bonds in Europe, as the Financial Times explains, that shipping lines and tourist lines that had to pay double-digit interest rates a year or two ago, now are only paying 6.5%. There’s a flooding of the market — the stock market and bond market — in Europe and America, and all over the world, with money.

Well, the second point is that as the dollar declines relative to foreign currencies, the bonds and stocks of countries with higher interest rates are going to rise, and there will be a foreign exchange premium over and above this. So if you’re an American investor, and you move out of 4.5% in the U.S. to buy a 6.5% bond in England, that’s going to push up England’s exchange rate, and you get an exchange rate premium on top of the interest rate you’re getting.

So you borrow at a low rate, buy securities yielding a higher rate, all on credit for debt-financed capital gains.

None of this has anything to do with actual GDP production or incomes for the non-financial sector, except to interfere with it, as I’ll explain.

The decline in the dollar’s exchange rate is probably going to exceed the interest that you make on the American bond. And if that’s the case, then why would foreign investors and governments and national wealth funds want to invest in the United States? If the highest returns are likely to be made abroad, it’ll weaken the dollar. That’s going to raise prices and higher import costs, plus the tariffs.

And the result is that Trump is actually destroying America’s financial free lunch of being able to run a balance-of-payments deficit without limit. But he’s spurring the stock market. And as Adam Smith said: Wealth is very often most apparent in countries “going fastest to ruin.”

Well, that’s exactly what’s happening in the United States. We’re seeing what the classical economists realize: When you let the income be made not by production, not by industrial capital, businesses, or labor’s living standards, but solely in a financial way, that is purely manipulative, and turns out to be anti-labor and also anti-business.

That’s what’s ultimately so destructive about Trump’s Big Beautiful (Budget Deficit) Bill. And it makes a lot of free, easy money for the billionaires and those financial speculators and hedge funds and other capital funds. But in order to make money for themselves in this way, they’re willing to sacrifice the actual business.

Because why would a foreign investor do what Trump has promised that he’s going to do, and move their production facilities, their automobile companies, and others, into the United States? They can’t, despite the high tariffs in the United States that keep Japan’s cars out of the United States. And Trump says he’s going to raise the tariffs on Japanese cars and other imports to the U.S. to 35 to 40%. Well, even if Toyota and other companies were to move their plants into the United States to avoid the tariff, they’re going to have to pay a 20% tariff on aluminum, on steel, on the components that go into the car.

It’s not going to work.

The whole bill and the logic that the economics profession is trying to popularize turns out to be junk economics that’s going to be destructive because lower interest rates mean easier debt financing. That’ll increase the stock and bond prices for the wealthy, not consumer prices. But the consumer prices are going to rise anyway because of the tariff policy.

And you can be sure that a lot of the tax cuts that are being given are going to be spent on buying up yet more real estate, concentrating the absentee-landlord-owned real estate at the expense of homeowners.

So they’re ending the membership in the middle class that, as Richard just said, is supposed to be what America is all about.

So the effect of the giveaway to the financial sector is going to accelerate America’s deindustrialization. And that’s the dynamic of today’s finance capitalism. And because it’s the dynamic, that’s why the big campaign donors — indeed, as Richard said — threw all their support behind him to make sure he was the candidate. And also, they must have encouraged the Democratic Party to lose, to throw the fight — by keeping either Biden or Harris — which guaranteed Trump’s victory.

RICHARD WOLFF: Let me give you a different way of handling this. In many ways, the world’s manufacturers are comparing the United States and the People’s Republic of China as possible, or likely, locations for manufacturing industry. China, in recent years, has not imposed tariffs in anything like the way the United States has. It hasn’t been changing the few tariffs it imposed because most of them are responses to what Mr. Trump did, if they happened at all.

The country is very stable. It has promised manufacturers that if you come to China, you will have access to well-educated, well disciplined, relatively low-wage workers, and you will have access to the largest and fastest-growing market in the world. They have consistently offered that to the world’s manufacturers, and after much hesitation, the world’s manufacturers took the invitation and went there, including many, many American megacorporations.

They voted with their feet that they preferred being in a country run by a communist party, which was the political adversary, more or less, of the United States, of which they were a company because that was a better deal than the United States could offer them.

What do we have now?

China is offering pretty much the same it always did, and doing a good job of giving reasons to go there. Their technology is now top of the line, the dispersion of their industry extraordinary, and their social stability equally extraordinary.

Whereas the United States? We don’t know from one day to the next what the tariffs will be. We don’t know from one week to the next what the value of the dollar in exchange will be. We don’t know how long Mr. Trump will survive as president. We don’t know what he’ll do. We don’t know what his successors will do.

So, yeah, if in that situation, all the cards say go to China, then what Mr. Trump is doing are marginal shifts that cannot change that process. That’s what Michael has just explained.

Whatever he does, it’s marginal to what all led to what we have now lived through in the last 30 to 40 years, which is deindustrialization. That’s why we are cutting Medicaid and food stamps. Mr. Starmer in England is reducing the money laid out for people with disabilities, and the Chinese got an award for lifting 800 million people out of poverty.

Hello? There’s a difference here. And that difference has to do with the totality.

No company is going to come here because of a tariff for a moment, or a value of the dollar for a while. There are too many other variables that they need to have under control that aren’t under control here, or going in the wrong direction. An 18% drop in the value of the dollar. That means if you come here and you have inputs that are imports, what are you going to do? You factored that in?

Think clearly and you will understand. The biggest likelihood for a downturn in the American economy is the fact that we’re going to have stagnation because the industrial foundation of this economy keeps shrinking, as do the recent numbers for manufacturing in this country.

The return of manufacturing has not happened. He promised it in his first administration. It did not happen. Mr. Biden promised it. It did not happen. Mr. Trump has promised it again. It still hasn’t happened.

You have to now answer the question: Why not?

And that’s because the totality of variables that any decision-making corporate executive uses says: Don’t be crazy, don’t undertake the costs and the risks of moving production to the United States, given the uncertainties and the instability of what is going on in the United States. And Mr. Herky-Jerky Trump’s tariff policy and interest rate policy, only makes that worse.

MICHAEL HUDSON: Well, let’s look at China’s success and see: What is it doing so differently from the United States?

Why do American leaders accuse China of being America’s existential enemy? They are singling it out as an enemy because it demonstrates that there is a better way of organizing an economy, and raising living standards, and creating prosperity, than the finance capital model that the United States and Europe are following.

And what China’s doing is actually following the classical economics of industrial capitalism. They call it industrial socialism, but industrial socialism was the logical evolution of industrial capitalism already by the late 19th century. The idea of a free market, from Adam Smith’s time to John Stuart Mill all the way through Marx, was a market free from rentier income, free from the landlords.

The first half of the 19th century was spent by the industrialists saying: We cannot compete with foreign countries if we have a landlord class that is going to block food imports in order to make higher farm rents for their agricultural land at the cost of higher food prices by the labor that we have to employ. You have to repeal the Corn Laws.

Well, that took 30 years from the time that the Corn Laws were imposed in 1815.

The economists then said: It’s more than landlords. It’s economic rent. It’s the excess of prices over the real cost of production. And that cost can be not only for land rent, but for the monopolies. And the monopolies are created largely to help kings and parliamentary governments raise money to pay the war debts that they were running up ever since the 13th century.

And the final problem to be attacked was that banks in England and America didn’t really play a role in financing industry at all. The whole idea was to change the financial system that actually financed industry.

None of that worked out. All of these hopes: What everybody expected to see, that economies would be socialized into a mixed public and private economy, they’d be regulated markets to get free of economic rent, so that people wouldn’t have to deal with a class of wealthy people that made money without working and contributing to production in any way.

Well, it turns out that China’s biggest, unique characteristic of industrial socialism has been to keep money and finance in the hands of China’s central bank, in its own Treasury. So it’s the government that creates money, not an independent commercial banking system.

And so China’s banks don’t lend for corporate takeovers. They don’t borrow money to make dividend payouts or stock buybacks to push up their prices. The credit that’s created based on the Chinese Treasury and the People’s Bank of China is designed to build infrastructure, factories, and all of the things that China has been doing.

To the Americans, that’s what makes China an existential enemy. If America were to do that strategy of raising industrialization, increasing employment and living standards, that would free the American economy from this billionaire class that we’ve been talking about for the last half hour. The billionaire class is — think of it almost as a tumor on the economy, as a parasite. They pretend to be part of the real economy of production and consumption. They pretend to be helpful, and even necessary, for industry to take place.

But they’re not helpful at all.

They’ve led the deindustrialization of the country. And so, of course, what we’re dealing with is almost a civilizational conflict now between a society, from Europe to the United States, run by billionaires who make money by deindustrializing the economy, and squeezing living standards, and driving the wage-earning force further into debt so that it can’t afford to buy the products that it makes, on the one hand.

And then you have China’s model on the other. And by providing this model — the antithesis of the American model — that’s what today’s fights internationally, including next week’s BRICS meetings, are all about.

NIMA ALKHORSHID: Richard, I think we can bring in the case of BRICS and the conflicts we have — the conflict in Ukraine, in the Middle East, with China, all of that. How are these conflicts with the West going to be translated into the future of BRICS?

We have the BRICS summit here in Brazil. In your opinion, what are the main issues to be considered by this summit?

RICHARD WOLFF: The way I would begin this is to remind everyone of a really historic statistic that was released last week. And that statistic said that, for the first time, the total of trade within the BRICS community crossed $1 trillion. It had never done that before, and, for me, this is a summary of everything we’ve been talking about.

What the BRICS are — and at this point, I feel free to exaggerate a little bit because the line of direction is clear — the BRICS are becoming the economic alternative, the other context for Russia, China, India, Brazil, and South Africa, and the other countries that are involved. They are now in a position to do what they never could do before in at least three or four hundred years: namely, live and grow without a dependency on the United States or Western Europe or Japan.

And that is what this statistic shows.

They could find in one another the market for their exports and the source for their needed inputs that would enable them to have a growth path adequate to sustain those societies. That’s never been true, in my judgment, before.

Part of the result of colonialism and its lasting economic achievement was to force Asia, Africa, and Latin America into a subordinate position in Western capitalism. So that whatever they might do, their dependence on that subordinated position would hold them back from doing anything that the West didn’t want them to do, which included becoming independent.

Oh, they could become, after a while, independent politically, when that couldn’t be prevented anymore — when the Mau Mau in Kenya and Mahatma Gandhi in India put an end to all of that — they were still subordinate to economic capitalism.

Now, for the first time, they have created an institution that was the dream of the Bandung Conference back in 1955, but could not be realized. Now it’s realized. And the credit for that goes to China.

This has nothing to do with endorsing what happens in China or being critical of China, which you can be, and should be, in many ways. They have their flaws like everybody else.

But what they have achieved, no amount of pretense can be taken away from them. They now are able to say to the United States that the longer you act as a rogue nation in the world, the more we will build an alternative to you that will, in the end, isolate you. And you better be careful, lest the policies you choose accelerate your isolation rather than overcome it.

And I’ll give you two examples.

The decision to push NATO all the way into Ukraine. The Americans understood it. The literature there is clear. They understood what they were doing. They understood that the Russians opposed it. They made that clear. They understood that the deal at the end with the unification of Germany entailed a commitment not to move NATO to Russia’s border. When they did it anyway, Russia was too weak to do anything, when they did it in Poland or they did it in the Czech Republic, or they did it in Romania. But when they finally came to Ukraine, Russia felt it had the military means, but just as important, it had the BRICS. And that meant it could be free of its dependence.

The first thing that the Europeans and the Americans did, once the Russian military moved into the Donbass in February 2022, was to develop the so-called sanctions policy. They didn’t need to develop the military. They had been working militarily with the Ukrainians for at least the previous eight years.

What was new, what was different, and what was thought to be decisive were the sanctions. Europe would no longer buy Russian oil and gas. If Russia was a gas station pretending to be a nation — a joke made in America — well, they would show them what happens to a gas station when no one stops by to load up with gas.

What they never counted on was the BRICS, that Russia could turn to two BRICS allies — India and China — and sell all the oil and gas it could pump; and thereby fund the very military operation that the sanctions were supposed to make impossible.

That was a miscalculation whose results we’re living through: the deindustrialization of Europe because it doesn’t have cheap energy from Russia anymore; the particular disintegration of the leading position of Germany, which was the dominant economy and is, now, with Britain, the basket case of the European economy… Wow, the cost of not understanding the BRICS!

And now the Chinese can make jokes about Mr. Trump’s tariffs. If they can’t sell in the United States, they have another place to go.

This is cataclysmic in its consequences, not just in terms of economics, but in terms of military struggles, political struggles, on and on and on. Israel cannot proceed against Iran if Iran’s membership as a BRICS nation gives it access, as it looks like it does, to the support of Russia, China and India.

And of course, you have to have a ceasefire. Israel, I mean, that’s not going to work: Israel has 8 million Jewish Israelis, and Iran has 90 million Muslims. You don’t want to do that. You do not want to do that. Not unless you have the old colonial system. It’s really the old colonial system that’s finally dying.

And we have to understand that we have been living through 300 to 400 years in which colonialism has been the way the world capitalist system organized itself. It shouldn’t have, didn’t have to, but that was the way it developed. And now those chickens are coming home and the world has changed.

And the BRICS that meets next week, having achieved the milestone of a trillion dollars worth of trade among them, is in the driver’s seat.

And the United States is watching because that’s about all it can do.

MICHAEL HUDSON: Well, President Trump certainly agrees with you, Richard, about the BRICS and China, what you just said. I’ve also been saying it, and I think we’ve been saying it on Nima’s show.

Trump has been threatening this week and next week. He says he’s threatening countries that trade with China by imposing very high tariffs to deny them the U.S. market. Well, as you point out, the United States isn’t the only market, and the market it has is shrinking anyway. So, of course, this is going to lead China to work with other Asian countries and global south countries to develop the market.

Trump is also imposing sanctions on Russia. If countries don’t impose trade sanctions on Russia, they’re going to have very high tariffs. I think, for China, he said the tariff will be 500%. That’s five times the price of the imported good if you trade with China. This really is, for Trump, a conflict of civilizations, and he’s betting everything on it.

And you’re right. What is he defending? It’s financial colonialism.

And although, quite rightly, this is no longer the old colonialism of military occupation and settler states that you’ve had from Africa to South America to North America, it’s still very highly military. And as we’ve discussed before, the military arm is the final threat that America has against other countries to enforce its policy.

Well, to do that, you need an enormous military expenditure. And if you look at the United States and also Europe, the leaders of the stock market are the military firms. This is called Military Keynesianism. Trump’s bill, I think, is leading to a trillion dollars to be spent on building the Golden Dome, his version of Israel’s Iron Dome, to protect itself from Russian missiles — if they go very, very slowly. But Russian missiles don’t go very, very slowly. It doesn’t work.

The whole strategy is so transparently just a means of spending the largest element in the budget for arms and products that don’t have a function, except to make profits for the investors in these companies. That’s yet another element in America deindustrialization for all of this.

But it’s also very dangerous because it’s threatening the whole world. If you’re going to have all of these arms, you’re going to try to use them sometimes. They don’t work, and you’re going to lose, just as you’re losing in Ukraine. But that’s the policy we have, and it’s a bipartisan policy.

Democrats and Republicans together all have pretty much the same donor class funders for deciding who’s going to be on the ballots when you vote in November. So that’s really the problem.

The BRICS and China are not only breaking away with trade and investment in the United States, they’re creating a different kind of economy. And that’s really what Richard and I have been talking about for most of our lives: a socialist economy as opposed to a finance capitalist economy.

RICHARD WOLFF: Yeah, I should also remind people that the United States, once, as the empire, had what its supporters like to call things like ideological influence, or cultural hegemony, or, you know, a lot of words — soft power — words like that.

And there is a great anxiety right now in Washington. I don’t want to minimize this. Mr. Trump doesn’t have a clear sailing.

There’s a great deal of anxiety that, for example, eliminating USAID, whatever you think of it, is damaging American soft power. It was an agency that did some good around the world — hyped the good it did for the maximum amount of publicity you could get for it — but those are parts of what successful empires do. It made sure that when votes came up in the United Nations, it could mobilize pretty much the whole world to vote in a particular way, to make it look like what the United States was doing was globally supported.

All of that is gone now. One of the reasons they’re giving all the money to the military is their economic influence is shrinking and their political influence is shrinking.

Really, one of the few things they have is the ability to keep being the number one military power, at least by the amount that they spend. There’s a famous statistic, been well known for the last 50 years, that the United States spends more on military than the next nine countries, together, spend. And those nine include Russia and China, and the remaining ones are all allies of the United States.

So, with this overwhelming predominance, you’re getting a mentality that shouldn’t surprise you: that the military has to be what we celebrate, and focus on, and rely on.

And I think you could see it coming up when a decision is made, a week or so ago, by Mr. Trump — unilaterally — to bomb Iran, a country with whom we were not at war, which had not declared on us, nor we on them, that we were in the midst of actual negotiations with. Mr. Trump suddenly hit them with a bomb, and then immediately the next day said: Now let’s sit down and talk.

Well, that is a use of the military to intimidate, and to shape, and to control, what’s going on. And maybe it’ll work for a while, but it is the last card they have to play. And it should be understood in that light.

And that’s why the BRICS is important. And I need to say to some of my fellow economists: This is not an argument that the BRICS represent the socialist future, or that the BRICS are homogeneous. They’re not. Mr. Modi in India is a different thing from Xi Jinping in China. And they’re both very different from Lula in Brazil, and so on. They have enormous differences, as an international collection of 25 countries would have to be.

What I’m focusing on is the project they all share. That’s what’s remarkable. They haven’t been able to do that in the past. They haven’t overcome all of their differences to be able to do that in the past. They are now being caught up, in my judgment, in this historic moment of the final end of colonialism that they know they’ve been fighting all of their lives.

They know the end is in sight.

And the United States is a society devoted to not seeing what I just said.

That’s why, in the last presidential election, neither Mr. Trump, nor Mr. Biden, nor Kamala Harris, ever said a word about a declining empire. This is the greatest example of collective denial that you could ask for. But for just that reason, it jumps out at those of us who don’t need to deny it. We see it all too clearly.

MICHAEL HUDSON: Well, what you’re saying is that the BRICS and the other countries, despite their differences, they’re reinventing the wheel. And what’s so striking is that the wheel that they’re reinventing is very much like the revolutionary impact of industrial capitalism that it had in Britain and the rest of Europe. The British had to deal with the problem that there was land rent that was taken by their landlord class. There isn’t a landlord class; they got rid of it. But the BRICS countries have something much like a landlord class, and that’s the foreign investors in their subsoil wealth; foreign investors in their oil, their mining, their forests.

RICHARD WOLFF: And, Michael, what you specialize in: their heavy international debt.

MICHAEL HUDSON: Yes, that too. But I want to focus, first of all, on the fact that they’re dealing with the rentier class — that England and Germany and the industrial capitalist countries of the 19th century had to deal with — [it] was domestic. But the BRICS have to deal with a foreign capitalist class. That’s what makes financial imperialism so different and independent from colonialism. The monopolies, because the attempt to finance their economy when the foreign investors take all of their natural wealth rents for themselves — instead of leaving it as the tax base for their own countries — means that the government doesn’t have enough money to build the infrastructure necessary to make a balanced economy like the industrial capitalists.

And so they run a budget deficit and a balance of payments deficit. They have to borrow from the International Monetary Fund, or else see their currencies plunge and their inflation going up. And that requires them to sell off their natural monopolies — their communications, their transportation infrastructure — all the things that were kept in the public domain in the mixed economies of Europe and the United States. Well, of course, once they sell this off, the monopoly rents have to be sent abroad, along with the land rents.

And finally, as you point out, the debt service. Once you borrow from the IMF and from bondholders to finance the balance-of-trade deficits that you’ve suffered as a result of letting the United States and Europe impose a neoliberal model that doesn’t work, then you’re left without national self-sufficiency and sovereignty anymore.

The BRICS countries are trying to — for the first time — achieve the sovereignty that they have not been able to achieve by running into debt, by not being able to tax foreign investment in their natural resources, by not being able to tax monopoly rents from the public utilities that they’ve had to sell off.

All of this had to break down at a point. And Trump has catalyzed all of this breakdown because, by imposing tariffs on these countries, they can’t pay their foreign debts anymore. The United States is going to treat this as an existential threat and do everything it can against them.

So now they think: Well, why don’t we do what made industrial capitalism work so well in its take-off? Why don’t we impose rent taxes on foreign investors in our national resources? Why don’t we nationalize the monopolies by passing antitrust legislation? And why don’t we just realize that the debts that we’ve run up have been run up as a result of financial colonialism, not our sovereign decisions, but their odious debts.

That’s the fight that we’re going to see, is the inherent logic of the situation.

RICHARD WOLFF: We’ve already seen that in recent years. There are movements around the world to cancel the debts. There is a reminder for those who take seriously the religious histories that almost all religions many centuries ago understood how we began today’s conversation: that unbridled inequality, if allowed to continue, destroys the community, destroys whatever social cohesion holds us together.

So they developed, and attributed to whatever deity they believed in, the commandment for a Jubilee year, for every 10 years, or every 20 years. It varied. You would take the land and redistribute it. If you happened to have gotten a good piece of land that made you a rich person, in the redistribution, that land would go to whom? It would go to a person whose land didn’t get enough rain or didn’t get enough soil fertility, and that way the rich would become poorer and the poorer would become richer. And no one would become crazy about accumulating wealth because you are getting every day closer to the time when you would lose it anyway.

It just transformed the whole relationship of people to accumulated wealth.

And the irony is, of course, the same religion, once capitalism comes, has to get rid of that, and does get rid of that, because it would undercut the whole notion of the value, the incentive value, of becoming rich, which was their argument, which would justify the endlessness of exploitation.

All of that is coming to an end. That’s what it means to be at the end of an empire. The really interesting question, which maybe we should take up, is whether the end of the U.S. capitalist empire, is it the end of capitalism itself? Or not? That’s like asking: Is China the next empire? Or will the Chinese bring us a multinational community, which was after all the ideal of the League of Nations, the United Nations, and people who wanted to see peace as the rule of law, rather than violence, which is what we have now.

NIMA ALKHORSHID: Thank you so much. Michael, do you want to add something?

MICHAEL HUDSON: No, I’ve been saying the same thing that Richard has been saying. We’re the two people who were saying this because we’re taking the long historical point of view. And what Richard has just described is what Confucianism was all about: rulers were supposed to keep the peace. They were supposed to keep the population satisfied enough so that they did not revolt. And again, they’re reinventing the wheel now.

It’s a different mentality from America’s bully mentality: If you don’t let us take all of the wealth for ourselves, we’re going to hurt you.

I don’t think that was the philosophy of any earlier religion, which was the ideology of their societies. It’s Western finance capitalism, or whatever you want to call it, that has diverged from this core of civilization from the very beginning. So, in a sense, you could say that the BRICS and China and global majority are moving back to this central norm, leaving the United States and Europe isolated, unless they join the movement of history, instead of accusing this return to civilization as being a clash of civilizations, as if the U.S. and Europe is actually a self-sufficient civilization, instead of barbarism. The world will choose socialism, not barbarism, as Rosa Luxemburg put it.

RICHARD WOLFF: Well, I would add that we should remember one more historical reality. Successive kings of France accumulated wealth. But when the accumulation of wealth reached absolutely insane proportions in the 18th century, when you would have unbelievable urban poverty in Paris, and an hour away, in Versailles, you would see, as you can still see today, the most spectacular collection and concentration of wealth imaginable by the last king. He’s also the one who got his head chopped off. That’s how that story of the accumulation… you know.

And when you watch Jeffrey Bezos take over the city of Venice for two weeks of indulgence of his wedding, when he arrives at the port in his $500 million dollar yacht, that’s what we’re watching. We’re watching this eon’s Versailles. And we’re going to get the next step of it, likely, also.

MICHAEL HUDSON: Well, the question then is: Can this return to civilization that we’re talking about be done without a military confrontation? Is America actually going to war with China? It’s trying to stir up fights against China, with Taiwan, with its neighboring countries. It’s trying to stir up fights in Central Asia against Russia.

China was able to make its reforms because there was a revolution in 1945.

And when China emerged as a country in 1949, they didn’t have a financial class. So, of course, the government had to create the money. But that took a revolution.

Will it take a revolution, a defensive revolution, for the BRICS, and this higher civilization, to emerge?

Because the violence will not be on their part. Marx pointed out that there would probably be violence by the privileged classes, the rentier classes, by the landlords and the wealthy against the people attempting to get a revolution, as you saw in the Paris Commune in 1871. It’s the people who have made wealth without working, who know that there are parasites who are willing to fight so hard, and so violently, to preserve their claims on wealth that consist of the ability to impoverish the rest of the population below them.

RICHARD WOLFF: Yeah, and you have to wonder whether that isn’t matched by the military thinkers who tell us that looking, as a military person, at China over the last 40 years and the United States, one is crystal clearly ascending, and the other one is crystal clearly descending. And what that means is time is on one side, and not the other.

And what will that lead the military of the United States to contemplate?

NIMA ALKHORSHID: Thank you so much, Richard and Michael. Great pleasure, as always. Have a great time. Bye-bye.