We here in France are well along the path to the so-called cashless society championed by certain economic experts. The other day I was in a taxi in Nice, cruising along the Promenade des Anglais, and we passed by a branch of one of our Big French Banks, a bank that had, of course, its distributeur de billets (cash machine) on the front facade of the building. There, was the typical layout making it convenient for customers to withdraw a few banknotes from the machine without having to enter the building.
But, just next to the cash machine was a slot, about the size of a small letter-box slot one sees on the front door of houses. And just above this slot was, engraved on an attractive panel, the word poubelle.
I leave it to those needing a translation to go to Google translate.
I realized in a flash of enlightenment that here was France's contribution to the growing movement to get rid of cash! Citizens are encouraged to make a small weekly withdrawal from the distributeur de billets, even just a €5 note or two, and deposit them directly in the poubelle. Someone of high genius in our Ministry of Finance had surely thought up this sure-fire cash elimination method!
I haven't seen any prime-time TV ads informing citizens about this excellent service, nor any statistics on how the program is progressing, but I have little doubt that many French citizens will willingly participate!
Now that you are in a merry mood, I should like to post here an excerpt from Professor Michael Hudson's recent book, The Destiny of Civilization. I am doing so without permission on the grounds that it is for “fair use” non-profit educational purposes, and hopefully will encourage sales of this excellent book.
The fact that I have judged it appropriate to begin this essay with a bit of comic relief (as compared with the typical Shakespearean mid-scene comic relief used to ease the dramatic emotional tension his plays routinely elicit) should signal the reader here that what follows is a most serious matter: whether or not Western Civilization can and/or will be reformed voluntarily and intelligently so as to avoid a certain catastrophic meltdown in the not very distant future.
The following foreword, a brief introduction to the book, succinctly captures the essence of Professor Hudson's first chapter, with following chapters going into greater detail concerning the subjects raised. (See the table of contents following the excerpt.)
I must encourage readers to put to sleep, at least temporarily, all prejudices, convictions, propaganda, lies and fallacies about Communism, Socialism, “Red” China, Dictatorships, new Hitlers, good guys and bad guys,... i.e., adopt an “open mind” for the rest of your time here today.
I will assume that most readers are well aware that not only are things not improving, but that it is only an increasingly unmerited optimism that we will somehow soon turn the corner to better times. We have, as this book confirms, been in a slow-motion collapse of our economic system — finance capitalism — for several decades. This has been more apparent for most of us after the economic problems in 2008. Wen Tiejun has surely captured, in a few short paragraphs, the essence of the West's predicament.
Rentier capitalism
Rentier capitalism describes the economic practice of gaining large profits without contributing to society.[1][2][3] A rentier is someone who earns income from capital without working. This is generally done through ownership of assets that generate yield (cash generated by assets), such as rental properties, shares in dividend paying companies, or bonds that pay interest.[4]
I have slowly discovered over the more than half-century since I took an economics course at university, that most of the standard “truths” I was taught not only were debatable, but entirely the opposite of the reality now seen with a devastating clarity. For example:
—Government controlled enterprise is radically less efficient than privatized enterprise.
—Capitalistic competition results in the best quality products at the lowest possible price for the consumer.
I now see that my Samuelson textbook was not only in error on many points, but that it was more like a book of mythological tales than a scientific tome. And finally, so many years later, along comes a book that can explain to me exactly why I was taught fairy tales. And why economic “experts” of today are promoting such obviously destructive policies as the elimination of cash.
Saddam Hussain and Mohamer Gaddafi were assassinated by “The West” not because they perpetrated the crimes we accused them of, but because they had implemented plans to break away from debt-based Dollar Hegemony, principally by the intention to sell petroleum for other currencies than the dollar. A similar reason resulted in Assad's demonization.
China, Russia, and the BRICS nations are now implementing similar plans to break away, and it seems that neocon-controlled foreign policy in the USA believes it can do the same to these nations... Assassinate them? It is sheer folly, and may well lead to tragedies we can at present not even imagine.
Sun-Tzu has said of the superior enemy that he cannot be attacked directly, but instead must be encouraged to superior folly, the errors that come with advanced hubris and belief in one's superiority and invincibility. How to do this? I think most people see no way they could contribute to such a project. But they can, however, for it is of utmost importance that citizens are informed, even though that often leads to “what can I do?” pessimism. One must be as fully informed as possible so that when the moment arrives one will know which way to push, who to support, and how to survive the probable turmoil of a collapsing neoliberal economy. The excerpt follows:
Foreword by Wen Tiejun
Humanity Shares a Common Prospect: Barbarism or Ecological Civilization
The most important factor affecting the global economy is the increasing strain caused by U.S. hegemony. Its diplomacy has shaped the economic and trading rules enforced by the IMF, World Bank and other international institutions in America’s favor after World War II. U.S. leadership reached its peak with its Cold War victory over the Soviet Union in 1991, consolidated by increasingly aggressive military diplomacy over the next twenty years. But since 2008 this U.S. diplomacy has become so aggressive that it is now self-destructive, driving other nations out of the U.S. orbit, leading America’s international influence to fall increasingly short of its ambition to siphon off the world’s income and wealth for itself despite its own weakening economic power.
The principal conflict in today’s world is between the United States and China. This book by Professor Hudson explains this conflict as a process of international transformation, above all in the sphere of economic systems and policy. He explains why the U.S.-China conflict cannot simply be regarded as market competition between two industrial rivals. It is a broader conflict between different political- economic systems - not only between capitalism and socialism as such, but between the logic of an industrial economy and that of a financialized rentier economy increasingly dependent on foreign subsidy and exploitation as its own domestic economy shrivels.
Professor Hudson endeavours to revive classical political economy in order to reverse the neoclassical counter-revolution. The essence of 19th- century political economy was its conceptual framework of value, price and rent theory. Its idea of a free market was one free from economic rent - defined as the excess of market price over intrinsic cost-value, and hence unearned income. The classical aim was to free markets from landlords, monopolies and creditors. Yet the reverse has occurred in the West, particularly since the globalization of neoliberal policies in the 1980s.
Historically, the way for industrial nations to gain wealth and power was to make their government strong enough to prevent a landlord class from dominating, and indeed to suppress the rentier sector as a whole. To promote industrial prosperity, governments provided public services to reduce the costs of living and doing business. Basic services were provided at subsidized prices that would have been replaced by exploitative monopoly prices if key public infrastructure were turned over to private owners.
Economically, the most important service that all economies need to function smoothly is the provision of money and bank credit. When privatized, it becomes a rent-extracting choke point. That is why 19th-century economists developing the logic of industrial capitalism concluded that money and banking needed to be a public utility, so as to minimize financial overhead unnecessary for industrial production.
Today’s anti-classical economics regards financial charges as income earned productively by providing a “service,” which is categorized as output and hence part of Gross Domestic Product (GDP). That statistical methodology treats financial profits, along with other forms of economic rent, as additions to GDP, not as an overhead burden. This produces an illusion that the real economy is growing. But what actually is growing is the rentier sector, which does not create real economic value, but merely transfers income from debtors, renters and consumers to creditors, landlords and monopolists. This rentier takeover is achieved by privatizing the public sector to create rent-extracting means for monopoly capital, organized mainly by the financial sector.
This book by Professor Hudson is based on the lecture series on finance capitalism that he presented for the Global University for Sustainability. The series is directed towards the Chinese audience because he believes that China’s mixed economy with its classical industrial policy has best succeeded in avoiding the neoliberal American disease. These lectures explain why the U.S. and other Western economies have lost their former momentum: A narrow rentier class has gained control and become the new central planner, using its power to drain income from increasingly indebted and high-cost labor and industry. The American disease of de-industrialization has resulted from the costs of industrial production being inflated by the economic rents extracted by this class under the system of financialized monopoly capitalism that now prevails throughout the West.
The policy question for China is how it can best maintain its advantage and indeed, avoid falling prey to American ideological and diplomatic pressure. Professor Hudson summarizes his prescription as follows: First, national statistics should distinguish the productive sectors that create real value from the financial rentier sectors that merely transfer income from the rest of the economy to themselves. A transfer payment is not production. Second, all successful economies have been mixed economies. Money and credit, land, public services and natural resources should be controlled by the government so that they can be provided at cost or on a subsidized basis, thereby lowering the cost of living and doing business in the private sector. Third, the way to prevent unproductive debt overhead is to tax away economic rent so that it will not be financialized and paid out to banks as interest by speculators and buyers of rent-extracting opportunities.
A central point of Professor Hudson’s analysis is that U.S. diplomacy is an extension of the neoliberal ideology sponsored by its rentier oligarchy. “U.S. exceptionalism” means that the United States can ignore international laws, dictate the policies of other countries, and demand that they relinquish control of potential rent-yielding assets (Such as banking, mineral-resource extraction rights, and high- technology monopolies) to U.S. multinational corporations and those of U.S. economic satellites.
For nearly the entire 75 years since World War II, pro-creditor laws have been imposed on all nations within the U.S. diplomatic orbit. This U.S. drive has imposed austerity on Global South countries when they have not been able to pay their dollarized debts, sacrificing their domestic economy and the well-being of their people to pay foreign bondholders.
What is ironic is that the United States itself is by far the world’s largest international debtor. It has turned the dollarized system of international payments into a way to make other countries finance its global military spending by making the foreign reserves of the world’s central banks take the form of loans to the U.S. Treasury - holdings of U.S. Treasury securities, U.S. bank deposits and other dollar- denominated assets. That is the buttress of today’s debt-based Dollar Hegemony. To break out of this dollar trap, China should stand with other independent nations to develop a new system of international payments and formulate new principles of international law for trade and investment relations. These principles require an overall economic and political doctrine along the lines described in this book.
What I find strange is that despite the West’s economic, political, social and cultural problems stemming from its neoliberal anti-classical ideology being obvious for many years, many people in China still look to Western schools and leaders for guidance, as if their own native institutions, civilization and even their own race are inferior. The defeat of a country starts with the defeat of the people’s self-confidence in its institutions. Yet as an American scholar, Professor Hudson, who has studied U.S. finance his entire life and worked on Wall Street for decades, recognizes China’s institutional advantages. As long as we have the scientific spirit to continue self-reflection, self-correction and self-enhancement, there is no reason not to believe that China’s social organization and its ideology of Common Prosperity can lead its society toward a higher form of civilization. The key is to pursue our institutional advantages and abandon the shortcomings of the postindustrial Western rentier economies, not follow the Western neoliberal path and fall into dependency on the U.S. hegemony and ideology that has ground prosperity to a halt in most Western economies, subjected as they are to debt-ridden austerity.
Behind today’s finance-capitalist crisis is thus a profound civilizational crisis. The world is at a crossroad in which all humanity now shares a common prospect: Barbarism or Ecological Civilization.
Wen Tiejun
Executive Dean, Institute of Rural Reconstruction of China Southwest University, China
Translated by Alice Chan
Contents
Foreword by Wen Tiejun iii
Foreword by Lau Kin Chi vii
Preface xxi
Introduction 1
I THE DYNAMICS OF ECONOMIC POLARIZATION
1. Industrial Capitalism’s Reform Program to Free Markets from the Rentiers 11
2. Finance Capitalism Promotes Rent Seeking and Rentier Tax Avoidance 25
3. The Democratic Imperialism of Finance Capital 45
4. Economic Rent: Price without Value 65
5. Financializing Rent and Imposing Debt Deflation 85
6. Free-Trade Imperialism and its Financialized Class War against Labor 107
7. Food, Oil, Mining and Natural-Resource Rents 129
II THE RENTIER COUNTER-REVOLUTION
8. How the Rentiers Diverted Politics away from Socialism 153
9. The Neo-Rentier Road to Serfdom 171
10. Dollar Hegemony: The Privilege of Creating “Paper Gold” 185
11. The War against Nations that Treat Money and Land as Public Utilities 205
III THE ALTERNATIVE
12. Reviving the Classical Concepts of Value, Rent and Fictitious Capital 233
13. The War against Governments Strong Enough to Check Oligarchs • 253
"Les réseaux sociaux ont donné le droit de parole à des légions d'imbéciles qui, avant, ne parlaient qu'au bar, après un verre de vin et ne causaient aucun tort à la collectivité. On les faisait taire tout de suite alors qu'aujourd'hui ils ont le même droit de parole qu'un prix Nobel. C'est l'invasion des imbéciles." —Umberto Eco
I don't have a clue as to what a poubelle is and I am too lazy to look it up. So, I assume that it would be a very good place to send all governments and their wretched officials. Garbage in that stays in.