The Neoliberal Exploitation Under a Super-Imperialism Lense

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Michael Hudson
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An interview on The Zero Hour to discuss the newly-released third edition of the 1971 book, Super-Imperialism: The Economic Strategy of American Empire.

ESKOW:

… The premise of your book, which has just been reissued, is something that I think a lot of people nebulously grasp parts of but don’t have a firm fix on. I think people, particularly people who would watch a program like this, understand that there is a deep and a symbiotic relationship between the US economy, global capital, and US influence, in what you describe as “super-imperialism.” But I think the mechanics of it are obscure to people. And it seems to me that’s what your book sets about addressing. Could you just briefly give us kind of an overview of what this machinery consists of?

HUDSON:

Well, the basic point is that America controls other countries financially more than militarily. I wrote the book, right after the United States went off gold in 1971. I’d written chapters and published them before, but the big part of the book is on the balance of payments. The entire balance of payments of the United States in the 1950s,1960s, and part of the 1970s is military in character. As a result of the military spending, culminating in the Vietnam War, the United States was losing what had given it all its world power since World War One. It had over 75% of the world’s gold, and it was losing this power.

And when the United States and finally forced off gold by military spending, the American Government and the State Department, and the White House thought “this means the end of American Empire.” And what I wrote was, well, actually, this strengthens America’s hold over the rest of the world. Because in the late 1960s, and 70s, every Friday when I worked at the Chase Manhattan Bank as their balance of payments economist, we’d look at the Federal Reserve’s gold holdings and check, how much gold would cover the dollar bills that you have in your pocket? Well, General de Gaulle was cashing in the money that we would spend buying Saudi Vietnamese currency, the Vietnamese bank would send it Paris, Paris would turn in the dollars for gold and America thought, ‘without having gold, how are we going to finance our military spending? And without military spending, how can we support and force other countries to support our policies?’

“… other countries were tied into keeping their savings by making loans to the United States that uses this money to finance the military spending that encircles them all. And they were financing their own subservience …”

Well, what I said was, once central banks are no longer able to use their dollars to buy gold, because America has gone off the gold standard and won’t sell it, all they have to buy are US Treasury bills. And all of a sudden, when France or Germany, or even Russia or China would gain dollars, all they could do to keep them safe was to recycle them to the United States to buy US Treasury bonds, Treasury securities. And when they bought these securities, they were not only financing the balance of payments deficit, they were financing America’s domestic budget deficit. So leaving the rest of the world without an alternative to the dollar, now that they closed gold, meant that other countries were tied into keeping their savings by making loans to the United States that uses this money to finance the military spending that encircles them all. And they were financing their own subservience.

And immediately, the largest buyers of the book were the CIA in the Defense Department. I was hired by Herman Kahn of the Hudson Institute to go down to the White House and explain to them how this was working. They didn’t really intend to create an exploitative system. But they said, ‘we’re getting a free lunch from the rest of the world.’

“… by avoiding dollars, they’re no longer financing American military spending or that financial takeover of their own economies that was buttressing world power since World War Two.”

Well, the reason we’re doing I decided to publish a new edition of Super-Imperialism was to explain this is why Russia and China and Iran and Venezuela and other countries are going off the dollar standard. Because by avoiding dollars, they’re no longer financing American military spending or that financial takeover of their own economies that was buttressing world power since World War Two. And in fact, since World War One.

ESKOW:

And Michael Hudson, I’ve worked on this question in my own mind a lot. You hear people use the rhetoric “the American Empire” or say that we are an imperial force in the world. And what it feels like, what it seems like, is that this is true, but it’s an inversion of what people normally think of as a traditional empire. Right? Because with a traditional Empire you think someone goes –Portuguese, British, France – goes in with force into Africa or other parts of the world, imposes themselves by force and extracts the wealth.

It almost seems as if now we’ve inverted it. Up until recently, anyway, by being the safest place for people to put their money once gold went away, we were extracting the wealth and using it to build up military power instead of the other way around. Do you get what I’m driving it?

HUDSON:

Yes, actually, America only uses old colonial force in maybe 40 or 50 countries, in Honduras, Latin America, Africa, it’s probably only overthrown 40 governments.

ESKOW:

Okay, of course.

“Colonialism exploited less developed countries … The genius of American imperialism is it exploits the most developed countries, the industrial countries.”

HUDSON:

That doesn’t count, of course, the CIA assassination programs and Ukraine, giving five $5 billion to reinstall a neo-Nazi regime in Ukraine. But the biggest thing is, who’s America really going to exploit? Colonialism exploited less developed countries. England and Europe exploited Africa, Latin America … The genius of American imperialism is it exploits the most developed countries, the industrial countries. It exploits mainly Europe. And it exploited Russia under Yeltsin, when it essentially sent the neoliberals in there. And it would like to exploit China and do to China, what it did to Russia, the neoliberal exploitation.

But the way you explained developed countries, you’re not going to have a military invasion of Europe, all you have to do is assassinate the leaders like they did in Greece, kill the communists they did in Italy, and finance pro-Americans and the labor parties and social democratic parties and make them essentially arms of the State Department.

That’s not a very nice way of putting it, but it can control European politics so that it can really exploit them financially. What it wants is their money. It doesn’t want raw materials from Europe, doesn’t even want their industry, primarily. It wants the money that they can make by working in other countries. And it wants to prevent Europe from having its own currency to make an alternative to the dollar. It’s true that the Europeans do have the euro. But they can only create a few extra euros, because they’ve written their constitution that you can’t run a budget deficit of more than 3% of your GDP.

“So the mode of exploitation is that of a rentier autonomy. It’s financial, it’s, monopolies, it’s not military … Europe is now so complacent that it’s willing not to grow and to essentially to impose the kind of class war against labor just as we’ve imposed here.”

Well, of course, that imposes austerity. So the United States essentially says to Europe and other industrial countries, you have to impose austerity on your own economy, you have to prevent your labor force from increasing its revenues so that the financial sector, the real estate sector, and the monopolies can get the money and let Americans buy a share of this and remit the interest and dividends and economic rents to the United States.

So the mode of exploitation is that of a rentier autonomy. It’s financial, it’s, monopolies, it’s not military. There was the use of military force after World War Two, but Europe is now so complacent that it’s willing not to grow and to essentially to impose the kind of class war against labor just as we’ve imposed here. You saw that when Europe fought against Greece, five years ago, when it bankrupted Greece with debt leverage by the International Monetary Fund and the World Bank.

So my book, Super-Imperialism, describes how the International Monetary Fund and the World Bank essentially impose austerity programs on other countries so that nothing is left for them to keep after they do their exports. They create foreign earnings, there’s nothing that they can do except send their exports and industry to the United States.

ESKOW:

And Michael Hudson, I’m, I’m really glad you mentioned Greece because it seems to me the way this empire works, it’s invisible, in most cases, to most people. But I can think of three examples offhand where, when its interests are threatened, it’s willing to become quite visible. And I wanted to ask you about that. Greece is one example where, if I recall correctly, at one point the European Union actually stepped in with a troika of basically financially-based interests and insisted that the Greek legislature get prior approval before passing any laws. If I recall that correctly, that’s an overt act of basically vetoing democracy for a country based on your own power leverage. We did the same thing to do Detroit, Michigan, here in the United States, appointing emergency managers to control their debt. Am I off base with this line of thinking here?

HUDSON:

Yes. It’s not the Troika that did it. The European governments agreed that Greece owed 50 billion euros. Christine Lagarde of the IMF had a list of all of the tax avoidance that Greek billionaires had put into Switzerland, so they could have grabbed all of this. Europe had reached an agreement with Greece that it was going to say, ‘Okay, we’re going to write down your debt and we don’t want to bankrupt you, we’re going to let you go by.’ But then you had President Obama and the Secretary lay down the line to Europe.

First of all, you had Tim Geithner, the bag man for Wall Street, the Secretary of Treasury, go there and say “you cannot you write down the debt that Greece owes because the American Wall Street companies have written derivative guarantees, so that if there’s a debt breakdown the Wall Street banks who have made a bet that Greece will pay will have to pay for anybody who loses money.”

“Obama went to Europe and said, ‘Look, we’re going to quite frankly remove you from office if you don’t insist that Greece pays all the money … my largest campaign contributors are on Wall Street, and I have to serve my campaign contributors.’”

And then President Obama went to Europe and said, “Look, we’re going to quite frankly remove you from office if you don’t insist that Greece pays all the money. It’s worth wrecking the Greece economy just so my clients, my largest campaign contributors are on Wall Street, and I have to serve my campaign contributors. And you’re not going to write down the debt one penny, because Wall Street would lose.”

So it was Wall Street that told Europe what to do. Don’t imagine, vicious as the European bankers are, so selfish and greedy as the German and French bankers are, they were still willing to do something to alleviate the bankruptcy of Greece and the basic impoverishment of it under US direction. In my book, Killing the Host, I give all of the documentation on this. So the insistence on austerity abroad, that other countries must impose austerity to prevent, essentially, labor from getting the fruits of its productivity, and that the financial sector should get all of the benefits from productivity, specifically financial institutions controlled by the United States. So bad as Europe is, it’s doing what America tells it to do.

ESKOW:

And, you know, people on Wall Street, as you well know, love to talk about moral hazard when it comes to providing certain access to funds in certain ways to working people. But it seems that, when the when the crisis happened in Greece, I got a little curious about the underwriting of some of these loans. And I looked at them and they were, frankly, poor quality, they were not the ones that there was no real due diligence, there was no assessment, did Greece have a problem with inability to collect the taxes that they didn’t weigh. There were other considerations they didn’t make … And yet the moral hazard stops here. I didn’t see anybody say, Well, you know, you guys were careless with these loans. You’re gonna have to take a major haircut on this … isn’t that a fair criticism of what’s going on here?

HUDSON:

Sure. When Greece joined the European Union, there were certain financial preconditions of solvency. The Greek government hired Goldman Sachs, which presented falsified economic accounts to make it appear as if the Greek government was solvent, when actually it wasn’t solvent. The financial press knew this. They knew that Goldman Sachs had faked the accounts. But they didn’t care because they know that the American government will bail them out If they make a losing bet. And you’re a big campaign contributor, you’ll go to your representative or you would go to the Obama administration and say, “We don’t want to lose $100. Will you bankrupt this country and cost it a billion dollars just so we don’t lose $100?” And Obama every single time said, Yes.

“It was in 2009 and 2010 under Obama and Geithner that the whole financial lock-in of the world economy occurred to essentially create a more usurious, exploitative financial system than had ever been in place before.”

This was really the turning point. It was in 2009 and 2010 under Obama and Geithner that the whole financial lock-in of the world economy occurred to essentially create a more usurious, exploitative financial system than had ever been in place before. And the Obama administration used the World Bank and the IMF as the sort of the bad guys whereas they were really arms of US foreign policy. Super Imperialism shows how they were created in 1944-1945. explicitly to be arms of US financial times policy to essentially prevent any kind of rivalry, originally from the British Empire and the French Empire to the United States. The function of the IMF and the World Bank in the postwar order in 1945 and 46 was essentially to absorb the British Empire and the French empire into the US financial area.

ESKOW:

And then, before we go into the next topic, Michael Hudson, I feel as if this kind of, first of all, you mentioned that it was exploitative, and I forget the other word you use, but it’s also seems authoritarian because if a government dares defy the economic order that’s being imposed on it, it will suffer the fate of Greece and have its own elected officials overruled. And I think, although the topic of your book is foreign policy and imperialism, in that sense, we’ve seen that in our own country mentioned Detroit, the most glaring example, Puerto Rico, which should have statehood as part of the United States, and PROMESA and the whole process there of saying, “Well, you guys owe too much money to Wall Street so we’re going to put together a junta of financial types and others who are going to tell you what to do, and the hell with your democracy.” Aren’t they connected?

“The mechanism is financial. It’s much less direct than in the old Roman Empire, for instance. It’s much more sophisticated than that, and more sophisticated than the British Empire, although very similar in spirit.”

HUDSON

Of course, I mean, you’ve just said what the connection is. What America wants is, it doesn’t need ownership of foreign property, it just needs the money that the property yields. So the mechanism is financial. It’s much less direct than in the old Roman Empire, for instance. It’s much more sophisticated than that, and more sophisticated than the British Empire, although very similar in spirit.

ESKOW:

The coins were better in the old Roman Empire, though. The early ones looked great.

But Michael Hudson, I’ve been looking forward to asking you something. The third edition of Super-Imperialism is coming out at would seem to me to be a kind of watershed moment in the history of this imperial force, which is China. China’s always been there, but China is growing economically. China is expanding its influence. And it seems to me we’re seeing at the same time, China making more open plays in the world. And why shouldn’t it if it wants? It’s making more open plays, whether it’s to lend money to developing countries, whether it’s to expand its Belt and Road initiatives, or so on. It’s being treated by the United States as an existential threat of some kind. That includes, you know, irresponsible military escalation in the South China Sea and driving or triggering a new arms race with China. And there economic measures as well.

I sense inside the halls of empire a certain feeling, an undertone of panic. Am I off base?

HUDSON:

“If you have a more equal society that means we get to take less, so we should boycott them. We should isolate them. It’s an existential threat.”

No, the existential threat is to an economic system. A few months ago George Soros gave a speech and said that American companies like Wall Street firms like Blackrock should not invest in China, because he said President Xi has announced that he wants a more equal society. And he said this is not good for foreign investors. If you have a more equal society that means we get to take less, so we should boycott them. We should isolate them. It’s an existential threat.

In August, Secretary of State Blinken came and said in effect, “the world faces a choice: It’s either democracy or autocracy. Democracy is letting Wall Street and finance capital control governments and run them and become the central planners of the economy along financial lines. Autocracy is what China does, or any country that defends itself against foreign investors against rentier interests. Any country that does what Ecuador does, and tries to sue Chevron for polluting the land with oil spills. That’s autocratic. And so you can choose autocracy or democracy.”

Basically, what he didn’t say was that political democracy is not economic democracy. Political democracy in America is controlled by campaign contributors, by the donor class. The job of a politician is to deliver voters to the campaign contributors. And what China is trying to do, and what President Qi came out with in August, was a long article explaining how the next phase of Chinese development is going to create greater equality within China in the fight against inequality. And you can be millionaires but you’re not going to be able to take control of the government. And President Putin recently also came out and said, “This is really the turning point is the crisis of civilization. This is America, the world is going to choose, are you going to let the 1% run the economy, in its own interest and concentrate, suck up all the wealth for themselves? Or are you going to create a broadly-based prosperity?”

“It’s not military. It’s not economic. There’s no trade competition between America and China because America has already decided to de-industrialize and move its labor force and production facilities abroad. It’s who’s going to get the economic surplus. That’s what the whole fight of civilization is all about …”

The United States is backing essentially a financialized rentier economy, and other countries are trying to defend themselves against this by increasing their productivity and living standards. That’s the existential fight. It’s not military. It’s not economic. There’s no trade competition between America and China because America has already decided to de-industrialize and move its labor force and production facilities abroad. It’s who’s going to get the economic surplus. That’s what the whole fight of civilization is all about for Putin, Qi and people who are trying to create an alternative to American empire.

ESKOW:

The rhetoric that is used on the Wall Street side reminds me of, for example, this group Freedom House, these groups that measure ‘freedom’ in you know, countries around the world, which includes the freedom to exploit or extract you know, as you say, rentier wealth or, or otherwise as, as if it were – what was Zola’s quote, that rich man is as free to pass over the bridge in his carriage as the poor man is to starve underneath it? – that form of freedom. But you know, Michael Hudson, you’ve worked on Wall Street, I’ve worked on Wall Street. And yet, the more distance I get, the more I look, internationally and domestically, the more the leaders of these forces – I mean the economic leaders, not the political ones who work for them – the more it seems there’s almost a cartoonishly bad-guy quality about them. I don’t want to diminish the sophistication of your book Super-Imperialism or the complexity of the issue, but it does seem to me at some level, these are just plain bad guys. Is that unfair?

HUDSON:

Well, “Serfdom House” does all sorts of covert activities abroad along with the National Endowment for Humanity. They try to buy control of foreign political parties, what they call “the Mighty Wurlitzer,” and they are trying what some people call fascism with the friendly face. They say, “America is for democracy.”

“The libertarians and the free market people are for much more centralized planning than you have in Russia or China, but the centralization of planning is on Wall Street …”

It’s a libertarian concept. It’s taking power away from governments, which is the Road to Serfdom, and shifting central planning to Wall Street. So the libertarians and the free market people are for much more centralized planning than you have in Russia or China, but the centralization of planning is on Wall Street – or in the City of London and the Paris financial centers And any government that tries to tax or regulate or shape the economy, or even keep basic infrastructure in the public domain to offer inexpensively, is accused of being the Road to Serfdom.

The real Road to Serfdom is financial. The real Road to Serfdom was what happened in the Roman Empire, when the whole country ended up in debt, bankrupt, and 1% ended up with all of the land basically and turned the economy into serfs. That’s democracy. We’re dealing with an Orwellian rhetoric there.

ESKOW:

We are. People like Obama and his administration present themselves as technocrats. But what you’re describing is really a ferocious and passionately held ideology, it seems to me, as well as people behaving out of self-interest. People like this — let’s not be partisan about it. This is ideological extremism to me. This is people saying the dollar rules and I rule the dollar and you do what I say, and that’s the way it should be. Isn’t it?

HUDSON:

This is the antithesis of everything that the 19th century thought was democracy. If you look at Adam Smith and John Stuart Mill and the whole fight for parliamentary reform, the idea was that in England the House of Lords could block any kind of taxation of land. Germany, France, every government was controlled by the upper house that represented basically the 1%, the hereditary financial and landowning class. The fight for democracy was to let everybody vote, on the theory that the wage earners who are the majority of people would vote in their own self-interest. And everybody thought that the wave of the future was going to be what made the United States and Germany and other countries so industrially successful. Governments would invest in basic infrastructure, education, public health, railroads, and they would increase living standards and productivity. And that would be the wave of the future.

“And that’s why economic history is no longer taught in schools. Because if people actually read Adam Smith and John Stuart Mill and other writers wrote, they’d see it the exact opposite of what the Orwellian rewriting of history pretends that they were saying.”

The big change occurred in the 1980s, with Margaret Thatcher in England and Ronald Reagan in the United States. And they said, “We’ve got to privatize infrastructure, we’ve got to take all this public infrastructure and instead of offering public service, education and health care at the lowest price, we’re going to create a choke point for rent extraction opportunities, we need the concept of economic rent here, and essentially, turn the educational system, the health care system into financialized monopolies.” And all of this was be depicted as free enterprise. But it’s the opposite of everything that Adam Smith and the 19th century thought was free enterprise and everything against what they described as democracy. And that’s why economic history is no longer taught in schools. Because if people actually read Adam Smith and John Stuart Mill and other writers wrote, they’d see it the exact opposite of what the Orwellian rewriting of history pretends that they were saying.

ESKOW:

And it just seems to me as if there’s no going back, you know, whether it’s Adam Smith saying corporations should be recertified every 20 years, what have you … what it seems to me there is no going back, that it’s a system that’s incapable of reforming itself. And therefore it may face a substantial shock, because it also seems to be unsustainable. Maybe in closing, if you don’t mind giving us your thoughts on that, that it seems incapable of reform, and yet incapable of existing indefinitely as it is.

“Yes, the financialized system is unsustainable as the Roman Empire was. But they say, we have one ace in the hole. We can blow up the whole world.”

HUDSON:

Well, this is exactly why other countries are withdrawing from the system. And the way you withdraw is to de-dollarize your economy. Not to use dollars. Not to trade with the United States. Not to depend on the United States for your food supply but to grow your own food. Not to depend on anything essential from the United States, like the SWIFT bank clearing system. You make your own clearing system. Not to depend on US internet companies. You make your own internet companies, so that the United States can’t play the role of wrecker. So yes, the financialized system is unsustainable as the Roman Empire was.

But they say, we have one ace in the hole. We can blow up the whole world. They’re bad losers, and all they can do is destroy. They can’t provide an alternative because they’ve already de-industrialized the US. They wanted to get rid of industry because that was unionized as a labor force. They want to continue to privatize. Biden, I guess it was announced this week, he’s going to the global warming conference. He said, ‘The future of American energy is coal.’ We’ve appointed Senator Manchin, the senator from West Virginia, the coal mining interests, to be in charge of writing our environmental law. And I’ve just increased oil drilling, offshore drilling.’ Oil, which is the largest American industrial sector next to real estate.

And so you can see how the rest of the world is saying “Wait a minute, how are we going to prevent – global warming may be good for the United States, but it’s not going to be good for us. It’s going to flood our countries.’ What are they going to do?

So, you’re having a whole conflict of social systems. And that’s the character of today’s international rivalry. It’s not industrial, who’s more productive. It’s, who can carve out monopoly privileges or get rid of monopoly privileges? Will governments be able to prevent a rentier class, a financial class from taking over the government, or can they resist this and make the government stronger than the financial class? That’s the question that’s dividing the whole world today.

ESKOW:

Well, it’s certainly an interesting time to be alive, isn’t it? So, Michael Hudson, again, I encourage everyone to read the third edition of Super Imperialism: The Economic Strategy of American Empire, and it seems to be the nature of every empire that it eventually claims its own citizens as victims. So, I know you have to go. And Professor Michael Hudson, thank you so much for all your great work and thank you for coming on the program.

HUDSON:

Really good to be here. Thanks so much for inviting me.

ESKOW:

And we’ll be right back after this. I’m Richard RJ. Eskow. And this is … the Zero Hour.