There is much that Michael Hudson and I agree on, especially with regard to the growing economic and political influence of finance capital in the last half century. We differ, however, in our analyses of how the growing global weight of finance capital destabilizes the global capitalist economy (and especially USA & UK variants) as well as its role in the US economic empire–that is, imperialism.
Another difference between Hudson and I is Hudson sees debt as the centerpiece and lynchpin to reform of the current capitalist economic system. He thus calls for a ‘debt jubilee’ in which by a political-legal action debt is expunged from the capitalist system. In my view, however, a debt jubilee is politically naive call for reform. Capital cannot function without debt, and as it financializes it necessarily creates more debt to function. To therefore call for a ‘jubilee’ in which debt is expunged requires a political revolution first. It is not possible to ‘reform’ excess debt by expunging it from the capitalist system. Capital’s political elite will not assassinate itself. The call for Jubilee is thus a naive, never attainable reformist demand.
Still another important difference in our analyses is Hudson sees a direct conflict between finance capital and industrial capital in the 21st century in which the former is prevailing over the latter. In contrast, my view is this class dichotomy proposition is over assumed. Capital is Capital and the two expressions–finance and industrial–are actually quite integrated. Finance capital is becoming more industrial; Industrial capital has been financialized for some time and is becoming more so.
This writer recently joined in a discussion on another blog, where commentary and exchange occurred on Michael Hudson’s book, SuperImperialism, in which his above basic propositions regarding debt, finance capital, and imperialism were discussed.
My reply and contribution to the discussion was as follows:
“Hudson is right about the growing financialization of Capitalism in the late 20th century, accelerating in the 21st and that financialization creates excess debt in its wake. But he’s wrong about Industrial capital (China, Russia) vs. Finance capital (USA). The USA is still the global leader in industrial capital. USA and China each produce about 25% of the world’s goods output. The USA does it with fewer workers, which means its rate of exploitation of labor is higher. More important, Hudson misses the fact that since the advent of Neoliberal economic policies (late 70s and ever since) US has enabled its multinational corps to offshore much of US goods production. So when industrial capital inside the US is combined with US industrial capital relocated offshore in the empire, the USA capitalism is still the ‘industrial’ capital leader. It is simultaneously become the ‘financial’ capital leader as well. But to the point: in the age of global capitalism and global US economic empire, one cannot compare national economies (China v. USA). As neoliberal policies were implemented and expanded from Reagan to Biden, finance capital also expanded offshore along with industrial capital, beginning in the late 1980s and accelerating. The US empire around the same time also created what I call the ‘twin deficits’ solution to enable US capitalism to repatriate a good part of the surplus value back home that its offshore multinational corporations created. It purposely and consciously (following the Plaza (NY) Accords with Japan and Louvre accords with Europe) ran a trade deficit whereby money capital created offshore was recycled back to the USA in the form of buying US Treasuries and other M&A acquisitions. That surplus allowed the USA to run massive budget deficits in turn, which further in turn allowed the USA to fund constant wars in the 21st century ($8T)while at same time cutting corporate and investor taxes by $15T. Global financialization was essential in order to recycle this foreign created surplus value.
In short, US trade deficits are ‘good’ for US capitalists in that they ultimately increase the global repatriation of value and, very important, enable funding wars and massive tax cuts for capitalists (ie the state returning value to the capitalists via the tax system)
USA empire and capitalists find both industrial and financial capital profitable. In some ways the former is even more profitable. (Note here that ‘profits’ are both from productive labor as well as ‘fictitious’, for Marxists). Capitalism sucks up global productive labor profits via imperial policies. But it same time creates more ficititious profits. Contra contemporary Marxists’ analysis, fictitious capital is not irrelevant..at least not to the capitalists. Fictitious capital and profits expand because there are no costs of goods, no need for labor in most cases, and the turnover is far faster than for industrial goods profits.
It is naive to call for a Debt Jubilee without clarifying that debt is essential now (in many forms not just financing industrial capital as in the 19th century) to capitalism and the US global economic empire. An anti-capitalist revolution would be necessary to expunge debt in general in the system. Hudson doesn’t understand this and calls for a debt jubilee under capitalism, as if the capitalists would agree anyway to such ‘reforms’ that would topple their own economy and eliminate much of their current system of profit maximization (fictitious as well as productive labor profits). An anti-capitalist revolution would be required to expunge debt on any scale. And that takes a political strategy, not an economic reform proposal to pass legislation to enact a debt jubilee.
There’s one more comment on Hudson ‘Superimperialism’ thesis and view that financialization is taking over real investment, leading to the decline of US economic empire, as finance capital attains dominance over industrial capital:
Do the capitalist global energy companies represent industrial capital? Yes, they produce the non-durable products called oil (and chemical derivatives of same). They make profits from industrial production. But the global price and therefore profits from oil is as much ‘financial’ as industrial. A major part of price and profit is determined by finance capitalists speculating on global oil futures exchanges. Profits are thus both industrial (production) and exchange (speculation in financial oil futures markets). So are the world’s oil corporations ‘industrial’ or ‘finance’? How does one speak of industrial vs. financial in this case? The same can be said for most globally traded industrial commodities, also bought and sold on futures markets. And then there’s the world’s great manufacturing corps. Many of them make a majority of their ‘profits’ from financial asset investing, not producing. In other words, in 21st century global capitalism, run by the American empire, the old 19th century distinction of bankers/finance capital vs. industrial capital is largely in accurate. It is just Capital, finding ways to leverage finance in order to make even more ‘fictitious’ money capital as it squeezes labor to extract more value and thus profits from production as well.”
Dr. Jack Rasmus
Sept. 16, 2022
Thanks for this. I found Michael Hudson’s work very helpful in bringing into focus things that I only vaguely understood. But it is true, as you point out, that he paints with a very broad brush, ignores important things and oversimplifies.
[…] Michael makes is too severe. The two forms of capitalism are much more integrated. Read article by Jack Rasmus […]
Jack,
Spot on response to the Michael Hudson cult. Debt jubilee is utopian nonsense. And the concepts of industrial capital and financial capital are inseparable as Lenin noted. Who are the “Marxists” who think “fictitious capital” is irrelevant?
Greg Godels
I left a comment earlier that (somehow) never was copied. Now I’m thinking of another comment. It’s a very complex and full topic. I suggest Rasmus read James Crotty’s epic “Keynes Against Capitalism”, a 400 page book. Crotty taught a UMass/Amherst for decades. There are reviews of his book on the web, by Jacob Assa, and by Allan H. Meltzer. Assa’s essay: “Keynes had in mind a rather utopian “New Jerusalem,” where public investment creates not only full employment, but also improved infrastructure,
cultural and educational facilities, transport, and industry. . . . In the leadup to World War II, Keynes distinguished between two kinds of private property one that a person earns with their own labor vs. another that constitutes monopoly ownership of giant corporations such as that of Rockefeller, affecting the lives of thousands of workers. . . . Presaging Mazzucato’s work on the “entrepreneurial state” (2015) as well as the development model of several East-Asian countries, Keynes’s vision was one in which “the State would fill the vacant post of entrepreneur-in-chief, while not interfering with the ownership or management of particular businesses” Keynes also advocated the elimination of capital flight, which is antithetical to NeoImperialism (a better an improved word for NeoLiberalism). Finally, I’ll mention a ratio, the ratio between national “household net worth” to “disposable personal income” — between income and savings on a national scale. The Fed’s Flow of Funds Table 101.B, Line 50, at the bottom records this ratio, and over the decades it has recorded the vacillations. Today we have much too much savings, which I think of as hoarded resources. Q1 2022 it’s 823%, in 2014 it’s 627, in 2009 it’s 450, in 1988 it 488. Savings has grown much faster than income over the decades. Look at the S&P 500 since Dec. 1, 2008, 735, and in Sept 1, 2021 it’s 4567 — adjusting for inflation, the S&P 500 quadrupled. This is insane, it’s fictitious capital, but it’s real money driving up prices in housing and other items. It’s hoarded waste. This topic is rich, but very complicated. It relates to debt and jubilee of debt cancelation, it brings up the idea of the “euthanasia of the rentier”.
Read chapter 12 of Keynes ‘General Theory’ and the implications for capitalism of the trend toward ‘speculative’ investment at the expense of ‘enterprise’ investing. The former creates the massive financial asset wealth you note, aided by the capitalist state, which is the basis of the accelerating inequality last 40 and especially 20 years. The figures you cite are the result, in the USA alone, of $10T in no cost money provided by the Fed to banks and investors; the $15T of fiscal tax cuts for corps and investors just since 2001; and the $13T in F500 distribution to shareholders in stock buybacks and dividends just since 2008; and so on and on. Much of this money capital gets funneled into financial markets worldwide that then multiply the fictitious value of the money capital. 21st century capitalism is a massive income and wealth distribution (and redistribution) machine for holders of capital. Fiscal and monetary policy no longer function to stabilize the economy’s business cycles but to redistribute money capital and wealth to the few. Keynes saw the outlines of this trend in chapter 12 in the 1930s. Problem was he viewed it from an individual capitalist investor perspective, not from an institutional class perspective. This ‘classless’ view kept him from seeing the bigger picture. But he understood the potential growth of rentier capitalism. That is financial asset wealth accumulation independent of production and real investment. He called for the ‘euthanasia’ of the rentier, but didn’t actually say how this was to occur except by some magical shift by the capitalist state to redistribute and reinvest the rentier wealth toward real investment and growth. But that too was a ‘class-less’ proposal since it assumed the capitalist state was neutral and do what was best for society–i.e. rid it of the rentiers–when in fact the capitalist state is in service to the rentier faction of capital more than ever before. Whose been running the economic and related policies of the US last quarter century? Citigroup, Goldman Sachs, the big private equity and hedge funds, and all the rest like them.
Should U.S. society plan to create a ratio or a range between total income and total wealth? Is that a desirable goal? Today wealth is around 9 times higher than income. That is, there is about $150T of wealth and $18T of income (disposable personal income); that’s a spread of 8.3 times. As I related in my comment, this spread is much larger than before, wealth has been around 5 times greater it seems historically. To democratically control the applications of wealth is it desirable to reduce it’s relative size, which would free up more resources, as well as creating a sizeable and substantial coordination of the useful application of wealth, nationalizing a good part of the economy? Do you have a glimpse at what social balance we should wish to create? I can envision a wealth tax that would eliminate billionaires, for instance, and a nationalized economic policy council — therefore eliminating this dangerous power-grabbing mountain of wealth is a necessity for a civil society.
Reblogged this on Calculus of Decay .
It is wealth (assets) that throw off streams of income constantly. Some of that income is then re-invested in assets (financial mostly but also ‘real’) with the intent of generating even more asset wealth to create an even greater stream of income. In other words, wealth and income are but two sides of the same coin. Income can be redistributed from owners of capital to workers (altho the re-distribution is mostly in the opposite direction) but that still leaves asset wealth as the source of the inequality problem in general. Both asset wealth and its income need to be addressed and restructured so that they don’t continually generate inequality of both. I don’t agree with calls to redistribute income that don’t address and redistribute asset wealth, and vice-versa.
Thanks for the added clarification.