Instruction: Write an article about: NATO/West or Global Majority? Unipolar destruction or multipolar development? The world must choose. Use the themes and topics represented by the tags provided as guidance for the content. It's not necessary to include the exact tag words in the article, but the article should reflect the essence and context of these tags.

Input: China, EU, European Union, Geopolitical Economy Hour, India, Israel, Michael Hudson, Narendra Modi, Radhika Desai, Russia, Ukraine

Output:
Political economists Radhika Desai and Michael Hudson discuss the fracturing international order between the NATO/West bloc and the Global Majority, analyzing Israel, Gaza, Ukraine, Russia, Argentina, and Europe.

Political economists Radhika Desai and Michael Hudson discuss the fracturing international order between the NATO/West bloc and the Global Majority, analyzing Israel’s war on Gaza, Ukraine’s defeat in the proxy war against Russia, and the rise of the far-right in Argentina and Europe.
You can find more episodes of Geopolitical Economy Hour here.

RADHIKA DESAI: Hello, and welcome to the 19th Geopolitical Economy Hour, the program where we discuss the evolving political and geopolitical economy of our time. I’m Radhika Desai.
MICHAEL HUDSON: And I’m Michael Hudson. And we bring you this program with the help of our host Ben Norton, our videographer Paul Graham, and our transcriber Zach Weisser.
The carnage in Gaza has paused, though the possibility that this will open the door to a permanent resolution is remote. Little else seems to have changed. The U.S. remains doubled down on its one-sided support for a murderous Israel, the tail that wags the U.S. dog.
MICHAEL HUDSON: Well, it’s not only the United States that’s doubling down, it’s Europe that’s doubling down. And it’s becoming, you’re seeing, they’ve banned protests supporting the Palestinians in Germany, in France, and in Italy. And this is leading to the break between Europe, I think, and the Islamic countries. Yesterday, Prime Minister Netanyahu called Hamas the Nazis. And in Europe, the Arabs are calling Germany the Nazis. So it looks like the question is, what kind of Nazism is the U.S. and NATO alliance going to have?
RADHIKA DESAI: And what is the definition of what a Nazi is anymore? I mean, it’s completely losing touch with the historical record. Indeed, as Michael, you rightly point out, the U.S. and Western governments generally are growing even further apart from their people, most of whom seem to favor a permanent ceasefire and a lasting solution to the Israel-Palestine conflict. And one might add an end to the war over Ukraine and an end to persistent saber-rattling directed at China.
The U.S. and NATO continue to mouth support for Ukraine, even as the inability to support Ukraine, whether with money, military production, or political legitimacy, becomes clear. And defeat for Ukraine is all but acknowledged. While the U.S. refuses to acknowledge it, the hunt for scapegoats has already begun in Kyiv.
The upcoming NATO foreign ministers meeting continues to invite foreign ministers of Asian non-members such as Japan, South Korea, Australia, and New Zealand, even though the possibility of the U.S. sustaining a third war front remains in question, even with allies, while the key to the entire Indo-Pacific strategy lies in tatters, because India’s Modi stands accused of organizing murders of citizens of allied countries on their territories, because, Modi claims, they are doing nothing about what he alleges is Sikh separatism in favor of a homeland called Khalistan.
So all in all, the Western powers present a picture of increasingly impotent rage. Meanwhile, the world majority continues to side raucously in demonstrations or silently for peace and development. So today we want to discuss both the international and domestic dimensions of the increasingly divergent strategies represented by these two parts of the world, the NATO- and U.S.-led West on the one hand, and the world majority, which now includes, one would imagine, the overwhelming majority of the ordinary people of the Western world, who do not wish to pursue this militaristic and war-like line. They would rather have a policy which is more in line with what China, Russia, and other world majority countries are pursuing in favor of development.
So we are looking at two very stark alternatives. The first represents destruction, both economic and military. And the second represents, again, development, both, in this case, economic and military, at least in the sense of providing for defense against the increasing aggression of Western powers. So I think you wanted to start our discussion off by discussing a couple of instances of economic self-harm that we are seeing in Western countries and those countries that seek to ally with them.
MICHAEL HUDSON: Well, while you were in China for the last few weeks, the whole post-1945 U.S.-centered order has been breaking up, most clearly in Germany and Argentina. So I want to talk a bit about the crises there, because they’re very closely related. And the BRICS countries also are just beginning to define themselves as an alternative to this.
The main strains are financial right now, and not only financial, but the particular way in which the U.S.-centered neoliberal order that was put up in 1945 has now reached its limit. And you’re seeing that in the crises. And it’s largely a balance-of-payments crisis in Germany and Argentina connected to the budget deficits, all that with a kind of neoliberal junk economics that has frozen spending in Germany to prevent Germany from essentially using public funding to get over the depression that it’s created by declaring war on Russia, and it looks like China, too. And the fact that its middle class and labor class are being squeezed, just as they’re being squeezed in Argentina.
So I think underlying both countries and their balance-of-payments deficit is a kind of false view of what causes inflation. And I just want to say one thing about where the German nuttiness comes from. The Germans say that we have to freeze government spending because that’s what is causing inflation. It’s not that the United States has blown up Nord Stream. It’s not that energy prices have gone up. It’s not that food prices have gone up. It’s because we’re running a deficit, too much social spending. And the only cause that the Germans realize except for inflation is government money creation.
But that’s obviously not the case. Every hyperinflation in history, such as we’re seeing in Argentina now, whose prices have gone up 140% in the last year, every hyperinflation has come from the currency depreciation, from the balance-of-payments deficit. And Germany, now that it is deindustrializing, now that it cannot import, if affordable, gas and oil to run its industry, all of a sudden this anchor of the euro’s exchange rate has turned into a deficit, meaning the euro is looking like it’s on the downside.
The reality back in the 1920s is Germany had to pay reparations. The payment of reparations caused the currency to plunge. When a currency goes down, as Germany’s did and Argentina’s today, the price of imports go up. And the price of imports go up, increase the domestic price of food, the domestic price of doing business. And so the government then has to create more money to enable these transactions of the economy to take place at the higher price level.
In every case, the hyperinflation and even regular inflations are led by the balance-of-payments deficit, followed by a declining exchange rate, followed by increasing import prices and domestic prices, and then at the very end, money creation increases, just the opposite of what Milton Friedman and the Chicago School and the right-wingers say.
When you have a false view of what causes inflation for the last 100 years, ever since the 1920s, it’s not a mistake. It’s because there’s a social interest in having a wrong view. The social interest is essentially to squeeze government and essentially privatize everything.
What you’re seeing in Argentina now is that the incoming Mr. [Javier] Milei is trying to create a new government. He’s dropped the idea of dollarization, but he says there’s a simple way to stabilize Argentina’s balance-of-payments. And it’s exactly what Argentina did in 1991, and that is you sell off the public domain. Argentina was able to stabilize its exchange rate by selling its banks, selling its natural resources, selling its public utilities. Milei says, we can raise the exchange rate once again and stop the depreciation if we just sell off everything, sell off our roads, sell off our streets, sell off our land, sell off whatever natural resources we have, and you’re going to have an influx of foreign money coming in, and that foreign money is going to buy up our government, what we sell off from the government, and that will stop the inflation, and now you middle-class and working-class people can somehow survive.
And, of course, the problem with this is once you privatize the public domain, the private owners are now going to raise the prices for public services. They’re going to turn government infrastructure into monopolies and extract monopoly rent, and all of this rent is then going to be remitted to their own countries abroad, and most foreigners in Argentina are Argentinians, the 50 families that run the economy, operating out of offshore banking centers, the Dutch West Indies, the United States, London, and so they’re pretending to be foreigners, so you’re having a huge privatization and the squeeze of the middle-class and the working-class.
RADHIKA DESAI: What you say is really interesting, Michael, but first of all, let me just make one little qualification to what you’re saying, because, you know, Germany yesterday has announced that it has actually raised the debt brake. And so what that means is, and by the way, this is not the first time they’ve done so, they have done so repeatedly, particularly over the pandemic, but even before that, because quite frankly, the position they have taken that the German public debt should be limited to some ridiculously low amount, or rather the German deficit should be limited to a ridiculously low amount, can actually not be sustained, even in the case of an economy like Germany.
And as you rightly point out, more recently, they have been indulging in deindustrialization. And what is at stake this time around is precisely the ability of the German government to give subsidies to German corporations to allegedly organize a green transition, but in reality, it’s not so much the green transition that matters, but the subsidy to the big corporations.
And that’s the point I want to make, because, you know, we all say that neoliberalism is all about essentially freeing up markets and rolling back governments and reducing government spending even, but in reality, it is about none of those things primarily. That is the rhetoric that is indeed used, but it is used in order to essentially create a government policy paradigm, whose main purpose is to focus, is to protect the interests of and advance the interests of the biggest corporations in the country.
And that’s what the German government was being prevented from doing by taking the money that it did not spend during the pandemic, which the parliament had allocated, and giving it to the Green Fund. The issue is not that it’s a Green Fund, the issue is that this would have gone in the form of subsidies and supports for Germany’s big corporations.
So in that sense, neoliberalism is less about markets, all the junk economics is indeed junk economics, but its primary purpose is to serve the interests of big corporations.
MICHAEL HUDSON: That’s quite correct. Under the claim that there’s a budget squeeze, what is cut back is the social spending on the population at large, the consumers. In Germany, what was cut back has been the subsidies of families that have to pay much higher prices now for their heating and for their oil and gas. And that’s cut back precisely for what you say, in order to help the large corporations.
But the large corporations in Germany were very large, primarily industrial corporations. And there’s no way that a government subsidy can really protect these corporations, given the sixfold, somewhere threefold, sixfold increase in energy prices. So it’s very difficult.
So what Germany has done is saying, OK, we are going to need more money, we’ll cut back social spending, but we’ll spend it on the war. And that’s what EU Commissioner President Ursula von Leyen said. And back in February, the Minister [Robert] Habeck, the economics minister, went to Washington and he said, the more Germany serves, the greater its role. That was his quote. In other words, he’s trying to increase, his role in Germany is to serve the U.S. interests in Ukraine. And you’re having Germany more for a war economy right now, even than how, I don’t know if it can save its industrial sector and its economy.
But what it can do, at least, is act as America’s puppet, going for the war economy. And essentially, that’s really the problem. The inflation is going to increase there. There’s going to be a wage squeeze. And that’s what’s leading to the right wing shift all throughout Europe. The Social Democrats and the center parties are really the pro-war parties and the anti-labor parties now. And ironically enough, it’s the right wing in Germany with a little bit of the old Linke party with Sarah Wagenknecht. And it’s the right wing parties in Holland and in Hungary that are doing what used to be the left wing parties.
All this is posing the question, will the European Union break up? And you can say the same thing for what’s happening for the global south countries now that Argentina is saying that it wants to leave the BRICS.
RADHIKA DESAI: So this is really, again, very important and interesting, Michael. Because what we are looking at is really the world is splitting. And it’s splitting at two levels. On the one hand, there is a split, of course, among the countries of the world. And that split is a little more messy than we thought it would be. So countries like Argentina and India may not really remain part of this non-Western alliance or the world majority alliance. Although, of course, we’ve seen this before. It’s not necessarily anything new. When Bolsonaro was in power, then Brazil was not exactly pulling its weight in the BRICS, et cetera. So that was so but nevertheless, there is a polarization at the international level.
But increasingly, there is also a polarization that is taking place within the Western countries. You don’t see the same polarization elsewhere. Within the Western countries, you are seeing a polarization between ordinary people upon whom governments are imposing austerity, low wages, ever-disappearing social services, increased taxes, et cetera, in order to finance, in Germany’s case, the war and subsidization of big corporations. And in the case of Argentina, as you said, essentially to service the interests of a small number of really rich families there.
So at both levels, we are seeing polarization. And I would say that the real issue is that the neoliberal strategy does not work, which is why you get the election of people like Geert Wilders, because the so-called centrist governments basically create the mess and then people get alienated with it.
They have nobody else to vote for, but these populists like Milei or Geert Wilders or what have you. And this is the whole sort of spectrum of Western politics has moved to the right in such a way as to leave people with no alternative. So essentially what we are also at the root of what we are looking at is the exhaustion of Western capitalism and the inability of political forces in most of the world to see that their salvation lies in a political strategy which is fundamentally different, which is not aimed at protecting the interests of a small number of big corporations. It is not articulated in the form of junk economics, but it is fundamentally a developmentalist strategy which involves pursuing the interests of the vast majority of the people, much like what we see in China. It’s not perfect, but it is broadly correct.
MICHAEL HUDSON: Well, we’ve been talking about this for the last few months and well, we’ve been talking about this in China, Russia and the global majority have been talking about this. The amazing thing is there is no talk about this in any major NATO party, nowhere in Europe, nowhere in the United States, nowhere in Canada are people coming and saying there has to be an alternative. The only alternative that is being discussed is in Eurasia, which is very interesting.
And for the first time now, because of the split of the Israeli war against the Arab countries to create a greater Israel, you have the Arab countries now, I think, beginning to turn away from the European Union and from NATO. Now that they see Europe is backing the U.S. and they’re now working, I think, opening their eyes, at least, to the possibility of the kind of alternative there’s going to be. And that’s really what all of these shows that we’re doing are all about.
RADHIKA DESAI: Absolutely. And I just want to go back to what we started with, you know, you pointed out that a lot of this is financial and I completely agree with you that it is indeed financial, but it is also military and economic and political. So in the military sense, of course, what we are looking at in the Western world generally, which is backing Ukraine and now Israel, what’s really going on is that these countries which spend so much of their money, particularly the United States, but also these other countries, you know, a small proportion of their very big GDPs is still a very large amount. So they spend a lot of money on their militaries.
But in fact, the last 18, 20 months of war against Ukraine has already depleted the arsenals of these countries. And even though the military industrial complex is making money hand over fist producing new weapons, the fact of the matter is this military industrial complex is turning out to be a toy weapons complex. It is not actually able to produce at the rate at which, say, Russia is able to produce or China is able to produce.
So once again, on the productive front, even though it involves military production, which is usually regarded as a national priority, even though in the United States, the military industrial complex eats up about a trillion dollars, and probably that’s an underestimate every year. The fact is they cannot produce the weapons.
The second associated fact is that they cannot produce technologically sophisticated weapons. I was just recently reading in the news that Iran has now produced a hypersonic missile. So Russia produces hypersonic missiles, China produces hypersonic missiles, now Iran produces hypersonic missiles. Meanwhile, the coddled military industrial complex of the West is not able to produce anything of the sort. So it is also a military confrontation which the West is losing.
MICHAEL HUDSON: Well, this is why there are calls for a ceasefire right now, both in Ukraine saying, well, there’s a stalemate in Ukraine, let’s just stop. And they want to stop because the West has run out of the weapons, even though the weapons don’t work. What they have, they’ve run out of. They’ve run out of tanks, they’ve run out of bullets, they’ve run out of missiles. They’re trying to buy some more bullets from South Korea, I think, the Ukraine is.
But the fact is, obviously, it’s not a stalemate. The Ukrainians have been essentially losing their entire population and turning Ukraine into a land without the people, as they used to say of Palestine in 1947. It’s depopulated. And so what you’re having is a military that doesn’t work there.
And regarding what you commented on quite correctly on Iran, it looks like both Israel and the United States want to end the ceasefire and then resume the fighting. It’s now primarily on the West Bank. There’s been no ceasefire at all on the West Bank. The murder squads have been going out. They call them “settlers”, to shoot the existing homeowners, take over their homes, and essentially make the West Bank and Palestine only for the Israeli population.
If this continues, you’re going to have not only Lebanon and Hezbollah come up, you’re going to have Iran actually use these missiles. And you may see in the Near East fighting to the last Israeli to support the United States’ attempt to fight Iran. And they will not succeed, I don’t think, in the Near East any more than they’ll succeed in Ukraine.
RADHIKA DESAI: Absolutely, Michael. This is exactly what I was saying the other time when we were chatting with Pepe, you know. And in fact, let me say another thing, which is, you know, this is how the international and the domestic interact, you know, what we call the political and the geopolitical economy of the world interact.
Part of the reason why we are going in this direction is that the West in general, and Biden in particular, cannot afford to admit defeat in Ukraine. And nor can he, in fact, what he seems to have decided to do, particularly given that he is essentially, you know, I never thought there would be such a thing, but you know, there are lame duck presidents. Well, I think he is a lame duck candidate.
That is to say that there are essentially people in his own party who are saying that he should basically step aside. He’s not capable of running, but he is insisting on running. And I think one of the ways in which he’s going to try, he may not succeed, but he’s going to try to force the hand of the rest of his party and make them keep him as the candidate for president, is essentially he wants to run the campaign as a war president and a war president and then some.
So he wants to go into the campaign with certainly one war, certainly two wars now, the war against Russia and as I pointed out last time, the war. So the war against Russia with using Ukraine as a proxy and now a war against Iran using Israel as a proxy. And here the position of Hamas and the Palestinians is actually to be likened not to Ukraine, not to Russia, as President Zelensky tried to do. But in fact, it is to be likened to Donbass, which Ukraine was pummeling before it became the proxy for a war against Ukraine. So now Israel will be a proxy for a war against Iran.
And of course, meanwhile, the possibility that there may be a third front has not been closed. President Biden has said repeatedly that the United States will defend Taiwan in the case of, in the case of China trying to take Taiwan by force, etc. The fact is China has no intention of taking Taiwan by force. China has been engaged in an economic and charm offensive vis-a-vis Taiwan for decades now. And what, however, we have to look out for, is some provocation in the case of which the Biden administration will try to use Taiwan in the same way as a proxy against China, as it is using Ukraine against Russia and in the coming weeks and months may use Israel against Iran. Thankfully, there are elections in Taiwan and it is very likely that a sensible government will be elected in Taiwan, which may kibosh this possibility.
But nevertheless, President Biden so far can be assured of at least trying to run as president, as a war president with a war on two fronts going on well into next November. That is why he can’t afford to admit defeat.
MICHAEL HUDSON: Well, in order for a sensitive government to take place, there has to be, I think the awareness is spreading now that the Western policy is a U.S. policy. It’s to try to control other countries by war. That’s the only way that the United States can exert control. It can’t have trade control anymore because it’s de-industrialized. It can’t even have financial control because of the problems that it has here. The only way that it has is to force other countries in a zero-sum game. As Donald Trump, who will be running against Biden, has said, America has to win on every trade deal.
Well, the difference is that if China, Taiwan, Russia, Eurasia says there is an alternative to try to fight other people, and that’s to offer mutual gain. If you have the global majority following a policy of mutual gain, the Belt and Road Initiative to develop mutual trade among them and to have it Eurasian-centered instead of all centered on the United States and its satellite in London and Frankfurt, then that is really going to be the whole difference in Western from Eurasian policy. If you can have this at least at the center of Eurasian politics, I think you’ll have a recognition of just how great an alternative there is, even if it’s not appearing in the American and European political scene.
RADHIKA DESAI: Again, I want to add to your point and to strengthen the excellent points you’re making, Michael. Let me take a minute to reflect on, just as we said, what is the domestic basis of U.S.’s militarism. It is an increasingly senile, financialized capitalism, which needs to be able to suck value out of the rest of the world in order to survive, which explains its militarism, its international aggression, etc.
Meanwhile, we can very well ask, what are the contrasting domestic bases of the completely different foreign policy that China is pursuing? What we see here is that, essentially, sometime early in this century, in the first decade of the 21st century, the government in China realized that decades of reform and opening up had been important, it had been very good, it had created employment, it had dealt with the series of multiple crises that China had to deal with in the late 1960s with the Great Proletarian Cultural Revolution and then the 1970s, but what it had not been able to do was to help China climb up the value ladder.
So to modernize China’s industry, to make China’s industry develop technologically, and in order to address that problem, since that time, the Chinese government has been taking numerous industrial policy initiatives designed to upgrade the technology of China, and within less than a decade, by about the middle of the 2010s, it already became clear that China was becoming a technological leader in many fields, whether it is information and communication technology with Huawei, or with artificial intelligence, with green technology, and so on, with high-speed rail.
By the way, we were in China, and we experienced a most amazing high-speed rail ride from Beijing to Xi’an, and I have to say, if they had high-speed rails like that, I’d never take another airplane ever in my life, unless it was for, you know, crossing oceans and so on, but anyway.
So these are just amazing levels of technological development, and as we know, the US-led West has been reacting to this by increasingly making the international environment hostile to the extent they can for China, so all of the initiatives China has taken over the last decade and more, whether it is the Asian Infrastructure Investment Bank, the Belt and Road Initiative, which celebrated its 10th anniversary this year, or more recently, all the various BRICS initiatives, its increasingly close alliance with Russia, its attempt to try to win over its own neighborhood, all of these things are essentially a way to try to resist this attempt of the United States to create a hostile international environment, and instead have a competing international order, which will be based not on aggression, on sucking out capital and value from the rest of the world, but rather on facilitating the development of the rest of the world, and that’s what we are looking at, and this is where, again, the world is standing before a set of alternatives, a very clear fork in the road.
On the one side lies China, and still the world majority, even though countries like Argentina and India may be stepping back temporarily, we hope, from that, and on the other hand, the Western-led alliance, the U.S.-led alliance, which basically stands for financial exploitation, the sucking out of value through financial means from the rest of the world, while giving nothing in return, and militarism and aggression to compel the world to cooperate with this.
MICHAEL HUDSON: Well, there’s also a parallel fork in the road that we haven’t mentioned, but is very important, and that’s the global warming and the extreme weather that we have. Certainly, that’s one problem that’s facing China.
What is making this a fork in the road is, why is the United States fighting so much to support Israel? It’s fighting not for Israel, but because Israel is a landed aircraft carrier to control the Near Eastern oil, and the American foreign policy is based, the one way in which it can control trade is by monopolizing the oil trade that American companies have been monopolizing ever since World War I, along with England and Holland for that.
Well, if America is not going to leave the Near East easily, it’s still pumping oil out of Iraq, even though it’s been told to leave. The American forces in Iraq and in Syria are being attacked.
Over the coming six months, I think you’re going to see the war being settled, one way or another, in the Near East. If there’s a defeat of the American oil in the Near East, this will entail a defeat of Israel, too. This fight is parallel to the Ukrainian fight, which ended up all to split Europe away from reliance on Russian oil.
Well, obviously, Eurasia and the other countries that are threatened by global warming, despite the fact that Europe and the United States says that it’s in favor of the green ecology and cutting back pollution, the United States is the leading lobbyist for pollution, for accelerating global warming because the global warming is caused by its oil and gas. And that’s what the United States is using, hoping to use as a lever to control the energy and hence the GDP of other countries. That’s a related fight to what you’ve been saying.
RADHIKA DESAI: Absolutely, Michael. And let me bring this back to a monetary and financial question. You know, that is to say, climate change is also a monetary and financial question. Why do I say that? Because you see, recently, of course, we’ve had a lot of inflation. And while it is undoubtedly true that on the one hand, some of it has been caused by the war in Ukraine and the rise of food and energy prices. And while it is also true that big corporations in the United States in particular, but also elsewhere, are taking every opportunity to try to jack up prices and keep them there.
Interestingly, they can only do this because, we’ve had big corporations for a very long time. So if that was the case, why didn’t we have inflation for the last two decades? We’ve had a highly monopolized economy in the US and many, most Western countries since then. The opportunity to jack up prices is only provided by supply chain bottlenecks, where those companies that do not suffer to the same extent from supply chain bottlenecks then use the opportunity to jack up prices. Fine. All of this is true. But there is an underlying cause of this. Why are supply chain bottlenecks being disrupted?
I think they are being disrupted for two reasons, both of which have to do with the destructive strategy that the United States-led West is trying to impose on the rest of the world. On the one hand, you have an increase in supply chain bottlenecks to the extent that countries like China, but also a few other countries increasingly refuse to provide the United States with cheap goods, whether they are cheap primary products such as, you know, food products or coffee or whatever, and of course, oil, or whether it is cheap manufactured products.
In both of these cases, the ability, the willingness of these countries to provide cheap goods has been declining because their own domestic markets are expanding and their own wage costs are rising, particularly in the case of China, which is a good thing. This is not a complaint. Wage costs should rise in developing countries. That’s what development is about. So that’s the first thing.
And then the second thing is that neoliberal policy has so, has laid agriculture to waste in so many countries. And today, with climate change and the United States essentially ensuring through its wars that the world will remain too divided to do anything about climate change, we are looking at an increasingly desperate situation.
Take, for example, the recent ban that India had to place on the export of oil. With the squeezing of consumption of ordinary poor people in India, India had become a major exporter of oil, sorry, of rice, on which countries like Nigeria, for example, had come to depend. Nigeria imports a lot of Indian rice. Now, if India bans the export of rice, Nigeria cannot import rice, which means prices of food in Nigeria are going to go up. And they are also going up in India because of climate change, because the rice harvest has not been sufficiently robust.
So you can see that in general, you know, just as people have lost, have left the labor force in Western countries after the pandemic and so on, the labor market has shrunk. So similarly, more and more farmers have been either leaving or have been pushed out of agriculture, which means that agricultural production is in decline. And if we in the West think that this is an easy thing, just go to the supermarket and look at the number of things we import from the rest of the world, particularly the third world, in our daily diet, and you will see where the inflation is coming from.
MICHAEL HUDSON: Well, you mentioned India and I think that’s going to be a topic of some of our future broadcasts because there’s a whole crisis. It’s occurring right now. India has been exporting oil largely that it’s gotten from Russia and it’s paid for the oil In blocked rupees in other words, Russia can only use these rupees to buy Indian goods But there are only so many Indian goods that it can buy And at the current point in time. it doesn’t want to get more Indian rupees. So it’s the question that’s going on in Russia is, are they going to continue to sell oil to India for rupees that they can’t spend?
Well in the past they were doing it because they hoped to have an alliance with India. And that’s why India and Russia, India was part of the BRICS. But now that it looks like India has decided to change its policy radically and to throw its backing behind the United States and to be sort of America’s landed aircraft carrier in Eurasia.
You have Pakistan now saying, well, we want to apply to be a member of BRICS Plus at the upcoming January meeting. So if you have Pakistan replacing India in the BRICS that is going to obviously make the Belt and Road Initiative much easier for China, but it’s going to leave India out of this whole reconstruction of Eurasia that’s taking place. That’s a really radical change and India may end up just like Ukraine and Israel left out of the whole process.
RADHIKA DESAI: Let me add a couple of complicating factors there. So what you say is absolutely right, but let me add a couple of further complicating layers. So the complicating layer number one is of course that the United States has been pursuing a strategy of essentially bringing India into its strategy in the Asian region in a very big way and this is represented by the shift from using the term Asia-pacific, which was the term that was favored until recently from the 1990s onwards until recently, the US foreign policy towards the Pacific region towards the what’s called the Western Pacific has been articulated by using the term Asia-Pacific.
Now over the last three or four years, they have been using the term Indo-Pacific. And the purpose of using the term Indo-Pacific, and many people have dwelt on how you know, there was this German geographer who first coined the term etc, etc. But that has nothing to do with it. It has everything to do with bringing India into the picture as a counterbalance to China, something that India has offered the United States for a very long time, especially when we have had this BJP, you know governments of this party that is in power today. So this happened early in the late 90s and is again happening now. And of course the same party has also pursued closer alliances with Israel.
However, and now the West loves them for the same reason as they love Zelensky these are fucking fascists, I’m sorry, pardon my Greek, but these people are fascists in India. And so they thought they were going to get a strongman in Asia to support them, but the fact is that this strongman has turned out to be a bit of a rogue as far as they are concerned because now both Canada and the United States are saying that this government, the Modi government, has tried to assassinate Canadian and US nationals on Canadian and US territory.
And it’s also the case I don’t know the truth of this but I can certainly report that the WhatsApp world and and the social media world in India is absolutely abuzz with supporters of the current government not saying how dare US and China accuse us of this but rather, we got them, we did it, we gave it to them.
So really this is you know, there is an old saying, Who rides the tiger dare not dismount. So this is the situation in which Canada and the US now find themselves. So that’s the first complicating factor.
The second is that Mr. Modi faces an election. It must take place before May of next year. Now, of course, there is every possibility particularly if it looks as though he’s going to lose. And this is a real possibility this time because all the opposition parties created a big coalition and they are going to fight as a big coalition, and if that coalition remains together Modi cannot win. So either he will try to disrupt this coalition, and if he cannot do that, then he will try to perhaps create a national emergency to postpone the election. This is also a possibility. But nevertheless, I would say we may very well see a new government in New Delhi coming up. So both of those things are complications.
And we should probably wind down Michael, but can I just introduce a new thing? Maybe ask you to lead with it But you know you pointed out you pointed me to this book which was recently reviewed on Moon of Alabama By somebody called Fernandez about how there is a split between the US strategy of security versus hegemony. Maybe we can have a closing exchange about that and then bring our discussion to a close and of course any other remarks you want to add.
MICHAEL HUDSON: That’s a good idea obviously the idea that national security is going to increase security is just the opposite in practice. The national security has not made Europe more safe. Europe is now threatened. It’s not made America more safe. The whole world now is threatened by Insecurity as a result of America’s national security saying if we can’t control every other country we don’t feel secure. That’s why America has to go to war all over the world. And it’s the national security that is making the whole world insecure.
RADHIKA DESAI: Well, you know, let me just remind you of this particular paragraph. So basically we’re discussing the review of a discussion of a book by someone called Clinton Fernandes, who is an Australian and he has written a book called Subimperial Power which describes what Australia is doing and of course along with Australia other powers like the European powers as we know who are behaving like vassals of the United States.
So this is the key paragraph in the review.
In other words Fernandes’s point is that the key characteristic of the rules-based international order relates to the actual structure of the American or British or French or Australian social and economic system which seeks to enforce an order where the whole world is open to the penetration and control of their respective national monied classes which is why the order is about hegemony and not about security, Which is why the former so often come at the expense of the latter.
So essentially what it seems that Mr Fernandes is arguing is that countries like Australia or Britain or France are not being vassals of the United States. They are in fact pursuing a strategy of what he calls hegemony, which is opposed to what he calls security. And so what he’s saying is that the pursuit of hegemony is antithetical to the pursuit of security. In other parts of this review it seems that Mr. Fernandes discusses the position taken by John Mearsheimer that you know the US which is essentially that US security is not advanced by these behaviors of the United States.
But what we are really looking at in my humble opinion is a situation, or rather, let me rephrase that. What this argument completely forgets is the fact that all these countries the United States, Britain, Australia etc. They have never been pursuing national security if by that we mean the security of ordinary Americans, British, Australians, French, etc, etc. The fact is that they have always used the rhetoric of national security to justify what has always been what what would be called by Mr. Fernandes as hegemony and what ordinary people would call imperialism.
Today imperialism is not like Roman imperialism or even the imperialism of the czarist Empire or the Ottoman Empire or the Austro-Hungarian Empire. It is a specific capitalist imperialism in which, as I’ve argued under my geopolitical economy rubric, the contradictions of capitalism. On the one hand its tendency to overproduce commodities and capital and on the other hand its reliance on a constant supply of cheap inputs and labor. These two things come together to essentially create an impulsion or an imperative on the part of capitalist countries like the US, France, Britain, Australia, to essentially try to create a domination over peripheral nations so that they can require these peripheral nations in the past to absorb their excess commodities and capital.
But today, when quite frankly excess commodities and capital are not the problem they once used to be because these capitalisms have become productively quite debilitated, but rather they are now sources for financial profits and sources of cheap labor and sources of cheap goods. But in all of these ways that this world is escaping from them.
But anyway, this has always been the case. Imperialism has never been about the security of ordinary Americans. Ordinary Americans can be sent to die in the killing fields of Vietnam or Korea or wherever else as British people did and so on and so forth. So this is the real issue. And so to me I would say that while I don’t disagree with Mr. Fernandes in a certain sense what he’s saying is not necessarily very new because we’ve been saying the same thing but using different expressions.
MICHAEL HUDSON:  So imperialism goes hand-in-hand with the class war and also with warfare financially by the United States and the core against the global majority. So what you’re having right now to put it all in the context of what we’ve been saying is that the whole Arab-Israel split is a catalyst. Somehow it’s shocked the whole world into forcing the global majority to Isolate itself from this NATO-US center or be sucked into it. And the only way it can isolate itself is to end not only end what has turned out to be a post-1945 financial colonialism. But you’ll have to reverse the effects of financial colonialism: the privatization of the government sector. You have to restore the government to the position that it was in throughout all of the rest of world history before privatization, this financial takeover in the name of national security.
And that’s going to involve debt cancellation. It’ll involve de-privatization It’ll involve all the things that we’ve been talking about for what will be a Eurasian alternative to the US Cold War economic order.
RADHIKA DESAI: That’s really a great note to end on Michael and I’ll just maybe add to that a very personal point and then we can wrap up. And that is that you know, as you said, I was recently in China. I attended the Tongzhou Global Development Forum there, which was a really exciting event with a lot of absolutely stellar speakers. And one of the things that I came away with is particularly after listening to the speeches of the major office holders in China and so on is that basically Chinese are really exceedingly angry at the way in which they are being treated by the United States and so on.
But it is remarkable how they are restraining this anger in order to very quietly and methodically putting forward essentially a development agenda to counter the security agenda. So I think that, and maybe just one thing and maybe I’ll flag this for a future discussion, what really also came through in these discussions is the Chinese use the word globalization in a radically different sense in the way in which we use it, and perhaps we can weave this into our next discussion.
And so I should say that we’ve been absent for a while over the last month or so, but we will now get back on a regular basis. We just had a very hectic month. I was traveling a lot and as you know, I was the target as well of a certain kind of campaign by my own government for pointing out that the government had been rather silly and bad by applauding a Nazi in Parliament.
But anyway, we should be back. So you will hear from us in another couple of weeks. Thank you very much for joining us. Thanks once again to our host Ben Norton, our videographer Paul Graham, and our transcriber Zach Weisser. And until next time, bye, bye!


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Economists Radhika Desai and Michael Hudson introduce their show Geopolitical Economy Hour discussing the rise of the multipolar world and decline of US hegemony.

Introducing Geopolitical Economy Hour: This is the first episode of a show being hosted every two weeks by economists Radhika Desai and Michael Hudson. They present the program and discuss the rise of the multipolar world and decline of US hegemony.
You can find more episodes of Geopolitical Economy Hour here.

Listeners can download a free audio version of Geopolitical Economy Hour at any major podcasting platform, such as Apple Podcasts or Spotify.

RADHIKA DESAI: Hi everyone, and welcome to this Geopolitical Economy Hour. I’m Radhika Desai.
MICHAEL HUDSON: And I’m Michael Hudson.
RADHIKA DESAI: Every fortnight we are going to meet for an hour to discuss major development in the fast-changing geopolitical economy of our 21st-century world.
We’ll discuss international developments. We’ll discuss their roots in individual countries and regions. We will try to uncover the reality beneath the usually distorting representation of these developments in the dominant Western media.
We plan to discuss many subjects: inflation, oil prices, de-dollarization, the outcome of the war over Ukraine which is going to determine so many things, the threats the U.S. is making against China about Taiwan, China’s increasingly prominent role in the world, how China’s Belt and Road Initiative is going to reshape it, how Western alliances and the Western-dominated world that was built over the past couple of centuries is so rapidly fracturing.
We’ll discuss financialization, the West’s productive decline. Many important things. Michael, am I leaving any important things out?
MICHAEL HUDSON: Well we have been talking about this for many decades. Already in 1978 I wrote a book, Global Fracture, about how the world is dividing into two parts. But that time, other countries were trying to break free so they could follow their own developments.
And today it’s the United States that is isolating other countries – not only China, Russia, Iran, Venezuela, but now the Global South – so the United States has ended up isolating itself from the rest.
What we’re going to talk about is how this is not only a geographic split, but a split of economic systems and economic philosophies. We’re going to talk about what the characteristics and the policies [are] that are shaping this new global fracture.
RADHIKA DESAI: Indeed, Michael and my collaboration goes back a couple of decades. In fact, even before we met I had read books like Global Fracture and Super Imperialism, which were quite prescient, and with which I agreed.
[Unlike] all those people talking about globalization and U.S. hegemony, Michael could see, and I also could see, the fractures underlying the system. My own approach has been characterized by such skepticism about enduring Western dominance, U.S. hegemony, dollar dominance, etc.
And after thinking and writing about small bits of it for a couple of decades I eventually came up with this book, Geopolitical Economy, from which Ben [Norton] has also taken the title of Geopolitical Economy Report, with which of course we are collaborating.
In Geopolitical Economy, I question the dominant cosmopolitan understandings of the world. In ‘globalization discourse’ the world is seamlessly united by markets. In ‘American hegemony discourse’, or ‘hegemony-stability discourse’, the world is united by a single leading power.
None of these narratives are really true, and the advance of multipolarity, which I’ve argued goes back at least to the 1870s, continues apace. Of course today multipolarity is in a very rapidly advancing phase, and we are looking at some major changes in the world order.
We are going to be discussing all these things, but today, for our opening show, what Michael and I thought we might do is to introduce the big idea that frames our thinking, which is the advance of multipolarity – that is, the difficulty of retaining Western dominance.
The difficulty is so great that not only are the West’s attempts to preserve this dominance futile, but they are even counter-productive, like the conflict over Ukraine or many other things that are actually boomeranging back on the West, like financial sanctions against Russia.
So we basically want to talk about this big idea, the emergence of the multipolar — or some might even say a bipolar — world order. Michael, do you want to start off with some reflections on that?
MICHAEL HUDSON: I think the most obvious driving force that’s splitting the world is the U.S. attempt to create a unipolar world under its control, [particularly] its national security diplomats and financial interests. They insist on monopolizing the international finance system so that if countries try to follow a policy that supports their own development, the United States can simply pull the plug and block their financial transactions.
The U.S. tries to control the oil trade. Oil has always been, for the last century, a centerpiece of American diplomacy, because if the American oil companies (along with British Petroleum and Dutch Shell) can control the oil, then they can turn off the power, and the lights, and the transportation, of any country that is not following the U.S. plans for a world order.
And also food. The United States, from the time that the World Bank was formed, has blocked other countries from developing their own food production, and has steered them into producing export crops (non-food crops, tropical crops) remaining dependent on the United States for its grain, so the United States can starve them out if they try to go their own way.
So the United States approach to leading the world order is to lead by being the aggressor — to threaten, to hurt other countries — not by providing mutual gains [or] by helping them [develop], but by saying, “If you don’t do what we want, we will overthrow you. We’ll have a coup d’état. We’ll do to you what we did with Pinochet in Chile. We’ll do to you what w did with Boris Yeltsin in Russia. We’ll interfere.”
This has been easiest of all in probably the most corrupt region of the world, Western Europe, where the United States Treasury officials have told me that all they need to do is give little white envelopes filled with dollar bills and they’ve been able to control European politics.
The United States is essentially trying to use its threats and its sanctions, and it believes that it can hurt another country.
Behind it all, of course, is the military threat, as you were saying, in Ukraine. But it turns out there isn’t really any military threat by the United States. Not only have the U.S. and NATO run out of normal military arms, but America really can’t mount a land war anymore.
There will never be another Vietnam. There will never be the United States invading another country, or Europe invading any other country, because you’ll never get a population willing to be drafted, since the anti-war movement.
And without that, America has only one military leader against other countries: the hydrogen bomb. There is nothing in between a targeted assassination attempt and an atom bomb.
That basically is what has enabled other countries, for the first time, to break away. They couldn’t do this back in the 1970s, when Radhika and I were first noticing it, because at that point, Indonesia and the Caribbean and Latin America didn’t have the critical mass to go it alone.
Now they do have the critical mass to go it alone, thanks to Russia, China, Iran, India. They are able to go it alone.
There is only one part of the world that is not able to go it alone, and that’s the United States and Western Europe. They de-industrialized.
In their class war against labor, looking for lower-priced labor abroad, they have cut their own industrial labor force, but they’ve also shifted the center of manufacturing, technology, agriculture — everything has shifted to Eurasia and the southern hemisphere.
The United States turns out to have left itself alone [i.e. isolated itself]. The problem that is frustrating American diplomats is: How are they going to dominate the world without industrial leadership, with debt deflation, with a debt that is much higher than other countries. How on earth can they lead, in a weakening position, without any military?
RADHIKA DESAI: Absolutely. I think this whole point you’re making — that the United States’ attempt to dominate the world is increasingly failing — the United States turns out to be essentially a giant with clay feet.
From the point of view of today, it becomes much more credible to say so. But I’ve been saying, and I think also with a lot of help from Michael’s writings, that in reality, when people talk about ‘American hegemony’, ‘American dominance’, ‘American imperialism’ — what we have to realize is that what we are looking at, what the United States has attempted to do for more than a century, is attempt to dominate the world. But this attempt has actually never been successful.
The story that I tell in my [book] Geopolitical Economy is actually a rather different story, which does not try to deny the huge extent of the harm the United States has done by its wars, by its economic coercion, by its suppression of attempts of countries to develop.
[The book] acknowledges that all these things have happened, but the key point is that the United States has never actually succeeded in exerting its dominance. What we are looking at today, what we are calling multipolarity, in fact shows the failure of America to dominate.
What I argue in Geopolitical Economy is that, in the early 20th century, it was very clear to many observers that British dominance over the world economy was weakening, and the United States felt that it was going to take over the torch from Great Britain and be the dominant power in the world.
But they knew, of course, even then, it was very clear that they would never be able to match the scale of British dominance; they could never acquire an empire, a formal empire, of the size that Britain had. Remember, Britain had an empire on which the sun never set.
So what [the U.S. ruling elites] decided to do was, instead, lower their sights and say, “We can’t have an empire of this size, but we are going to try to make the dollar the world’s money.”
The way they tried to do so after the First World War, and the financial mayhem they caused is a really interesting story that I’ve written about, Michael has also written about, and so on.
But, after the Second World War, we are told that the dollar became the world’s currency, but the fact of the matter was, that the first attempt to try to make the dollar the world’s currency fell afoul of the very famous Triffin dilemma – which is to say that, since the United States could not export capital, since it had no capacity to do so – Britain could export capital because it had an empire, it had an empire from which it drew surpluses – the United States had no such empire, no such surpluses, so it created dollar liquidity by running deficits.
And Robert Triffin pointed out, the bigger the deficits, the lower will be the value of the dollar, and the lower will be the attractions of the dollar.
This logic finally worked itself out, and the United States was forced to break the dollar’s link with gold, because people were ditching the dollar in favor of gold. Countries were ditching dollars in favor of gold, including famous Western allies, European allies.
And since then – what Michael and I argued in a recent paper we did called “Beyond the Dollar Creditocracy” – and by the way, this is also my argument in Geopolitical Economy – [since 1971], the dollar has become reliant on a series of financializations, or a series of expansions of purely financial activity, so that the unattractiveness of the dollar for normal economic use, for trade use, and so on, is counteracted by vastly expanding the financial demand for the dollar.
And that is why this (post-1971) age of alleged dollar dominance has in fact rested on a series of financializations, one after another. It has also been an age of recurring financial crises.
To emphasize: What we are looking at are American attempts to dominate the world, but they are all attempts that have failed. And this is another story that we will tell.
MICHAEL HUDSON: It’s interesting that when President Biden and the State Department and the media talk about what’s happening in the world, and [when] they describe policy, they don’t talk about anything that Radhika has just said.
And they don’t even talk about the fight between unipolar and multipolar world. President Putin talks about that, and [Russian Foreign Minister] Lavrov talks about that, but not the U.S.
If you listen to what President Biden and the State Department say, this global fracture is “between democracy and autocracy“. That is how they characterize it. This is Orwellian Doublespeak.
[To them,] ‘democracy’ means a financial oligarchy. Aristotle, 2500 years ago, wrote a book on constitutions of Greece. He wrote, “All these constitutions call themselves democracies, but they are really oligarchies.”
Democracy tends to turn into oligarchy. So by ‘democracy’, what President Biden means, is a financial oligarchy in control of policy.
And what Biden means by ‘autocracy’ is a mixed public-private economy with strong government support for industry, for technological research and development, for rising living standards, and most of all for providing basic needs: public health, public education, retirement income, transportation – all subsidized to minimize the cost of living for labor, so that the economic surplus can go to upgrade education, improve the productivity of the labor force, and do essentially what China has done and what other countries are doing, and what everyone expected industrial capitalism to do in the United States and Europe, but which finance capitalism is not doing.
So you have to go beyond this rhetoric to ask what is really happening. To the Americans, public spending, anti-monopoly regulation, and protection of consumer rights is ‘socialism’.
Well, it is socialism, and that’s why in the United States, they’ve done polls, and find that most people prefer the world ‘socialism’ to ‘capitalism’. Many people in the United States claim to be socialist, but finance capitalism is not socialism.
This distinction, which Rosa Luxembourg called the fight between barbarism and civilization, that’s really the fight between democracy and autocracy, with a different vocabulary.
RADHIKA DESAI: Let me take one or two of those points. First, the United States’ claim to lead the ‘democratic world’, to stand for humans rights and democracy, sounds increasingly hollow.
And this is also really interesting to reflect on why, because the policies that the United States has had to follow in order to exert dollar dominance, in order to create the financializations on which dollar dominance rests, have tended to undermine the United States’ productive economy.
They have tended to divide society because they have created astronomical levels of inequality in the United States, and other countries that follow that kind of policy paradigm.
And as a consequence they have essentially created the present political breakdown that we witness in the United States, where a character like Trump can get elected president. And then when Biden is elected, he must more or less continue Trump’s policies.
So you’re looking at a serious breakdown of democracy in Western countries themselves.
[Second], this is going to be a show about world affairs, and it’s interesting to explain to you how our approach to world affairs differs from the ones that you normally see.
So in the study of international relations, some people take a liberal point of view, which is essentially what I was earlier criticizing, [characterized by] globalization, U.S. hegemony, cosmopolitan views of the world economy, with the world economy seamlessly united.
[In the liberal view,] nations don’t matter, nation-states have become irrelevant, etc. etc. You can take that point of view. Or, you can take a so-called ‘realist’ point of view in which all nations are out to ‘do down’ other nations.
But in reality, the point of view that we take comes from a very strong tradition of critical thinking that goes back to Marx and Engels, but has continued to develop in a big way since then, which is to understand world affairs as the contest between imperialism and anti-imperialism.
Trotsky used to call this uneven and combined development, which is to say that the countries that are already developed, the imperialist countries, want to retain the uneven configuration of development in the world, with some countries being developed and other countries less so.
But the ones who are less developed, the ones who are left behind, contest this by promoting their own development through policies that are designed to improve their productive capacities and so on.
So what Michael is trying to say when he says that the United States is always trying to prevent development, is basically, for all the talk of Western countries trying to help the development of Third World countries, in reality when Third World countries develop in the only way they can, which is by focusing on productive activity, controlling trade and financial flows and so on, as all successful developers have done, including the United States in its own time, when they try to do this, the United States tries to force them open.
They talk a lot about ‘free markets’, ‘free trade’, ‘openness’ – what does this ‘openness’ really mean? It means that countries should lay themselves open to being dominated by, penetrated by, Western capital, Western corporations, and be open to supplying, cheaply, what the West needs – namely, commodities, labor, low-cost goods, etc.
So this is really a contest of anti-imperialism and imperialism in which, today, the cracks of multipolarity is that the forces of anti-imperialism are winning.
MICHAEL HUDSON: What Radhika said that is most radical is America really is trying to stop the development of other countries.
This may seem surprising to some people – not to listeners of this show – but those very words were set into stone in America’s national security report, saying that “any other country’s development, to the point where it is independent of the United States, is a threat to the United States.”
And the reason that China is the number-one opponent and “systemic” rival, as they put it, to the United States is that it is developing, and the United States really is against any development except that which American financial interests control and receive the rental earnings and the profits from turning this development into a U.S. monopoly.
So, I guess what is going to be really unfolding, in this show and the future, is, we know the aim of other countries is to develop, we know what they want to do, but how are they going to actually implement this in policies?
Radhika mentioned my book Global Fracture, back in the 1970s, and that was right after the Vietnam War had forced the United States off gold and Saudi Arabia had taken ownership of its oil reserves.
And U.S. diplomats already at that time were [concerned to] make sure all the development was U.S.-centered, not foreign-centered. They were in the dark as to how to navigate, because, as ironic as it might seem, I was hired by Herman Kahn at the Hudson Institute [of no relation] to go to the State Department, and the White House, and the Defense Department, to explain how super imperialism worked.
The largest purchase of my book [Super Imperialism], 2,000 copies, was by the CIA, [where it was] an operations manual.
The United States thought that, well, if we can continue to make other countries keep their savings in the United States by buying U.S. Treasury bills, if we can tell Saudi Arabia and the oil countries that they can charge whatever they want for their oil, [they could] quadruple the price of oil, but they have to keep all of their earnings in the United States, in the U.S. stock market.
They cannot buy a major U.S. corporation – but the U.S. can buy control of other economies, but no other countries’ investors can buy control of critical U.S. industries. Saudi Arabia can buy minority stock holdings, can buy Treasury bills; the Japanese were allowed to buy golf courses, that they lost a billion dollars on; they were able to buy the land under Rockefeller Center, that they lost a billion dollars on. But they couldn’t really buy American industry.
So you had the whole plan for what seemed to be making other countries dependent on the United States and U.S. satellites, and getting very little for their dollars.
But the fact is, the United States found that it had developed a new kind of imperialism. It wasn’t the old kind of colonial imperialism.
They looked at what happened to Haiti. When it bought itself independence from France in 1804, France said, “Yes, we will give you the independence, but you have to reimburse our military invaders for having conquered you. You have to pay them the current value of what they took for free when they took you over.”
Haiti for the last 200 years has been a debt peon of France and the international financial community.
The United States said, “We can do the same with other countries. We can make them borrow, base their monetary systems on creating their own credit by U.S. banks, creating their own credit in dollars, and all the interest payments and the capital gains on all of this will be remitted to the United States. We don’t need military colonialism anymore. We know that we can’t have another Vietnam. What we can have is dollar dependency.”
That is a system that they put in place, and that is the focus of talks between China, Russia, Iran, and the Global South, has been de-dollarization. And that is what both Radhika and I have been writing about and focusing on for the last few years.
RADHIKA DESAI: Absolutely. And one of the things I was also reminded [of] by what you were saying: the United States has changed its economic structures very radically over the post-Second World War period, because if you – I remember when I was researching my book Geopolitical Economy, I came across this quote from a major American official [George Kennan] at the end of the Second World War, where he says, ‘Today we account for half of the world’s production, and our aim should be to retain that position of relative dominance’ – that is to say, that the United States must continue to account for half of the world’s production.
So the rest of the world can only grow insofar as its growth does not outpace that of the United States. But of course that is exactly what happened. It was impossible.
One of the things people forget, you know, even major historians such as Eric Hobsbawm, for example, when you read the books The Age of Extremes, in which he writes about the history of the 20th century, he talks as though the United States started growing from the late 19th century onward.
By the eve of the First World War, it was a really major producer, and so when [the US] came to become such a dominant producer, when it came to account for half the world’s economy at the end of the Second World War, this was [portrayed as] some kind of a completely natural process.
What people entirely forget is that the United States acquired this position of dominance not through some secular process of growth, but because of the war.
During the war, the United States essentially grew, as the so-called ‘arsenal of democracy, its economy boomed. Between 1939 and 1945, U.S. GDP doubled.
It would not double again for another 22 years, even though these were the years of the so-called ‘golden age of capitalism,’ and growth was relatively high.
So you can imagine the sort of boost that the war gave the U.S. economy.
Plus, of course, if you’re talking in relative terms, the war is boosting the U.S. economy while it is destroying productive capacity in the rest of the world, where the war is actually occurring, where the fighting is actually happening.
So it was the complex result of this. So there was nothing natural about the U.S. position of dominance.
There are a couple of things one can add to this.
[The first thing is that] you know, today, when people are once again celebrating the United States’ role as ‘the arsenal of democracy,’ it’s really ironic because the United States, both in the First World War and the Second World War, profited in this manner.
Many countries have only recently finished paying off the war debt, etc. So the United States essentially has been indebting other countries simply by posing as an ally, when in fact it was not an ally.
The second thing is that, of course this also should tell us, give some background to how the U.S. economy has become so reliant on military production [and] armaments production, why the military-industrial complex is such a large part of the U.S. economy.
MICHAEL HUDSON: Well you pointed, quite rightly, to the role of debt in all of this. During WWII, the United States used its position of supplying arms to the Allies to force the creation of two institutions, the World Bank and the International Monetary Fund (IMF) – along lines that were opposed by Europe – designed to, number one, break up the British Empire.
Under Lend-Lease of WWII, and under the terms of the IMF, they make Britain [overvalue] the pound at 5 pounds-per-dollar, and promise not to devalue it until 1949.
They also insisted that Britain could not maintain its sterling area. Britain had a sterling area that was much like the dollar area today.
During the war, India and other former colonies had exported raw materials and built up huge government savings in exchange for these raw materials. And, as [part of] the sterling area, they were obliged to spend all of these savings on British manufactures.
But America said, “We want free markets! Free markets means you can spend your money anywhere.” They broke open the British sterling area and said, “You can buy goods anywhere”, meaning, from the United States.
Because with Britain being committed to an [overvalued] pound sterling, and the United States having the industrial capacity, the United States ended up with all of these savings that the British Empire had accumulated.
And the United States, under Franklin Roosevelt, signaled that Britain was America’s number-one rival. Britain was in the position that China is in today.
So the [British] empire was broken up, and basically forced into debt in the balance of payments, because Britain could no longer earn its way to dominate the sterling area by exporting. It was on the road to deindustrialization.
Meanwhile, the second thing that was important, is that the United States emerged from the war with almost no domestic debt at all.
The [Great] Depression had wiped out domestic personal lending and corporate lending. There was nothing to buy in WWII, in the civilian economy, because it was war production. So there was hardly any debt.
So, since WWII, [for] every recovery there has been a business cycle in America, Europe, all over the world. Every business cycle recovery has started from a larger and larger proportion of debt-to-GDP, a larger proportion of personal debt to personal income, and corporate debt to corporate income.
This is what has essentially made America spend so much money on domestic debt service, that neither its labor compete with other countries – if you have to pay mortgage debt, and personal debt, credit card debt – but American industry is debt-ridden.
Suppose, now, you’re China, Russia, and the Global South. How can they develop their economies in a way that does not simply replicate the American debt overhead?
How can China develop its real estate without following the American real estate [model], that, what people thought was increasing middle-class wealth by the price of housing going up and up, all of a sudden, you’re house poor – you’re spending so much money on your mortgage that you don’t have enough money to buy goods and services.
How are China, Russia, and the Global South going to create an alternative economic system that doesn’t simply replicate what the United States has done since WWII?
And how are they going to create, to help this, an alternative to the World Bank and the IMF, that is quite different, and with different principles?
RADHIKA DESAI: And that brings us to another theme that Michael and I have both collaborated on and written independently about, which is really: What should the structures of finance ideally be?
And when Michael poses all these questions – how China can organize its financial sector and its economy in such a way as to promote production without creating these debt overheads?
In one sense, of course, these are always new questions, because economic circumstances change. But in another way, we have models going back at least a century, century and a half.
That is to say, that in their own industrialization, major industrial countries, including the United States, Germany, Japan, China today, they have all had financial sectors in the period of their most rapid development.
For the United States, we are talking about the 19th and early 20th centuries. In this period they had a very different model of finance. It was, the financial sector was structured in such a way as to aid production.
Finance was the handmaiden of production. Finance facilitated long-term investment in productive capacity. Finance did not focus on consumer lending and so on. In fact there was hardly any consumer lending.
So in all of these ways, finance has actually powered the development of these countries, and finance was subordinated to production.
By contrast, Britain has always had a very different financial model which — ironically, for the home of the first industrial revolution — actually was not geared to promoting production. It was rather geared to short-term credit for commercial purposes, eventually for speculative purposes, and so on.
So this short-term financial model, which was originally British but has been adopted by the United States through a creeping process of financial deregulation that began in the 1970s and 1980s, and reached a peak in the repeal of the Glass-Steagall Act in 1999, under the supervision of none other than the so-called “Maestro,” Alan Greenspan.
I’m sure we will have an episode discussing the role of central banking as well.
So anyway, this model of finance, which the United States has adopted over the last many decades, is actually the opposite of the sort of financial structures that you need.
You need financial structures that are going to aid production, whereas these financial structures actually strangle production. These financial structures actually create the economic inequality which we have seen scaling new heights.
And the opposition of the interest of finance and production is so great that we saw, for example, during the pandemic over the last two or three years, while the economy was tanking, stock markets were doing nothing but scaling new heights, and increased the wealth of those with the greatest number of financial assets.
These contrasting models of finance, historically and today, will be another theme that Michael and I will be addressing.
MICHAEL HUDSON: Well, what’s so remarkable, is that the point that Radhika has just made was well understood in 1914.
After WWI broke out, the British press began to write articles about how they thought that they were probably going to lose WWI because of British banking.
They said, “Germany has a great advantage over the United States. In Germany, the banking is for long-term. There is a three-way [relationship] between the German government, the banks, and the large corporations — especially the steel-making and heavy industry for the militaries.”
And there was a belief that German industrial banking, that they had been able to industrialize, and that the banking in England was post-feudal; it was short-term banking, the financial time frame was only short-term, and the British stock market especially was hit-and-run.
It was like a brokerage in the United States today. They’d put clients into a stock [and] pump-and-dump. That was the British way of making money.
But when the British were creating the industrial corporations, they were run by financial managers, just like has happened in the United States with General Electric and other financialized firms.
They didn’t take their profits and reinvest in new industrial capital formation; they paid them out in dividends. Instead of industrial engineering, they had financial engineering.
And the result was that finance in Britain was predatory.
All of this was understood. And it was believed that, in the aftermath of WWI, you were going to have what Marx had described in volume three of Capital, that finance was going to be industrialized.
And Marx said the revolutionary role of industrial capitalism was to get rid of the landlord class and make land rent and natural resource rent part of the public domain, and not for private absentee owners, and to get rid of predatory finance, English style, and replace it with productive finance.
And he [Marx] believed that this would lead naturally into socialism, with the banks being, if anything, the model of socialist planning and government planning for the economy.
And that was actually what was happening in Germany under the Reichsbank. I described this in my book Killing the Host.
And instead, what happened was, with America’s victory [in World War One], you had the Anglo-American financialization policy that, as you know, brought on the 1929 stock market crash and the 1931 debt cancellation of inter-Allied debts and German reparations.
So there were two opposing financial systems. And what Radhika is saying is that the Global South and China and Russia are doing today is finally a recognition, a replay, of this same debate between finance capitalism and industrial socialism that you had a century ago.
RADHIKA DESAI: Yes, and there’s another point worth making in connection with the history you were recalling, Michael.
So in the United States, like I said, in the late 19th and into the early 20th century you had very different banking structures.
And then, yes, as Michael said, in the 1920s, the financial structure sort of began to evolve towards this British-style predatory short term.
Of course, you also had this enormous boom in consumer lending in the United States in the 1920s. These were the “roaring twenties” as we remember them. And a large part of what made them “roar” was debt-fueled consumption in the United States.
So anyway, so there was a brief period, but then you got the 1929 crash, you got the Great Depression, and you got the depression-era banking legislation — Glass-Steagall chief among them — which really made American banking, U.S. banking, among the most regulated banking sectors in the world.
Because you had a system of essentially state regulation of banks, and a sharp distinction between banks that were commercial banks that took the deposits of ordinary customers like you and me, and enjoyed federal deposit insurance, which was the new institution that was created by this depression-era banking legislation.
So if you enjoyed federal deposit insurance, which basically allowed ordinary depositors like you and me, trust that if we put a few thousand dollars in the bank, that it would not disappear if the bank went bust.
But, banks that enjoyed this deposit insurance were heavily regulated in terms of how much they could lend, at what interest rate they could lend, what purposes they could lend for, and they were forbidden from speculating in financial markets; whereas, banks that did so – banks that speculated in financial markets – the so-called investment banks – were not given federal deposit insurance.
And this structure of US banking, which allowed US banks to play a positive role in the economy, continued into the 1970s.
And it was then, particularly after the dollar’s gold link was broken, and it became gradually clear that expanding dollar-denominated financial activity would be able to counteract the Triffin dilemma to a considerable extent.
That’s when the financialization really took off, so you saw vast increases in financial activity in terms of government borrowing, in terms of lending to Third World countries – eventually the stock market bubble, the dot-com bubble, the East Asian financial bubble, and finally the mother of all bubbles, which broke in 2008: the housing and credit bubbles.
And of course now, nothing has been done in all of these decades, despite repeated financial crises, to regulate American banking structures, or very little has been done.
And as a consequence, we today have an even bigger so-called “everything bubble.” Anything that even remotely smacks of any lucrativeness is an asset to be acquired.
So the United States has undergone quite a transition. And this is important to remember as well.
MICHAEL HUDSON: Well, what the implication of what you’re saying is: What are other countries going to do to avoid this same problem? Because many other countries followed the US [banking] philosophy.
What we’ve been discussing is not at the center of economic discussion, either here or abroad.
Well, what has made China so successful, and what is so unique about Chinese socialism, is they have treated money creation, banking, and credit as a public utility.
That means that, if the United States cannot really cure the debt bubble it’s built up really since the 1980s, because if it writes down the debt there will be huge defaults, and in 2008 the head of the FDIC, [Sheila Bair] said that Citibank was the most corrupt bank, and incompetent bank, in the country; it was in negative equity, it had wiped out the entire stockholder wealth.
But fortunately, President Obama had appointed a treasury secretary, Robert Rubin, who worked for Obama’s sponsor, Goldman Sachs.
And Obama was the political lobby of Citibank. They bailed out Citibank, instead of letting it go under – instead of letting it go under and turning it into a government bank, to actually loan money for productive reasons.
Obama sponsored the super-financialization of the United States, and, since 2008, has traded $9 trillion in subsidies to the financial sector, that is used – this $9 trillion – to buy control of the industrial sector, to financialize corporations, to [deindustrialize] them, and essentially the financial sector has helped destroy industry in the United States.
Well, China is not in this position. It doesn’t have a powerful financial interest to take over the government; just the opposite.
China has a very large corporate debt, now, and especially a real estate debt. But when its corporations get insolvent, China does not say, “Well we’re going to break you up and you’ll have to be sold to foreign buyers and anyone who can buy them.” China essentially writes down the debt.
And it’s easy for it to write down the debt, because it’s writing down debt that is owed to itself. There is no private bank to fight it and to lobby against it.
The same situation occurs in Chinese real estate right now. There are a lot of complaints in China that families have to go into long-term debt in order to borrow the money to buy their housing, because their housing has been bid up – like the United States – on credit.
How can China lower the price of housing to keep its labor force with low housing overhead, so that it can remain competitive, and so that it can use labor’s income to buy the goods and services that labor produces instead of paying the banks?
RADHIKA DESAI: These contrasts that you’re drawing, Michael, between Chinese financial structures and what American financial structures have become over the last several decades, this is very pertinent for talking about de-dollarization, on the one hand, and the rise of the renminbi, or the yuan – the Chinese currency has two different names – as a major world currency.
Now, there are a couple of things one should say about this. First of all, as far as the de-dollarization is concerned, the fact of the matter is that this is happening because the rest of the world is increasingly becoming aware that participating in the dollar financial system has many disadvantages, including the tendency of the dollar system to incur increasing financial crises and so on.
But in addition, there is another point one must make, which is that the dollar system, which rests on the structures of financialization, have been strangling the American economy.
They have been making the American economy less productive. They have been increasing social inequality in the United States. And of course, all of this has also had repercussions for politics.
But of course, the way American politics works, you know, it’s “the best democracy money can buy.” So essentially the extremely wealthy interests, which are also those interests which have an interest in financialization, are keeping the system going – even though it is having these bad effects on the American population, and even though the dollar system is actually decreasingly attractive to the rest of the world. And therefore we are going to see its demise very soon. So, these interests are keeping it going.
By contrast, in China what you have — people say that the Chinese yuan must be internationalized in the same way as the dollar — and this is where they are making a mistake.
Yes, there will be increasing use of the Chinese yuan in international trade, but also you are seeing that the new structures that are emerging are not just about yuan domination.
On the contrary, China is signing more and more agreements to trade with other countries’ currencies. So it will also enable the currencies of, say, Iran or India, to become used in a limited, regulated way, nevertheless, but nevertheless used in international trade.
But this will be about trade. As long as you don’t have a vast investment in the financial bubbles regularly blown up by the American financial system, you don’t need the dollar system, basically.
So the yuan will be internationalized in an extremely different way. It will not look the same as dollar internationalization has looked over the last many decades, reliant on financialization.
So China, we will see that, but it will look very different. That’s a clarification that must be made.
MICHAEL HUDSON: Well the question is, how are they going to create an international bank to oversee international reserves that do not really contain the dollar, except some dollars for foreign-exchange stabilization.
Certainly the first step is going to be bilateral and multilateral currency swaps. China will hold Saudi Arabian riyal, and Saudi Arabia will hold Chinese yuan, and the result will be the petroyuan that people have talked about.
The members of the SCO (Shanghai Cooperation Organization) and the allies of China, Russia, Iran, are going to develop mutual currency swaps. And at some point they will join together and create an international bank that will be able to create credit to finance the huge investment in infrastructure, port development, transportation, that we’re so far seeing China take the lead in developing along the old Silk Road and the Belt and Road Initiative.
This is going to be coordinated by an international bank, so that they can essentially have their economy without much contact with the dollar and the euro.
Because the dollar and euro have very little to offer – not raw materials, not much technology. They can make specialized machinery for producing computer chips, but basically it requires a whole institutional development.
And I’m sure that’s what they are discussing right now. And this is going to be unfolding in future programs that we’ll be discussing.
RADHIKA DESAI: Exactly. We’re nearly at one hour, Michael, so let’s wind down this conversation. Maybe I’ll wind it down by underlining something that you and I argued in our article “Beyond the Dollar Creditocracy.”
The dollar system has operated with a carrot and a stick. The carrot has of course been the vast financialization bubbles that the United States has blown up regularly in order to invite the rest of the world to buy dollar-denominated assets, and thereby increase demand for dollars.
And that also has of course been running into increasing contradictions, to such an extent that today, Michael mentioned earlier the Federal Reserve’s expanded balance sheet.
It went from about $1 trillion in the early years of this century to about $2 trillion, then $4 trillion after the 2008 Financial Crisis, and now it is over $9 trillion dollars.

The bulk of this money is there because essentially foreigners are not crowding into American asset markets to buy dollar-denominated assets. So those asset markets have to be supported by the Federal Reserve.
Of course, eventually it can become a sort of self-contained system, in which the Federal Reserve continues to inflate the wealth of some Americans, but the rest of the world is decreasingly interested in it.
The other – the stick – has of course been control over commodities. Michael mentioned control over oil.
Of course today many other commodities are becoming important – food of course is becoming important.
Various resources connected with the production of various ‘green’ technologies, like lithium is becoming important, so there will be a big attempt to control this.
But American attempts to try to keep control over oil has also been slipping over the last many decades. Oil prices take a turn of their own.
And of course as commodity prices go up, the value of the dollar falls. And so this is another – essentially the reason why commodity prices are going up is because the rest of the world is demanding more, because the rest of the world is also developing.
And so the development of the rest of the world itself is going to have a negative effect on American attempts to retain purchase.
So the sooner the United States realizes the folly of trying to dominate the world, and focuses on being a productive national economy, the better it will be for Americans themselves.
Because Americans have also paid a big price. The world has paid a big price, but so in a lesser way Americans have paid a price for the U.S.’s vain attempts to retain dominance over the world, even if it is only by keeping the dollar as the world’s money.
MICHAEL HUDSON: Radhika, we could have gotten a million dollars from the State Department by keeping this to ourselves and just telling them how the world works.
RADHIKA DESAI: Well I hope instead we get a million viewers. This would be far more rewarding for us.
So please watch out for our next show, which we will record in two weeks time, and you will see in two weeks time.
Meanwhile, please also give us your reactions, your suggestions, for topics we might cover. We’ll try to do that as much as we can, and we look forward to talking with you every fortnight from here on.
Thanks very much, and see you next time.