Michael Hudson joined a discussion with Class Unity about the Financial Crisis of 2007-9 and the politics of finance capitalism. Discussion is based in large part on his book Killing the Host (2015) How Financial Parasites and Debt Bondage Destroy the Global Economy (2015).

CLASS UNITY: For today’s main event, we’ll be speaking with Professor Michael Hudson. Professor Hudson is the president of the Institute for the Study of Long-Term Economic Trends and a distinguished research professor of economics at the University of Missouri, Kansas City. He has written numerous books on economics, trade, imperialism, financial capitalism, and debt. Today’s discussion will focus on his book, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

Professor Hudson, thank you so much for speaking with us today. We recently discussed your book on the 2008 financial crisis in our reading group. We’re all well aware that you were one of the few economists who correctly predicted the global financial crisis before it happened. Could you tell us about that? How were you able to predict it when it seemed like no one else could? And what prompted you to write this book?

MICHAEL HUDSON: Well, it was fairly easy to predict because the basic assumption of my book is very simple: the rate of interest grows exponentially. Any rate of interest represents a doubling time. I described the rule of 72 in the book—any sum of money at a given rate of interest doubles, redoubles, and continues to grow exponentially. Meanwhile, the economy grows in an S curve.

I was happy to discover that all of this had already been analyzed in Mesopotamia. By 1800 B.C., scribes were trained mathematically. The mathematical models developed by the Babylonians were far more sophisticated than any model put out by the National Bureau of Economic Research or other official agencies. Students were taught, for example, to calculate how long it would take for a sum of loaned silver to double. At 20% per year—or, more precisely, 1/60 per month—it would take 60 months, or five years, to double. To quadruple? That’s another five years, or 10 years total. To multiply by 16? That’s another 10 years, or 30 years in total, during which the principal would multiply 64 times.

However, compound interest was not permitted in Babylonia. Every time the original sum doubled, a new contract had to be written. If you were a wealthy person lending money, the credits owed to you would grow according to the exponential curve I just mentioned.

Already in 1800 B.C., we find analyses of mathematical models describing how rapidly a herd of cattle grows, which follows an S curve. Today, the same principle applies, except the reason the U.S. and other economies falter is that the debt burden grows higher and higher, shrinking the domestic economy, consumption, and investment. The result is that, at some point, the debts cannot be paid. You could say that this is the underlying principle of my book: a debt that can’t be paid won’t be. But the question is, how won’t the debts be paid?

Since the time of classical antiquity in Greece and Rome, Western civilization has been marked by pro-creditor laws. Instead of wiping out debts and canceling them, the system has said, “Well, if a debtor can’t pay, they lose their land, their freedom, and become bondservants.” This polarizes the economy, leading to collapse.

What happens in Rome? You can understand why the National Bureau of Economic Research and economic courses don’t teach this obvious principle. If an economic curriculum were to address debt and the tendency of debt to grow faster than the economy, it would reveal the inevitability of a crash. However, all National Bureau of Economic Research models assume a constant S curve where everything is self-correcting. These models dismiss financial problems in the economy, assuming that the magic of the marketplace will somehow enable everyone to pay their debts. This assumption, of course, works if you’re willing to see 90% of the population lose all their property, watch their income drop, and allow the remaining 10%—or even just 1%—to end up owning everything.

This is why the history of debt and how societies have repeatedly crashed under its weight isn’t part of the economics curriculum. It would contradict the prevailing idea of self-correcting economies.

Why does the economics discipline and the government’s official economic agency, the National Bureau of Economic Research, promote such an unrealistic model? The reason is that the financial class doesn’t want a model that shows their activities as unproductive, corrosive, and leading to economic collapse. And yet, that is the lesson of history.

I’ve been working on a history of debt, banking systems, and creditor alliances from the Crusades to World War One. Looking at the 17th and 18th centuries, you find extensive discussions about the dynamics of debt, who benefits, and what happens when debt is owed to foreigners. None of this discussion is allowed in modern economic curricula, which is why I was a professor at the University of Missouri-Kansas City. It was the only university in the country teaching modern monetary theory (MMT).

The essence of MMT is that governments don’t have to borrow from wealthy financiers and creditors to finance budget deficits. Governments can create their own credit, with effects identical to printing money, rather than borrowing from a wealthy class that wouldn’t spend this money on consumer goods in any case. Essentially, I found that most university curricula promote economic fiction.

All of this is discussed by Marx in Volume III of Capital. I’ve been disappointed to find that most people who call themselves Marxists have not read Volume III; they’re essentially Volume I Marxists. They think Marxism is simply about the exploitation of wage labor by employers who sell labor for a price markup. But Marx said this is only part of the economy. The rest of the economy is what Adam Smith, John Stuart Mill, Ricardo, and others in the 19th century were really talking about: how to get rid of the legacy of feudalism and the landlord class. How do we eliminate the power of the House of Lords, run by the landlord class, so workers no longer have to pay high rents? And as an extension of that, how do we abolish the monopolies that governments created to borrow money from bankers to fund wars? Until the 18th century, all government debt was borrowed for one purpose: war. This was not a productive use of debt, and as a result, kingdoms repeatedly went bankrupt, especially the leading military kingdoms like Spain, France, and later Habsburg Austria.

This situation led to a struggle between Catholic countries, which were autocracies aiming to prevent parliamentary government, and the banking class, which discovered around the 17th century that kings could no longer pay their war debts. To address this, the banking class realized they needed to create a state structured in such a way that parliaments could no longer block a king from paying debts. The entire state was reconstructed to act as a financial agent, taxing the economy to finance the growing debt. This essentially marked the advent of the modern fiscal state that has existed since 1700. I won’t delve into this history in Killing the Host, but I do discuss how since finance is just as predatory a form of economic rent as land rent was in the 19th century, it strives to make itself invisible. It does this by claiming that bankers and creditors are merely playing a financial role.

By the late 19th century, a growing political movement emerged, essentially a liberal movement, which included Marx. In many ways, Marx was a free marketer in the sense that he believed dialectical materialism works, and if countries act in their self-interest, and the industrial class acts in its self-interest, it will not only eliminate landlords but also rid the system of predatory banking. It would industrialize banking. What happened instead? The landlord class, monopoly class, and bankers, all of whom were threatened, banded together to fight against the development of value, price, and rent theory that was central to classical political economy in the 19th century. By the 1890s and early 1900s, this fight intensified. By then, Marxism had absorbed much of the classical economics of Smith, Mill, and others.

The fight against Marxism, therefore, became a fight against the value system, value theory, and the concept that economic rent is the excess of market price over value. Rent is unearned and exploitative. Marx argued that capitalism is revolutionary because its destiny is to free economies from economic rent, to end feudalism, and to transform itself into socialism. That was what I was essentially taught growing up. Even when I pursued my Ph.D. at New York University in the 1960s, courses on the “History of Economic Thought” and economic history still existed. However, these two histories have since been removed from economics and graduate economics curricula and replaced by mathematics. The result is that when people in the press and media discuss economic growth today, they are talking about GDP.

However, the problem with GDP is that it is a product of this broader reaction against Marxism and classical economics. This was largely spearheaded, as I described in my book, by J.B. Clark in America in the 1890s and the Austrian school around the same time. What Marx pointed out is that economies are divided into two parts: the production economy, which includes production and consumption, and the marketing and distribution sectors, which form the productive part of the economy. However, in Volumes II and III, Marx explained there is also the circulation department. Circulation encompasses banking, monopolies, and the price system, which have nothing to do with production.

This discussion in Volume III is precisely why the financial classes and landlords said, “We’ve got to get rid not only of Marxism but also the entire concept of classical economics behind it.” Not all income is earned, and not all wealth is earned. Some income and wealth are derived purely through predatory means. The new idea became that everyone deserves whatever they get. But if you were to conduct a Marxist analysis of today’s American economy, you’d look at the GDP and ask, “How much of that GDP truly reflects national income and product accounts?” Most of the GDP is not a product at all. Interest is not a product; it’s an overhead charge. For example, if a bank’s credit card company charges penalty rates that double or increase the interest rate from 19% to 33%, that penalty rate is labeled in GDP accounts as “providing economic services.”

The financial sector, landlord sector, real estate sector, and monopoly sectors like insurance and public health all want to present themselves as necessary parts of the economy, not as sectors that should be eliminated. If you’ve been brainwashed through an economics Ph.D. program that teaches these ideas, it won’t occur to you that some parts of the economy are not only unnecessary but outright predatory. As these rentier parts of the economy—landlords, bankers, and monopolists—continue to grow, they shrink the economy more and more, leading to de-industrialization. That is why America is de-industrialized today.

As I discuss in the introduction to Killing the Host, the whole idea of a parasite is to pretend it is part of the host, convincing the host it needs the parasite. A smart parasite will keep the host alive just enough to continue feeding off it. But finance capitalism has effectively replaced industrial capitalism, and it is not a smart parasite—it’s killing the economy. This transformation began under Clinton in the 1990s. The Democratic Party’s program has essentially been one of deindustrialization, operating under the belief that wealth could be generated more quickly this way. However, the wealth America has created, particularly since 2008, has almost entirely accrued to the upper five percent or even the top one percent. Meanwhile, the bottom 99 percent have seen their wages and living standards steadily decline—not only in terms of buying groceries, goods, and services reflected in the Consumer Price Index but also in terms of access to housing.

Since Clinton initiated the massive foreclosure crisis targeting non-whites—specifically Black and Hispanic communities victimized by junk mortgage loans—the effects have been devastating. After he facilitated the eviction of these groups, homeownership in America plummeted, especially among Black and Hispanic populations. Despite this, many of them still applaud Obama, to the point that he’s now campaigning in Pennsylvania, possibly with Kamala Harris, urging people to vote Democratic. Yet, he should be remembered for poisoning the economy by putting financial racketeers in charge and failing to prosecute them.

CLASS UNITY: Your book contains a lot of fascinating and enlightening material. It is calling for a sort of pushback against the financialization of the economy, right? Reforms to bring it back to—

MICHAEL HUDSON: Really, the only solution to debt exponentially growing is to cancel the debts. You can see that for student debt. You can see that for Third World debt. As I said, the debts have gone beyond their ability to be paid without stifling the economy. At that point, debts have to be written off or canceled. That’s not pushing back—that’s taking an ax to them.

CLASS UNITY: About the relationship between that and essentially— I realize it sort of sounds like a bit of a pipe dream at the moment—to talk about a working-class movement for socialism that ultimately transcends, overturns, or overthrows capitalism and institutes the transition to socialism. But if that’s the long-term goal, I’m wondering about the exact relationship between responding to the financialization of the economy in this way and that long-term goal.

One possibility, which seemed to be hinted at by what you were saying, is that there’s a thought Marx had, right? Capitalism has to develop to a certain point for a transition to socialism to be successful. And so, perhaps financialization is impeding or preventing that from happening.

Another possibility is that the working class has to be economically secure to successfully fight for socialism, right? They need to be able to strike without worrying they’ll lose their healthcare. Maybe that’s part of why we need to fight against financialization, or maybe there are other thoughts about it—or something about that whole framing that you don’t like. I’m curious about what you would say about that, if that makes sense.

MICHAEL HUDSON: Well, most revolutions are led from the top, not from the bottom, unfortunately. And I think it would be a mistake to try to frame your attempt to bring about socialism by limiting it to the working class.

I knew almost all of the socialist leaders in Chicago and the rest of the country where I grew up, and there were hardly any working-class members among them. Marx expected the capitalist class itself to continue to lead the revolution, as it did against the landlord class, ever since the Corn Law debates after 1815. That was when there was an effort to tax land and tax away the hereditary rents of the European aristocracy—the nobility that was receiving these rents. Marx said the dynamic of industrial capitalism is to free economies from unnecessary production costs, like rent, to make the economy more competitive.

In that sense, there was a revolution in the 19th century. The revolution to get rid of feudalism wasn’t led by the working class; it was led by the upper class and later joined by the middle class. I don’t see the working class today being much of an advocate for socialism. In Chicago, for example, all the socialists I knew were middle class. Especially those at the University of Chicago—I doubt any of you are really working class.

To advocate socialism, you have to explain how the different elements of the economy dovetail together, how the layers interact, and how failing to free yourself from economic rent—whether land rent, monopoly rent, or especially banks—stifles the economy.

Marx expected money to become a public utility, not left in private hands. There was indeed a discussion about this leading up to the 1890s. However, in 1913, the Federal Reserve was created, which had a devastating impact on the American economy. Its explicit aim was to take financial policy out of the Treasury’s hands and put it under Wall Street’s control.

Today, many working-class people are libertarians. Libertarianism is essentially anti-government and, ironically, central planning—it shifts planning from government to Wall Street. If you eliminate government taxation of real estate, then land rents and monopoly rents end up going to the banks.

In the 19th century, revolutions were about freeing society from the landlord class. Today, the banking class holds that same position in the 21st century. However, no Western country seems to be fighting against it; everyone takes the existing structure for granted.

From the very beginning, socialism was about changing that structure. In the late 19th century, almost everyone was a socialist. The question was, “How will capitalism evolve, and what will it evolve into?” There was Christian Socialism, Libertarian Socialism, Henry George’s ideas, Marxian Socialism, and even Catholic Socialism. All of these explored how capitalism would evolve because it was clear it couldn’t continue as it was.

In fact, industrial capitalism didn’t continue as it was. Since the 1980s, we don’t have industrial capitalism anymore with the dynamics Marx described in Capital. Instead, it’s become finance capitalism, with anti-industrial dynamics antithetical to industrial capitalism.

After Mao’s revolution in China, there was no wealthy creditor class to lend money to the government. So, the only way to organize the Chinese economy was for the government—through the Treasury—to create money. It didn’t need to borrow; it simply created the money.

The same happened in Russia. The bank was the planner and distributor of credit. Whoever controls the credit supply determines the shape in which economies grow. That’s why Marx anticipated that banks would evolve into the commanding heights of socialism.

That was happening in Germany during his time. German industrial banking was highly successful compared to the short-term, hit-and-run Anglo-American and Dutch banking systems. Marx believed it was in the industrial class’s interest to move away from Anglo-American banking and adopt Germany’s approach.

Public utilities like canals, railroads, water and sewer systems, radio, and phone networks were government-run to prevent privatization. That happened in England and Germany. But since the 1980s, Europe has been thoroughly Thatcherized.

CLASS UNITY: So I’m getting the sense you’re saying that capitalism as a sort of revolutionary development, which was getting rid of feudalism, was kind of met with a feudal, rentier insurrection, which sort of stopped it.  It would have industrial – if it had gone with the German model, say industrial capitalism, it would have transitioned towards socialism, or even, you know, industrial capitalism with democratic leadership is just socialism, but instead, there was a counter-revolution, and we’re still living in the sort of interregnum period between feudalism and what would have happened and what we have is a kind of financialized feudalism, and so in a sense the order of operations is to get rid of the rest of feudalism, and in a sense go back to capitalism. 

MICHAEL HUDSON: And that’s because of what industrial capitalism has been replaced by, as you’ve said, the reaction, which is finance capitalism, which is in many ways a return, it’s been called neo-feudalism, like the discussion that we, we had a few months ago at Chicago.

CLASS UNITY: What came up in our group, one of the questions rather is how to understand sort of this historical transition, say beginning in the 70s and 80s, from industrial capitalism towards financialization or what we would think of as neoliberalism, whatever term would be appropriate. We came across a couple of different views that seemed to be in conflict. On the one hand, we studied some authors associated with the Monthly Review, particularly Fred Magdoff and John Bellamy Foster, who essentially argue that the transition from industrial capitalism to financial capitalism was because there was a crisis within industrial capitalism around failure to profitably reinvest surplus profits and so stagnation comes about within industrial capitalism, and because there’s a need for some new means of capital accumulation you see the deregulation of banks and the rise of finance.

 On the other hand, your book seems to be saying the opposite, that finance strangles the industry. And so, I wonder if you could comment on how you do it. Is there a direct causal relation here that we can posit, or is it more complicated than that between stagnation and finance and how that transition happened?

MICHAEL HUDSON: The question is, how did all this surplus money become available? Almost all the fortunes in history have been made financially, or they’ve been made by taking the public domain into private hands. Privatization, I mean, think of the kleptocrats in Russia after 1991. Kleptocracy is the basic dynamic of finance capitalism. So it’s not – the problem with Foster’s view and the whole background is that there is the assumption, the failure to realize that banks create new money, they create credit. All this money that’s spelled into finance was created by the bank itself on its balance sheet. If you go down to a bank and want a loan, you don’t – the banker doesn’t say, let me see how much money I have. And to lend to you, he said okay, you know we’ll make you the loan, you sign an IOU debt note, the banker puts money in your checking account. You owe him the money. That’s just a fresh creation of money. That’s the difference between a commercial bank that creates credit and a savings bank that can’t do that. A savings bank can only lend out money that’s already deposited. Foster and almost the entire so-called Marxist community do not understand banking. They believe this, the loanable funds theory, that the economies can only create and lend money that somebody’s

already saved. 

Well, who wants to promote that idiotic theory? People who’ve saved a lot of money and don’t want the banks don’t want people to understand that the banks can create money whenever they want. Because if you realize that the banks can create money, just out of nothing but a balance sheet, then you realize the government can do it. Why shouldn’t the government create the money? Why should the banks create money when they don’t create it to be part of the production process? Banks don’t make loans for production. They don’t make loans to build factories; they make loans to corporate raiders to take over factories, fire the workers, downsize, work and work and squeeze it out smash, smash up the company, and sell off the company’s real estate for an amount of money, agree on the leaseback, and pay the sales price to the financial backers as a special dividend. 

The attempt to make an idea of how the economy works without realizing that it’s the bankers that do the planning, it’s the bankers that create the money, it’s the bankers that create the economic surplus, then you’re just going to somehow imagine that capitalism itself creates this money to monopolize, and capitalism didn’t do that. It was the financial class, independent of capitalism, that created this money to take over the industry, to take over the means of production, and then just smash it up for themselves.

So, I think this group today is probably the first Marxist group I’ve spoken to in the last 30 years. I don’t know any Marxist who’s interested in finance at all. They’ve, I think, maybe it was URPE. I think a few years ago, maybe five or 10 years ago, they had someone, I think some Mr. Mason, who tried to study Marxism at Amherst. He said, “Well, you know, there isn’t any such thing as ‘finance capitalism’ different from ‘industrial capitalism.’” Last Saturday, I sat down with Richard Wolff, and we had a four-hour discussion with Robinson Earhardt on the evolution of Marxism and how Marxists have turned so anti-Marxism. What makes Marxism and Marxists hate Volume II so much and hate Volume III so much? Why do they, why do they not understand the role of banking? 

It’s them, I think, personalities of very ignorant people that, such as you’re describing, who have this tunnel vision. They’ve been suckered by the banking class and the lobbyists.

CLASS UNITY: To clarify, you’re saying that Marxists wrongly think that banks are intermediaries that lend deposits rather than creating deposits. 

MICHAEL HUDSON: Yes. That’s exactly right. So, I don’t think they’re Marxist. Most people who claim to be Marxists aren’t, and I must say, I’ve had the same problem in China very often. I won’t get into the details, but most of my students in China tell me that the students who are sent to America to study economics still get priority in being hired over graduates where I was a professor at the School of Marxist Studies in Beijing – PKU. It’s a fight that is even going on in China right now, which is what led China to permit this whole bank-financed real estate bubble that is now blasting. 

CLASS UNITY: So the mistake with the Monthly Review monopoly capital view is that finance is not the excess profits because banks aren’t lending deposited profits. They’re creating money.

MICHAEL HUDSON: Yes. Harry Magdof could understand that. His job was selling insurance, but Sweezy, I could see, he felt quite hostile to all of this, and I never became very friendly with him, only with Magdof. You’ve put your finger on it exactly.

The difference in our views about finance capitalism vs industrial capitalism is basically this:

          The Sweezy-Baran School and its Monthly Review followers argue that finance capitalism is a natural outgrowth of industrial capitalism, akin to Lenin’s idea of capitalism’s expansion to seeking new markets. That is quite different from what Marx wrote. He described finance as being external to the economy of production and consumption. His word for it in Capital was the Sphere of Circulation in contrast to the Sphere of Production.

          Marx certainly did not view industrial capitalism as leading to financial capitalism. He thought that it would lead to socialism, which would “industrialize finance” by making money creation and credit allocation a public utility. Its role was expected to be to facilitate production and the socialist aims of raising living standards and prosperity, not create a financial dynamic “external” to production.

          The problem with Sweezy’s analysis is that it is the “loanable funds” theory – that investment is limited to the savings already in place. That treats commercial banks as if they were savings banks, only able to lend out what they already have on deposit. The source of financial expansion in the 20th and now, especially in the 21st century, stemmed from the ability of banks to create credit – and to lend against assets, with the effect of inflating prices for real estate, stocks, and bonds, making “paper” asset-price gains. This financialization of industry was not an inherent product of industrial capitalism. It was external to it, with quite different dynamics and laws of motion. In sum, Sweezy et al. see stagnation coming from the evolution of industrial capitalism into monopolies, making monopoly rent instead of profits. (But he doesn’t use the term monopoly rent; the concept of economic rent plays no role in his analysis.)

          My approach, by contrast, sees stagnation resulting from the overgrowth of debt, with an overhead burden that expands faster than the economy’s ability to pay. This debt overhead is a financial phenomenon that industrial capitalism would logically seek to avoid because its effect is to impoverish and deindustrialize the economy of production and consumption. That is the cost of enriching the financial sector and its FIRE sector’s allies, including the monopolies that are created by high finance as “the mother of trusts.”

CLASS UNITY: In your introduction, you described an ideological war against Marxist economic analysis. One of the first texts we read in our 2008 Financial Crisis Course was your essay, “The Archaeology of Money,” in which you described two conflicting theories of the origin of money, one in which it functions effectively as a convenience to enable barter, and another in which money is fundamentally financial, enabling charging interest, and so on. I interpreted the former theory as being motivated by this war that you described in your introduction against Marxist economic analysis. Can you describe any other financial myths that have been created by this conflict?

MICHAEL HUDSON: Yes, and I just published the sort of collection of my academic essays in “Temples of Enterprise,” and I described in the origins of money that it wasn’t barter. Money was created to pay taxes, and land tenure was created to pay taxes on the temples and the palaces. It did not have anything to do with barter because the whole idea of the economy is that barter is non-historical. Money was only used from the Bronze Age all the way down to maybe the 14th century in England. Cultivators on the land would use money once a year at harvest time. When the harvest was in, they would pay by turning over their grain – on the threshing floor in Babylonia, and that would be weighed, and then they would pay all of the credit that they’d run up during the year. 

For instance, if they went to an ale house, the ale woman would literally put the beer on the tab. And we have examples of that, and at the end, when the harvest was in, and the grain was being measured out on the threshing floor, the ale lady would be paid. Priests would be paid if they provided marriage services, debt services, or whatever. That’s when the money came into being, just for that exchange. Similarly, in medieval times, all of the serfs or the peasants would build up debt during the year, and then the harvest would come in, and they would pay it all.

They wouldn’t really be given silver coins in pay. Everything would be sort of monetized to the monetary equivalent, and the debts would be settled. So, the idea of looking at an economy as if there was no debt as if there was no credit means that you don’t say, well, who owed the money to whom, and who were the creditors, and how did debtors get into such trouble? And this was the Austrian approach to everything. They didn’t want any discussion of who the creditors were because, originally, almost all societies wanted to prevent creditors from getting enough power from labor and from other people to end up overthrowing the king and making a creditor or, again, a Margaret Thatcher, Milton Friedman society. 

Instead, in the Heinrich Schurtz book that you mentioned, he pointed out that the source of instability in these indigenous communities wasn’t really money yet. It was a form of wealth that we call a sort of proto-money. Most of it came from dealings with foreigners abroad. They were shells that you didn’t get at home, or something else you didn’t get at home, or an heirloom of some prestigious family – some clothes that somebody had worn – and he said, “The whole problem was money tended to be destabilizing.” Well, how does primitive society – he is not primitive, I don’t like that word – indigenous societies deal with that? Well, if somebody had accumulated wealth and gold – not gold – whatever wealth was, that it would be buried with them instead of being bequeathed to their children. 

The whole idea of archaic societies was you don’t want hereditary wealth to begin to build up and make some families more powerful than others, or else you get the Rockefellers; they use their wealth to essentially gain control of the government, and they favor their kids.

The problem is that in every generation that inherits their wealth, their IQ goes down by 10%. Then another 10% in the next generation. I mean, I’m sure you’ve all met people who have inherited their money, and you notice that something’s dulling their minds. Well, ancient society wanted to prevent that stupefying effect of wealth.

CLASS UNITY: Could you comment on the funding of our military-industrial complex right now? How we’re basically giving them billions of dollars, and it seems like they’re using that money to build weapons of war. And how, if I remember you correctly, empires suck the wealth from their hinterlands to their cities, and then they kind of use that wealth to kind of buy out, you know, all the poor people around them and turn them into serfs and buy up other lands and everything. So, could you comment on whether that’s happening or if I am even close?

MICHAEL HUDSON: Well, it’s not the military-industrial complex that does this; it’s really the bankers. You can take a look at the junk mortgage loans that were leading up to 2008. The fact is that the loans are made of the carrying charges on the mortgage for the loans, which were much higher than the rents would have been, but people were frightened into buying houses because they thought if they didn’t, then rents would continue to go up.

Well, then, President Obama, before he was president and running for office, promised to write down the loans to the actual market price. They were fake and fraudulent market prices and appraisals done by crooked appraisers. They were fraudulent statements of income made by the brokers to fill out the papers for the mortgage borrowers. This was really the big lever. So it wasn’t that you just bought out; nobody wanted to buy out the problems of the poor people, the low-income people. What they wanted to do was foreclose on them. They wanted to throw them out. They wanted to just throw them out of the house and all of a sudden crash real estate prices. So companies like Blackstone and other big corporate landlords could come in and buy them all out. That’s why Obama was working for the landlords.

How about what Obama did in Chicago as an example of this? I knew Obama’s teachers at Harvard in the law school. I gave lectures at the law school. I was associated with Harvard for 25 years in the archaeology department, which is the only place where I could – the only department that talked about debt was the archaeology department. So I know Obama’s teachers, and one of his black teachers came up to me and said, “You know, I never got along with Obama.”

When he left, he decided to be a community leader. He said that Obama was one of the editors of the Law Review, and that was very prestigious. Most of the law students who had that job would become clerks for a Supreme Court justice, but Obama didn’t do that. He didn’t go that route. He wanted to be a community leader. And, you know, what does the community leader do?

Well, the community leader works with the real estate reverends and the big real estate families, and essentially, he clears out the community. Obama worked with the Pritzker family, the family of Pritzker who’s now your governor of Illinois, and the Crown family, and his job was at the University of Chicago, the big blockbuster when I grew up. I’ll get to that later. But the University of Chicago and real estate reverends and basically the Pritzkers and Crown – began to buy real estate in the black neighborhoods on the southwest side, and Obama came in and arranged for them all to be torn down. And they were very well located because they were along the subway, and that’s what made billionaires for the Pritzkers. The University of Chicago was doing this back in the 1950s when I lived in Hyde Park. I was at 48th and Dorchester, and one day, a black family moved into our block down the street and found out it worked for them to get the loan. My sister was friends with the daughter of the family. So, you know, I walked over to talk about the loan. Well, it turned out they bought it from the brokers who were the University Chicago brokers. 

Well, as soon as the black family moved in, the whites began to panic and began to sell out on the street. So, you had other brokers come in, buy the houses inexpensively, and then sell them at a huge price markup to other black families who could finally get a mortgage. Finally, banks will end us, and the blacks brought into Dorchester and Blackstone on the east side and begin to buy them. And then, once they bought in, Mayor Daley came in and condemned whole blocks, saying that we’ve got to rezone it. They tore down the block with my house in it. My father moved to Hyde Park Boulevard and found a nice condo there. 

And so it was a whole – the real estate speculators made a killing on that. And essentially, that was around 1959-60. Well, essentially, Obama did the same thing on a vast scale for the university and for the Pritzkers, and that’s when they realized, here’s a great guy; he can tear down the black neighborhoods and still get the black vote. You know, this is the guy. He’s so thoroughly corrupt and smooth. He’s the guy we want to push as president. Anyway, Bob Fitch, who grew up in Chicago too, wrote the big expose of that. I think it’s on the naked capitalism site somewhere from years ago, where I published it right after Bob died. 

CLASS UNITY: I wanted to ask a question about local politics because the sense that we got from your book, and I thought from your comments just a minute ago, is that the only way to fight back against financial capitalism is through the state, which controls the money.

MICHAEL HUDSON: And you just need the workers to do it. Yes, you have to find out who’s going to fight against the state. People have to be well-positioned, as is usually the case with the upper class. Who were the old socialists of the 19th century when I was growing up? My father was a union leader and went to jail as one of the Minneapolis 17. So, you know, I grew up with union leaders. Most of them were middle-class people, except drivers. 

CLASS UNITY: Right. The trouble with fighting back, at least at the federal level, which is where the money-making happens, is you would probably need the presidency and or the House of Representatives and the Senate. And it’s very difficult to take control of that. And so the temptation for other people wanting to fight back somehow politically is to go back to the local level where elections might be easier, there’s less power, but maybe there’s something that can actually be done. What do you think about that avenue for fighting against?

MICHAEL HUDSON: It’s very appealing in principle because it’s the only place that you can make a movement. It worked in Minneapolis in the 1930s. Minneapolis was, apart from being the only Trotskyist city in the world, the whole leadership that put together the truckers, the Teamsters Union. So, yes, it can work in some cases there, but usually, it ends up being sort of absorbed. Mac Shachman gave a speech once. He said, “You know what happened?” I think this was around 1962. He gave a wonderful speech. “What happened to all the old socialists?” You know, his generation. He said, “They ended up all going out west and making nice socialist communities, and then they all became artisans in the communities. Because they were socialist, the communities were very creative and became art centers, and all the children became artisans.

CLASS UNITY: So what do you think would be the most practical intervention at the local level? the most likely to succeed, and the most likely to actually help the working class people that are given?

MICHAEL HUDSON: It really all depends on the circumstance. But as Lennon said, “There has to be a revolutionary situation.” And right now, when you say, well, how on earth can you ever expect the wealthy classes to overthrow the existing economic system? Well, the times they all do it is when there is a social collapse. That’s how the Russian Revolution took place. That’s how the Chinese Revolution took place. 

There almost has to be a clash because the vested interests make such a consolidated power amongst themselves that you see what happened to Bernie Sanders and his supporters within the Democratic Party. They all got co-opted because they realized all we can do is at a marginal level and at a local level. All you can do is be marginal. You can try to change the tax on absentee-owned real estate, or you can try to tax the land value instead of the wealth value. You can do local tax shifts and make an economy better, but it’s really all about taxes and finance. You can have a Bank of South Dakota, which a lot of local developers want. Well, that’s good in principle, but they can’t really create enough credit, and the Federal Reserve is never going to extend them the credit that predatory banks get. So that’s part of the whole problem there. You have the whole establishment against you as long as the system’s working. 

So,  I have not been able to do anything. I thought, you know, what can I do to change the situation? Well, all I can do is write about history and show people how to think why the system is going to tear itself apart. That’s the only thing that I can think of. There’s no way that I can react at a local level, especially in a city like New York that’s so utterly corrupt.

CLASS UNITY: The other thought that we had read in your book, at least I did, was that class war is sometimes waged in the stock market with activist takeovers of productive companies to financialize them. So, one very broad and speculative question I have is whether there is a way to wage class war in the stock market on behalf of working people or on behalf of the people more broadly. We’ve seen some sort of attempts at this in history with Saul Alinsky and his struggle against Kodak. I thought maybe – I don’t know if you’re familiar with the game-stop incident recently.

Also, you can see various ways I could imagine. I mean, one way or one way I could think of is if there is a way to defend against these activist attacks that you mentioned in your book. Or is there another more productive route to take the stock market as the arena of class struggle to try to wage it on behalf of ordinary people?

MICHAEL HUDSON: Well, you’re going to have Harris, if she wins, or certainly Trump, get rid of Lina Khan, the anti-monopolist regulator, and sort of turn over everything to the corporate raiders. So, it’s very hard to work with the stock market itself. One way that I tried and failed was to get the black community to be the main activist community. The issue for that would be largely related to real estate. Well, there’s been a race war in America ever since slavery. The race war came to a peak in 1945, and that’s when it was decided to make sure that black families could not get mortgages. Banks would only lend to white families unless, of course, it was the University of Chicago trying to crash a real estate and pick up something cheap and tear it down. 

Well, today, you have a huge disparity between the black and the white population. There’s this discussion about reparations. And I’d like to shift the terms of the reparations debate. And this has overall economic discussions. It’s very hard to pay reparations for somebody who was enslaved 150 years ago. That’s really not the problem. The problem is to pay reparations to blacks who are suffering today from what has been built into the economy by the fact that the white middle-class families after World War One – the way to join the middle class for all these soldiers coming back from the war was to be able to buy a house. And you could buy a house. Any of you could go to the bank to get a loan. And as long as you could, they would lend you a mortgage to buy the house, only up to 25% of the income you had, not 43% like today.

Now, the white families were all able to get their own houses on the easy mortgage credit and the VA loans after World War Two, but the blacks were prevented from this. Well, what that has done is create a two-tiered society. If the badge of being a member of the middle class owns your house, but almost all of the houses of white people – not mine, I had to buy my own – but almost all white people have houses that the parents bequeathed to their children, and then their children bequeathed to their children. They were already all able to get mortgages for the house at an affordable rate that was only 25% of their income until the 1990s. 

Well, that explains why the black population doesn’t have housing today, and without housing, they’re prone to all of these rent pressures. Well, they’ve been disenfranchised from membership in the middle class by the current situation of inherited wealth for the whites. The only solution is that you’re obviously not going to be able to take the houses away, is for the governments to create a huge real public housing, not the kind of housing you had to tear down in Chicago, which was white anti-black housing, but actual housing, just as nice as white

people’s housing. Houses that you can actually live in. 

That would call into question the whole issue of real estate, how real estate pricing has been all a product of however much banks would lend, and the whole price inflation, that it’s this asset price inflation that’s been financialized that has created this racial disparity in the United States. I think that would open up the financial and the real estate and the rentier awareness that I’m trying to bring about, and obviously, you can’t just give free new housing to black people; you’d have to give it to everybody to make it viable to other poor people. So, poor Hispanics, poor people in general, you would have to use this black reparations solution as an economy-wide solution. And I can’t think of any better way of letting people viscerally understand the class war.

CLASS UNITY: Yeah, it seems that at least it’s in the air in American politics that if you are a political ally or advocate of or for working-class people or black people, you should really support the Democratic Party. You should really turn out the vote for the Democratic Party. 

MICHAEL HUDSON: They are the MOST racist! Just with Obama, just in my book, I describe exactly what Obama did. That’s why he was pushed by people –  quite frankly, I know some of them –  I better not even mention – I use language that I think people wouldn’t like. But Obama was a – somebody had suggested that the only way that you can get better laws for the blacks is to take away the right of black people to vote because they’re the people who are willing to vote for the most anti-black leaders, like the congressional leader, I’m blocking out his name right now, who went and threw the election to Obama, he understands us. You know who I mean, the Democratic House Rep.

The black caucus in Congress is known for being the utterly corrupt opportunists there by other people, and they get their money by delivering their constituency to their donors and protectors. So, the black population is tricked into thinking if there’s a black politician on our side – they don’t get that white people have caught on to this and figured out how to game the system. 

CLASS UNITY: Last event, we had Walter Benn Michaels, who we greatly admire and respect for his writings on class politics and identity politics, who seemed to be advocating for the position that at least of the two parties, you know you’re going to get either republican or a democrat, and if you had to choose between the two, you have to choose you have to go with the Democratic Party and that’s not a unique position to him. That’s an argument that we’ve encountered over and over and over again on the left in these discussions, and I know you yourself are with the Green Party and supporting Jill Stein’s presidency.

MICHAEL HUDSON: I’m her political adviser and economic adviser. We’re working together. And she and I have said numerous times. We’ve had two shows, one on Nima’s site. We’re very clear that there cannot be any progress made in American politics without getting rid of the Democratic Party, PERIOD. Awful as it may seem to get the Democrats out of power, even at the cost of turning it over to Trump and the Republicans, who will certainly self-destruct the economy very quickly. If you want to destroy the economy, you know, do that. 

But as long as you have the blacks pretending to be the protectors of the minorities, protectors of the poor, protectors of everybody who’s not a Republican, when actually what they’re doing is –  their job is to protect the Republicans and the vested interests from any critique from the left, and you want to take away the ability of that pretense that the Democrats represent the Left. So, Jill and I both said that one of our aims is that we know that she’s not going to be elected president, but we can make sure that the Democratic Party will not get the presidency and can never get the presidency again because we’re going to make it very clear to the voters how it’s necessary to destroy the Democratic Party and the Democratic Leadership Committee and the whole rotten structure of it in order for there to be any free electoral progress in the United States (Fire, Doc!)

CLASS UNITY: So the purpose is to make Kamala Harris lose?

MICHAEL HUDSON: Yeah, that’s what you get.

CLASS UNITY: I have a question that is not exactly on the topic of Killing the Host, but it’s related. You give a very clear picture in your book that, basically, as it is now, people with executive power and government positions are sort of asset managers for the absentee-owning, rentier type to make sure that they get their return on their investment; however, they have to, predation or whatever means. I was just wondering because I follow quite closely what John Mearsheimer says and what you say about international relations with China, Russia, and Ukraine. I was just wondering, what do you think about Mearsheimer’s realist view, which I am quite sympathetic to in general? 

So he says that all states are like black boxes. They’re like billiard balls. You don’t look inside of them. We assume that any state would behave this way by trying to take as much power as possible. Any state in this position would try to take as much power as possible, and that’s realistic because the international order is anarchic, and conflict is what settles it. I mean, which is a realistic description, but my sense is, and I think this might be your sense too from reading your book, you have to look inside the states. You have to disaggregate that unit because different leaders of different states have different interests, different motivations, and different needs. I get the sense from reading your book that the leadership of this country needs certain things from the international order, which are different from, for instance, what the leadership of China or Russia would need. 

For instance, Lindsey Graham goes on the news and says there are two trillion rare earth minerals under Ukraine. So when I hear that, I think, okay, this government is not a black box. It’s the asset manager-in-chief for the asset owners. I just want to hear what you think about Mirsheimer’s view because I’m sympathetic to realism, but I feel like what you have to say could complement that.

MICHAEL HUDSON: It’s too philosophical. Here’s the problem. All of my colleagues try to take a materialist approach to history, and we begin with the first idea. And I stopped calling myself an economist in the 1970s because I wasn’t saying what economists were saying. I called myself a futurist, so I was working with Alvin Toffler, Herman Kahn, and others. 

How do you project the future? Well, you assume that everybody’s going to act in their own interest. Well, here’s the problem. Is America acting in its self-interest today? Well, as you just said, there are different layers. It’s in somebody’s self-interest, but it’s not in America’s self-interest. It’s in the particular group that is running the government.

I think Stalin made a big mistake in World War Two in not thinking Germany was going to attack Russia. And what was his logic? He said, well, Germany would have to be crazy to attack Russia. Its interest is not attacking Russia. Let it count. And yet Germany acted against its self-interest because it was run by crazy Hitler, who I thought really should never have had the army and should never have let him set the military policy. 

Well, you have another crazy person today in America. You have Biden, who’s done the war in. He’s a crazy Russian hater, and he’s surrounded himself with Russian haters. I did a show with Nima a week ago and then again yesterday going over how the Russian haters were cultivated by the neocons, and basically, it all came out of Scoop Jackson and the right-wing military-industrial complex. Jackson was the Democratic party leader in 1960. They called him the senator from Boeing because he was in Boeing State, and he brought in all of the neocons, and I actually heard some of the negotiations going on where all of this happened. I discussed this on Nima’s show. It’s too long to go into here. 

But obviously, what America is doing right now in Ukraine, in the Near East, you can’t say that acting in a crazy way is in the self-interest of the country. You have most of the voters in America realizing they don’t want war in Ukraine, Israel, or Iran. And yet, the government pays no attention to them at all. Same thing in Europe. The voters are completely against the Ukrainian war. But the European Commission is sort of non-elected but in the hands of Von Der Leyen, who appoints Russia haters. And so you have the situation from Europe to the United States where you have a particular clique taking over, and that military is self-destructive. 

Well, how can you if you’re trying to forecast history and explain international affairs and how people will act? How can you explain how a country will act self-destructively? There are a million ways you can do this. All you can do is say here’s the logical way that a self-interested nation would be expressed in the past, which worked. It doesn’t work in today’s world. But you can analyze it by looking at who the nutcases are and where they come from, and how they get their support.

CLASS UNITY: So, is it really as simple as that the people in charge hate Russia? Or I mean, if you look, there are plenty of people who are benefiting from the war in Ukraine against Russia, so I guess the question is, are there other interests at play here besides hating Russia and being gratified by Russia losing its citizens and more. 

MICHAEL HUDSON: Well, I think it’s pretty clear what Russia’s – Lavrov and Putin explain very clearly what their logic is, and they follow it very clearly because they’re both trying to follow the logic of law, rule of law, very clearly. So, it’s easy to say what Russia’s interest is going to be. It’s pretty easy to see what China’s interest is going to be. It’s almost impossible to explain what German interest is going to be because that really requires the government to be not only the government to be voted out of office in Germany and Europe but also to prevent the whole Eurozone from being dismantled. I mean, if we’re talking about where the – if the source of chaos in the world is the United States now, then breaking away Europe will at least that colonized chaos. 

And I think what Putin is doing is going very slow, and he’s not in a hurry to settle the Ukrainian war because he realizes that the longer it goes on, the more the pressure is building up in Europe just to say that your Eurozone zone isn’t working. European politics don’t work. It’s all part of NATO. Europe is basically run by NATO out of a small basement in the Pentagon or the CIA; you could joke. It’s not run by the people. Well, right now, you’re having the nationalist parties opposing the war. That’s the irony. It’s the so-called left-wing parties, the social democratic parties, and the labor parties that are the pro-war parties now. The anti-labor parties. It’s like all of the left-wing movements in Europe have been Tony Blair-ized. What do you do about that? Well, that’s what opened the gates to the Alternative for Deutschland in Germany, the right-wing in France, and the right wing in Italy. I don’t think this could have been predicted 20 years ago, certainly not when I was in school.

CLASS UNITY: Specifically about other interests in the United States and in the West in general: What is the difference between the interests or motives of the USA on the one hand and Russia or China on the other?

MICHAEL HUDSON: The United States wants to control, essentially let American banks into China and Russia to take over the loans and take over Russia’s raw materials and public utilities. They want to restore the Yeltsin era. They want foreigners. Remember, Russia was the biggest stock market in the world from 1995 to 1996 because you had everything being privatized and taken over. The United States wants another Yeltsin who will be willing to turn over ownership of Russia’s rent-yielding real estate, natural resources, and monopolies to American buyers so that Russia’s economic surplus can be transferred to the United States.

And the US planners realize, well, to do that, we’re going to have to carve up Russia into five different countries and find the most corrupt leader in every country who will sell off their resources and have sort of a parody of what Trotsky called the permanent revolution. It’ll be the permanent counter-revolution. They want to break up China into parts because they’d like it if, instead of the Bank of China making loans to industry, they’d want American banks to go over there. Send Robert Rubin back there. The bankers will get all of the revenue from the Chinese companies, and they’ll use, if they take over the high technology companies, they’ll pay out the dividends as stock, they’ll pay out the profits as stock buybacks or as dividends instead of reinvesting. And they’ll sort of just grind China down in order to empty it out as quickly as they can. That’s the American interest. The Chinese and Russian interests are to prevent this and to prevent rent-yielding monopolies, natural resources, land, and banking from being monopolized. To keep it in public hands. That’s their version of socialism. And that’s the key to any socialist economy.

CLASS UNITY: In your futurist, best Marxist kind of prognostication, would you say that Russia and China, with the BRICS group that they’re building, do you see a path for them to kind of keep the pressure up on the American government and the American state to kind of turn over the financial warmongers? Or are we just fucked?

MICHAEL HUDSON: No, they’re not putting any; they want nothing to do with the United States. They want to break off. We’re seeing a whole split in the world. Literally, this is a civilizational split. The global majority just wants to be independent of the United States and Europe. They want to go their own way. They have no interest in influencing the US. All they want to do is say, “Get away from us.” If you don’t remove your military bases, we’re going to bomb them. You go your way, we’ll go ours. They want to just go their own way. They don’t want relations with the United States and its puppets or colonies or satellites, whatever you call them. They’re trying to reinvent the wheel. I wish they were more familiar with the – wheel, which was already developed in the 19th century. And I think they’re trying to reinvent it without looking at classical economics and even without looking for Marx. When I was appointed as a professor at the School of Marx studies, Sasha Bozgalin, who and his wife were also appointed a professor at the same day of economics, told me that Marxism was the Chinese word for politics. And I think that explained it all to me. Now I have it: how to interpret what they’re doing.

CLASS UNITY: If we could ask for a closing statement, we’ve talked a lot about the financial crisis and contemporary politics. What do you think is the long-standing impact of these events, and what do you think the future holds for us?

 MICHAEL HUDSON: Well, maybe there won’t be a long-term. Maybe we don’t know whether Biden is really going to give in to the neo-cons and bomb Iran, in which case Iran will destroy Israel. The Democrats are dead set on conquering the entire Near East and essentially controlling the world’s oil supply. And oil is the key to energy, energy use per worker, lighting, and fuel. The whole center of American foreign policy is on oil. 

So it’s willing to go to war for this. They are crazy people. I’ve met them. I know them. They’re filled with hatred. And most of all, we’re seeing a fight against civilization. When you have America – there’s one common denominator between America, Ukraine, and Israel. They all say that other people who are not part of our group are subhuman. That is what the Ukrainians have said. We’re going to kill the Slavs, the Russians because they’re a different species. We’ve evolved into a new species. It’s called American democracy. Other people are not part of this species. We have to literally exterminate them. These are the words they’re using. They’re Nazis. Same thing in Netanyahu’s speeches. These people are subhuman. That’s the word. 

Now, if you have any group that claims that another group is subhuman, this is a fight against civilization. The only thing that civilization can do, and this is what China, Russia, and the global majority realize, all you can do is shun them, isolate them, and have nothing to do with them. I don’t know how they’re going to get rid of the problem in Israel without just bombing the whole country. Same thing with Ukraine.

But you have the fight of World War Two now being refought with America on the Nazi side and treating America and its allies as a new species that has to exterminate the other species that are not joining the American orbit as if they’re a danger to their human species with everyone else being subhuman. This is the kind of racism that goes way beyond what I think anybody had thought about in the kind of identity politics that you have here. But this is exactly what’s being fought. Again, I think I did this. I said the same things on Nima’s show, Dialogue Works, yesterday.

Does that sound too radical for you?