GLENN DIESEN: Welcome, my name is Glenn Diesen and I’m joined by Alexander Mercouris and Professor Michael Hudson. Welcome to the both of you.
Today, I really wanted to discuss the decoupling or fragmentation of the international economy and also now the alternative economic architecture emerging, I would say primarily in the east, but also in other parts of the world. So I thought we can start off by discussing the defining economic challenges of our time.
For those of us who were studying economics in the 90s and 2000s, the big talk was always economic interdependence. This was supposed to be the recipe for prosperity and peace, but these days the rhetoric obviously has changed. Now the main talk in town will be a new international division of power.
So while in the early 2000s the idea was the United States would invent the iPhone and the Chinese could assemble it, this was the distribution of labor, but now of course China has climbed up these global value chains and it can effectively do both, the invention of it and assembly.
Meanwhile, Biden recently argued that if something is invented in the US, it should also be produced there. So it’s a dismantling or repatriation of the supply chains going on.
We also see economic dependence being weaponized, I would say, hijacking of Iranian oil tankers, seizing the Russian central bank assets or simply trying to cut off or cripple China’s access to technology.
So I guess my first question would be what does all of this mean? What are the main trends and what does it mean not just for the United States and China but also the wider world? Will countries such as Germany, which was very much tied into this very liberal economic system, be crushed under the new political economy or what do you see coming?
MICHAEL HUDSON: Well, the United States was always for free trade after World War II as long as it was the most efficient and strongest industrial producer. But now that it’s not the strongest anymore, it’s gone back to the protectionism that in the 19th century built up its industry to begin with.
The problem is at this time, even though the United States and other countries are going protectionist, the United States can’t reindustrialize like it could then because it’s already overloaded its economy with financialization, corporate debt, personal debt, and privatized medical care, privatized education.
The economic overhead of getting a job here and the pay that workers have to get, not simply to eat and get clothes but for medical insurance, for debt service, prices America out of the market. So it really has no alternative but to be autarkic. But it can’t be autarkic because nobody can see how it can reindustrialize. So there’s a kind of rage going on here among economists.
And just today, the Treasury Secretary Janet Yellen is going to China and said, well, we can’t import the solar panels anymore because China’s government supports them, as if the U.S. government also doesn’t support them and other countries don’t support them. You’re getting a travesty almost of the public statements of why America has to avoid imports from China, impose sanctions on Russia. But the result is there are going to be shortages all throughout economies that are following this withdrawal from international trade.
ALEXANDER MERCOURIS: That is very interesting. When you say that there’s going to be shortages, will these shortages eventually become self-correcting?
Because I was reading actually, again, there’s been a very interesting statement by the governor of the Russian central bank, Nebulina, who is, by the way, somebody who I think personally, emotionally, was very wedded to the neoliberal, open market, unregulated economic model. She is absolutely astonished at what the effect, the actual effect of the push to a kind of enforced protectionism in Russia has been. And in this statement she says that what’s actually happening, and she says, I can’t explain it, this is astonishing to me, is that investment is rising. Consumer spending is rising. Wages are rising. And in conditions of an investment boom, production is expanding. She says, you know, I don’t quite believe this. I worry that the economy, our Russian economy, is growing faster than capacity, that it’s going to burn itself out in some way.
I mean, it’s a very strange statement, both confident in some respects, panicky in others. This can’t be true. But is that actually what is going to happen? Because this system of everybody being linked up in a single economic system actually has been, I think, a relatively recent thing in terms of, you know, post-British Empire time. Will, in fact, the fragmentation actually in the end lead to a more diverse economic landscape and a more balanced one? I’m just wondering, because Nebulina is now perhaps, I think, starting to, to her own astonishment, wonder whether that might happen in Russia itself.
MICHAEL HUDSON: Well, economists love to use the word self-correcting, because if economies are self-correcting, you don’t need a government. You can just have the private sector running the economy. And in practice, that means Wall Street.
But there’s no way that the American economy can be self-correcting without a few decades of new investment. You’d have to reinvent the educational system. You would have to take public health into the, health care into the public domain so that you could lower the cost of living so that employers wouldn’t have to pay such high wages. You’d have to provide freer education so that workers don’t graduate into the labor force with so much debt that they need high enough wages to pay the debt. And even so, can’t afford to buy houses.
America, and also, I think, Western Europe, has painted itself into a corner that is now systemic. The whole trend from 1945 to today, all of these 70 years have built up such rigidities that there’s no way that you can break them down. And the idea that somehow there’s a government policy that can fix things won’t work either, unless it’s so radical a policy that it won’t be the current economy anymore.
Nobody’s talking about the need for structural change. They just avoid talking about the debt problem, talking about what makes America high cost. And then, of course, there’s the war spending.
Read full text: https://www.unz.com/mhudson/us-economic-decline-and-rise-of-greater-eurasia/
