LOGO DAEDALUS: Well, I just wanted to say thank you. First off, your books have been extremely important to me. I’ve done, I think, some good work in helping to popularize them on Twitter or X, I guess we’re calling it these days.
But when I first found your work, I was really coming from more of a literary studies sort of perspective. I studied Russian literature and Russian in college, and was mostly interested in literature, and then slowly became interested in economics, more from a literary perspective.
In your one of your interviews about your biography, you described going into musical composition, classical composition, and then finding a sort of aesthetic satisfaction in the study of economics.
I found that very inspiring personally, because I feel sort of the same way. The appeal to Marx and other political economists like Veblen and guys like that, guys like yourself, was that they gave me the same satisfaction of reading a great novel, especially like a great satirical novel. And that’s been sort of my interest in all of this… how economics is sort of an outgrowth of literary satire, and the genre of the anatomy that people like Northrop Frye would describe. So I think of you as like the greatest living satirist in the world – you make me laugh more than anyone in the whole world. So thank you.
MICHAEL HUDSON: Well, you understand where my mentality is at.
LOGO DAEDALUS: If there’s any question I could start off with – I’m sure you’re going to cover this in the book you’re working on. I‘ve been a long time follower of your work. So I’m waiting patiently for the next book in the cycle on debt covering the crusades and onward, because that’s a particular interest of mine from a literary perspective on Christian hermeneutics. The translation of the Lord’s Prayer was a major thing for me – the “forgive us our debts” and whatnot. Tying this into material economics really opened all of this up for me.
So I believe you referred to a specific school of the Catholics, men who come up with the justification for charging interest on debts, but under a different name, so it doesn’t qualify as usury. I was wondering if you could go into detail about when specifically you would say this shift happened and under what dispensation?
MICHAEL HUDSON: Well, funny, you should put the question that way about literary
discussion, because most of the discussions about economics in the 13th and 14th Century – and that’s when the schoolmen were coming up with their justification of interest – the best discussions were all of a literary character, of course, by Dante. I mean Dante describes putting all the usurers back in the seventh circle of hell.
And there was a kind of theme of usurers being put together with the sodomites, in the sense that they said lending is sterile. Lending does not produce an economic return for the borrower. The borrower has pay the interest out of whatever they earn elsewhere.
If it’s the government borrowing money to go wage war, then it has to levy taxes, and this reduces the population. If it’s an individual who borrows from a usurer, then they have to cut back their consumption or lose their property, or lose their economic freedom and fall into debt bondage.
So it’s the literary people that describe this, just like in Greek and Roman history. It’s the literary writers that describe what was happening in the creditor landowning oligarchy that ended up stifling Rome. Also, in the 20th Century it was the literary historians that won the Nobel Literature Prize for writing about antiquity, or were nominated… people like Theodor Mommsen and Guglielmo Ferraro. They were viewed as literary historians.
Economists don’t talk about debt, they don’t talk about finance, they don’t talk about interest, or how it began at all, because it didn’t begin in the private sector. It was the Catholic Church that created and sponsored the first international banking in the 12th and 13th Century. And they sponsored it because the Roman church wanted to essentially take over all of Christianity, and the crusades were waged mainly against Christians.
The official crusade, the first real crusade, was in southern Italy and Sicily by Robert Guiscard. The Catholic Church asked, who are we going to get to kill the Christians that don’t agree with us? Who are we going to get to fight the Germans? The Germans wanted a decent, balanced church without all of the craziness and fighting against everybody who didn’t agree with you. How are we going to fight against the Muslim territories? But most of all, how are we going to fight against Orthodox Christianity, the majority of Christianity. There were five Patriarchates in the 12th Century. Rome was the least important. The most important was Constantinople, then, Antioch, then Alexandria, and then Jerusalem.
Rome was at the nadir in the 9th and 10th Century. The Catholic Church histories call it the pornocracy, because it was basically just the local families of a wealthy Roman suburb called Tusculum that sort of had controlled the church as their own personal set of sinecures for themselves, and they were so corrupt that you had Germans set out to try to reform it.
And then they said, how are we going to get rid of the nepotism and the fact that the Vatican is captured by churches? – basically, so they could find either young women or boys to screw… the utter corruption that you read about these families. They asked, how are we going to make some semblance of Christianity again? And they tried to reform.
Well after them came another reform that wanted to prevent an aristocracy from taking over the Catholic Church and making it a family business. They did not want to let the clergy and popes be married, because if they marry, they’re going to have kids, and if they have kids, they’re going to make them the Pope. That’s what happened from the 9th and the 10th Century in Tusculum. You can find it all on Wikipedia or in the Catholic Church histories. They’re sort of embarrassed.
So that made Western Christianity, Roman Christianity, different from all the other Christian churches that permitted priests to get married.
MICHAEL HUDSON: Well, Veblens point was that it was the financial sector that sabotaged industrial capitalism. It’s the financial system that seeks to make its gains financially – capital gains, corporate raiding, living in the short term, paying out profits as quickly as it can instead of reinvesting its profits in long term investment like the German banks were doing. So it’s a shift from industrial capitalism to finance capitalism that ended up destroying industrial capitalism leading to deindustrialization.
Veblen’s pointing on how the American economy was turned into a rentier economy, largely on real estate. Because 80% of bank loans are for real estate. And the effect of increasing the loan to value ratio is you lend more and more money against any given property or home or office building and the effect is to constantly inflate real state prices. Well, the financial sector gained enough power over the government by being able to make mortgage interest the primary financial return along with monopoly rent.
So you have land rent and monopoly rent being the objective of finance capitalism, not industrial profits. So the finance sector took the lead against classical economics. And the fight against classical economics was much like that of the Roman Church against early Christianity. The whole idea of classical economics and the free market – from the French physiocrats to Adam Smith to John Stuart Mill and Marx, all the way up to Veblen – was that a free market is one free from the landlord class and its land rent. Free from monopolies and monopoly rent. And free from predatory banking and its interest, which was a form of monopoly rent because banks had a monopoly on being able to create money and credit with government banking.
And so, as the financial sector took over governments moving toward the apotheosis that you have in America since the Supreme Court Citizens United case – essentially privatizing the election process, saying anybody can fund elections – you have a shift of politics to favor the financialization of the economy, which in turn favors land rent, monopoly rent and interest. And also the financial class became the major donors to the Universities. Especially the business schools, and they backed economic curriculum that rewrites all of economic history as if its all individuals…
