by MICHAEL HUDSON & ROSS ASHCROFT
Sputnik International
Ross: Welcome to Renegade Inc. With China’s increasing wealth, Western investors want some of the action. One of those investors is a bullish gentleman called George Soros. However, the Chinese are acutely aware that with Western investment comes inequality. So as Beijing begins to rethink how to do proper economic growth, we ask, will China learn from Western mistakes?
Ross: Michael Hudson, always great to have you back on Renegade Inc.
Michael Hudson: It’s good to be back here. Thanks for having me.
Ross: Michael, we join you at a time where a lot of people think the unipolar world could have maintained its supremacy. Turns out it hasn’t. Multipolar world is here to stay. You of late have been quite vocal about George Soros, no less. Mr. Soros has been casting aspersions about various things, but one of them is talking about the Chinese economy and why Black Rock, amongst others, should be allowed to invest there, because ultimately it’s going to undo American interests. Can you unpack that for us because it seems very complicated?
Michael Hudson: Well, George Soros’ dream is that China would do what Yeltsin did to Russia – that it would privatise the economy, that it would basically carve it up and let US investors buy control of the most profitable heights. And in that way, the foreign investors would be able to sort of get all of the profits of Chinese industry, Chinese labour, and it would become the darling stock market of the world, just like Russia’s stock market was the leading booming stock market of 1994-96 and that China, essentially, would be run to benefit US investment bankers. And Soros is furious that China is not following the neoliberal policy that the United States is following. It’s following a socialist policy wanting to keep its economic surplus at home to benefit its own citizens, not American financial investors. And so this, for Soros, is a clash of civilisations. And he said somehow we’ve got to stifle the Chinese economy. We’ve got to put sanctions against it. We’ve got to stop investing in it to force it to do to its country what Yeltsin did to Russia.
Ross: Let’s hear it in his words. He says: ‘The Black Rock initiative imperils the national security interests of the US and other democracies because the money invested in China will help prop up President Xis regime, which is repressive at home and aggressive abroad. Congress should pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China. The effort ought to enjoy bipartisan support’. He’s not mincing his words, is he?
Michael Hudson: Well, he’s a comedian. What’s wrong with that statement? He thinks that China actually needs American dollars to build its factories and invest. He thinks that somehow China’s balance of payments is going to fall apart without the US market, without US investors telling President Xi what to do. The Chinese government won’t have a clue as to what to invest in and how to let the ‘free market’, meaning George Soros and Black Rock and other companies, operate. So he’s living in a dream world where other people need us. It’s like a guy who doesn’t realise his girlfriend doesn’t need him anymore.
Ross: There seems to me to be a distinction here that the Chinese are acutely aware of, and it’s between the classical economists and the neoclassical economists. The classical economists have understood the idea of unearned wealth, unearned income. The neoclassical economists actively chase unearned wealth, unearned income, because that is central to their playbook. Can you just expand on those two ideas? And is it the case that that’s why you talk about a clash of civilisations?
Michael Hudson: Well, you put your finger on it, Ross. Well, people think that China’s advantage is its abundant, low priced labour force or the government building infrastructure. But what’s guiding this all is an understanding of the kind of economics that actually goes back even beyond Marx, Adam Smith and John Stuart Mill and the other economists. They realise there’s a difference between earning and creating wealth by employing labour to produce goods, to sell at a profit and then reinvesting the profits and more capital formation, or simply buying a rent yielding property, buying land and letting it rise in price without the landlord doing anything, buying a monopoly and just raising the price and charging monopoly prices like the US pharmaceutical companies are doing.
China understands the difference between earned income and unearned income, between productive investment and unproductive investment. And in the United States, if they do recognise this difference, they realise that unearned income you can make wealth by parasitically much quicker than you can actually create wealth. It’s cheaper to be a parasite than a host. And so most of the financial strategy of Wall Street thinks, how can we get something for nothing? How can we get a free lunch? Well, let’s begin by telling people, having Milton Friedman as a kind of sock puppet saying there is no such thing as a free lunch, when the whole of Wall Street is looking for a free lunch. They’re looking to grab Chinese assets on the cheap, like Soros is grabbing post-Soviet assets. They’re looking for monopoly rights. They’re looking for lending money and let China do the work, just pay the interest to the Americans that are going to be providing it with money that the Federal Reserve ends up creating on its computers or that George Soros already has saved largely by how he got the free lunch from the Bank of England betting against that and driving Sterling down.
Ross: Some people call it the free world. Others call it a democracy. Others, for America, call it an advanced oligarchy. Do you think that the Chinese have looked at America and the wider West, understood that privatising all that rent has ultimately led to societal decline?
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