Hudson: A World Up For Grabs?

[don]

At Issue Is Who Shall Rule The World: Interview With Michael Hudson July 09, 2014 RT: Could you summarize for us the tried and tested steps that will lead from IMF loans, to Ukraine's best assets ending up in private Western hands - the IMF's 'knee-breaker' role as you memorably described it as? Michael Hudson: The basic principle to bear in mind is that finance today is war by non-military means. The aim of getting a country in debt is to obtain its economic surplus, ending up with its property. The main property to obtain is that which can produce exports and generate foreign exchange. For Ukraine, this means mainly the Eastern manufacturing and mining companies, which presently are held in the hands of the oligarchs. For foreign investors, the problem is how to transfer these assets and their revenue into foreign hands – in an economy whose international payments are in chronic deficit as a result of the failed post-1991 restructuring. That is where the IMF comes in. The IMF was not set up to finance domestic government budget deficits. Its loans are earmarked to pay foreign creditors, mainly to maintain a country’s exchange rate. The effect usually is to subsidize flight capital out of the country – at a high exchange rate rather than depositors and creditors getting fewer dollars or euro. In Ukraine’s case, foreign creditors would include Gazprom, which already has been paid something. The IMF transfers a credit to its “Ukraine account,” which then pays foreign creditors. The money never really gets to Ukraine or to other IMF borrowers. It is paid to the accounts of foreigners, including foreign government creditors, as in IMF loans to Greece. Such loans come with “conditionalities”that impose austerity. This in turn drives the economy even further into debt – forcing the government to tighten the budget even more, run even smaller budget deficits and sell off public assets. RT: Can Ukraine expect the so-called 'IMF effect' of 1 in 5 of the impoverished population emigrating to work abroad, and what consequence could this have on a country to lose its brightest minds? MH: Ukraine already draws in foreign emigrants’ remittances equal to about 4% of its GDP. (About $10 billion a year.) Most of this money comes from Russia, the rest from Western Europe. The effect of IMF austerity plans is to drive more Ukrainians to emigrate in search of work. They will send some of their earnings back to their families, strengthening the Ukrainian currency vis-à-vis the ruble and euro. RT: How are the IMF's tools in reality “weapons of mass destruction” as you quoted it? MH: Lower budget deficits cause even deeper austerity and unemployment. The result is a downward economic spiral. Lower incomes mean lower tax revenues. So governments are told to balance their budgets by selling off public assets – mainly natural monopolies whose buyers can raise excess prices to extract economic rent. The effect is to turn the economy into a renting “tollbooth economy.” Hitherto free public roads are turned into toll roads, and other transportation, water and sewer systems also are privatized. This raises the cost of living, and hence the cost of labor – while overall wage levels are squeezed by the financial austerity that shrinks markets and raises unemployment. RT: The IMF's perhaps also a weapon of mass destruction in a more literal sense. The organization has publicly threatened and blackmailed Ukraine that it will 're-design' its aid package, unless Kiev goes to war on fellow Ukrainians in the East of the country and stops them protesting. Does that not make it now literally a criminal accomplice or instigator of war and murder? MH: The IMF’s “conditionality” is that it “pacify” the East. Pacification may occur violently in today’s Orwellian rhetoric. The only way in which actual political and economic peace can be achieved is by a loose federalization of Ukraine, to make each region independent of the kleptocrats in Kiev, who are appointed mainly from the West. As for accusations of criminality, this always depends on who is the prosecutor, and what is the court! No country has yet prosecuted the IMF. All that voters can do is reject governments submitting to IMF conditionalities. Many voters who are able will “vote with their feet” and simply leave the sinking economy. So the IMF’s defense is that Ukraine and other clients are voluntarily committing suicide rather than being murdered. Austerity is ultimately a policy – nobody is holding gun to their head, except when political leaders are assassinated as in Chile in 1974 under Pinochet with the US Government behind it. In this sense, Ukraine today is a replay of Chile four decades ago. RT: Everyone knows austerity's effects on Greece and elsewhere; polls show most Ukrainians don't want it; even the IMF itself now admits austerity doesn't work. Why will Ukraine's leaders allow it to happen, are they guaranteed a cushy job in the West when they've voted out or something? MH: Ukraine’s leaders are mainly kleptocrats. Their aim is not to help the country, but to help consolidate their own power. George Soros has written that their best way to do this is to find Western partners. This will provide US and European backing for the kleptocrats tightening their hold on the economy. Western support will provide more IMF and European lending to support the currency so that the Ukrainian oligarchs can move their money safely to the West, to British banks and US banks. RT: Do you think that the EU isn't stupid enough to make Ukraine a full member, so under the one-sided association agreement, member states will just strip the country of its best assets, and use its workers as near slave labor, with Ukraine's 91 US cents an hour minimum wage? MH: The EU hardly can really make Ukraine a member. One reason is that a key policy underlying French and German creation of the original Common Market in 1957 was the Common Agricultural Policy (CAP). Ukraine has rich Western land, and that part of the country is largely still rural. Foreign investors would like to buy it out and “re-feudalize” it, creating large business farms. But the EU is unlikely to provide the subsidies that financed mechanization and capital investment in Western European agriculture. The EU does not need to formally integrate with Ukraine to benefit from its inexpensive labor. Wrecking the economy Greek-style or Irish-style or Latvian-style is sufficient to send its workers to the West. And the most mobile traditionally are the best educated youth in their 20s, able to speak foreign languages and with skills in demand in the West. RT: You noted Ukraine 'must have asked the US first' before blowing up that gas pipeline. Do you think NATO will support anything even terrorism to make Russian gas seem less reliable, especially while US fracking giants currently are waging a big PR campaign in Europe. MH: The US has pressed Europe to make its own economy much more high-cost and to rely on US gas exports mainly in order to deprive Russia of foreign exchange. The NATO rationale is essentially that which Prime Minister Arseniy Yatsenyuk tweeted on Monday, June 16: Ukraine “won’t continue subsidizing Gazprom [to the tune of] $5 billion annually, so that Russia can arm itself against us [with this money].” The US position today is what it was in 1991: Without manufacturing, Russia cannot be a serious military power to defend itself. And without purchasing foreign technology and without large state subsidy – as US and European governments provide their own economies – Russia cannot create a manufacturing economy. So NATO is trying to prevent Russia from earning enough money to modernize its economy, on the principle that any industrial power is potentially military, and any military power my potentially be used to achieve political independence from the US sphere. RT: Anything else you would like to add? MH: What is at issue is whether economies throughout the world will let financial leverage dismantle the power of elected governments, and hence of democracy. Governments are sovereign. No government actually needs to pay foreign debts or submit to policies that negate the three definitions of a state: to create its own money, to levy taxes, and to declare war. At issue is who shall rule the world: the emerging 1% as a financial oligarchy, or elected governments. The two sets of aims are antithetical: rising living standards and national independence, or a renting economy, austerity and international dependency. Michael Hudson is research professor of economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. http://michael-hudson.com/

[don]

Re: Hudson: A World Up For Grabs?

an appropriate quote . . .

In the 1970s, I met Leni Riefenstahl and asked her about her films that glorified the Nazis. Using revolutionary camera and lighting techniques, she produced a documentary form that mesmerised Germans; it was herTriumph of the Will that reputedly cast Hitler’s spell. I asked her about propaganda in societies that imagined themselves superior. She replied that the “messages” in her films were dependent not on “orders from above” but on a “submissive void” in the German population. “Did that include the liberal, educated bourgeoisie?” I asked. “Everyone,” she replied, “and of course the intelligentsia.”

John Pilger

[gwynedd1]

Re: Hudson: A World Up For Grabs?

an appropriate quote . . .

In the 1970s, I met Leni Riefenstahl and asked her about her films that glorified the Nazis. Using revolutionary camera and lighting techniques, she produced a documentary form that mesmerised Germans; it was herTriumph of the Will that reputedly cast Hitler’s spell. I asked her about propaganda in societies that imagined themselves superior. She replied that the “messages” in her films were dependent not on “orders from above” but on a “submissive void” in the German population. “Did that include the liberal, educated bourgeoisie?” I asked. “Everyone,” she replied, “and of course the intelligentsia.”

John Pilger

The strength and Achilles heel of both Japan and Germany is their willingness to blindly follow authority and engage in social obedience. The weakness of the US is failing to realize that nation building on the basis of our former WWII antagonists was dependent on these traits.

[astonas]

Re: Hudson: A World Up For Grabs?

The strength and Achilles heel of both Japan and Germany is their willingness to blindly follow authority and engage in social obedience. The weakness of the US is failing to realize that nation building on the basis of our former WWII antagonists was dependent on these traits.

This is an extremely perceptive observation. Thanks!

It triggered the following thought in me:

It's no secret here that I've come to see cultural misunderstandings as a key component of strife, and a major dynamic of international politics. But I think the US is not so much guilty of fallacies of extrapolation from our own culture - which is an error more dominant in Europe - as it is guilty of falsely extrapolating between different external cultures.

Put another way, it seems that the US state department has learned - the hard way at times - that we can't assume other states will act as we would. But it still seems to struggle with the idea that other states can be much more different from one another than they are different from ourselves. As different as the middle east is from the US, it is far further removed culturally from Japan and Germany.

One wonders how this translates into the viability of different monetary philosophies in, for example, the middle east, or the Ukraine. I confess to knowing little of the relevant cultures, but am curious about what thoughts others might have on the subject.

[don]

Re: Hudson: A World Up For Grabs?

Binney recently told the German NSA inquiry committee that his former employer had a “totalitarian mentality” that was the “greatest threat” to US society since that country’s US Civil War in the 19th century.

William Binney is one of the highest-level whistleblowers to ever emerge from the NSA. He was a leading code-breaker against the Soviet Union during the Cold War but resigned soon after September 11, disgusted by Washington’s move towards mass surveillance.



“…An empire is a despotism, and an emperor is a despot, bound by no law or limitation but his own will; it is a stretch of tyranny beyond absolute monarchy. For, although the will of an absolute monarch is law, yet his edicts must be registered by parliaments. Even this formality is not necessary in an empire.” John Adams (1735-1826), 2nd American President


“Politically speaking, tribal nationalism always insists that its own people is surrounded by “a world of enemies”, “one against all”, that a fundamental difference exists between this people and all others. It claims its people to be unique, individual, incompatible with all others, and denies theoretically the very possibility of a common mankind long before it is used to destroy the humanity of man.” Hannah Arendt (1906-1975), The Origins of Totalitarianism, 1951


“War is mankind’s most tragic and stupid folly; to seek or advise its deliberate provocation is a black crime against all men.”, President Dwight Eisenhower, 1947 commencement speech at West Point


“I believe in American exceptionalism with every fiber of my being. But what makes us exceptional is not our ability to flout international norms and the rule of law; it is our willingness to affirm them through our actions.” President Barack Obama, May 29, 2014 commencement speech at West Point

[don]

Re: Hudson: A World Up For Grabs?

Hudson:
Washington Consensus Encloses Ukraine