(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
The progressive political economist and proponent of new monetary theory (Modern Monetary Theory, MMT), Michael Hudson, has written The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism. The book depicts the conflict between the United States and China as a confrontation between the divergent political-economic models of Chinese industrialism and American fiscal policy. For Hudson, nothing less than the fate of civilization is at stake in this confrontation – socialism or barbarism.
Financial capitalism is not the production of new goods, but the extraction of unearned profit from existing capital.
The book—like the books of Hudson's most high-profile admirer, David Graeber—
sometimes loses the thread in its countless digressions and generalizations. It began as a series of lectures, and it shows clearly – Hudson means something about just about every major topic in economics, economic history, the history of economic ideas, geopolitics and political economy from the Bronze Age to the present day. Nevertheless, it is a solid contribution about contemporary politics and economics that demands to be taken seriously – even if it cannot be accepted unconditionally.
In Hudson's story, the United States and large parts of the Western world have undergone an economic revolution in recent decades – away from industry and towards finance. The former produces value through commodities – industrial capitalism and its political-economic framework of Fordism-Keynesianism – firms' 'Fordist' willingness to pay high wages (to weaken unions) and states' Keynesian management of capitalism's endemic crises through countercyclical fiscal and monetary policies . Finance capitalism, on the other hand, with its neoliberal political-economic framework – cuts in private wages, public services and protective tariffs – produces rentierism: not the production of new goods, but the extraction of unearned profits from existing capital, especially in the finance, insurance and real estate sectors .
The reasons for this revolution are many and debated. In the most common explanation (but by no means the definitive one), the economic historian Robert Brenner identifies increased competition that has arisen from globalization. Competition between high- and low-wage zones – especially between the US, Germany and Japan – resulted in a profit squeeze in the 1970s. The "Volcker shock" in 1979 raised interest rates to such a high level that unprofitable businesses went bankrupt and triggered a deindustrialization of the so-called rust belts in the United States and Great Britain.
Speculation, asset stripping and rentierism
As the capitalist class searched for new sources of profit, it turned to the financial market: speculation, asset stripping and usury. China's industrialization from the 1980s onwards has only exacerbated this dynamic. As the West became neoliberal—and spread its neoliberal dogma around the world, with disastrous results from Russia to Argentina to Africa—China charted its own course, eschewing neoliberal shock therapy (as Isabella Weber has put it) and modernizing the country through a fantastically successful combination of market reforms and state-led investment.
Let's take a step back. It is not only the causes of the revolution that are controversial, but the nature of the revolution itself. A wide range of historians and economists (Tim Barker, Mike Davis, Noah Smith) have pointed out that American manufacturing has not fallen as the word "deindustrialization" suggests. Rather, production has changed form: Industry has moved from the unionized Midwest to the non-unionized South and West. It has shifted from steel and car production to high-tech industries – think Silicon Valley, think the military-industrial complex. It has automated: Employment in manufacturing has stagnated or fallen, although production remains relatively high.
In the article "Making Capitalism Great Again?" economics professor JW Mason claims that Hudson's industrial/financial dichotomy is misplaced, pointing out that the richest people in the US today are still industrial capitalists – businessmen like Bezos, Musk, Gates, Zuckerberg and the Walton family. Rumors of the demise of American manufacturing are exaggerated. Undoubtedly, rentierism is a big problem, especially when it comes to urban land, which has fueled a housing crisis across the West, and Hudson is right to distance himself from its political economy of endless inflation in property values. He is also precise in linking this to "debt deflation": When an increasing proportion of income is eaten up by mortgage debt or rent, people have less to spend on consumer goods, which slows down price growth, wages and growth in the real economy.
American industry has shifted from steel and car production to high-tech industries – think Silicon Valley, think the military-industrial complex.
As far as China is concerned, Hudson paints with a broad brush. Admittedly, China is the world's workshop and far ahead in green technologies. But this is not the whole picture: Michael Pettis has often argued that China's development model has led to diminishing returns. Growth in the 2010s was lower than in the 2000s when China's state-led investment in infrastructure and property construction, isolated from market indicators, did not always prove efficient or productive. Above all, since China is still dependent on being a low-wage country, household wealth is still low – which in turn slows spending.
What is at stake in this discussion? As the title suggests, the book is about the fate of civilization. Hudson supports a quasi-Marxist teleology in which industrial capitalism leads to socialism (or at least a democratic mixed economy), and in which financial capitalism leads to feudalism or fascism. But the West deviated from this teleology because the capitalists managed to deceive the working class with false ideals – such as nationalism, the welfare state and class mobility.
The China–Russia bloc
Hudson – like many on today's left – is sympathetic to the political economy (if not the geopolitics) of the China-Russia bloc, which he sees as a repetition of the protectionist model that helped Western countries develop their industrial base. (This is perhaps the reason why two Chinese academics saw fit to write separate introductions to the book.)
I am not convinced. Although there are real political-economic differences between China and the US, neither is on the road to socialism. In the US, neoliberal ideology appears to be dying a slow death, where the Democrats' potentially revolutionary industrial and infrastructural policies – such as the Green New Deal and the Inflation Reduction Act – face Republican reluctance to change positions.
As for China, its socialist assumptions have been disproved by the rise of its new empire. Chinese purchases of French luxury goods have made LVMH owner Bernard Arnault the world's richest man (a financial dependency that has forced Macron to adopt a condescending stance toward Xi and Taiwan). Chinese investment abroad has made Vancouver one of the world's most expensive cities (there's that usury again). Universities across the Anglosphere rely on (high) tuition fees from Chinese students. And – signaling the exuberance of the Chinese bourgeoisie – Hui Ka Yan, founder of Chinese construction company Evergrande, owns Britain's most expensive home, a £210m mansion opposite London's Hyde Park.
In the 2020s, it is China's globalized bourgeoisie, not the proletariat, that plays a world-historical role. Hardly a harbinger of socialism.
Translated by Iril Kolle