“J is for
Junk Economics – A Guide to Reality in the Age of Deception,” by Michael
Hudson, 2017
Many people drive cars or
live in houses and have no idea how they work or how to fix them when they
break. Even growing food is a mystery. Yet
without a house or some form of transport – even a bicycle – they would be
homeless or walking all the time. In an
emergency, not knowing how to grow food might be damaging too. Similarly, in a society dominated by capital,
many people do not actually know how the society works. And subsequently, have no idea, or false
ideas, about how to fix it.
Understanding the profit system is essential to anyone looking at the system
itself. I.E. dealing with the ‘engine compartment’ or the ‘furnace’ or the ‘soil’ of capital’s social
life, not just fiddling with the radio buttons.
At bottom this is a material world, not just one of ideas.
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| I Don't Have Cash - Can I Use My Credit Card? |
Hudson is a left-economist who got so tired of reading
gobbledygook by today’s corporate economic shills that he decided to create a
virtual dictionary of terms and what they actually mean. In separate sections he also describes the
main capitalist myths promoted by the business media, a section on 'economics as fraud' and
later asks if ‘economics’ deserves a Nobel prize. The listed myths mainly restate what is in
the definitions. The fraud section
undermines the idea that ‘logical consistency’ replaces an analysis of
economic reality. (Which strangely duplicates purely mathematical theories
about the origin of the universe…) Hudson knows, along with many other leftists, that economics is not a ‘science,’ it is political to
the extreme.
Classical Economics
Hudson’s main thrust is that
original classical economists – Adam Smith, J.S. Mill, Ricardo et al. – were
hostile to ‘rentier’ and non-production-based forms of earning, while the
present system is once again dominated by these various forms of ‘financial
capital’ centered on Wall Street. “Rentier” income includes various
kinds of rents, including mineral rights; interest charges, unequal exchange, monopoly
and oligopoly, crime, fees and privatization, which are all not ‘products’ but
are instead the result of ownership alone.
They are merely ‘transfers’ from the worker’s pocket to the capitalist’s
or landlord’s pocket. The rentiers are not
producers, but parasites.
To Hudson finance capital cannot claim classical
economists as ‘forerunners,’ but as enemies, just as they abhor Karl Marx. Classical economics believed in the ‘labor
theory of value’ along with Marx, while modern capitalist economists do
not. This was because in the 1800s
industrial capital was battling with landlordism, a vestige of feudalism, and
classical economics originated promoting the new industrial capital. Hudson, a person with some initial Marxist influences,
but who you might call a Minskyite or ‘post-Keynesian’, focuses strongly on
this issue to highlight its prominence in today’s economy. As part of this, he supports a ‘mixed
economy’ based on industrial capital and government working together, ostensibly against
financial capital.
Here is a choice quote from
Adam Smith you probably have never read:
“The proposal of any new law or
regulation of commerce which comes from [business] ought always to be listened
to with great precaution, and ought never to be adopted till after having been
long and carefully examined, not only with the most scrupulous, but with the
most suspicious attention. It comes from
an order of men, whose interest is never exactly the same with that of the
public, who have generally an interest to deceive and even to oppress the
public…”
This explains why the
present has a whiff of economic neo-feudalism about it, as present capitalistic
societies are backpedaling furiously into the past. The Lords of Finance dominate the governments
of nearly all countries, their central banks and the international agencies
like the World Bank, IMF, ECB and WTO. The
health of the stock markets is the key barometer of ostensible world economic
strength. But as Hudson
points out, the dialectical effect of rentier profits is increasing debt, to
the point where stagnation and crashes are inevitable. The bigger the debt, whether corporate,
government or individual, the bigger the resulting inequality, economic
imbalances and depressions. Hudson uses a calculation
that shows that if 5% debt service payments outstrip smaller wage gains or
growth (‘GDP’ and “NIPA” is what he uses, though both are full of deceptions),
then debt slowly eats away at the whole economy, which he calls ‘debt deflation.’ Marx first pointed to this interplay of debt
and growth in ‘Capital, Vol. III.'
So, in a way, this book is
timely, given today’s bubble markets inflated by government policies like ‘quantitative
easing,’ which gave $4.3 trillion to the FIRE sector. I.E. that phrase is impenetrable jargon for ‘free
money’ created on a computer screen and transferred to the bankers. However, in the last few days, the bubble has
apparently started bursting. The greatest one-day fall in the DOW in its history took place today.
Issues in Paradise:
Hudson seems to be an anti-capitalist, but his focus on the
glories of industrial production raises a question as to whether he just favors
industrial economies, ignoring the exploitation of labor even there. This bifurcation ignores the intimate relationship between industrial and financial capital, as industrial firms go to the big bank's capital markets to raise money, or become financial giants themselves, like GE and GM. He sometimes ignores things he could go into,
like the false figures in the ‘consumer price index.’ Or a laughably short section on
‘derivatives.’ He completely avoids a
real definition of ‘middle class.’ Hudson dwells on the 1% v.
99%, which is a non-political formulation that ignores the supporting role of
the approximately 9% for the 1%. He also
contends that the capitalists are against property taxes, which makes sense
given they are large landowners. Until
you consider the present trend to reduce income and capital gains taxes, but not
property taxes on homeowners and renters.
He now envisions the main class struggle as between creditors and debtors,
not capitalists and workers.
One question he doesn’t
answer is whether tax monies going to the rich or corporations or the military,
etc. aren’t also partially ‘rent seeking’ behaviors? General taxes are used as direct or indirect
transfer payments to corporations or the rich, not just for the majority. For instance, he says Southern states
overtaxed black sharecroppers in the 1960s so they would not be able to get out
of debt peonage.
Details, Details…
This is an entertaining book
on many levels, as Hudson makes fun of many
bogus concepts, going back as far back as Mesopotamia
to prove his points. It is chock full of
information, large and small. Such as
how business can use depreciation and ‘business operating costs’ to reduce
their taxes, while individuals cannot. Or
how landlords and real estate interests use public infrastructure projects to
make money, first pointed out by Thorstein Veblen. Lets say they put in a
light-rail line paid for by general taxes.
Builders rush to erect apartment buildings around stations and brag
about how close they are to light rail transport, which enables them to sell or
rent the apartments at a premium. The
public never sees that profit. Or a myth
peddled by shills like Paul Krugman, who insists that all bank loans are just
the reverse side of deposits.
Jesus’s first sermon in the
book of Mark was to demand a debt ‘Jubilee’ according to Hudson.
But if you read the fine-print about ‘debt jubilees’ (also mentioned by
Graeber) Hudson
said they were because the sovereign needed the peasants and citizens to fight
in his army or to work on large building projects. So debts had to be forgiven or there would be
a revolt. Neither of these conditions
exists anymore, as there is a ‘volunteer’ army and mass projects are built by construction
workers or debt slaves (as in the Gulf
states), not ‘volunteers.’ Hence the only ‘jubilee’ anyone will get in
modern times is through the ‘jubilee of revolution.’
Prior reviews on similar
subjects: Graeber’s “Debt,” “The
Invisible Handcuffs of Capitalism,” “Slavery by Another Name,” “Zombie
Capitalism,” “MMF,” and reviews of Piketty’s “Capital in the 21st
Century.” Commentaries on current
debt and modern slavery below.
And I bought it at May Day
Books!
February 5, 2018
Red Frog
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