Polarization, Then a Crash: Michael Hudson on the Rentier Economy

Polarization, Then a Crash: Michael Hudson on the Rentier Economy

Posted on December 29, 2020 by Yves Smith

Yves here. Lynn Fries of GPE Newsdocs sat down with Michael Hudson to discuss the Covid-19 economy. Hudson describes how our present form of capitalism has distorted the role of government and how that is increasing general and Covid-related misery.

By Lynn Fries. Originally published at GPE Newdocs

LYNN FRIES: Hello and welcome. I’m Lynn Fries producer of Global Political Economy or GPEnewsdocs. I am delighted to have Michael Hudson joining us today. He will be discussing how under a neoliberal shift from industrial to finance capitalism, today’s most pressing economic conflict is not simply between labor and employers. It is a conflict in which rentier interests have the upper hand over labor, industry and government together. This is the political economy in which the COVID-19 economic shock is playing out with dire consequences.

Michael Hudson is a research professor of Economics at the University of Missouri, Kansas City, and research associate at the Levy Economics Institute of Bard College. A prolific author, Michael Hudson’s latest book is …and forgives them their debts: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year. Welcome, Michael.

MICHAEL HUDSON: Good to be here, Lynn

FRIES: Michael, It has been argued that every successful economy has been a mixed economy, where the public sector places checks and balances on private sector power; specifically on the financial sector’s power to indebt society in ways that impoverish it. Yet this kind of role for the public sector is being vilified under finance capitalism. So, what is your take on that?

HUDSON: Well ever since the Bronze Age you had the temples and the palaces providing basic needs. Because if you leave this to the private sector, then you’re going to have a situation where the private supplier has a chokehold on the economy and can say: your money or your life.

There are certain things that governments are supposed to supply and which industrial capitalism wanted government to supply. Because they didn’t want employers or their employees to have to pay for them. These are a number of things. Governments obviously have to supply military defense. You can’t leave that private people but also healthcare, for instance. The conservative party in England, Benjamin Disraeli said: health is everything; we have to spend on health.

And you don’t want to, in principle, make money off crime. But in America we’re privatizing the penal system, the jail system. So you have increasing pressure on government, on governors, to arrest people, put them in jail especially on drug use, where you can employ them at 10 cents an hour. And lease them out to companies as low priced labor.

But most of all, government is supposed to provide the infrastructure: the transportation, the communication, the telephone system. And the idea is that if you leave like cable TV to private suppliers, they are natural monopolies. The idea throughout history from classical Greece and Rome, medieval times in Europe is that natural monopolies should be in the public domain.

Because you don’t want to provide opportunities for monopoly rent. Because monopoly rent, like land rent and natural resource rent, is not a necessary cost to production. You want the necessary cost of production to be the material costs and normal profit. Because obviously you need people to have some incentive to do things. But the incentive is supposed to be normal profit, not super profits, not just a free lunch.

And so if you let transportation become privatized, then it is going to cost the workforce much more money to get to work and to get to a job. If you let the oil industry be privatized and the profits from the natural resource, and that’s the patrimony of mineral rights, oil and gas is all going to go to the private financial sector not to be used as the tax base.

Polarization, Then a Crash: Michael Hudson on the Rentier Economy | naked capitalism