We’re living in a time of economic babble, where politicians and economists throw out words like “reform,” “privatize,” and “austerity” to prop up corrupt capitalist opportunists. So says our guest this week, economist Michael Hudson, author of J is for Junk Economics.
Laura Flanders:Okay. We're going to start. The intro is about the book. The book is a wonderful thing. We're really glad to be here talking about it. I'm really excited to have you back on the program, Michael. It's great to see you.
Michael:It's good to be back.
Laura Flanders:This book was 10 years in the making. In that period, have you seen any new, exciting, or terrifying obfuscations, lies, and ways of talking about the economy?
Michael:Fortunately, things got worse and worse since 2008. As a result, I greatly expanded it, made it a completely different book. Also, it made the whole focus on the vocabulary because economics has turned into an Orwellian vocabulary where words mean exactly the opposite of what they used to mean.
Laura Flanders:Give us an example.
Michael:Reform. Reform used to mean Ford labor unions and consumer protection and regulation. Now reform is used by the IMF. It means you have to cut back wages, you have to shift taxes off the 1% onto consumers. You have to scale back pensions. You have to scale back social security and you have to impose austerity. It's just the opposite. It's as if the 'rentier' class, another word that has fallen out of use, the rentier class has won and they now call themselves the job creators-
Laura Flanders:That's right.
Michael:-instead of the idle rich or the free lunchers or the words that people used to know them by.
Laura Flanders:What in your view is an economy for, it's a question I like to ask economists. What do you think an economy is actually about?
Michael:It's about letting people who don't work make all the economic gains for themselves leaving nothing for the people who actually do work.
Laura Flanders:Well, that's what it is. What should it be?
Michael:It should be just the opposite. The whole idea of Adam Smith and John Stuart Mill and all of the classical economists that are considered the patron saints of free marketers, their idea of free market was exactly the opposite. Here we have another Orwellian term. For Adam Smith, a free market was a market free of landlords. You wouldn't have them anymore. That was the first thing that he picked up in his travels in France was the physiocrats. John Stuart Mill said, "Economic rent is what landlords make in their sleep without working."
He wanted the government ... Basically they were called Ricardian Socialists. They wanted the government to collect all the rent so that the only income people would get would be income they make from actually being productive, for making things, for makings goods and services. Now the idea of productivity is just the reverse. It's defined as how much money Goldman Sacks, for instance, can make from the rest of the economy without doing any work.
Laura Flanders:Is there anything new in the way Trump or his colleagues talk about the economy in so far as you can make sense of it? You're making the point that it's difficult to make sense of in the best of times.
Michael:I don't think he really talks about the economy. He talks about, "Here's a beautiful picture how America could be," and he never talks about how he'll get there, never talks about what he'll do. In his speeches before Congress, there isn't a program so I have no idea what he believes.
Laura Flanders:He does throw out words like infrastructure, spending, nationalism, fair trade, language that crops up in his speeches we have heard before even if we have no idea what meanings are attached now.
Michael:The meanings now are very different from what they used to be. In the late 19th century, Simon Patten who was the first economics professor at the first business school, the Wharton School of Business said, "America's going to get rich on infrastructure because it's a fourth factor of production besides labor, land, and capital." Public infrastructure actually is the largest capital investment in every economy.
Laura Flanders:Now we're talking schools, roads-
Michael:Schools, roads, everything that-
Michael:Yes, and these are most of ... The investment of every country is in this. Patten pointed out that the objective of schools, and education, and roads isn't to make a profit. It's just the opposite. It's to lower the cost of living and lower the cost of doing business because if the government produces, provides this in social infrastructure, free or on a subsidized basis, then you can afford to undersell other countries that have privatized the infrastructure. When Donald Trump talks about private public partnership, he means infrastructure for profit and financed by Wall Street, not by the government.
Laura Flanders:We're told that everything that's private is better than everything that's public. It's not true, but is that the case that he's making again today?
Michael:Better for whom? It's better for the stock underwriters, it's better for the owners. The reason infrastructure was in the public domain for hundreds of years in Europe was because they're natural monopolies and you don't want monopolists to own the roads, or the schools, or the cable systems, or the health insurance because they will try to squeeze the monopoly for whatever the market will bear. That's called 'rent extraction'. If you privatize it for profit, then the cost of using these roads, the cost of using education, the cost of using water and sewer are going to rise so much that the economy's going to begin looking like England after Margaret Thatcher.