Michael Hudson has a new book out so I thought it was high time I posted some thoughts I’ve been meaning to write up about his last one, The Bubble and Beyond.
I’ve posted before about Hudson’s 1973 classic Superimperialism, whose analysis of the economic strategy of American Empire was followed by a terrific 1977 sequel called Global Fracture that analyzed how the US defeated the challenge to that strategy that was mounted by the New International Economic Order in the early 1970’s. Then came a long gap: his next book didn’t come out until 1992. Folks like Vijay Prashad refer to these two early books as “classic accounts” of 20th century economic history, and they’re on my list of favorite books of any kind. Much like Thomas Pynchon, I can’t say that his post comeback work that I’ve read is as great as his early stuff, but then again I’m a recovering record collector so that’s a default position I take from time to time. The Bubble and Beyond mostly concerns itself with economic theory which is a bit of a drier read than the detailed political history laid out by Global Fracture & Superimperialism.
What The Bubble and Beyond does have is an appeal that any record collector can understand: it raises the question, “Why isn’t this guy more famous?” Much like underground records that are too thorny to cross over, Hudson’s work is not an easy read. He is eclipsed in mainstream liberal press outlets by more widely read authors like Paul Krugman and Joseph Stiglitz that are more accessible. Some of this is down to the main criticism I have of The Bubble & Beyond, which is that it is too repetitive. I thought of a 4th grade classmate of mine who responded to my repetitive report on beavers with the comment, “I didn’t know beavers do everything twice.” A better editing job could have made it much shorter and therefore more likely to be read.
But some of his absence from mainstream media is down to the fact that his critique of economic policy is more radical than that of Krugman or Stiglitz, even though they share common concerns. On positions where Hudson and Krugman now agree, Hudson has been consistent over his career, while Krugman is a former proponent of free trade policies who changed sides without public explanation. Stiglitz served under Bill Clinton and was one of the architects of the Third Way that became the doctrine of New Labour and New Democrats in the ’90’s, even though he battled Larry Summers from a relatively progressive position within that ruling junta. Hudson publishes his non-academic audiences through Counterpunch, while Krugman is an Op Ed columnist for The New York Times and Stiglitz is a columnist for The Guardian. Krugman and Stiglitz are on the faculties of Princeton and Columbia, while Hudson teaches at the University of Missouri, Kansas City. I heard about Stiglitz and Krugman’s work from The New York Times, while I was first introduced to Hudson’s work when I read an interview with him published by Black Agenda Report.
Hudson’s persona is not that of a fiery radical like Alexander Cockburn, however. He doesn’t even come off as a rational radical like Noam Chomsky. There is no signifier of the counterculture about him. He could be published by the Times and appear on PBS instead of The Real News Network without posing any threat to the expected image and mannerisms of white guys in suits with glasses projecting a “dignified” gravitas. He quotes Marx and Lenin much more than Krugman or Stiglitz, but he places them in a Western tradition of economic theory that takes as its goal the not very controversial idea that the goal of politics and economics should be to raise the standard of living for the members of a society. Marx’s writings come off very differently when they are presented as one voice in a highly contentious but nevertheless cohesive tradition of thinking about how to accomplish this goal.
Rather than reading Marx from an ahistorical position as capitalism’s eternal Other, to be loved or hated, Hudson reads him in dialogue with those who studied political economy before and after him. One thing Hudson writes that Marx did not foresee is that the two classes of society whose oppositional struggle was his concern are in fact now at the curious impasse of sharing a common enemy:
“What appeared primarily as a class war between industry and labor a century ago has become a broader war of finance against the economy as a whole.”
“Socialists who stand on the sidelines repeating the rhetoric of class war between industry and labor (a conflict that never has disappeared, to be sure) miss the threat to labor and industry posed by banks joining with rentiers from the real estate and insurance sectors and monopolies. This makes criticism of financial malstructuring neither left nor right wing. It spans the entire political spectrum, because the entire economy is threatened by the austerity that results from financial dynamics operating unchecked – and ultimately bankrupts the banking sector itself.”
Sounding a bit like a couples therapist, he writes about how warring parties need to recall what brought them together in the first place:
“When setting out to re-couple banking and credit to tangible capital formation today, it is not necessary to re-invent the analytic wheel. The logic was clarified even before the 19th century’s blossoming of heavy industry. French economists from John Law through Colbert advocated economic planning financed by an industrial banking system. After the Napoleonic reforms, the Saint-Simonians inspired a virtual credit religion. Their ideas underlay the Credit Mobilier, founded in 1852, and shaped Marx’s ideas of how banking needed to be transformed to finance industrial capitalism….the guiding idea is that loans should finance direct investment in productive enterprise, not enable borrowers merely to bid up real estate and stock market prices by using credit for speculation, corporate raiding, takeovers, and management buyouts.”
Hudson debunks the idea that capitalism is a “free” market system whose forces operate on their own to shape history. He shows that major western industrial powers achieved their wealth through their own kind of central planning, even though it differed in important ways from the self-named Planned Economies of the Socialist block. He maintains that even the current neoliberal era is a planned economy, only its planners reside on Wall Street instead of behind the reins of former industrial titans like Ford Motor Co. and US Steel. The failure of the Washington Consensus to address poverty in the Global South results largely in his view from the deliberate steps the World Bank and the IMF took to prevent nations of the Third World from planning their economies with the strategic protections that countries like the US used to gain the wealth they are now addicted to gambling away.
Explicitly a book about the rise of finance capitalism and the demise of industrial capitalism, The Bubble & Beyond is also a book about academic corruption. For Hudson, the real radicals are the proponents of contemporary reigning ideas about economics, who have thrown over a “classical” tradition that Hudson presents as a historical consensus that has only recently been abandoned. These right wing radicals have accomplished two goals: they have divorced economics from politics by calling it a “science,” and they have set its goal as maximization of short term return on capital rather than building the productive capacity of a society so as to improve its standard of living:
“The long tradition distinguishing between productive and unproductive credit and indeed the role of debt has been excluded from the economics curriculum. The anticlassical school has replaced Progressive Era financial analysis with a happy-face view in which finance only adds to economic activity by providing credit, never corrodes it with debt – as if one party’s credit were not another’s debt! These market structures and broad economic patterns that classical political economists placed at the center of their analysis are treated as “exogenous” by today’s academic mainstream.”
This resonates for me with my own experience with the academic world. I grew up in Cambridge, MA in the shadow of Harvard University. My parents taught the children of Harvard and MIT faculty members at private elementary and high schools I attended as a scholarship student. I learned to play drums by playing in a band with a bass player whose father was on the faculty of the Sloan School of Business at MIT and whose guitar player was dean of Harvard Business School. Stories I heard around the dinner table included gossip about another Harvard Business School professor whose BMW malfunctioned and drove forward when it was put in reverse, causing him to drive through the wall of his garage. The political slant of both my elementary and high schools was liberal and countercultural, respectively, but I absorbed clear messages about where the real money behind them came from.
I went on to attend Brown University and circulate in a left wing academic culture that was almost entirely segregated into departments whose explicit focus was on literature and culture – Comparative Literature, English, Modern Culture & Media, French, etc. I knew fellow students who were active with the International Socialist Organization and went on to do left wing work in documentary film, academia, and publishing. None of them to my knowledge ever took a course in economics, even though we talked about economics all the time in our classes. When I wrote a thesis on money in literature, my thesis advisor only suggested one actual book by an economist to read for my research, which was Capital by Marx. Even when I took a course as a junior with an academic who focused more directly on the study of money his own work, (Jean-Joseph Goux,) the frame of reference was primarily philosophy and psychology rather than economics.
Hudson’s book made me realize the presence of a limitation in my own education I hadn’t even thought about at the time. The segregation of left wing thought about class and economics to literature and the “humanities” – as if economics is not about humanity – was a sign of defeat. It was only after I graduated from college that I came around to reading actual economics, and it took many years before I found writers like Hudson after reading Krugman in the ’90’s when he was a free trade cheerleader.
I read a blog post by Jedediah Purdy last year that argued that economics departments have always been well aware of this barrier. He wrote that he received the following message from economics professors at Harvard that taught him as an undergraduate: You can have your feminist, anti-racist, anti-homophobia, and class conflict studies in your humanities courses, as long as you leave them at the door when you come to this class. We’re here to study economics as a science, and those preoccupations with advocacy for disempowered peoples have no place here. They had no expectation that this stipulation would be challenged, and it wasn’t. This in turn contributed to Jedediah’s view that Harvard was and is a corrupt institution.
Harvard and other Ivies such as Yale, Princeton, and Columbia are of course where people like Barack Obama, Larry Summers, Bill & Hillary Clinton, George Bush, Henry Kissinger, Paul Volcker, Ben Bernanke, yada yada yada are educated, or some might say, indoctrinated, on their way to being stamped with the seal of approval of the Republican or Democratic National Committees. Hudson argues that financial institutions that endow these Universities have ensured that they will reproduce the ideology that allows for their current position of dominance in Washington and New York’s corridors of power. This ideology has been upheld by both parties from the beginning, witness the fact that Jimmy Carter kicked off the neoliberal era once known as “Reaganomics” by appointing Paul Volcker to head the Fed in 1979, and more recently, Obama’s decision to hire Larry Summers after his first election.
As a microcosm of bipartisan support for this status quo, consider the following story: while teaching at a private school outside Boston, I recommended William Greider’s Secrets of the Temple to the Head of the school because it had motivated me to become a better math teacher after it showed me how much students will need to be able to understand economics in order to understand politics in today’s society. As I discussed Paul Volcker’s central role in the story the book tells, she told me that Volcker’s granddaughter was a student at our school. She also said she was trying to have him come and give a talk there, presumably as a fund raising event. When I asked her, “Can I heckle him if does speak here?” she said, “No, and I’m glad you asked.” Her response can not be chalked up to Republicanism – she was a staunch enough Democrat to have once told me that she would have moved to Canada if Romney had defeated Obama. (Some students at the school wore Bain Capital backpacks, and one of Romney’s chief advisers sent his children there.) Yet she referred in a seminar on teaching math to what Harvard Business School professors told her they want their future students to be able to do, without critically examining whether preparing students to be fed into that system of training was a good thing for society.
It doesn’t seem to be an accident that progressive economists I hear interviewed on The Real News and such are typically employed by public universities rather than by Harvard and their ilk. In addition to Hudson, University of Missouri
Kansas City hosts Bill Black, a former financial regulator and white collar criminologist. The University of Massachusetts
has the Political Economy Research Institute, whose scholars like Bob Pollin are also regular guests on TRN.
While they may be outside of the halls of power in Washington, it’s been surprising to me to see learn that many of these scholars have served as advisers to governments and political parties in places like Ecuador, Iceland, Greece, Mexico, Korea and Spain. I’d like to think they’d be called to serve if Bernie Sanders were elected, but so far he’s name checked Krugman and Stiglitz instead. The lengths to which the ECB went to crush Syriza after they brought economists with a similar academic background such as Yanis Varoufakis into their cabinet shows that today’s anti-industrial finance capitalists are well aware of the danger that would pose to their current position of power.
In light of Syriza’s forced capitulation and the way in which it showed that democracy as it is currently constituted does not include democratic control over economic affairs, Hudson’s dire prediction at the end of The Bubble and Beyond rings true with a frightening power:
“…All this threatens to turn the final stage of finance capitalism into debt-ridden austerity. That is what a neo-rentier economy means. Once entered into, it cannot be escaped from except by a violent political clash. The end game of finance capitalism will not be a pretty sight.”