Dialogue Works
NIMA ALKHORSHID: Hi, everybody. Today is Thursday, July 3rd, 2025, and our friends, Richard Wolf and Michael Hudson, are back with us. Welcome.
RICHARD WOLFF: Glad to be here.
NIMA ALKHORSHID: I want to start, Michael, with you and the "Big Beautiful Bill" of Donald Trump. We could manage to do something with the bill, but we know that the history between Donald Trump and Elon Musk — Elon Musk went against him — and what has happened in the aftermath. But when it comes to the bill, what is the importance of this bill for Donald Trump? And we know that he's insisting on it. He's somehow trying to do everything to get it passed. Your take on that?
MICHAEL HUDSON: Well, I think that Trump's bill — the (Republican) Big Beautiful (Budget Deficit) Bill — along with Trump's tariff policy will have the effect of ending dollar hegemony and will lead to a falling exchange rate of the dollar because Trump has said he wants the dollar's exchange rate to go down, imagining that this is going to make America's industrial exports more expensive.
The problem is it doesn't have many industrial exports anymore. They're all made abroad.
So it's a fantasy that somehow lowering the exchange rate of the dollar is going to cure America's trade deficit and enable much more profit to be made and hence taxes to be paid. So it's all a fantasy. It's amazing junk economics. And looking at the newspaper and media coverage this morning, it's all about how so many Republicans say: We can never be re-elected after we pass this bill. We're not even going to run next time our Senate term's up.
And some of the House Representatives have said — [Thom] Tillis, he can't run again because the cutbacks in medical coverage and Medicaid are going to hurt his constituency so much that they just give up.
So the effect is going to end — the dollar's free lunch — this exorbitant privilege of being able to run huge military and trade deficits, without having to see its exchange rate decline and prices rise. Now you're having a flight out of the dollar. The dollar's exchange rate has gone down 10%. That's the largest decline since Franklin Roosevelt devalued the dollar in 1933. They're running for the exit. So we're seeing the end of an era. This bill is that important.
And it's been an era that enabled the United States to finance both its balance-of-payments deficit and its budget deficit by printing IOUs — Treasury bonds — that supposedly would never have to be repaid. Because (we've discussed on an earlier show) when the United States spends money abroad, mainly for military purposes, these dollars end up in the hands of foreign central banks. And what are they going to do? In the past, until right now, for the last 54 years, they had only one choice: to recycle them into safe U.S. Treasury bonds, or federal agency bonds that have yielded a little bit more.
But for the first time now, they're running for the exits. That's what's happened today.
The Financial Times has a wonderful article about how investors are borrowing at a low interest rate to buy European junk bonds. And in the last week, as this bill has been working its way through Congress, investors have been doing arbitrage, borrowing low rates here, buying high-yielding junk bonds in Europe. And it's a bonanza — but it's all about making money financially, not industrially.
So you're seeing that big financial funds in the U.S., as well as foreign investors, are beginning to worry that this artificial affluence by the dollar standard for international monetary reserves is coming to an end.
Today, the stock market's up because stocks are what the wealthiest 1% are going to be spending their money on. Gold prices also jumped because they realize that while the stock market's going up, the economy is going down. And interest rates rose for 10-year Treasury bonds because there are more sellers than buyers.
The Republicans continue to use this old trickle-down theory. They claim that giving more money to the wealthiest 1% is going to increase investment and employment.
But that's not what billionaires do with their wealth. They buy more stocks and bonds and interest-bearing loans. They make money financially, not by building new factories and employing more people.
So the tax giveaway doesn't really trickle down. It actually trickles up because this added untaxed income of the billionaires, the 1%, the 10%, is going to be used in bidding up stock market prices, bond prices, and real estate prices, all the more. That's how you make a fortune in today's finance capital economy.
And shifting taxes onto wage earners, which the bill also does, the wage earners are taxed more in order to help cover up some of the budget deficit resulting from this giveaway. Well, that will force them yet further into debt and having to pay yet more of their income to the banks as interest and late fees.
Well, we've just seen the highest returns are likely to be made abroad now. So giving more money is going to weaken the dollar, as both the U.S. and foreign investors bail out of the U.S. bond market, and out of the dollar itself.
And the result will be a devaluation of the dollar. And that's going to raise prices because now you have to pay a larger dollar sum for imports that remain the same price in foreign countries, quite apart from Trump's tariffs, which are also raising prices.
So Trump has managed to pick the worst of both worlds for the United States. It's made the 1% richer, and it's ended the whole era of easy growth for the United States.
RICHARD WOLFF: Let me comment on that, and take it a couple of steps further. It wasn't very long ago (I'm talking a matter of months), when there was nearly parity between the Euro and the dollar. I checked this morning, and the Euro is now costing $1.18. Okay, that's a devaluation relative to the Euro of 18%.
By the way, a devaluation of the dollar by 18% means that you have a situation where you have to give more and more dollars to get the European currency. It's a statement to everyone in the world who has dollar assets, who holds anything denominated in a dollar — like a U.S. Treasury note, of which there are 700 billion in the hands of China, of which there are a trillion in the hands of Japan, and so on — are now worth 18% less.
That is a screaming message because, as Michael correctly says, that's a devaluation at a speed that is frightening. That is a screaming recommendation to people to get rid of the dollar before they suffer worse losses. They've been doing that for the last year, and they're going to continue to do it since there is no end in sight. And if Mr. Powell, or his successor, is going to lower interest rates because Mr. Trump is beating the drum to do it, it will make all of that likely worse. Okay, that's the first thing.
The second thing: Let's do a little history. The only meaningful economic act achieved by Mr. Trump in his first presidency was the tax cut of December 2017. Let's remember, that was an enormous tax cut for corporations and the rich. It happened at the end of a 40-year period — mid-1970s to 2015 (40 years) — during which we have had a massive redistribution of wealth, from the bottom and the middle, to the people at the top.
Never, therefore, in the year 2017, never did an American corporate sector, or rich sector, need a tax cut less than they did at the end of a 40-year redistribution. Mr. Trump gave it to them anyway.
And that signaled an out-of-control ruling class that is simply grabbing as much as they can before it all disappears. A behavior very common in empires that are declining. The people at the top are in a position because they're at the top to hold on to wealth. Everybody else pays the price of the declining empire.
So weak were the Democrats in 2017 that the only thing they could do was not to stop the tax cut, not to stop all the damage it did, but to put a proviso that it would end on the 31st of December of this year, 2025 — eight years into the future, then.
What did they bring Mr. Trump back into office for? To do the next logical step: to get rid of the little limit that the Democrats, in their weakness, imposed.
And that's what this new bill does. It permanently fixes the cuts of 2017. It negates the sunset they were supposed to suffer at the end of this year, and they add a few more.
Therefore, the gross inequality of the last 40 years, which was worsened by the tax cut of 2017, will be further worsened by what we're going through now. And in my opinion, that's the biggest threat to social stability in this country at this time.
You are taking away medical support for poor people at the same time that you are giving the wealthy yet another… it is grotesque! As, by the way, even a significant number of Republican and Democratic politicians have been able to say: It is grotesque! You are taking away from the food stamp — the SNAP program — supports that they give. From the poorest people, you take food and medical care. This is like a cartoon come to life. And it is a severe additional inequality that the country suffers.
I did some work on the New York City — where I live — economic situation. The city of New York is the richest city in the United States, and the city of New York is among the ten poorest cities. Both statistics are correct.
How is it counted?
If you take a measure, the percentage of the people in the city who live at or below the poverty line, you can get a list of the ten poorest cities. New York City is among them.
If you ask about wealth, New York City is the richest city in the country. Listen to these numbers: 380,000 millionaires live in New York City; 88 people who have 100 million or more live in New York City; and 66 billionaires live in New York City.
How is a city as rich as that among the ten poorest cities in the country?
Because we live in a society in which the gap between rich and poor is stupefying. And that's not tenable. That's not tenable in any society, very long.
But in a society whose entire 20th century was devoted to saying: We are the exceptional society? We don't have rich and poor? Everybody here is in the middle class? A society trained with that, dumped into what's happening now, is a recipe for catastrophe.
And the poor people look, and they watch, and they see that there are special police called ICE who beat up and harass poor immigrants. How much of a step do you think it takes to wonder whether the next poor people they will be going after are the ones that were born here? Come on. We are training people.
I learned this morning — last point — that in Los Angeles, there is now a volunteer civilian patrol: local people who mobilize and drive their cars in and around the immigrant neighborhoods, with cameras, who have been trained by lawyers as to what immigrants' rights actually are, and what ICE can, or cannot, legally do.
There it is, folks. There's the escalation. We're going to have an army on both sides. This is the end of whatever the consensus was that held this country together.
We are watching the people at the top desperate to become even wealthier than they already are. And this is their own undoing.
And they will all look back when Warren Buffett, himself one of our great billionaires, told us over the recent years that there's something wrong, that his secretary pays a higher percentage of taxes on her income than he does on his.
MICHAEL HUDSON: Well, if any of you have taken an Economics 101 course, you're taught in the first week that what Richard said could not possibly happen because all of the price theory is based on diminishing marginal utility. The idea is that wealth is like bananas. The first one tastes good, after about the tenth banana, you really get sort of sick of it. So the idea is that as people get wealthier and billionaires, they become satiated.
And if that really were how economies work, what Richard has described couldn't possibly happen.
The irony is that the Greeks, and the Romans, and most of antiquity before that, realized that there was such a thing as wealth addiction, as money love. And the fact is that wealth is addictive, and they keep wanting more and more. It is insatiable and grows, exponential.
But I want to focus, my specialty has always been the balance of payments. And I want to explain why Trump's budget is going to lower the dollar's exchange rate. And that's what affects the 1%, as Richard said, are the whole group behind the bill. Most of the media blames the deficit, as if this money is going to be spent into the economy to raise prices, instead of on stocks and bonds and bank loans.
But already in the 17th century (the mid-1600s), there was an argument, just like today. And the British economists said: Well, wait a minute. Rich people don't buy goods and services, except for luxury Italian imports and luxuries, and luxury real estate. All this money gets recycled into more and more loans.
And from the vantage point of foreign investors and money managers, the most serious threat to the dollar's exchange rate is Trump's pressure on the Federal Reserve to lower interest rates. And he said that if Federal Reserve Chairman Powell does not lower rates, once his term expires next year, he's going to handpick a successor whose loyalty to Trump will lead him to lower interest rates yet more.
And I want to describe how this policy is going to be an exclamation point beyond the dynamic that Richard has just been explaining. It's going to have a twofold return.
First of all, as I mentioned, investors can make an easy arbitrage gain by borrowing lower interest rates here to buy high interest rates in other countries. They can do it freely. All they have to do is arrange at their bank: Lend me money at 4.5%. I'll buy something yielding 6%.
And there's been so much money flowing into junk bonds in Europe, as the Financial Times explains, that shipping lines and tourist lines that had to pay double-digit interest rates a year or two ago, now are only paying 6.5%. There's a flooding of the market — the stock market and bond market — in Europe and America, and all over the world, with money.
Well, the second point is that as the dollar declines relative to foreign currencies, the bonds and stocks of countries with higher interest rates are going to rise, and there will be a foreign exchange premium over and above this. So if you're an American investor, and you move out of 4.5% in the U.S. to buy a 6.5% bond in England, that's going to push up England's exchange rate, and you get an exchange rate premium on top of the interest rate you're getting.
So you borrow at a low rate, buy securities yielding a higher rate, all on credit for debt-financed capital gains.
None of this has anything to do with actual GDP production or incomes for the non-financial sector, except to interfere with it, as I'll explain.
The decline in the dollar's exchange rate is probably going to exceed the interest that you make on the American bond. And if that's the case, then why would foreign investors and governments and national wealth funds want to invest in the United States? If the highest returns are likely to be made abroad, it'll weaken the dollar. That's going to raise prices and higher import costs, plus the tariffs.
And the result is that Trump is actually destroying America's financial free lunch of being able to run a balance-of-payments deficit without limit. But he's spurring the stock market. And as Adam Smith said: Wealth is very often most apparent in countries "going fastest to ruin."
Well, that's exactly what's happening in the United States. We're seeing what the classical economists realize: When you let the income be made not by production, not by industrial capital, businesses, or labor's living standards, but solely in a financial way, that is purely manipulative, and turns out to be anti-labor and also anti-business.
That's what's ultimately so destructive about Trump's Big Beautiful (Budget Deficit) Bill. And it makes a lot of free, easy money for the billionaires and those financial speculators and hedge funds and other capital funds. But in order to make money for themselves in this way, they're willing to sacrifice the actual business.
Because why would a foreign investor do what Trump has promised that he's going to do, and move their production facilities, their automobile companies, and others, into the United States? They can't, despite the high tariffs in the United States that keep Japan's cars out of the United States. And Trump says he's going to raise the tariffs on Japanese cars and other imports to the U.S. to 35 to 40%. Well, even if Toyota and other companies were to move their plants into the United States to avoid the tariff, they're going to have to pay a 20% tariff on aluminum, on steel, on the components that go into the car.
It's not going to work.
The whole bill and the logic that the economics profession is trying to popularize turns out to be junk economics that's going to be destructive because lower interest rates mean easier debt financing. That'll increase the stock and bond prices for the wealthy, not consumer prices. But the consumer prices are going to rise anyway because of the tariff policy.
And you can be sure that a lot of the tax cuts that are being given are going to be spent on buying up yet more real estate, concentrating the absentee-landlord-owned real estate at the expense of homeowners.
So they're ending the membership in the middle class that, as Richard just said, is supposed to be what America is all about.
So the effect of the giveaway to the financial sector is going to accelerate America's de-industrialization. And that's the dynamic of today's finance capitalism. And because it's the dynamic, that's why the big campaign donors — indeed, as Richard said — threw all their support behind him to make sure he was the candidate. And also, they must have encouraged the Democratic Party to lose, to throw the fight — by keeping either Biden or Harris — which guaranteed Trump's victory.
RICHARD WOLFF: Let me give you a different way of handling this. In many ways, the world's manufacturers are comparing the United States and the People's Republic of China as possible, or likely, locations for manufacturing industry. China, in recent years, has not imposed tariffs in anything like the way the United States has. It hasn't been changing the few tariffs it imposed because most of them are responses to what Mr. Trump did, if they happened at all.
The country is very stable. It has promised manufacturers that if you come to China, you will have access to well-educated, well disciplined, relatively low-wage workers, and you will have access to the largest and fastest-growing market in the world. They have consistently offered that to the world's manufacturers, and after much hesitation, the world's manufacturers took the invitation and went there, including many, many American mega corporations.
They voted with their feet that they preferred being in a country run by a communist party, which was the political adversary, more or less, of the United States, of which they were a company because that was a better deal than the United States could offer them.
What do we have now?
China is offering pretty much the same it always did, and doing a good job of giving reasons to go there. Their technology is now top of the line, the dispersion of their industry extraordinary, and their social stability equally extraordinary.
Whereas the United States? We don't know from one day to the next what the tariffs will be. We don't know from one week to the next what the value of the dollar in exchange will be. We don't know how long Mr. Trump will survive as president. We don't know what he'll do. We don't know what his successors will do.
So, yeah, if in that situation, all the cards say go to China, then what Mr. Trump is doing are marginal shifts that cannot change that process. That's what Michael has just explained.
Whatever he does, it's marginal to what all led to what we have now lived through in the last 30 to 40 years, which is deindustrialization. That's why we are cutting Medicaid and food stamps. Mr. Starmer in England is reducing the money laid out for people with disabilities, and the Chinese got an award for lifting 800 million people out of poverty.
Hello? There's a difference here. And that difference has to do with the totality.
No company is going to come here because of a tariff for a moment, or a value of the dollar for a while. There are too many other variables that they need to have under control that aren't under control here, or going in the wrong direction. An 18% drop in the value of the dollar. That means if you come here and you have inputs that are imports, what are you going to do? You factored that in?
Think clearly and you will understand. The biggest likelihood for a downturn in the American economy is the fact that we're going to have stagnation because the industrial foundation of this economy keeps shrinking, as do the recent numbers for manufacturing in this country.
The return of manufacturing has not happened. He promised it in his first administration. It did not happen. Mr. Biden promised it. It did not happen. Mr. Trump has promised it again. It still hasn't happened.
You have to now answer the question: Why not?
And that's because the totality of variables that any decision-making corporate executive uses says: Don't be crazy, don't undertake the costs and the risks of moving production to the United States, given the uncertainties and the instability of what is going on in the United States. And Mr. Herky-Jerky Trump's tariff policy and interest rate policy, only makes that worse.
MICHAEL HUDSON: Well, let's look at China's success and see: What is it doing so differently from the United States?
Why do American leaders accuse China of being America's existential enemy? They are singling it out as an enemy because it demonstrates that there is a better way of organizing an economy, and raising living standards, and creating prosperity, than the finance capital model that the United States and Europe are following.
And what China's doing is actually following the classical economics of industrial capitalism. They call it industrial socialism, but industrial socialism was the logical evolution of industrial capitalism already by the late 19th century. The idea of a free market, from Adam Smith's time to John Stuart Mill all the way through Marx, was a market free from rentier income, free from the landlords.
The first half of the 19th century was spent by the industrialists saying: We cannot compete with foreign countries if we have a landlord class that is going to block food imports in order to make higher farm rents for their agricultural land at the cost of higher food prices by the labor that we have to employ. You have to repeal the Corn Laws.
Well, that took 30 years from the time that the Corn Laws were imposed in 1815.
The economists then said: It's more than landlords. It's economic rent. It's the excess of prices over the real cost of production. And that cost can be not only for land rent, but for the monopolies. And the monopolies are created largely to help kings and parliamentary governments raise money to pay the war debts that they were running up ever since the 13th century.
And the final problem to be attacked was that banks in England and America didn't really play a role in financing industry at all. The whole idea was to change the financial system that actually financed industry.
None of that worked out. All of these hopes: What everybody expected to see, that economies would be socialized into a mixed public and private economy, they'd be regulated markets to get free of economic rent, so that people wouldn't have to deal with a class of wealthy people that made money without working and contributing to production in any way.
Well, it turns out that China's biggest, unique characteristic of industrial socialism has been to keep money and finance in the hands of China's central bank, in its own Treasury. So it's the government that creates money, not an independent commercial banking system.
And so China's banks don't lend for corporate takeovers. They don't borrow money to make dividend payouts or stock buybacks to push up their prices. The credit that's created based on the Chinese Treasury and the People's Bank of China is designed to build infrastructure, factories, and all of the things that China has been doing.
To the Americans, that's what makes China an existential enemy. If America were to do that strategy of raising industrialization, increasing employment and living standards, that would free the American economy from this billionaire class that we've been talking about for the last half hour. The billionaire class is — think of it almost as a tumor on the economy, as a parasite. They pretend to be part of the real economy of production and consumption. They pretend to be helpful, and even necessary, for industry to take place.
But they're not helpful at all.
They've led the de-industrialization of the country. And so, of course, what we're dealing with is almost a civilizational conflict now between a society, from Europe to the United States, run by billionaires who make money by de-industrializing the economy, and squeezing living standards, and driving the wage-earning force further into debt so that it can't afford to buy the products that it makes, on the one hand.
And then you have China's model on the other. And by providing this model — the antithesis of the American model — that's what today's fights internationally, including next week's BRICS meetings, are all about.
NIMA ALKHORSHID: Richard, I think we can bring in the case of BRICS and the conflicts we have — the conflict in Ukraine, in the Middle East, with China, all of that. How are these conflicts with the West going to be translated into the future of BRICS?
We have the BRICS summit here in Brazil. In your opinion, what are the main issues to be considered by this summit?
RICHARD WOLFF: The way I would begin this is to remind everyone of a really historic statistic that was released last week. And that statistic said that, for the first time, the total of trade within the BRICS community crossed $1 trillion. It had never done that before, and, for me, this is a summary of everything we've been talking about.
What the BRICS are — and at this point, I feel free to exaggerate a little bit because the line of direction is clear — the BRICS are becoming the economic alternative, the other context for Russia, China, India, Brazil, and South Africa, and the other countries that are involved. They are now in a position to do what they never could do before in at least three or four hundred years: namely, live and grow without a dependency on the United States or Western Europe or Japan.
And that is what this statistic shows.
They could find in one another the market for their exports and the source for their needed inputs that would enable them to have a growth path adequate to sustain those societies. That's never been true, in my judgment, before.
Part of the result of colonialism and its lasting economic achievement was to force Asia, Africa, and Latin America into a subordinate position in Western capitalism. So that whatever they might do, their dependence on that subordinated position would hold them back from doing anything that the West didn't want them to do, which included becoming independent.
Oh, they could become, after a while, independent politically, when that couldn't be prevented anymore — when the Mau Mau in Kenya and Mahatma Gandhi in India put an end to all of that — they were still subordinate to economic capitalism.
Now, for the first time, they have created an institution that was the dream of the Bandung Conference back in 1955, but could not be realized. Now it's realized. And the credit for that goes to China.
This has nothing to do with endorsing what happens in China or being critical of China, which you can be, and should be, in many ways. They have their flaws like everybody else.
But what they have achieved, no amount of pretense can be taken away from them. They now are able to say to the United States that the longer you act as a rogue nation in the world, the more we will build an alternative to you that will, in the end, isolate you. And you better be careful, lest the policies you choose accelerate your isolation rather than overcome it.
And I'll give you two examples.
The decision to push NATO all the way into Ukraine. The Americans understood it. The literature there is clear. They understood what they were doing. They understood that the Russians opposed it. They made that clear. They understood that the deal at the end with the unification of Germany entailed a commitment not to move NATO to Russia's border. When they did it anyway, Russia was too weak to do anything, when they did it in Poland or they did it in the Czech Republic, or they did it in Romania. But when they finally came to Ukraine, Russia felt it had the military means, but just as important, it had the BRICS. And that meant it could be free of its dependence.
The first thing that the Europeans and the Americans did, once the Russian military moved into the Donbass in February 2022, was to develop the so-called sanctions policy. They didn't need to develop the military. They had been working militarily with the Ukrainians for at least the previous eight years.
What was new, what was different, and what was thought to be decisive were the sanctions. Europe would no longer buy Russian oil and gas. If Russia was a gas station pretending to be a nation — a joke made in America — well, they would show them what happens to a gas station when no one stops by to load up with gas.
What they never counted on was the BRICS, that Russia could turn to two BRICS allies — India and China — and sell all the oil and gas it could pump; and thereby fund the very military operation that the sanctions were supposed to make impossible.
That was a miscalculation whose results we're living through: the de-industrialization of Europe because it doesn't have cheap energy from Russia anymore; the particular disintegration of the leading position of Germany, which was the dominant economy and is, now, with Britain, the basket case of the European economy… Wow, the cost of not understanding the BRICS!
And now the Chinese can make jokes about Mr. Trump's tariffs. If they can't sell in the United States, they have another place to go.
This is cataclysmic in its consequences, not just in terms of economics, but in terms of military struggles, political struggles, on and on and on. Israel cannot proceed against Iran if Iran's membership as a BRICS nation gives it access, as it looks like it does, to the support of Russia, China and India.
And of course, you have to have a ceasefire. Israel, I mean, that's not going to work: Israel has 8 million Jewish Israelis, and Iran has 90 million Muslims. You don't want to do that. You do not want to do that. Not unless you have the old colonial system. It's really the old colonial system that's finally dying.
And we have to understand that we have been living through 300 to 400 years in which colonialism has been the way the world capitalist system organized itself. It shouldn't have, didn't have to, but that was the way it developed. And now those chickens are coming home and the world has changed.
And the BRICS that meets next week, having achieved the milestone of a trillion dollars worth of trade among them, is in the driver's seat.
And the United States is watching because that's about all it can do.
MICHAEL HUDSON: Well, President Trump certainly agrees with you, Richard, about the BRICS and China, what you just said. I've also been saying it, and I think we've been saying it on Nima's show.
Trump has been threatening this week and next week. He says he's threatening countries that trade with China by imposing very high tariffs to deny them the U.S. market. Well, as you point out, the United States isn't the only market, and the market it has is shrinking anyway. So, of course, this is going to lead China to work with other Asian countries and global south countries to develop the market.
Trump is also imposing sanctions on Russia. If countries don't impose trade sanctions on Russia, they're going to have very high tariffs. I think, for China, he said the tariff will be 500%. That's five times the price of the imported good if you trade with China. This really is, for Trump, a conflict of civilizations, and he's betting everything on it.
And you're right. What is he defending? It's financial colonialism.
And although, quite rightly, this is no longer the old colonialism of military occupation and settler states that you've had from Africa to South America to North America, it's still very highly military. And as we've discussed before, the military arm is the final threat that America has against other countries to enforce its policy.
Well, to do that, you need an enormous military expenditure. And if you look at the United States and also Europe, the leaders of the stock market are the military firms. This is called Military Keynesianism. Trump's bill, I think, is leading to a trillion dollars to be spent on building the Golden Dome, his version of Israel's Iron Dome, to protect itself from Russian missiles — if they go very, very slowly. But Russian missiles don't go very, very slowly. It doesn't work.
The whole strategy is so transparently just a means of spending the largest element in the budget for arms and products that don't have a function, except to make profits for the investors in these companies. That's yet another element in America de-industrialization for all of this.
But it's also very dangerous because it's threatening the whole world. If you're going to have all of these arms, you're going to try to use them sometimes. They don't work, and you're going to lose, just as you're losing in Ukraine. But that's the policy we have, and it's a bipartisan policy.
Democrats and Republicans together all have pretty much the same donor class funders for deciding who's going to be on the ballots when you vote in November. So that's really the problem.
The BRICS and China are not only breaking away with trade and investment in the United States, they're creating a different kind of economy. And that's really what Richard and I have been talking about for most of our lives: a socialist economy as opposed to a finance capitalist economy.
RICHARD WOLFF: Yeah, I should also remind people that the United States, once, as the empire, had what its supporters like to call things like ideological influence, or cultural hegemony, or, you know, a lot of words — soft power — words like that.
And there is a great anxiety right now in Washington. I don't want to minimize this. Mr. Trump doesn't have a clear sailing.
There's a great deal of anxiety that, for example, eliminating USAID, whatever you think of it, is damaging American soft power. It was an agency that did some good around the world — hyped the good it did for the maximum amount of publicity you could get for it — but those are parts of what successful empires do. It made sure that when votes came up in the United Nations, it could mobilize pretty much the whole world to vote in a particular way, to make it look like what the United States was doing was globally supported.
All of that is gone now. One of the reasons they're giving all the money to the military is their economic influence is shrinking and their political influence is shrinking.
Really, one of the few things they have is the ability to keep being the number one military power, at least by the amount that they spend. There's a famous statistic, been well known for the last 50 years, that the United States spends more on military than the next nine countries, together, spend. And those nine include Russia and China, and the remaining ones are all allies of the United States.
So, with this overwhelming predominance, you're getting a mentality that shouldn't surprise you: that the military has to be what we celebrate, and focus on, and rely on.
And I think you could see it coming up when a decision is made, a week or so ago, by Mr. Trump — unilaterally — to bomb Iran, a country with whom we were not at war, which had not declared on us, nor we on them, that we were in the midst of actual negotiations with. Mr. Trump suddenly hit them with a bomb, and then immediately the next day said: Now let's sit down and talk.
Well, that is a use of the military to intimidate, and to shape, and to control, what's going on. And maybe it'll work for a while, but it is the last card they have to play. And it should be understood in that light.
And that's why the BRICS is important. And I need to say to some of my fellow economists: This is not an argument that the BRICS represent the socialist future, or that the BRICS are homogeneous. They're not. Mr. Modi in India is a different thing from Xi Jinping in China. And they're both very different from Lula in Brazil, and so on. They have enormous differences, as an international collection of 25 countries would have to be.
What I'm focusing on is the project they all share. That's what's remarkable. They haven't been able to do that in the past. They haven't overcome all of their differences to be able to do that in the past. They are now being caught up, in my judgment, in this historic moment of the final end of colonialism that they know they've been fighting all of their lives.
They know the end is in sight.
And the United States is a society devoted to not seeing what I just said.
That's why, in the last presidential election, neither Mr. Trump, nor Mr. Biden, nor Kamala Harris, ever said a word about a declining empire. This is the greatest example of collective denial that you could ask for. But for just that reason, it jumps out at those of us who don't need to deny it. We see it all too clearly.
MICHAEL HUDSON: Well, what you're saying is that the BRICS and the other countries, despite their differences, they're reinventing the wheel. And what's so striking is that the wheel that they're reinventing is very much like the revolutionary impact of industrial capitalism that it had in Britain and the rest of Europe. The British had to deal with the problem that there was land rent that was taken by their landlord class. There isn't a landlord class; they got rid of it. But the BRICS countries have something much like a landlord class, and that's the foreign investors in their subsoil wealth; foreign investors in their oil, their mining, their forests.
RICHARD WOLFF: And, Michael, what you specialize in: their heavy international debt.
MICHAEL HUDSON: Yes, that too. But I want to focus, first of all, on the fact that they're dealing with the rentier class — that England and Germany and the industrial capitalist countries of the 19th century had to deal with — [it] was domestic. But the BRICS have to deal with a foreign capitalist class. That's what makes financial imperialism so different and independent from colonialism. The monopolies, because the attempt to finance their economy when the foreign investors take all of their natural wealth rents for themselves — instead of leaving it as the tax base for their own countries — means that the government doesn't have enough money to build the infrastructure necessary to make a balanced economy like the industrial capitalists.
And so they run a budget deficit and a balance of payments deficit. They have to borrow from the International Monetary Fund, or else see their currencies plunge and their inflation going up. And that requires them to sell off their natural monopolies — their communications, their transportation infrastructure — all the things that were kept in the public domain in the mixed economies of Europe and the United States. Well, of course, once they sell this off, the monopoly rents have to be sent abroad, along with the land rents.
And finally, as you point out, the debt service. Once you borrow from the IMF and from bondholders to finance the balance-of-trade deficits that you've suffered as a result of letting the United States and Europe impose a neoliberal model that doesn't work, then you're left without national self-sufficiency and sovereignty anymore.
The BRICS countries are trying to — for the first time — achieve the sovereignty that they have not been able to achieve by running into debt, by not being able to tax foreign investment in their natural resources, by not being able to tax monopoly rents from the public utilities that they've had to sell off.
All of this had to break down at a point. And Trump has catalyzed all of this breakdown because, by imposing tariffs on these countries, they can't pay their foreign debts anymore. The United States is going to treat this as an existential threat and do everything it can against them.
So now they think: Well, why don't we do what made industrial capitalism work so well in its take-off? Why don't we impose rent taxes on foreign investors in our national resources? Why don't we nationalize the monopolies by passing antitrust legislation? And why don't we just realize that the debts that we've run up have been run up as a result of financial colonialism, not our sovereign decisions, but their odious debts.
That's the fight that we're going to see, is the inherent logic of the situation.
RICHARD WOLFF: We've already seen that in recent years. There are movements around the world to cancel the debts. There is a reminder for those who take seriously the religious histories that almost all religions many centuries ago understood how we began today's conversation: that unbridled inequality, if allowed to continue, destroys the community, destroys whatever social cohesion holds us together.
So they developed, and attributed to whatever deity they believed in, the commandment for a Jubilee year, for every 10 years, or every 20 years. It varied. You would take the land and redistribute it. If you happened to have gotten a good piece of land that made you a rich person, in the redistribution, that land would go to whom? It would go to a person whose land didn't get enough rain or didn't get enough soil fertility, and that way the rich would become poorer and the poorer would become richer. And no one would become crazy about accumulating wealth because you are getting every day closer to the time when you would lose it anyway.
It just transformed the whole relationship of people to accumulated wealth.
And the irony is, of course, the same religion, once capitalism comes, has to get rid of that, and does get rid of that, because it would undercut the whole notion of the value, the incentive value, of becoming rich, which was their argument, which would justify the endlessness of exploitation.
All of that is coming to an end. That's what it means to be at the end of an empire. The really interesting question, which maybe we should take up, is whether the end of the U.S. capitalist empire, is it the end of capitalism itself? Or not? That's like asking: Is China the next empire? Or will the Chinese bring us a multinational community, which was after all the ideal of the League of Nations, the United Nations, and people who wanted to see peace as the rule of law, rather than violence, which is what we have now.
NIMA ALKHORSHID: Thank you so much. Michael, do you want to add something?
MICHAEL HUDSON: No, I've been saying the same thing that Richard has been saying. We're the two people who were saying this because we're taking the long historical point of view. And what Richard has just described is what Confucianism was all about: rulers were supposed to keep the peace. They were supposed to keep the population satisfied enough so that they did not revolt. And again, they're reinventing the wheel now.
It's a different mentality from America's bully mentality: If you don't let us take all of the wealth for ourselves, we're going to hurt you.
I don't think that was the philosophy of any earlier religion, which was the ideology of their societies. It's Western finance capitalism, or whatever you want to call it, that has diverged from this core of civilization from the very beginning. So, in a sense, you could say that the BRICS and China and global majority are moving back to this central norm, leaving the United States and Europe isolated, unless they join the movement of history, instead of accusing this return to civilization as being a clash of civilizations, as if the U.S. and Europe is actually a self-sufficient civilization, instead of barbarism. The world will choose socialism, not barbarism, as Rosa Luxemburg put it.
RICHARD WOLFF: Well, I would add that we should remember one more historical reality. Successive kings of France accumulated wealth. But when the accumulation of wealth reached absolutely insane proportions in the 18th century, when you would have unbelievable urban poverty in Paris, and an hour away, in Versailles, you would see, as you can still see today, the most spectacular collection and concentration of wealth imaginable by the last king. He's also the one who got his head chopped off. That's how that story of the accumulation… you know.
And when you watch Jeffrey Bezos take over the city of Venice for two weeks of indulgence of his wedding, when he arrives at the port in his $500 million dollar yacht, that's what we're watching. We're watching this eon's Versailles. And we're going to get the next step of it, likely, also.
MICHAEL HUDSON: Well, the question then is: Can this return to civilization that we're talking about be done without a military confrontation? Is America actually going to war with China? It's trying to stir up fights against China, with Taiwan, with its neighboring countries. It's trying to stir up fights in Central Asia against Russia.
China was able to make its reforms because there was a revolution in 1945.
And when China emerged as a country in 1949, they didn't have a financial class. So, of course, the government had to create the money. But that took a revolution.
Will it take a revolution, a defensive revolution, for the BRICS, and this higher civilization, to emerge?
Because the violence will not be on their part. Marx pointed out that there would probably be violence by the privileged classes, the rentier classes, by the landlords and the wealthy against the people attempting to get a revolution, as you saw in the Paris Commune in 1871. It's the people who have made wealth without working, who know that there are parasites who are willing to fight so hard, and so violently, to preserve their claims on wealth that consist of the ability to impoverish the rest of the population below them.
RICHARD WOLFF: Yeah, and you have to wonder whether that isn't matched by the military thinkers who tell us that looking, as a military person, at China over the last 40 years and the United States, one is crystal clearly ascending, and the other one is crystal clearly descending. And what that means is time is on one side, and not the other.
And what will that lead the military of the United States to contemplate?
NIMA ALKHORSHID: Thank you so much, Richard and Michael. Great pleasure, as always. Have a great time. Bye-bye.
Transcription and Diarization: hudsearch
Editing and Review: Kimberly Mims