An Interview with Michael Hudson
Pulished on Counterpunch, by Mike Whiney, September 8, 2008.
… What do you think the positive effects would be of taxing property rather than income and industrial profit?
Hudson: It would have two major positive effects. First, it would free labor and industry from the tax burden. And by the same token, it would require the economic rent currently used to pay interest and depreciation to be paid instead as a property rent tax. This would free an equivalent sum from having to be raised in the form of income and sales tax. That was the classical idea of free markets.
As matters stand today, the tax subsidy for real estate and finance leaves more net rental income to be capitalized into bank loans. This is a travesty of the “free markets” that lobbyists for the banks and the wealthy in general claim to advocate …
… With regard to your abhorrence of economics, some of my best students at the New School withdrew from the discipline as they found that it wasn’t addressing the problems they were most concerned about. The field has been sterilized by more than a generation of Chicago School intolerance.
The economics profession does not seem to be amenable to reform along the lines that would get you interested in it. It has become mainly a rhetorical gloss to depict financial oligarchy as if it were populist economic democracy. Many people have tried to expand its scope, and have failed. Thorstein Veblen made an attempt a century ago, his analysis – basically, classical political economy – was exiled to the academic sub-basement of sociology. Economists preferred to put on blinders when it came to looking at wealth distribution and the classical distinction between “earned” and unearned” (that is, parasitic) income. Just while sex was becoming un-repressed, wealth distribution became the new politically incorrect topic to discuss.
In the old movies about invaders from outer space such as The Thing, there usually was a near-sighted scientist who said, “Let’s try to reason with it. It’s smarter than we are, because it’s come in a flying saucer with all that great technology.” The monster from outer space then would simply whack the man aside, killing him brutally.
It’s much like the Terminator from the future. “It doesn’t feel compassion. It doesn’t feel pain. You can’t reason with it,” says the movie’s hero. “All it does is kill.”
This is the task the Chicago Boys have taken on in their defense of financialized markets as being “free.” You can’t reason with them.
Reason is not their job. They are not there to be fair.
But to achieve its censorial role, today’s economic orthodoxy pretends that markets work in a fair way to provide everyone with opportunity – something like a sperm with a chance to inherit a billion dollars from a Russian kleptocrat or American real estate magnate or Wall Street operator. To promote this worldview, one needs to craft a rhetoric pretending that markets are “free,” not leading to serfdom. One has to pretend that is government regulation of the kleptocrats that is leading to serfdom rather than protecting the population from predatory finance.
Regarding your concern with the police state and, ultimately military aggression that is required to promote “free markets” at gunpoint, Pinochet-style, empire building always has gone hand in hand with impoverishing the population of the imperial center as well as its periphery. For starters, empires and wars don’t pay, at least not in modern times. At best, it is like the war in Iraq – a vehicle for the Bush administration to channel billions of “missing” dollars to its campaign supporters, to recycle back into new Republican campaign funding. The economy at large is taxed as imperialism turns into asset stripping.
A second and more purely political dimension of imperial warfare is to distract the attention of voters away from economic issues, by appealing to their nationalism and chauvinism.
Hobson’s theory of imperialism was that the domestic population lacked the income to consume what it produced, so that producers had to seek out foreign markets. This led to war. But today, the “postindustrial” mode of imperialism is more about recycling wealth to produce capital gains, mainly by globalizing and privatizing the Bubble Economy. The most important markets for “wealth creation” are not for goods and services, but for real estate and financial assets. So we are brought back to your initial questions today, about how Fannie Mae and Freddie Mac will sponsor more sales of mortgage-backed securities.