NIMA ALKHORSHID: Hi everybody. Today is Thursday, May 29, 2025 and our friends Richard Wolf and Michael Watson are back with us. Welcome back.

RICHARD WOLFF: Glad to be back. Thank you.

NIMA ALKHORSHID: Michael, let’s get started with you. How is the current global fracture between the Western economies and the global majority similar to the industrial capitalist revolution in 18th and 19th century Europe?

MICHAEL HUDSON: Well, before explaining that, I should give a little prefatory note. Both Richard and I are classical economists. We follow the value theory that was developed by Adam Smith, Ricardo, and John Stuart Mill, and others—those whose analyses led up to Marx. The problem is that the modern economic curriculum doesn’t talk about the value theory, the price theory, and the rent theory that classical economists developed. The only people talking about this are Marxists. 

So it’s ironic that we’re both classical economists but we’re called Marxists. We identify ourselves with Marxists because Marx wrote the first history of economic thought, his Theories of Surplus Value, where he talks about how the classical analyses of the Physiocrats, Smith and the others—their value theory and their price theory—all led up to the problems he discussed in Capital. He devoted Volume One to his additions to their theories, but Volume Two and Volume Three describe the rent theory, the financial theory, and the real estate theory that led up to all of this. 

It may surprise a lot of viewers to know that we believe in the classical free market. But what the classical economists meant by a free market was something free of the vested interests carving out incomes for themselves that had nothing to do with the production process and are barriers to the success of industrial capitalism. 

It was the role of classical political economy to develop value and price theory as a tool to isolate economic rent—unearned income—which was the task of industrial capitalism to end in order to make Britain the workshop of the world, and in order to enable France, Germany, and industrial powers to become the industrial powers they became. 

The classical industrial strategy was based on classical economics and political economy. That’s what made industrial capitalism itself so revolutionary in clearing away the vestiges of feudalism. And that’s, in a way, what the BRICS countries are facing today in trying to develop their own plan for their own markets. This is to free themselves from the legacy of colonialism and from the U.S. centered neoliberalism that has dominated government policy all throughout the world and is imposed by the World Bank, the International Monetary Fund, and the economic mainstream.

So our position is that the BRICS countries are facing a problem that’s very similar to that faced by Europe’s industrial capitalist countries in the late 18th century as it was understood by the French Physiocrats and Adam Smith (who was influenced by them)— through to the end of the 19th century. Britain, France, Germany, and others had to cope with the vested interests carried over from feudalism. 

Today, the BRICS countries have to confront a similar legacy—this legacy of colonialism and foreign investment and client oligarchies who have ownership of their raw materials resources, their land, their privatized public utilities. These are all burdens on them preventing them from developing in a way that, for instance, enabled China’s growth to be so successful. So what we want to talk about is this, which is going to be the political issue that is driving the BRICS countries over the next few years. 

It took an entire century for industrial capitalism to try to clear the vested interests of real estate, banking, and monopolies. And in the end, it failed. There was an anti-classical reaction that we’re still living with today. We want to describe how the BRICS countries can follow this value, price, and rent theory to free themselves from unearned income, from all these classes, foreign investors and domestic rent seekers that have nothing to do with the production process and are blocking them from devoting their fiscal revenues, their government revenues, their foreign exchange earnings, and their foreign trade to industrializing. Maybe I should let Richard say a few things here.

RICHARD WOLFF: Before I do, I want to take my hat off to Michael, not by way of mutual celebration, but because this is a very important thing to have figured out. What the BRICS nations and China are doing now is analogous to, has lots of parallels with, what the initial Western European break from feudalism was all about. They are trying to achieve for themselves a comparable breakthrough with the improvements in income and so on that went with that. 

The people who made the revolution back in the 18th and 19th century in Europe now occupy the opposite or the reverse position. They are the new feudal lords against whom they revolted but which they have now become. And the Global South has taken over the historically progressive and dynamic moment. 

Notice I’m not talking about socialism yet. That’s another issue. Socialism is the recognition that even what they’re doing isn’t going to get them what they hope it will. You know, Marx looked around in the middle of the 19th century and said, ‘I love the slogan of the French Revolution: “Liberty, Equality, Fraternity”. And I love what the American Revolution added to that—democracy.’ And I understand that the leaders of the revolt against feudalism promised that, alongside the end of lord and serf, replacing that with employer and employee, there would come, as a fantastic social benefit, liberty, equality, fraternity, and democracy. 

But I have to tell you, said Marx, writing in the London of Charles Dickens, that we don’t have liberty, equality, fraternity, and democracy. What capitalism promised, it could not deliver. And that has been true ever since. And so Marx’s project, if you allow me to say such a thing, was to answer the question, “Why did capitalism fail to deliver on the liberty, equality, fraternity, and democracy it promised?” 

That’s not to question the sincerity of the promise. It was sincere. Robespierre meant it. Thomas Jefferson, in his way, meant it. But they couldn’t do it. They couldn’t get it done. And Marx’s answer, which makes him so important, is that capitalism itself is the barrier to realizing liberty, equality, and don’t look elsewhere. Don’t look outside. It’s right inside.

There’s something that capitalism preserves that prevents it from overcoming the autocracy, the slavery, all the rest of it, of previous history. And that is the fact that there’s something frighteningly similar between master and slave on the one hand, lord and serf on the other hand, and on that famous third hand, employer and employee. You’ve kept that dichotomy. And in the retaining of that dichotomy, a minority at the top, a vast majority at the bottom, you have precluded liberty and democracy. You’ve created a hundred years or two hundred years of honest, good, well-meaning people trying to overcome inequality and all the rest of it, unable to succeed because they haven’t absorbed Marx’s lesson. 

If you want liberty, equality, fraternity, and democracy, you’ve got to get rid of capitalism. Otherwise, you’re foredoomed. You will fail as we have. Every time you read about Elon Musk, you’re staring failure right in the face. Okay? So what Michael has done is focus us even more beyond that. He’s helped us to identify landlords—because I really want to go through it a little bit—landlords, monopolists, and bankers. Now, what role did they play that had to be overcome? 

Well, the answer is given by the reaction that happened once classical economics really hit its stride. And that’s what we call the neoclassical revolution, dating around 1870 and 1880, when in Europe you have an explosion of socialism that questions capitalism and that uses Marx’s version of the labor theory of value to make its case to say that the world is divided between the proletariat that produces a surplus and the capitalists who take it and use it to reproduce that situation, that way of organizing the economy. That’s why the workers are forever without resources and in trouble. 

And, you know, the answer is always that the capitalists have cornered the surplus and are using it to keep the surplus, which is not surprising—or shouldn’t surprise anyone. And so one of the ways that this is done is by creating these special classes of people. And that’s where the beauty of the analogy with feudalism comes in. The landlords! 

Marx was at his humorous best when he simply taught us—you know, the working class has always understood: Why are we paying landlords a rent? They didn’t create the land. They had nothing to do with producing the land. And you know, if we stopped paying them, that wouldn’t mean the land disappeared. The land is there. That’s what we need. We don’t need the landlord. 

Paying him simply removes a part of the value created by workers from being available to develop their economy and instead supports an extravagant lifestyle for people who are effectively parasites on the system. Monopolists are doing the same thing. They are getting a payment for what they sell beyond what it costs to produce. They shouldn’t be getting that money. That money is then withdrawn by them for whatever it is they think they would like to do, but it’s no longer available to the workers and their industrial capitalists who presumably would use it otherwise. And the same is true of the bankers. 

The working class has often been confused between the industrial capitalist who takes the surplus from them and the moneyed capitalist who sits and watches the whole process and collects his interest. But the rent, the monopoly price, and the interest are deductions of a surplus produced by the workers that could be used otherwise. And the revolt of classical economics was to show that. The counter-revolution of neoclassical economics was to obliterate that understanding, to make everything a question of supply and demand. If there’s a demand for it, well, then it must be valuable. The capitalist demands workers. See, they’re valuable. The banker demands interest. It must be valuable. 

There we go. We have fudged away the surplus. We have fudged away everything the labor theory of value helped us to see. And the neoclassicals double the horror because they’re proud of not paying attention to the labor theory of value. For them, this is an achievement of greater theoretical precision. Whereas for us, it’s the obvious effort of a system that is no longer dynamically moving society forward, but is now entrenching parasitical elements that will be a problem for our societies as long as we allow them to exist.

MICHAEL HUDSON: Well, the key word that Richard has used again and again in what he’s just said is “value”. Marx pointed out that what made industrial capitalism so revolutionary was that it wanted to strip away from the economy all of the claims on income that didn’t reflect value, which was defined as a necessary cost of production. It was ultimately resolved by the cost of labor, according to Ricardo. 

But the fact is, if you were looking at, say, what makes monopoly rent, it’s the charge over and above the necessary cost of production that the monopolists face. Although capitalism was revolutionary in wanting to get rid of the landlord class, it recognized that rent was always going to exist. 

Some land is on a site that is more valuable than others. That’s what makes the same houses in some neighborhoods much more expensive than others. And that’s because there may be parks, there may be nearness to transportation, there may be museums, there may be all the things that public spending adds. Well, capitalism was revolutionary in wanting to get rid of all of the unnecessary costs of production—what Marx called the “false” class of production—and of economic rent to the landlords. The rent is going to exist, but that should be the tax base. And if rent is a tax base, then you’re not going to have to tax labor and industry.

As long as the landlords controlled the governments of Europe, which they’d done ever since feudalism, they were going to avoid paying taxes themselves and they were going to force labor and industry to pay the taxes. The industrialists said: “if we have to pay our wage earners enough money for them to be able to pay economic rent to the landlords and monopoly rent to the monopolists and then run into debt and pay interest to the banks, then we’re not going to be able to be competitive internationally”. Britain cannot be the workshop of the world as long as it doesn’t have political reform to end the landlord’s control of the government and its tax system. All of that was revolutionary. 

The idea of industrial capitalism was to streamline the cost of production. And it turned out that doing this was a precondition for a free market, that is, a market free from economic rent, to begin to evolve. And, as Richard has just explained, this would solve the aims of the Industrial Revolution for the industrial class but didn’t address the problems for the vast majority of the population that was increasingly the wage-earning class, along with the agricultural class. 

Marx believed that once you had freed markets and economies from the power of the rent seekers, they would naturally evolve into socialism. So while socialism went beyond capitalism, it was capitalism that Marx saw as evolving into socialism. This evolution, Marx said, was going to begin with the government supplying the means of production for all sorts of basic services, such as public utilities, communications—all the things that Europe certainly started by keeping in the public domain—the post office, transportation, all of these basic services. 

The Europeans, and the Americans following them, realized that if you leave these services in private hands, then the private owners are going to charge monopoly rents over and above profits. They’re going to become exploitative. And so industrial capitalism needed an active role of government to replace the monopolies that had been created during the medieval period largely to provide governments and kings with the money to pay bankers for the foreign debts that they ran up to finance their wars. 

Banking was basically aimed at arranging war financing and government financing. Banking did not play a role in the early Industrial Revolution. Bankers didn’t help finance the steam engine and the mechanization of production. That was done by the industrial capitalists. They wanted government support for this industrialization. 

They, of course, didn’t want to have to raise the wages they paid but they realized that labor needed high wages in order to be productive, in order to become industrial labor. And the high wages took the form, very largely, of cutting the cost of living by these governments playing the role of receiving the land rent, so that it didn’t have to tax labor. So labor didn’t have to pay landlords and wouldn’t have to pay monopoly prices. 

The whole idea was to streamline the means of production. And that was what the economists meant by a free market. Well, what Richard has just said, there was a counter-revolution against this and when people like Frederick Hayek and Margaret Thatcher talked about the free market—with something called The Adam Smith Institute-it meant a market free for rent seekers, for landlords, for monopolists, free of any government regulation to prevent rent interests. And so industrial capitalism in the 20th century, accelerating in the 1980s, became the antithesis of the revolution that industrial capitalism sought to create. 

Well, how are the BRICS going to cope with this? What they need to realize is that although industrial capitalism failed in the West, they have to ask how they can proceed in a way that it succeeds in what they’re doing? How do they free themselves? Well, take the issue of land rent, natural resource rent. Foreign investors play the role in the BRICS countries and the global south that Europe’s hereditary aristocracy did in Europe. They invaded, they took control of the natural resources and revenue. And while Britain, France, and America were all for getting rid of economic rent in their own economies, when they established colonies and tried to economically to take over what became the Global South countries – that was all about rent seeking. 

They wanted to grab the natural resources and get all of the natural resource rent, which was just like land rent, as Ricardo described in Chapter Two of his On the Principles of Political Economy. These principles were developed right after the Napoleonic Wars ended as an outline of what Britain had to do to now get rid of the Corn Laws, get rid of agricultural protectionism, get rid of the power of landlords over the government, and to have parliamentary reform to essentially support industrial capitalism against these vested interests. 

Well, the classical economists had a solution. Even if foreign investors retain foreign ownership of the natural resources, governments have the ability to pass a tax on economic rent, on unearned income, as distinct from wage income and industrial profits. Marx considered industrial profit an element of value because the industrial capitalists did play a role in production. 

The industrialists organized production, developed markets, did all sorts of things in order to compete with rivals abroad and to create markets for themselves throughout the world. But in order to continue to compete, in order to become really competitive, whether it was against their will or not, industrial capitalism had to evolve into socialism. 

Not only did Marx think that, but everybody in the late 19th century thought that they were going to see socialism of one form or another. There was, as we said before in the earlier shows while Richard was in France, there was Catholic socialism, Christian socialism, non-Marxist socialism. There were all forms, but there was a general idea that you needed a mixed economy, an increasingly active government public sector alongside private production in order to prevent the monopolists, the landlords, and the bankers from the rent-seeking that would have prevented industrial economies from being productive. 

Well, the same with what the BRICS countries would need. I didn’t mention banking before, but the BRICS countries would need to do what China has done: have banking create money and credit. Not simply to make profits by taking over industrial companies and creating monopolies as the mother of trusts, and then backing those opposing land taxation because they want landlords to make enough money in order to pay the government interest on the mortgage credit that enables new buyers of the land. 

Well, the key move that China has made and that the BRICS countries need to emulate is keeping banking as a public monopoly, a public creation of money and credit so that it will be used to finance actual industrial and agricultural and government infrastructure investment, not predatory behavior of the banks of Europe. 

Well, this fight was fought out in Germany in the 19th century, but the banks fought back. At any rate, these classical concepts of value, price, and rent, and the use of value theory to define economic rent as unearned income that economies need to get rid of is a precondition, not only for capitalism, but of socialism as well. That’s what makes that essentially the task of the BRICS economies today, I think.

RICHARD WOLFF: And look, not understanding this-if I could add, Nima—not understanding this leads you into the following conundrum. The denunciation in the West of China is precisely that the Chinese are doing, for example with their credit system, what Michael just described. They are not allowing it to function as though it were in some way equivalent to the way it functions in industrial capitalism. 

It’s not going to be privately owned. It’s not going to be driven by some narrow definition of whatever you call profit and maximizing-none of that. It’s going to solve the social problem, which for them has been, not being the poorest country on earth, but becoming a decent, modern, middle-income country, which they have accomplished in one generation. Nobody has ever done that before. 

But the denunciation is a double irony. It misses their success, and it guarantees the failure of the West, because it can’t do that. It—the West—has no way to mobilize its resources in a comparably focused way on economic growth. And so it will lag behind, leading to all the troubles. 

We read this morning in the press that the United States government has decided there are yet other kinds of equipment it will not allow American companies to sell to China. It’s not going to stop the process. It misunderstands the structural issue. It will be as big a failure as going to war in Ukraine has proved to be, or the war in Vietnam proved to be, or the war in Iraq proved to be. 

You’re not thinking clearly, not because you aren’t smart, but because you took out that labor theory of value, which was developed—again, because Michael said it, and so few people understand it-it was developed not by Karl Marx, but by Adam Smith and David Ricardo and there were other precursors beyond that. Marx took it in a different direction, for sure.

But he owed it to them, which was a debt he acknowledged in those books that Michael referred to in The Theories of Surplus Value, where he says over and over again what an important breakthrough it was when Smith and Ricardo got their hands on that labor theory of value. And what Michael is saying is that we have to read the history of economics differently because it’s crucial to getting ourselves straightened out where we are today. 

My debt, a little different from Michael’s, my debt is to a French philosopher named Louis Althusser, whose most important publication, virtually unknown in the United States, is a book in French called Lire le Capital, which translates into English as Reading Capital. And he meant by “Capital”, the book. He comes as a philosopher and says, “What is this book doing?”  What is the problem this book addresses? What is the project? 

He says it in his own language, which is a philosopher’s. He was a professor of philosophy. What his language is, is different. But what he reaches is a conclusion charmingly parallel to what Michael opened us up to today with that rendition. He says, look at what they’re trying to do. Oh!—and then he opens up. If you read this stuff in Althusser and then you go back and you say you had that Eureka moment, that’s what this book is about. It’s not about this or that detail. It’s about a different way of understanding what’s going on.

By the way, if you want to know why Marx’s Capital isn’t taught in the United States, it’s because it’s a different way of understanding what’s going on. And it’s very important for this system not to have that publicly discussed, publicly explored, or criticized. That’s all fine. Find shortcomings in it. There are plenty of them there. This is not a loyalty game. This is a game of saying what kind of society would enable the achievement of scientific breakthroughs which it then buries. What kind of a bizarre society must we be living in to do that? It’s not something to be proud of. It’s something to scratch your head and wonder why.

MICHAEL HUDSON: Well, Adam Smith today would be called a Marxist because he urged changing around the tax system to tax the landlords and not labor and capital. Remember, he accused businessmen of seeking monopolies. And if you want to prevent that, well, with anti-monopoly legislation, that’s called Marxist. Every reform that the classical economists urged in order to free markets is called Marxist today. 

So what are Richard and I to do? The only students who are being taught economics are being taught economics by Marxist professors. That’s the only exposure that they get to what Adam Smith, John Stuart Mill, Ricardo, and even Thomas Malthus actually were talking about. 

The whole strategy of industrial capitalism was summarized by Marx and that’s the strategy we’ve been discussing and is very embarrassing to the rent seekers who say, “no, no, no, don’t say that landlords don’t earn their money”. It’s true that landlords don’t just receive rent in their sleep, as John Stuart Mill said. They play an active role. They decide who to rent to. And they pay lobbyists to help the government understand that rent is productive. 

That’s why our GDP accounts and our national income accounts count rent as a contribution to product. But it’s not a product. Marx is very clear. He distinguished the production economy, product and consumption, from the unproductive economy, the circulation economy. That’s the same thing that other economists who criticized monopolies, the German reformers who industrialized banking, wanted to prevent— banking playing an unproductive role. 

But what happened after World War I is that instead of what Marx expected and what he described in Volume 3 of Capital, instead of banking being industrialized, industry was financialized. And that became a counter-revolution in the sense of being against the revolution in value, price, and rent theory that had guided industrial capitalism. That’s the way of thinking.

If you think of price as the unnecessary excess of economic rent over value as the necessary cost of production, that leads you to strip away all of the special privileges that landlords have, that monopolists have, and that other rent-seeking people have. You have a free market in the classical sense of Adam Smith and Marx and Richard and me, not the Hayek theory that, well, if you want freedom then get rid of government. 

Industrial capitalism led to a government strong enough to tax away economic rent, strong enough to take monopolies into the public domain to produce basic needs and basic services as public services to be subsidized and provided freely—like education, instead of having to charge for it, like transportation, like medical care and public health. Well, all of these were conservative policies in the 19th century. Benjamin Disraeli said health, health is everything. Disraeli and the classical economists would not support Obamacare and the enormous overhead of health care in the United States. 

This is what really distinguishes the kind of economic reform that industrialism promised but failed to achieve because it failed to prevent this intellectual counter-revolution that was sponsored by the political counter-revolution of the landlords, bankers, and monopolists fighting back against the industrialists’ idea of a low-price, efficiently run economy. And so it was left to socialist China to streamline this, and we’ve seen the difference in practice.

RICHARD WOLFF: Let me show you how this works out, folks. The most successful investor in the United States over the last half a century is a man named Warren Buffett. He recently retired. He is an elderly gentleman now, a billionaire, etc. And he was always asked one question throughout his career: why are you so successful? Why, in his Berkshire Hathaway corporation, did he assemble the right shares of stock at the right time to become a multi-billionaire, blah, blah, blah.

He never hesitated to answer. His answer—yes, in the language of economics that he’s used to— he said, “I always focus my investment as follows. I look for a company”. And now—in his language—that has a dominant position in its market’. Okay, that’s a nice way of saying “a monopolist”, somebody who’s in a position to jack the price of whatever it is they produce way above what it costs, and to then parcel out that wonderful revenue to whoever made it possible. 

That’s what he did. So he invested, based on a hunger for monopoly in modern capitalism. And he made a lot of money because he bet correctly that those companies in a position to dominate a market, that is to charge more than the cost of reproducing whatever it is, is where you want to be to collect the money in the way this capitalism runs. Wow. 

That’s why he’s big in banking. He’s big in insurance. He’s big in all those things—railroads that have an effective monopoly on where they run. Those are the things he’s made a ton of his money on. It’s an illustration of what Michael is trying to say. And a society that does that is siphoning wealth away from economic development to sustaining these special groups. And that’s what Adam Smith and Ricardo hated about the feudal landlords. They siphoned away wealth emerging out of feudalism that couldn’t be used to develop the English or French economies because it was being spent in the frivolous consumption craziness of that period of French history.

I just came back from France. If you travel along the Loire River, which is not so far from Paris, you can see the extraordinary mansions and chateaus that were built with this enormous surplus that was taken away from industrial production in order to produce one grand household after another. along the river as it runs from the middle of the country to the Atlantic Ocean. It’s extraordinary the insights you get from this. 

And then the irony of China one more time. By being excluded from the West, by being told you’re a communist country, so you’re the poorest country on earth. We’re not going to help you, and you’re going to stay the poorest country on earth because you’re not joining in the capitalist growth system. That was literally told to them in the late 40s and early 50s.

Being excluded was the best thing that ever happened to them. By being forced not to rely on the West, they were able to limit—not totally, by the way, only limit, for they have their problems too—but they were able to limit the loss of all of that wealth from the job of economic development. They kept it there. And that has made all the difference. 

Nothing will change in that process. We will continue to see the GDP of China grow two to three times faster than that of the U.S. which has been the case in every one of the last 30 years. Which is a stunning achievement, which any serious economics profession would make its number one object. If Adam Smith’s great book The Wealth of Nations wanted to account for why the wealth of one nation was a hell of a lot more than the wealth of another, that would be the issue today. Why is the wealth of China exploding relative to that of every place else?

MICHAEL HUDSON: Well, one thing that China had that the industrial nations of Europe didn’t have was a strong enough government to prevent an independent oligarchy, a financial oligarchy, and its associated landlord oligarchy and monopolist oligarchy from developing. The reason was that when China had a revolution, they got rid of the financial class. The financial class and the landlord class all fled to Taiwan or left the country, or essentially was socialized out of existence.

That didn’t happen in the West and that was the failure. The Western economies, by the late 19th century, by the time of the Austrian school, the American school, and the whole right counter-revolution against government said, “We don’t want a strong government. Government is the oppressor.” Well, what they meant was that government is blocking the landlord class, the monopolist class, and the financial class. 

But they convinced the population. And today, the so-called free market advocacy that you’re having in the United States with Donald Trump, Musk, and the Republicans, joined by the Democrats, is that government bureaucracies are less efficient than private monopolists and private capitalists. Well, they’re not really capitalists in the sense of industrial capitalists, as it was understood in the 19th century. They are essentially financial managers who’ve taken over industry and taken over government to steer government along financialized lines. 

It was the banking interests that backed the real estate interests in opposing a real estate tax. And they’ve done this because they know that, all right, there’s still land rent being paid, but it’s not being paid to landlords anymore. It’s being paid to banks in the sense that anyone who borrows money to buy a home has to pay the land rent and that’s most of the value of real estate homes and commercial buildings today going to the banks. 

And if you look down, who are the recipients of economic rent today? It turns out that it’s the banking and the financial sector. And so what we’re in is something that neither Marx nor other socialists before Lenin recognized. We’re in a financial capitalist society today, not an industrial capitalist society. Marx expected industrial capitalism to evolve into socialism, but it was hijacked by the rentier interest turning it into finance capitalism. 

That is what has led to deindustrialization of the United States and Western Europe. And that is essentially the object lesson that I think the BRICS countries need to look at, to say, what is it that we want to avoid? We want to avoid foreign investors and private owners, whether they’re domestic oligarchy, client oligarchy, or foreign investors, from taking our natural resource rent.

Natural resources are created by nature for free. There’s no cost of production and therefore no value. And to try to benefit from—if you’re making a mine—from more than the capital expenditures that you’re creating in digging an oil well and creating a mine, then you’re getting all of this natural resource rent. That’s unnatural. That can be taxed away and that would enable the BRICS governments to have the money to build their own domestic infrastructure, to replace the privatized infrastructure, to create an economy that is a streamlined economy and is based on the economics of production.

It would be used to raise living standards, to raise productivity, to raise education, to lower the cost of living and create what was the original capitalist promise. And it became the socialist promise that was fought against by the anti-industrial revolution that occurred, as Richard said, in the late 19th and early 20th century and essentially replaced industrial capitalism altogether in the wake of World War I.

RICHARD WOLFF: I could conclude this conversation and go back to Adam Smith. He warned us—and by the way, Marx repeated it later—he warned us that if you leave the capitalist structure the way it is, the way the capitalists think and function, they will make that transition that we have criticized. They will make the move from being an industrial capitalism focused on earning a profit by producing something, to looking for the monopoly position in which you can make money while you’re sleeping. It’s much less arduous. You become, instead of the living organism making the wealth, you become the parasite that sits and simply consumes the wealth and loses interest in it. 

The ultimate guarantee? Here’s the irony, the ultimate guarantee is what the early capitalist imagined, a capitalism driven by competition to make the most surplus and plow it back into the business to grow. But that image is undercut by the employer-employee relationship. That was Marx’s brilliance. What he called the relations of production in the end go from being a means to grow wealth to becoming a fetter, holding back the growth of wealth. 

So, what would be the guarantee that you wouldn’t move from appropriating the surplus to a parasite? The answer is: get rid of the contradiction between the employer and the employee, their interests are not the same. It’s the employees’ understanding of what Marx taught them. If they become their own employer, then they can be sure not to take it in that wasteful social direction. And having the workers become themselves the employer, that’s socialism. 

That’s why Marx-not as some mystical predictor of the future. Marx didn’t believe, you know, predicting the future like something that the people in the amusement park do. That’s not a serious business. None of us knows what the future is. That’s why we call it the future. When Marx talked like that, he was working out the logic of the system. 

The guarantor of socialism is that the internal contradictions of capitalism that he spent his life trying to figure out precluded not just the delivery of liberty, equality, and fraternity, it precluded the perpetuation of the capitalist system itself. And when he figured that out, he bequeathed to the rest of us a notion not only of how capitalism works, but how and why it will pass out of existence, at which point one of its products, Marxism, will disappear too.

I mean, who achieves such insight? You know, that’s what Althusser in France, what he marvels at. Look at this. This is an analysis which can account for the passing of the object of the analysis and then of the analysis too. It’s extraordinary. And it really underscores what Michael and I have said, the problem that he said we face. We’re trying to explain to our fellow economists what it is they are missing. But being educated the way they have, they can’t hear us. 

So we are yelling, we’re speaking in a situation where there’s just frustration all around. But then again, maybe we shouldn’t complain. Because if I learn anything from my fellow Americans every day in the street, we’re all wondering what the hell is going on because none of the old rules seem to be in place. Each day’s headlines are more bizarre than the ones before. 

Anyway, I have to go, so my apologies. I am very glad to be back in this conversation. I learn a lot from what we are trying to puzzle through here. So I look forward very much to doing it again next week.

MICHAEL HUDSON: See you soon. Thank you, Richard. There’s a reason why economists don’t hear us, and that is that we are not on the mainstream media or on television. We are not asked to comment in polite company. We’re on Nima’s show and often others. This is basically our vehicle. And what we’re getting back to is what Richard said. He said that Adam Smith forcast what would happen if the industrial hope of getting rid of the landlord class and its economic rent didn’t work. 

It was Ricardo, who was the bank spokesman in Parliament in Britain, who gave an even more dramatic description, saying that, as the population increased and demand for housing and agricultural land and real estate increased, then more and more of the national income would be used to pay the landlords until the entire economic surplus over and above bare subsistence would be paid to the landlord class and that would mean the end of industrial capitalism. 

Next week, I can read you the passage from what Ricardo said so dramatically. But in fact, what Ricardo didn’t criticize, of course, was the financial class because he was a lobbyist for the banking class of England. And what we’ve been discussing on this show for the last more than six months is how more and more of the national income of the United States and Europe has been paid as debt service to the financial sector, up and up. 

Every recovery since World War II has started from a higher and higher debt level. And now almost all of the income of over and above subsistence for more and more of the wage earners is paid to the banks as interest, credit card interest—mostly mortgage interest if they have a home. But otherwise it is in the form of economic rent that the buyers of real estate who borrowed the money from the banks to obtain land rent, and have essentially paid as interest.

That’s interest on their automobile debt, on their personal loans that they’ve had to take out in order to break even because they’re not paid enough money in their wages to pay for the basic cost of living. So the destiny that Adam Smith and Ricardo warned would occur if you don’t tax away economic rent— and they were thinking of the landlords—is actually now being taken by the banking sector that plays the role today that landlords played in the 19th century. 

So as you read the economics of Marx and John Stuart Mill and the other economists, then you can realize, ah, yes, now it’s the bankers that are the main recipients. And as the main rent recipients, they oppose taxing economic rent and using it as a tax base. They advocate tax on labor and industry, not on our client real estate interests, not on our client monopoly interests. And that is what has essentially deindustrialized the United States. 

The task of the BRICS countries is: how do we avoid this? How do we avoid the power of the international financial institutions, the World Bank, the IMF, and the American National Endowment for Democracy engaging in regime change to prevent us from taking steps to achieve a streamlined economy in which the economic surplus is used to increase production, increase employment, build more factories, and improve agriculture, and raise the standard of living and labor so better educated, better clothed, better housed labor can undersell the labor of the pauper countries. 

The pauper labor countries have become the United States, Germany, and Europe, which were supposed to be the leading industrial countries. It’s American and German and European labor that is now being pauperized by finance, along with real estate and along with the monopoly rent-seeking interests. It is distinct from China and other Asian countries that are trying to reinvent the wheel. 

What I think Richard and I have tried to do is provide them with the concepts of value, price, and rent that would guide their policy in freeing society from the rent. That implies a government strong enough to do this. And it’s the object of finance capitalism to prevent a strong government able to do this and to capture the government to make it strong on behalf of the financial sector, on behalf of the rent seekers—exactly what Britain, France, and other European countries spent a century trying to reform. 

All of this actually culminated in a constitutional crisis in England in 1909, 1910, when the British Parliament actually passed the land tax and the House of Lords rejected it. The crisis lasted a year, and Britain passed a rule saying that never again could the House of Lords reject a revenue act by the House of Commons. Well, by the time it passed, the world was on the way to World War I. 

National emergencies and all of that wiped out this whole drive to free economies from rent and create a free market, classical economic style. It was replaced with a free market in the sense of being free for the rentiers to prevent governments from blocking their takeover and grinding economies to a halt. That was the laws of motion that occurred.

Marx, in his introduction to Capital, said, my job is describing the laws of motion of capitalism. Well, the laws of motion today are not the same laws of motion that Marx described way back then. He was overly optimistic as to what he hoped industrial capitalism would end up doing. 

We’re trying to refocus attention on these laws of motion to guide the policy that we would like to see the BRICS countries apply because we don’t see much of a prospect of it being applied in the United States and Europe, where the neoliberals have taken a stranglehold on government and used it for the exact opposite purpose that the original and classical economists and industrialists of Europe and America had hoped to see.

NIMA ALKHORSHID: Great, Michael. We’re going to continue these discussions that are so much important, in my opinion, when it comes to the BRICS and the future of BRICS and the Global South and what they can learn from the United States, from the Western economy, from what you’ve been mentioning in the various sessions that you’re talking on, here on this podcast. Thank you so much, Michael.

MICHAEL HUDSON: Well, we’ve got to thank you for sponsoring us and giving us this arena to introduce these concepts that we’re not able to introduce to the academic curriculum in these countries.

NIMA ALKHORSHID: Thank you. See you soon, Michael. See you next week.

MICHAEL HUDSON: Bye-bye.

Photo by Tanya Barrow on Unsplash