The Ongoing Economic War
Peter Scott, RT anchor: Joining us now is Michael Hudson, economist and author of “Super-Imperialism” and the recently-published “Destiny of Civilization”. Welcome to the programme, Michael.
Michael Hudson: It’s good to be back.
PS: Let’s say all these European programmes like the REPOWER Programme come into effect, how do you expect the EU standing to be on the stage after that?
MH: Well, the EU standing will be squeezed economically. It was trying to be a powerhouse in the world economy but in the last month the euro has been declining steadily against the dollar and it’s on the way to one dollar per euro. That’s because it’s having to pay much foreign exchange for energy, for food, for weapons. It’s shrinking in terms of other economies.
PS: Where do you think the EU’s standing will be in relation to powerhouses such as China?
MH: Well, it’s obviously out of the game. Instead of putting its own interests first, it’s really putting the US interests first. It’s acting more like a satellite of the United States thank trying to its own destiny. The whole plan of the EU 20 years ago was to get rich by investing in Russia, investing in China and a mutual exchange. And now it’s decided to stop that. The US has absorbed Europe. The war in Ukraine is a war by the US primarily to pull Europe into the US orbit, prevent European transactions with Russia or China. So Western Europe is being left out, while Russia, China and Eurasia are going with the rest of Asia. Europe is simply going to be left behind. It’s losing its export markets, it’s being squeezed and -as you just mentioned- it’s pushed up the retirement age because it’s spending its budget on replenishing American military arms instead of investing in industry as it had been doing since 1945.
PS: You did indeed write that Europe has ceased to be an independent state. You’ve almost mentioned that the United States wanted to sever EU trade ties with Russia and China. How exactly did you get to that conclusion and do you think that this alleged US plan is succeeding?
MH: Well, I simply read the speeches of President Biden and his team. They’ve said that China is America’s number one enemy. If you’re going to call a country your number one existential enemy, you’re not going to be increasing your trade and mutual dependency with it. And it’s already insisted that its allies sanction -meaning boycott- Russian sports not only of oil and agriculture but of titanium, helium and all of the other exports that Russia has been making. Europe is been following US directions not to have contact with Russia and without contact with Russia it’s not going to have contact with China because China sees that Europe is going to do to it exactly what it’s been doing to Russia.
PS: Obviously as a result of this current situation, for many years now, Russia and China have been growing closer diplomatically and economically. How do you see a global shift in power evolving over the next 5, 10 years or so?
MH: The current war is dividing the world into two parts. There’s going to be a US dollar area of the US, Europe and its satellites. And there’ll be a multipolarity; there’ll be a group of Russia, China together and basically they will be making their proposal of a different way of organising the world economic affairs to Africa, Latin America and other Asian countries. And other Asian countries, Latin America and the global south will see that it can get a better deal with Russia and China than it can get with the United States.
PS: On the flip side of that coin, one could argue that the existing situation, world order, has only been cemented by this war. You see NATO more aligned than ever, you see Europe more aligned than ever. You see Finland and Sweden on the brink, perhaps, of joining NATO. What would your response to this be, Michael?
MH: This integration of Europe into the United States sphere is like the new Berlin Wall. It’s isolated the US from the whole rest of the world. So instead of a victory for the United States it’s self-isolated itself because US strategists have realised that they’re losing the economic war with China, Russia and the whole group of emerging nations. All they can try to do is hold on to Europe as their one source of income to exploit from Europe what it can no longer get from any other country.
PS: As well as being a war on the ground, this is obviously an economic war. You yourself have noted that Nord Stream 2 (the gas pipeline from Russia to Germany) was one of the first victims of this crisis. To what extent are we now seeing an international conflict for energy resources? We obviously have the EU now weaning itself off Russian energy, the US trying to fill that gap to a certain extent with LNG. Then we have Russia now selling oil to India and China.
MH: The important thing about Russian oil being sold to India is that they’re sold in roubles, they’re no longer in dollars. The entire oil trade is now de-dollarised. It will be in roubles, in Chinese Yuan and in other currencies. But the dollar will be left out. The whole idea of dollar diplomacy, of the dollar’s free ride and monetary imperialism has ended. Everyone thought it would take 10 years for Russia, China and other countries to break away. Yet the United States itself has broken away from the other countries by grabbing the foreign exchange reserves of Afghanistan, Venezuela and now Russia. Nobody is going to trust to transact oil, trade and invest in dollars anymore because the United States can simply grab whatever money they want from countries that don’t agree to turn over their economic surplus to American investors and American traders. The United States has isolated itself. It’s shot itself in the foot.
PS: Talking of currencies, Russia is currently the most sanctioned country in the world but the rouble has recovered to way before pre-war levels. To what extent do you think the sanctions imposed on Russia by western countries have negatively impacted the countries imposing them?
MH: It’s certainly been very positive for russia. The first sanctions were imposed on Russian agriculture like cheese from Lithuania. So now Russia produces its own cheese. When you sanction a country, you force that country to be more self-reliant on its own productions. President Putin has already said that now he’s going to be investing in import substitution. If he can’t buy imports from the United States now he’ll set up factories in Russia to produce themselves. There’s no reason Russia cannot do this and be its own industrial power. It doesn’t need the West. But the West still needs Russia. You mentioned Europe doing without Russian oil, and instead getting US liquefied natural gas. But it doesn’t have the ports to import that natural gas. It will have to spend $5 billion to build ports. It will take many years for this. What are Germany and Europe going to do for the next few years? Are they going to let their pipes freeze in their houses? So that their pipes break and flood the houses? Will the factories slow down? Already German fertiliser companies have closed down because they can’t get gas and it’s going to be years before they can get gas. Without fertiliser how are the Germans going to make their agricultural yields sustainable? Well, they won’t be. So Europe is going to increase its food deficit. It’s going to increase its energy deficit. It’s basically committing suicide on behalf of the Americans. I don’t know how long the political system of Europe can go along with leaders who represent America instead of their own national interests.
PS: As inflation and consumer prices keep rising in the US – Joe Biden maintains that it’s all Russia’s fault. Does it look like American taxpayers are buying that story, though?
MH: The press is very one-sided here. I think a lot of people are buying the story because Russia has not been very good on public relations here. The reality is, for instance, that in Ukrainian food exports, Ukraine cannot export its grain because Ukraine itself has mined the Black Sea. If you have mines that are going to block up ships in the Black Sea, that means insurance companies aren’t going to be willing to insure ships carrying the grain. All of this is blamed on Russia but Russia didn’t put the mines there – Ukraine did. But right now there is such a race hatred of Russians, that Americans are indeed buying it all and Russians are being blamed for everything. Such a thing happened when WW1 broke out. I live in Forest Hills in NYC and German families here had to change their name -away from a German name- and pretend to be Swedish or something else. Families like Donald Trump’s family had to pretend to be Swedish not German. There was such an anti-German family. Then you had the Japanese being interned in camps in WW2. So American society is a hate-filled society and the American empire is really an empire of hatred and antagonism. The way they look at the world is ‘Us vs. Them’ and Russia is the new ‘Them’.
PS: The seizing of Russian economic assets – hundreds of billions of dollars – in the West has certainly become a controversial precedent. Moscow has called it theft. What sort of impact has this situation had on the US economy and the dollar itself, as a global reserve currency?
MH: No impact at all on the US economy as such. If Russias loses the $300 billion that was stolen, it will be a great victory for Russia. That’s because what America has said is that no country’s savings in the United States are safe. Any country that denominated its trade in US dollars, any country that invests in the United States, if you don’t have your government follow American dictates, then we can simply grab your money -like we grabbed Russia’s money, Afghanistan’s money, Venezuela’s money. So the act against Russia has been essentially the US destroying foreign faith in the US economy and the safety of the US government. For the last 75 years, the US dollar and US Treasury Bills, loaned to the US government, bonds, have been the safest investment in the world. Now they’re the most risk investment. So what this means is that the American economy has decoupled itself from the Asian economy, from the Latin American and African economies. The Americans have decoupled and yet America is not self-sufficient. It relies on foreign countries, especially China and other Asian countries, for its industrial exports and it relies on Russia for much of its helium, titanium, iridium, palladium… all of these exports which it’s not going to be getting anymore. So America has basically committed trade suicide and economic suicide. Russia seems to have lost the $300 billion but on the other hand it now gets to compensate itself with all of the foreign investments that are in Russia, that it’s picking up, and its position in the world affairs as a trustworthy economy has gone way, way up relative to the United States.
PS: Russia, China and India are among the countries which are now calling for a new, multi-polar world order – without a strong reliance on the US and its allies. Does that seem like a realistic scenario to you?
MH: Well, the crisis is going to come this summer. Now that you have oil and food prices and shipping rates go way, you’re going to have Latin America, Africa and much of Asia have tremendous balance-of-payment deficit. These balance-of-trade deficits for oil, food and shipping are going to go hand-in-hand with huge foreign debts denominated in dollars for foreign bond holders and foreign banks. Something is going to give. What will probably give is massive debt defaults against American bondholders and against American banks. At this point, Russia, China and their allies can say, “We can create parallel institutions in the world. We can create our International Monetary Fund to give you credit. We can create our own World Bank to promote actual, positive developments and not dependency on the United States exporters. So the US policy has driven other countries into the Eurasian orbit of China, Russia, Iran will be joining, India will be along, Indonesia. All these countries now will have something that they never had before; they have their own critical mass. They can deal with each other and be self-sufficient. They don’t need the dollar anymore. That’s what makes today different from the 1970s when the third world countries and the non-aligned nations tried to create a new international economic order but couldn’t. They didn’t have enough scope in their economies. Now they have enough scope that they don’t need America. You’re going to find the rest of the world rushing away from the dollar area, leaving only Europe as part of the United States economy at great sacrifice of its own living standards.
PS: Which countries do you think are gaining the most from the ongoing political and economic turmoil?
MH: I don’t know if you can say win. I’d say Russia and China will be the big winners. Russia already is because the American sanctions against Russia have forced Russia to do something that it could have done half a century ago. It’s forced Russia to create its own consumer goods industry, its own industrial take off. Russia can now build its own plants, equipment and factories and hire its own labour to produce what it was buying from Europe before. So it won’t need Europe anymore. Europe has lost the Russian market. Without the Russian market, I don’t see where Europe can grow because the United States won’t let European goods into it. The United States is protectionist. Europe will be squeezed and ultimately it will end up moving into the Russian and Chinese orbits but it will take years of suffering before that occurs.
PS: There’s a lot of talk on Western unity but it’s clear that there’s an economic price for this. Will the pain see countries follow Hungary and Serbia and say, enough is enough, we’re done with this.
MH: Western unity is a one way unity. Western unity is the United States telling other countries, “Do what we tell you to.” If other countries don’t do what America tells it to, they’re treated like the enemy. Like Hungary has been treated as an enemy. There’s talk of how to punish Hungary. The Americans have no idea how to offer something to attract other countries to it. All the United States can do is, “We can bomb you if you don’t do what we say. We have nothing positive to offer you. We have no trade options to offer you. We have no investment to offer you that will not siphon off your income. All we can do is bomb you and threaten you and sanction you and try to hurt you.” That’s the only way the United States and now Europe can relate to the rest of the world. That’s a poisoned relating. It’s a way guaranteed to drive the rest of the world away.
PS: Looking to a time after the war. What do you think the relationship between the US and Russia, or the EU and Russia look like?
MH: Permanently hostile for 20 years until Europe collapses and until the United States goes into a long depression. There is no rapprochement. There will be no settlement because the United States industrial economy can only make military arms. The only thing the United States can offer other countries is bombers and military arms and weaponry. Not anything to raise the living standards. The situation in the United States will be one of increasing hostility towards the rest of the world. The great threat is that it will say, “Well, we’re just going to blow up the world.” The people who are in charge of US policy think that way, they’ve been thinking that way for 20 years. I’ve worked with these people before and they really are willing to blow up the world if they can’t turn the other world into dependencies. That’s a real danger for the rest of the world and it’s forcing it to withdraw from the US orbit. I think it was Henry Kissinger who said that, “To be an enemy of America can be dangerous, but. “To be an enemy of America can be dangerous, but to be a friend is fatal.” Well, the US friend who’s really in danger is Europe. The enemies are going to do OK because they’re at least friends with each other.
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