In this paper the authors recall the history of Jubilee debt cancellations, emphasizing what thei... more In this paper the authors recall the history of Jubilee debt cancellations, emphasizing what their social purpose was at that time. They note that it would not be possible to copy that procedure exactly nowadays, primarily because most debt/credit relationships are intermediated via financial institutions, such as banks, insurance companies, etc., rather than by governments or wealthy families directly. But they argue that the underlying social purpose of such Jubilees – to keep debt within the reasonable ability to be paid without social and economic polarisation – could be recreated via alternative mechanisms, and they discuss the politico-economic arguments for, and against, doing so.
European Journal of Economics and Economic Policies: Intervention, 2014
City. ISLET engages in research regarding domestic and international finance, national income and... more City. ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Michael Hudson acts as an economic advisor to governments worldwide including Iceland, Latvia, and China on finance and tax law. He has published extensively on International Trade, Finance, and Debt, and co-edited volumes on the archeology of the ancient Near East. How did you become an economist? I came to New York from Chicago in 1960 in hope of becoming an orchestra conductor. I had a BA in German philology and history from the University of Chicago, but most of my training was in music, and I was going to study conducting with Dmitri Mitropoulos. A friend of mine from high school urged that I meet his girlfriend's father, Terence McCarthy, who was a leading mentor to many Wall Street analysts. In one evening Terence convinced me to become an economist. He told me about water levels rising and falling in the mid-West causing a crop cycle that in turn caused an autumnal drain of currency to move the crops, leading to financial crises when harvests were interrupted. It was as beautiful as astronomy or music to me, and I registered at NYU's graduate economics department to get my MA and then my PhD. Terence was a former Irish socialist and the first translator of Marx's Theories of Surplus Value into English. (He used the French translation's title A History of Economic Doctrines.) He became my mentor and said that I had to start by reading every book in the bibliography of Theories of Surplus Value. So, I began to study the history of economic thought. I was especially interested in Third World development and imperialism. Terence had proposed to replace or supplement the World Bank with an institution that would make domestic-currency loans to finance self-sufficiency in food. This would have involved breaking free of dependency on US farm exports to protect local agriculture.
Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the eco... more Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the economy with carrying charges. What policies are best suited for China to avoid this neo-rentier disease while raising living standards in a fair and efficient low-cost economy? The most pressing policy challenge is to keep down the cost of housing. Rising housing prices mean larger and larger debts extracting interest out of the economy. The strongest way to prevent this is to tax away the rise in land prices, collecting the rental value for the government instead of letting it be pledged to the banks as mortgage interest. The same logic applies to public collection of natural resource and monopoly rents. The US and European business schools are part of the problem, not part of the solution. They teach the tactics of asset stripping and how to replace industrial engineering with financial engineering, as if financialization creates wealth faster than the debt burden. Having rapidly pulled ...
In this paper I want to discuss the financial sector's tendency to dominate, deflate and polarize... more In this paper I want to discuss the financial sector's tendency to dominate, deflate and polarize economies, thwarting economic potential. Understanding these financial dynamics is essential to explain why all nations are not operating up to the technological potential toward which classical liberalism aimed, and why the world economy is polarizing, as are domestic economies even in the most advanced industrial nations.
A century ago economists couldonlyspeculateontheoriginsofenterprise.It seemedlogicaltoassumethate... more A century ago economists couldonlyspeculateontheoriginsofenterprise.It seemedlogicaltoassumethatentrepreneurialindividualsmusthaveplayedakey role in archaic trade, motivated by what Adam Smith described as an instinct to "truckandbarter."WhenaMycenaeanGreeksitefrom1200BCwasexcavatedand storeroomswithaccountingrecordsfound,thebuildingaccordinglywascalled"a merchant'shouse,"notapublicadministrativecenter. 1 TherewaslittleroomforMaxWeber'sideathatadriveforsocialstatusmight dominateeconomicmotives.MaterialistapproachestohistorybothbyMarxistand bybusiness-orientedwritersassumedthateconomicfactorsdeterminedstatusand political power, not the other way around. The basic context for enterprise was deemedtoconsistoftimelessconstants:money,account-keepingtocalculategains, credit,andbasiccontractualformalities.Totheextentthatpublicinstitutionswere recognizedaseconomicactors,theywereassumedtobeanoverhead,incurredatthe expenseofenterprise,notasmeansofpromotingit.Therewaslittleideaoftemples andpalacesplayingacatalyticrole,muchlessakeyoneinproductionorproviding moneyandprovisioningcommercialventures.Therewasevenlessthoughtofrulers regulatingmarkets,cancelingpersonaldebts,andreversinglandtransfersasaway toenhanceprosperity. Translationofcuneiformrecordsoverthepastcenturyhaschangedtheseattitudes.Averitableexplosionofcolloquiaoverthepastdecadehasanalyzedtheemer-genceofenterpriseinMesopotamiaanditsneighbors(inparticularDercksen1999; Bongenaar2000;Zaccagnini2003;ManningandMorris2005;and,earlier,Archi 1984,inadditiontothecompendiousCivilizations of the Ancient Near East [Sasson et al. 1995]). Our own working group, the International Scholars Conference on AncientNearEasternEconomies,hasheldcolloquiadealingwiththepublic/private balance(HudsonandLevine1996),theemergenceofurbanandrurallandmarkets (HudsonandLevine1999),debtpracticesandhowsocietieshandledtheeconomic strainstheycaused(HudsonandVanDeMieroop2002),account-keepingandthe emergence of standardized prices and money (Hudson and Wunsch 2004). These conference volumes have been bolstered by many books and articles presenting a complexviewoftheemergenceofcommercialenterprise.
This paper reconstructs the National Income and Product Accounts to add asset-price (‘capital’) g... more This paper reconstructs the National Income and Product Accounts to add asset-price (‘capital’) gains to national income to derive a measure of total returns. It also treats rent-extraction as a charge against national income and GDP, not as a contribution to national output. Segregating the Finance, Insurance, and Real Estate sector from the rest of the private sector shows that most growth in wealth and income derives from rentier activities – from the dynamic of finance capitalism more than that of industrial capitalism.
Despite German complaints about the large size of government budget defi cits in Greece, Spain, P... more Despite German complaints about the large size of government budget defi cits in Greece, Spain, Portugal, Ireland and Italy, the fact is that German exports to these countries have risen over the past decade roughly in keeping with these defi cits. Running defi cits is how governments pump income and spending power into the private sector, after all. This poses a problem for Germany: now that these countries are being told to conform to the long-broken eurozone rule limiting such defi cits to just three per cent of GDP, how will this affect their ability to buy German exports? For example, Germany's exports jumped sharply in April 2012, but nearly all of this went to countries outside the EU (up over 6% from last year), while sales to eurozone countries shrank 3.6% on the year.
European Journal of Economics and Economic Policies Intervention, Sep 1, 2013
To focus on the dynamics of how financial wealth is created, obtained, and valued, this paper (1)... more To focus on the dynamics of how financial wealth is created, obtained, and valued, this paper (1) distinguishes capital gains from income by measuring total returns, and (2) contrasts the capitalized value of rentier income (rent extraction rights and privileges from land, natural resources, and monopolies) from that of industrial profits on tangible capital investment.
Ricardian trade theory was based on the cost of labor at a time when grain and other consumer goo... more Ricardian trade theory was based on the cost of labor at a time when grain and other consumer goods accounted for most subsistence spending. But today's budgets are dominated by payments to the finance, insurance, and real estate (FIRE) sector and to newly privatized monopolies. This has made FIRE the determining factor in trade competitiveness. The major elements in US family budgets are housing (with prices bid up on credit), debt service, and health insurance-and wage withholding for financializing Social Security and Medicare. Industrial firms also have been financialized, using debt leverage to increase their return on equity. The effect is for interest to increase as a proportion of cash flow (earnings before interest, taxes, depreciation, and amortization, or EBITDA). Corporate raiders pay their high-interest bondholders, while financial managers also are using EBITDA for stock buybacks to increase share prices (and hence the value of their stock options). Shifting taxes off property and onto employment and retail sales spurs the financialization of family and business budgets as tax cuts on property are capitalized into higher bank loans. Payments to government agencies for taxes and presaving for Social Security and Medicare absorb another 30 percent of family budgets. These transfer payments to the FIRE sector and government agencies have transformed international cost structures, absorbing roughly 75 percent of US family budgets. This helps explain the deteriorating US industrial trade balance as the economy has become financialized.
Understanding of the dollar’s world role is dominated by the ideas of ‘dollar hegemony’ and ‘US h... more Understanding of the dollar’s world role is dominated by the ideas of ‘dollar hegemony’ and ‘US hegemony’. In this paper, based on our extensive past work, we reveal how these ideas are ideologies, not theories. In their place, we reveal an understanding one that is theoretically sound and accords with the historical record, a geopolitical economy of the international monetary system of modern capitalism. We begin with a theoretical outline of how money operates under capitalism. We then consider how capitalism needs world money and, at the same time, makes its stable functioning difficult. We then go on to trace the fundamental instability of the modern international monetary systems based on national currencies of dominant countries, from the gold standard to the current volatile and predatory dollar-centred system, and their close connection to short-term and speculative.
Journal of the Economic and Social History of the Orient, 2000
http://michael-hudson.com
... the creditor's interest, at least un-til grain cultivation ... more http://michael-hudson.com
... the creditor's interest, at least un-til grain cultivation was replaced by less labor-intensive olive ... Renger rightly observes that the unchanging rate of interest throughout the centuries constitutes a strong ... They were akin to debt-service payments mainly by being due periodically. ...
http://michael-hudson.com
Focuses on Roscher′s generalities in the financial realm. Roscher post... more http://michael-hudson.com Focuses on Roscher′s generalities in the financial realm. Roscher postulated a secular decline in interest rates and an evolution of credit towards increasingly productive applications. Although Roscher′s theories were plausible, questions whether he got his causes and effects right. If not, of what use was his historical methodology as a predictive quasi-science? Points out that Roscher, like his contemporaries, failed to anticipate the proliferation of war debt and other public debt, consumer debt, corporate takeover financing and other non-productive uses of credit. Concludes by comparing Roscher′s ideas with those of his contemporaries, and analysing the reasons why plausible economic forecasts failed to anticipate the experience of the twentieth century.
In this paper the authors recall the history of Jubilee debt cancellations, emphasizing what thei... more In this paper the authors recall the history of Jubilee debt cancellations, emphasizing what their social purpose was at that time. They note that it would not be possible to copy that procedure exactly nowadays, primarily because most debt/credit relationships are intermediated via financial institutions, such as banks, insurance companies, etc., rather than by governments or wealthy families directly. But they argue that the underlying social purpose of such Jubilees – to keep debt within the reasonable ability to be paid without social and economic polarisation – could be recreated via alternative mechanisms, and they discuss the politico-economic arguments for, and against, doing so.
European Journal of Economics and Economic Policies: Intervention, 2014
City. ISLET engages in research regarding domestic and international finance, national income and... more City. ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Michael Hudson acts as an economic advisor to governments worldwide including Iceland, Latvia, and China on finance and tax law. He has published extensively on International Trade, Finance, and Debt, and co-edited volumes on the archeology of the ancient Near East. How did you become an economist? I came to New York from Chicago in 1960 in hope of becoming an orchestra conductor. I had a BA in German philology and history from the University of Chicago, but most of my training was in music, and I was going to study conducting with Dmitri Mitropoulos. A friend of mine from high school urged that I meet his girlfriend's father, Terence McCarthy, who was a leading mentor to many Wall Street analysts. In one evening Terence convinced me to become an economist. He told me about water levels rising and falling in the mid-West causing a crop cycle that in turn caused an autumnal drain of currency to move the crops, leading to financial crises when harvests were interrupted. It was as beautiful as astronomy or music to me, and I registered at NYU's graduate economics department to get my MA and then my PhD. Terence was a former Irish socialist and the first translator of Marx's Theories of Surplus Value into English. (He used the French translation's title A History of Economic Doctrines.) He became my mentor and said that I had to start by reading every book in the bibliography of Theories of Surplus Value. So, I began to study the history of economic thought. I was especially interested in Third World development and imperialism. Terence had proposed to replace or supplement the World Bank with an institution that would make domestic-currency loans to finance self-sufficiency in food. This would have involved breaking free of dependency on US farm exports to protect local agriculture.
Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the eco... more Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the economy with carrying charges. What policies are best suited for China to avoid this neo-rentier disease while raising living standards in a fair and efficient low-cost economy? The most pressing policy challenge is to keep down the cost of housing. Rising housing prices mean larger and larger debts extracting interest out of the economy. The strongest way to prevent this is to tax away the rise in land prices, collecting the rental value for the government instead of letting it be pledged to the banks as mortgage interest. The same logic applies to public collection of natural resource and monopoly rents. The US and European business schools are part of the problem, not part of the solution. They teach the tactics of asset stripping and how to replace industrial engineering with financial engineering, as if financialization creates wealth faster than the debt burden. Having rapidly pulled ...
In this paper I want to discuss the financial sector's tendency to dominate, deflate and polarize... more In this paper I want to discuss the financial sector's tendency to dominate, deflate and polarize economies, thwarting economic potential. Understanding these financial dynamics is essential to explain why all nations are not operating up to the technological potential toward which classical liberalism aimed, and why the world economy is polarizing, as are domestic economies even in the most advanced industrial nations.
A century ago economists couldonlyspeculateontheoriginsofenterprise.It seemedlogicaltoassumethate... more A century ago economists couldonlyspeculateontheoriginsofenterprise.It seemedlogicaltoassumethatentrepreneurialindividualsmusthaveplayedakey role in archaic trade, motivated by what Adam Smith described as an instinct to "truckandbarter."WhenaMycenaeanGreeksitefrom1200BCwasexcavatedand storeroomswithaccountingrecordsfound,thebuildingaccordinglywascalled"a merchant'shouse,"notapublicadministrativecenter. 1 TherewaslittleroomforMaxWeber'sideathatadriveforsocialstatusmight dominateeconomicmotives.MaterialistapproachestohistorybothbyMarxistand bybusiness-orientedwritersassumedthateconomicfactorsdeterminedstatusand political power, not the other way around. The basic context for enterprise was deemedtoconsistoftimelessconstants:money,account-keepingtocalculategains, credit,andbasiccontractualformalities.Totheextentthatpublicinstitutionswere recognizedaseconomicactors,theywereassumedtobeanoverhead,incurredatthe expenseofenterprise,notasmeansofpromotingit.Therewaslittleideaoftemples andpalacesplayingacatalyticrole,muchlessakeyoneinproductionorproviding moneyandprovisioningcommercialventures.Therewasevenlessthoughtofrulers regulatingmarkets,cancelingpersonaldebts,andreversinglandtransfersasaway toenhanceprosperity. Translationofcuneiformrecordsoverthepastcenturyhaschangedtheseattitudes.Averitableexplosionofcolloquiaoverthepastdecadehasanalyzedtheemer-genceofenterpriseinMesopotamiaanditsneighbors(inparticularDercksen1999; Bongenaar2000;Zaccagnini2003;ManningandMorris2005;and,earlier,Archi 1984,inadditiontothecompendiousCivilizations of the Ancient Near East [Sasson et al. 1995]). Our own working group, the International Scholars Conference on AncientNearEasternEconomies,hasheldcolloquiadealingwiththepublic/private balance(HudsonandLevine1996),theemergenceofurbanandrurallandmarkets (HudsonandLevine1999),debtpracticesandhowsocietieshandledtheeconomic strainstheycaused(HudsonandVanDeMieroop2002),account-keepingandthe emergence of standardized prices and money (Hudson and Wunsch 2004). These conference volumes have been bolstered by many books and articles presenting a complexviewoftheemergenceofcommercialenterprise.
This paper reconstructs the National Income and Product Accounts to add asset-price (‘capital’) g... more This paper reconstructs the National Income and Product Accounts to add asset-price (‘capital’) gains to national income to derive a measure of total returns. It also treats rent-extraction as a charge against national income and GDP, not as a contribution to national output. Segregating the Finance, Insurance, and Real Estate sector from the rest of the private sector shows that most growth in wealth and income derives from rentier activities – from the dynamic of finance capitalism more than that of industrial capitalism.
Despite German complaints about the large size of government budget defi cits in Greece, Spain, P... more Despite German complaints about the large size of government budget defi cits in Greece, Spain, Portugal, Ireland and Italy, the fact is that German exports to these countries have risen over the past decade roughly in keeping with these defi cits. Running defi cits is how governments pump income and spending power into the private sector, after all. This poses a problem for Germany: now that these countries are being told to conform to the long-broken eurozone rule limiting such defi cits to just three per cent of GDP, how will this affect their ability to buy German exports? For example, Germany's exports jumped sharply in April 2012, but nearly all of this went to countries outside the EU (up over 6% from last year), while sales to eurozone countries shrank 3.6% on the year.
European Journal of Economics and Economic Policies Intervention, Sep 1, 2013
To focus on the dynamics of how financial wealth is created, obtained, and valued, this paper (1)... more To focus on the dynamics of how financial wealth is created, obtained, and valued, this paper (1) distinguishes capital gains from income by measuring total returns, and (2) contrasts the capitalized value of rentier income (rent extraction rights and privileges from land, natural resources, and monopolies) from that of industrial profits on tangible capital investment.
Ricardian trade theory was based on the cost of labor at a time when grain and other consumer goo... more Ricardian trade theory was based on the cost of labor at a time when grain and other consumer goods accounted for most subsistence spending. But today's budgets are dominated by payments to the finance, insurance, and real estate (FIRE) sector and to newly privatized monopolies. This has made FIRE the determining factor in trade competitiveness. The major elements in US family budgets are housing (with prices bid up on credit), debt service, and health insurance-and wage withholding for financializing Social Security and Medicare. Industrial firms also have been financialized, using debt leverage to increase their return on equity. The effect is for interest to increase as a proportion of cash flow (earnings before interest, taxes, depreciation, and amortization, or EBITDA). Corporate raiders pay their high-interest bondholders, while financial managers also are using EBITDA for stock buybacks to increase share prices (and hence the value of their stock options). Shifting taxes off property and onto employment and retail sales spurs the financialization of family and business budgets as tax cuts on property are capitalized into higher bank loans. Payments to government agencies for taxes and presaving for Social Security and Medicare absorb another 30 percent of family budgets. These transfer payments to the FIRE sector and government agencies have transformed international cost structures, absorbing roughly 75 percent of US family budgets. This helps explain the deteriorating US industrial trade balance as the economy has become financialized.
Understanding of the dollar’s world role is dominated by the ideas of ‘dollar hegemony’ and ‘US h... more Understanding of the dollar’s world role is dominated by the ideas of ‘dollar hegemony’ and ‘US hegemony’. In this paper, based on our extensive past work, we reveal how these ideas are ideologies, not theories. In their place, we reveal an understanding one that is theoretically sound and accords with the historical record, a geopolitical economy of the international monetary system of modern capitalism. We begin with a theoretical outline of how money operates under capitalism. We then consider how capitalism needs world money and, at the same time, makes its stable functioning difficult. We then go on to trace the fundamental instability of the modern international monetary systems based on national currencies of dominant countries, from the gold standard to the current volatile and predatory dollar-centred system, and their close connection to short-term and speculative.
Journal of the Economic and Social History of the Orient, 2000
http://michael-hudson.com
... the creditor's interest, at least un-til grain cultivation ... more http://michael-hudson.com
... the creditor's interest, at least un-til grain cultivation was replaced by less labor-intensive olive ... Renger rightly observes that the unchanging rate of interest throughout the centuries constitutes a strong ... They were akin to debt-service payments mainly by being due periodically. ...
http://michael-hudson.com
Focuses on Roscher′s generalities in the financial realm. Roscher post... more http://michael-hudson.com Focuses on Roscher′s generalities in the financial realm. Roscher postulated a secular decline in interest rates and an evolution of credit towards increasingly productive applications. Although Roscher′s theories were plausible, questions whether he got his causes and effects right. If not, of what use was his historical methodology as a predictive quasi-science? Points out that Roscher, like his contemporaries, failed to anticipate the proliferation of war debt and other public debt, consumer debt, corporate takeover financing and other non-productive uses of credit. Concludes by comparing Roscher′s ideas with those of his contemporaries, and analysing the reasons why plausible economic forecasts failed to anticipate the experience of the twentieth century.
Neolithic and Bronze Age economies operated mainly on credit. Because of the time gap between pla... more Neolithic and Bronze Age economies operated mainly on credit. Because of the time gap between planting and harvesting, few payments were made at the time of purchase. When Babylonians went to the local alehouse, they did not pay by carrying grain around in their pockets. They ran up a tab to be settled at harvest time on the threshing floor. The ale women who ran these "pubs" would then pay most of this grain to the palace for consignments advanced to them during the crop year.
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Papers by Michael Hudson
... the creditor's interest, at least un-til grain cultivation was replaced by less labor-intensive olive ... Renger rightly observes that the unchanging rate of interest throughout the centuries constitutes a strong ... They were akin to debt-service payments mainly by being due periodically. ...
Focuses on Roscher′s generalities in the financial realm. Roscher postulated a secular decline in interest rates and an evolution of credit towards increasingly productive applications. Although Roscher′s theories were plausible, questions whether he got his causes and effects right. If not, of what use was his historical methodology as a predictive quasi-science? Points out that Roscher, like his contemporaries, failed to anticipate the proliferation of war debt and other public debt, consumer debt, corporate takeover financing and other non-productive uses of credit. Concludes by comparing Roscher′s ideas with those of his contemporaries, and analysing the reasons why plausible economic forecasts failed to anticipate the experience of the twentieth century.
... the creditor's interest, at least un-til grain cultivation was replaced by less labor-intensive olive ... Renger rightly observes that the unchanging rate of interest throughout the centuries constitutes a strong ... They were akin to debt-service payments mainly by being due periodically. ...
Focuses on Roscher′s generalities in the financial realm. Roscher postulated a secular decline in interest rates and an evolution of credit towards increasingly productive applications. Although Roscher′s theories were plausible, questions whether he got his causes and effects right. If not, of what use was his historical methodology as a predictive quasi-science? Points out that Roscher, like his contemporaries, failed to anticipate the proliferation of war debt and other public debt, consumer debt, corporate takeover financing and other non-productive uses of credit. Concludes by comparing Roscher′s ideas with those of his contemporaries, and analysing the reasons why plausible economic forecasts failed to anticipate the experience of the twentieth century.