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There is much that Michael Hudson and I agree on, especially with regard to the growing economic and political influence of finance capital in the last half century. We differ, however, in our analyses of how the growing global weight of finance capital destabilizes the global capitalist economy (and especially USA & UK variants) as well as its role in the US economic empire–that is, imperialism.

Another difference between Hudson and I is Hudson sees debt as the centerpiece and lynchpin to reform of the current capitalist economic system. He thus calls for a ‘debt jubilee’ in which by a political-legal action debt is expunged from the capitalist system. In my view, however, a debt jubilee is a politically naïve call for reform. 

Capital cannot function without debt, and as it financializes it necessarily creates more debt to function. To therefore call for a ‘jubilee’ in which debt is expunged requires a political revolution first. It is not possible to ‘reform’ excess debt by expunging it from the capitalist system. Capital’s political elite will not assassinate itself. The call for Jubilee is thus a naïve, never attainable reformist demand.

Still another important difference in our analyses is Hudson sees a direct conflict between finance capital and industrial capital in the 21st century in which the former is prevailing over the latter. In contrast, my view is this class dichotomy proposition is over assumed. Capital is Capital and the two expressions–finance and industrial–are actually quite integrated. Finance capital is becoming more industrial; Industrial capital has been financialized for some time and is becoming more so.

This writer recently joined in a discussion on another blog, where commentary and exchange occurred on Michael Hudson’s book, Super Imperialism, in which his above basic propositions regarding debt, finance capital, and imperialism were discussed.

My reply and contribution to the discussion was as follows:

“Hudson is right about the growing financialization of Capitalism in the late 20th century, accelerating in the 21st and that financialization creates excess debt in its wake. But he’s wrong about Industrial capital (China, Russia) vs. Finance capital (USA). The USA is still the global leader in industrial capital. USA and China each produce about 25% of the world’s goods output.

The USA does it with fewer workers, which means its rate of exploitation of labor is higher. More important, Hudson misses the fact that since the advent of Neoliberal economic policies (late 70s and ever since) US has enabled its multinational corps to offshore much of US goods production. So when industrial capital inside the US is combined with US industrial capital relocated offshore in the empire, the USA capitalism is still the ‘industrial’ capital leader. It is simultaneously the ‘financial’ capital leader as well. 

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But to the point: in the age of global capitalism and global US economic empire, one cannot compare national economies (China v. USA). As neoliberal policies were implemented and expanded from Reagan to Biden, finance capital also expanded offshore along with industrial capital, beginning in the late 1980s and accelerating. The US empire around the same time also created what I call the ‘twin deficits’ solution to enable US capitalism to repatriate a good part of the surplus value back home that its offshore multinational corporations created. It purposely and consciously (following the Plaza (NY) Accords with Japan and Louvre accords with Europe) ran a trade deficit whereby money capital created offshore was recycled back to the USA in the form of buying US Treasuries and other M&A acquisitions. That surplus allowed the USA to run massive budget deficits in turn, which further in turn allowed the USA to fund constant wars in the 21st century ($8T) while at same time cutting corporate and investor taxes by $15T. Global financialization was essential in order to recycle this foreign created surplus value.

In short, US trade deficits are ‘good’ for US capitalists in that they ultimately increase the global repatriation of value and, very important, enable the funding of wars and massive tax cuts for capitalists (i.e. the state returning value to the capitalists via the tax system).

USA empire and capitalists find both industrial and financial capital profitable. In some ways the former is even more profitable. (Note here that ‘profits’ are both from productive labor as well as ‘fictitious’, for Marxists). 

Capitalism sucks up global productive labor profits via imperial policies. But it same time creates more fictitious profits. Contra contemporary Marxists’ analysis, fictitious capital is not least not to the capitalists. Fictitious capital and profits expand because there are no costs of goods, no need for labor in most cases, and the turnover is far faster than for industrial goods profits.

It is naïve to call for a Debt Jubilee without clarifying that debt is essential now (in many forms not just financing industrial capital as in the 19th century) to capitalism and the US global economic empire. An anti-capitalist revolution would be necessary to expunge debt in general in the system. Hudson doesn’t understand this and calls for a debt jubilee under capitalism, as if the capitalists would agree anyway to such ‘reforms’ that would topple their own economy and eliminate much of their current system of profit maximization (fictitious as well as productive labor profits). An anti-capitalist revolution would be required to expunge debt on any scale. And that takes a political strategy, not an economic reform proposal to pass legislation to enact a debt jubilee.

There’s one more comment on Hudson ‘Super Imperialism’ thesis and view that financialization is taking over real investment, leading to the decline of US economic empire, as finance capital attains dominance over industrial capital:

Do the capitalist global energy companies represent industrial capital? Yes, they produce the non-durable products called oil (and chemical derivatives of same). They make profits from industrial production. But the global price and therefore profits from oil is as much ‘financial’ as industrial. A major part of price and profit is determined by finance capitalists speculating on global oil futures exchanges. Profits are thus both industrial (production) and exchange (speculation in financial oil futures markets). So are the world’s oil corporations ‘industrial’ or ‘finance’? How does one speak of industrial vs. financial in this case? The same can be said for most globally traded industrial commodities, also bought and sold on futures markets. And then there’s the world’s great manufacturing corps. Many of them make a majority of their ‘profits’ from financial asset investing, not producing. 

In other words, in 21st century global capitalism, run by the American empire, the old 19th century distinction of bankers/finance capital vs. industrial capital is largely in accurate. It is just Capital, finding ways to leverage finance in order to make even more ‘fictitious’ money capital as it squeezes labor to extract more value and thus profits from production as well.”

Predicting the Global Economic Crisis