Friday, October 15, 2021

Central Asia’s Neoliberal Tragedy — Michael Hudson

Resilience cannot be restored without public spending, but the rentier business plan is to minimize taxes by shrinking the government, especially by privatizing its public utilities and other functions to create opportunities for charging monopoly rents, and to oppose taxation of economic rent. Today’s mainstream economic philosophy and academic curriculum throughout the West backs this neoliberal program by denying that there is any such thing as unearned rentier income or wealth.

Yet only a rent tax can recapture what insiders have appropriated. At issue above all is whether credit, the banking and tax system will be managed as a public utility or for private gain. A national treasury or central bank must be empowered to create money so as not to rely on foreign banks. The guideline must be that no economy should borrow in a foreign currency that it does not earn, e.g., by exporting to earn the foreign currency needed to pay debts. There is no need to rely on foreign banks to lend dollars to be converted into domestic currency. In such cases the central bank has to create the domestic currency anyway. Foreign credit is needed only to pay for trade and payments deficits, not for domestic investment or consumption.

These tax and financial reforms failed as classical economics was rejected after World War I. The world today needs to recover its basic approach in order to free itself from the pro-rentier detour that it has taken, not only in the post-Soviet republics most conspicuously but now also plaguing Europe and the U.S. post-industrial economy itself.

To avoid the foreign dependency inherent in the neoliberalism sponsored by U.S. diplomacy, the World Bank and IMF requires an alternative body of economic theory, above all the distinction between earned and unearned income and the concept of economic rent as the excess of market pricing over intrinsic cost value. That was the thrust of classical political economy in the 19th century – to free markets from the rentier class. Value and price theory were the analytic tools to isolate economic rent as unearned income. These concepts provide the basis for managing a mixed public/private economy, public investment and credit creation, and for protecting domestic labour, industry and agriculture. In elaborating a theory to guide policy, the disastrous neoliberal promotion of rentier interests throughout the post-Soviet states provides an object [lesson]...

This neoliberal policy agenda, led by the US, UK, and European elites, is to impose neoliberalism, joined at the hip with neo-imperialism and neocolonialism, using all means available worldwide. This would lock-in a neoliberal world system permanently in their view and make resistance futile. This would be done under the guise of freedom and spreading democracy as a new crusade. 

This is the basis of Wilsonian liberal internationalism and interventionism aka foreign policy idealism as opposed to Jacksonianism (America first) and foreign policy realism (national interest).

"The resistance" opposes this as a form of neo-fascist totalitarianism that is euphemistically called "unilateralism." 

This is the dominant theme in the historical dialectic at this time. The result in increasing hostility and conflict, which is existentially threatening in a nuclear age.

Sub-dominant but important themes include the traditional/liberal conflict that has been ongoing since the 18th century, post WWII decolonization , and most recently climate change.

While this is an economic issue, as Michael Hudson presents it here, it is much wider and deeper than that as it affects the world system. It accounts for why the US and NATO are so interested in gaining a foothold in Central Asia and risking war with nuclear Russia and China, which are otherwise irrational.

Naked Capitalism
Central Asia’s Neoliberal Tragedy
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

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