A Conversation between Michael Hudson and Dimitri Konstantakopoulos
Political leaderships, the media, and even the stock markets (the “markets”) are trying to downplay the significance of the events unfolding in the Middle East, as well as in Ukraine. But if global leaders do nothing, if current realities do not change, then we are headed for an economic depression, comparable to or even worse than the Great Depression of the ‘30s – 1929 — the greatest crisis of global capitalism to date.
This is the warning from one of the world’s most renowned economists, a leading authority on debt and financial markets: the American Michael Hudson, one of the twelve economists who predicted the 2008 crisis. Hudson combines extensive practical experience as a Wall Street balance-sheet analyst and as an advisor to numerous governments worldwide with a rich academic research career.
The United States was supposed to be the “protector power” of its “allies.” Today, he tells us, it has become the greatest threat to them—financially, economically, and militarily—given what is happening as a result of the attack it has launched on Iran.
If the war does not stop and escalates, Iran will not lose. What will happen is that the global economy will be “blown up,” and what begins as an oil crisis will end in a global depression at least as severe as that of the ‘30s.
It is incomprehensible that the states of Europe, East Asia, and even the Arab Sunni states do not see this and are not trying to envision a different organization of the world, argues Michael Hudson, Distinguished Research Professor of Economics at the University of Missouri–Kansas City, a researcher at the Levy Institute, President of the Institute for the Study of Long-Term Economic Trends, and Professor of Economics at Peking University. Hudson has also worked in economic archaeology, studying the birth and evolution of economic institutions such as property in ancient civilizations, including Sumerian and Mycenaean cultures. His book “Super Imperialism” is considered a classic on how the American economic empire was built. In June 2015, at the height of the Greek crisis, before the referendum and the SYRIZA capitulation, he participated in the International Delphi Conference on the Greek and European crisis, where he spoke about the Greek memorandum and the potential strategies for Athens and the left . He is a member of the editorial board of www.defenddemocracy.press.
D.K. I was reading some of your texts. Nowadays, most people believe that after all, the role of Israel and of Zionism is well established. But at the same time, I think you believe that this war corresponds also to a way of addressing basic needs of American capitalism and imperialism, so to say.
M.H. Of course. Is Greece’s agreement militarily with Israel or with the United States?
D.K. Yes
M.H. With which one? With both?
D.K. Yes.
M.H. Okay. I didn’t realize that. So it’s really with United States as well as Israel? That doesn’t make Greece very popular for Iran, especially when you look at all the Israeli settlements that are taking place in Cyprus. So one question is what’s gonna happen with Cyprus? And then you have the Turkish problem too. You’re you’re gonna to have all theat I mean
D.K. You know, my dear Michael, are you taking an interview from me or I’m taking an interview from you (laughs)? But, anyway, we can play both roles. Listen. Speaking about Cyprus, it’s true that nowadays, Israel is colonizing Cyprus. It’s happened. And to a large degree, it has also begun to colonize Greece. At least they control the political establishment in both Greece and Cyprus. I’m afraid they control much of the armed forces and the secret services. They don’t control the public opinion, I must say.
M.H. Wait. Are they the US or Israel or both?
D.K. I think both, but Israel is taking now the initiative. And as far as colonization you know regarding property, it is Israel.
M.H. The population shift is going from Israel to Cyprus.
D.K. Yes. But, you know, Cyprus was from the very first day the Zionist movement was created, the first goal was to create a Jewish state in Cyprus. Israel was, for the Zionist movement, to be created in Cyprus. And I remind you that were terrible battles between Jews and Greeks during the time of the Roman Empire, there were the Jewish wars, and there was also the revolution by the Jews. But as Karl Kautsky is saying, you know, the Jewish revolutions, although anti-imperialist in a sense, have become very quickly imperialist ones. So there is a terrible past, but it is forbidden to remind such things in Greece or in Cyprus. You see? It is completely forbidden. Now the Israeli secret services, their representatives are openly threatening the Greek prime minister. And, in the past, they have threatened the SYRIZA leadership. I mean, openly. But in spite of this situation, in spite of a continuous propaganda that says that Israel is our great ally against the Turkish threat, the majority of Greeks, according to the polls, is believing that Israel is the second enemy after Turkey! Sixty five percent after years of official propaganda about our supposed alliance with Israel.
M.H. Sixty five percent is against the alliance?
D.K. They believe that Turkey and Israel are not friendly countries, that they are hostile countries.
M.H. I understand.
D.K. Public opinion has become autonomous from the official discourse. But the problem is, which is also in other European countries and probably the United States of America, that much of the political elite is controlled by very obscure forces and especially by Israel and the CIA and the different American institutes. So it’s a kind of decapitation of societies. I mean, societies believe what they want, but they don’t have the political leaders, the political tools, the media they need to follow a different course according to what they wish. They can wish whatever, but it is not easy to find representatives or leaders or tools to do it. We are in an advanced state of totalitarianism, and I don’t know what will happen also with artificial intelligence, because they will try to make people live in a completely fake reality. This is what I’m afraid. What do you think?
M.H. Now well, this sounds like what’s happening throughout all of the European Union. The population voters are against US and NATO war against Russia and are against, to what’s happening to the Palestinians, and yet the leaders are all for the war against Russia and for the war against Iran. So you have a split, obviously, democracy is not working the way it is supposed to in the textbooks. The leaders, say elected so called leaders, say one thing that is the opposite of what the voters want, whether it’s Germany, or France, or Britain or, from what you tell me, Greece and Cyprus.
D.K. Of course. But I think they try now, the elites are trying to correct the situation.
MH How do they do that? Yeah? Do they do that?
D.K. Yes. You know, there is a contradiction between the democratic ideology and the oligarchic or even totalitarian reality of our countries. So they begin to solve this contradiction by abolishing any remaining democratic norms. For instance, there is a number of European citizens who are sanctioned by the European Commission. This is an administrative measure. It’s not because they were condemned by somebody for a crime.
They don’t have access to their bank accounts. They can take just a minimum, like, five hundred dollars to live. A German journalist has suffered this, and very few people are protesting. And this, you know, has terrorized many other people.
M.H. Yes. And it happened to the international judges and the UN rapporteurs also.
D.K. Also, yes. And they are quite known persons. It’s terrible. So I think that there is an interrelationship between fascism and war as there was before the second World War. And now I think, it’s my analysis, it’s the same direction where the system is going. Its last resort is fascism and war. But listen, I did not begin an interview with you in order to say my opinion. I want your opinion. And by the way, Donald Trump is the first who has, in a most definite way, begun this process by declaring that there is no international law. That he’s not interested in law. He’s interested in what he wants and things like that, which clearly is the first time we hear this from a major political leader after 1945, after the defeat of German Nazism. So how is the situation in the United States? How do you see all this happening? How your public opinion is reacting?
M.H. The same situation as it is in Greece. The majority of voters are against the war, against the genocide in Gaza and now the West Bank and now in Southern Lebanon, and yet the Trump regime is entirely for it. So, again, there’s a disconnect. The fact that in America, both parties pretty much have the same donors and are both controlled by the neoliberals, it doesn’t matter whether it’s Trump or a Democrat. Trump is simply following the same policy that Biden was following and Obama before him, George Bush’s before them. This is constant US policy to control the oil trade, and not only the oil trade, but what happens to the dollars and foreign exchange earned from the oil trade so that it can have a chokehold on other countries’ access to oil and energy for their markets just as Donald Trump has established with his tariffs, a chokehold on other countries’ attempt to export to the American market. Well, what ’s done in the case of trade is other countries are basically beginning to give up the American market. Korea has promised, the congress in Korea has agreed to pay the 350 billion dollar money into Donald Trump’s account an account managed by Donald Trump that the profits are all going to go to the United States for 350 billion even though it’s hard to say what are Korea’s exports going to be to the United States now that it doesn’t have helium and natural gas and sulfur and oil to make the automobiles and electronics that it had hoped to export to the United States to raise the three hundred bill billion to give as protection money to Trump. Same situation with Japan with its 650 billion that may be 750 billion. How can Japan afford to pay this huge amount giving to the United States for Donald Trump personally and the US to invest in whatever they want, namely in the businesses of his campaign financiers to make a killing on the markups from all of this free money. How can Japan, like Korea, raise the money if it’s not able to export its cars and electronics and other goods to the United States because it doesn’t have oil and gas and helium and all of the other things that you need for heavy industry. I don’t understand how the other countries can be so quiet in permitting this breakdown of world trade that we’re seeing when it’s going to create a depression in their economies, which is going to be just as depressing as the ‘30s. Remember, what forced Japan into World War two was the United States cutting off its oil supply, and it was desperate. And that’s why it invaded Singapore and the other regions there in addition to China.
Well, same thing now. The United States has a stranglehold over Japan, but it’s not only in the form of access to the US markets and oil. It seems to be a personnel stranglehold established ever since 1945 when it backed the yakuza and the Japanese gangs to break up the socialist movement that tried to achieve office after World War two. General MacArthur was in charge of insuring the right winger wing in power.
So Japan, Korea, all these countries have the same problem that we’re talking about. The leaders of these countries are following the policies mainly of the United States, not what benefits their own countries, and the electorates of these countries. The voters realize this, but there’s nothing that the voters can do to dislodge these leaders that seem to be have been nurtured by the US government, by the National Endowment for Democracy, by the CIA and the State Department and the nongovernmental organizations and all of the other friendly institutions that they move, the individuals that they their talent scouts find, individuals in their twenties, maybe their teens in school, that they think here’s somebody who’s brilliant, charismatic, but also is an opportunist and just wants money and is, fortunately, is corrupt enough that we can have blackmail files on them just in case they don’t do what we want them to do for the amount of money and support that we’re giving them.
D.K.: It seems that the so-called blackmailing factor has become a much more important factor than in previous phases of history due to the development of surveillance technologies. But in the same time, you know, τhere is maybe another question. The financial capital is today much more denationalized and united than in the past. And so this is a a material basis for the phenomenon you’re describing.
Μ.Η. This surprises me so much. You’d think that the stock market, which, by the way, it was down earlier today (March 29th), but now the plunge protection team has come in, and the market’s beginning to recover a bit. The market is trading as what’s happening in Iran and also in Ukraine is a purely marginal temporary event, but it’s not temporary. It is the structure of world trade and finance that is being changed systemically.
The whole economic system has to be recreated by other countries outside of the United States because what they found is that in contrast for all of the subsidies that the United States has been receiving since 1945, claiming to protect other countries from military attack by Russia or other countries. And by destabilizing the economy, it does just the opposite.
The United States has become the major economic threat, financial threat, and military threat to all other countries. It’s become the threat that it had promised to protect other countries against. So what are they going to do? What’s the counter NATO? What’s the alternative organization that they need to do to make to somehow separate themselves? They’re not doing it yet. It’s as if they can’t even think of an alternative to the new international economic order, to the US centered rules-based order that it has been deteriorating they world into in the last half century.
D.K. You are right. They are they not able to think, and it is not in their interest to think. By the way, what you say about the markets understanding the reality, means that after all, we don’t have supposedly free markets which do whatever they want. I remember an article of yours in 2010 where you had introduced the term of debt war.
It seems that behind the so-called free markets, there are huge forces which are able to use them as armies against one and then against the second or against the third country. It is not, so to say, capital holders who are doing whatever they want at some point. And I don’t know what will happen with the fake reality. I was speaking before in some years. But for the time being, the consequences, if the war does not stop, will be monumental in all South, but also in Europe, of everywhere. And, okay, you can hide the reality. The media also are hiding the reality because both of the economic and the ecological one, because we have enormous ecological cataclysms in the Gulf and near it and nobody is speaking about that.
M.H. Well The problem is what are these large forces to what that you’re referring to, and what is their character? The character has changed. The usual idea is, well, the market is supposed to be objective and with trillions of dollars at stake, they can’t afford to live in a just pretend world of propaganda. So what are the big banks doing? Well, in the last few days in the United States, there’s been a lot of focus on the chairman of Chase Morgan, JPMorgan, when Chase Manhattan Bank merged with JPMorgan saying, we’ve got to support the US and its fight against Iran. And here you have the major US banker, and Chase is always the sort of standard US bank because it’s ever since Donald David Rockefeller, it’s always stood up for the treasury. Well, this is a a change from what it was way back in the ‘60s, you know, when the whole relation between finance capital, banking, and the state has changed.
I went to join Chase Manhattan Bank in December of 1964. And when I joined the bank, I was surprised to find officers telling me, well, you know, George Champion, the CEO of Chase Manhattan, was against the Vietnam War. Oh, on why he and why? Because it was not fiscally responsible. Well, obviously, subsequent wars have not been fiscally responsible either and Chase was very influential. And at that time, in the Republican Party, you have I think Robert Taft who was the isolationist, and the Republican Party had a major isolationist group. And I got along very well with them when I was in Washington and would meet with them. I was probably closer to the Republican isolationists than the others because I opposed the Vietnam War.
Well, shortly right after that time, George Champion was replaced by David Rockefeller. And Rockefeller was completely surrounded by a different kind of ideologists who always told him, you know, we want you to do the right thing. We had people always telling us, you know, Rockefeller wants to do the right thing, and the right thing he thought was whatever the treasury asked them to do. And though since my job was a balance of payments analyst, I followed the international activities of Chase. And the government, I guess, the state department or treasury asked Chase to set up a branch bank in Vietnam because Vietnam, Laos, Cambodia were all part of the French, the Frank zone.
And when Americans of the army would spend dollars there, the local recipients would turn the dollars over to their banks that would send them to Paris, to their head offices, to General de Gaulle, to cash in for gold every week or every month. Well so Chase did build this big bank, had no windows at all. It really was costly for the bank to do that, but it did it because Rockefeller wanted to be good citizen.
Well, I guess you could say that every it’s as if somehow finance capital has become subordinated to serve the state. And as it’s become neocon, as it has become a military state, and then somehow finance capitalism, which was always internationalist and seeking international control from the beginning, has been merged with this military control and the whole Cold War orientation that has reversed the idea of finance capital of saying, yes, we want to control the world, but without a military overhead. Controlling the world financially is much less expensive and then more efficient than controlling the world militarily, especially because the Vietnam War ended the ability of the US government to draft people. There’s no way you can draft American soldiers today to fight against Iran without there being another Kent State massacre where the students protest and the police shoot gun fire kill them with guns.
So somehow the United States needs allies to do all this. Well, look at how the irony is that this is breaking up NATO. For instance, you heard last night with Donald Trump and what he’s been saying for a few days. He’s angry at Europe and NATO for not standing up for him. Donald Trump has been told by the American army and sole military that we cannot seize the Strait of Hormuz without having our soldiers just shot down and machine gunned and droned to death and killed.
So Trump has asked Britain and its NATO allies, won’t you fight to the last European in fighting these? If you can only have enough of your soldiers die, they’ll be absorbing all these gun, these bullets and bombs, but, you know, someday, enough will die that they’ll absorb all the bullets that Iran has, and, Iran will be out of missiles, then we can grab the canal. Well, this is crazy. Obviously, Europe has said no. And so just, I think, today,
Secretary of State Rubio has said, well, Europe expects us to be there when Russia invades, begins to make march through Poland and give up 15 or 20.000 Russian lives in order to reconquer Germany on its way to invade England. Well, this fantasy, obviously, doesn’t play well with the electorate, although it’s this fiction that justifies the Cold War. And Rubio says, well, if we’re not there to protect Europe against this Russia refighting World War two, then Europe and NATO are not there to help us and die for us as we try to establish the world oil trade. Well, of course, America’s trying to reestablish control of the world oil trade so that they can control Europe.
So if Iran controls the Strait of Hormuz and is an oil producer, what does it want to do? It wants to sell its oil. It’ll be happy to sell its oil to Europe just like Russia was selling oil and gas to Europe before the neocons blocked it. Well, same thing now. If the United States were to gain control of the Strait of Hormuz and of the Near East and destroy Iran and seize its oil just like Donald Trump has seized Venezuela’s oil in the last few months, well, then the United States will do what just what its policy says.
It will go to Europe and say, well, just as we have a stranglehold over you, it if you want access to the US market, send Mrs. von der Leyen and to say, well, you know, we promise to invest so many hundred billion dollars in the United States as protection money for you, we promise to buy our natural gas and oil from you in the United States at four times the price that we were getting it from Europe.
Well, the same America can do the same thing to Europe with its control of OPEC oil. It can now say, well, you have to buy OPEC oil, you know, from us, not from Russia or not from any other supplier now that we’ve conquered Venezuela, now that we’ve blocked you from trading with Russia because your leaders have agreed to join the US Cold War, and we we’re trying to block you from Iran.
Well, why would Europe go along with this? Why would Europe end up voluntarily pushing itself into a depression looking just like Germany looked after February 2022 when it stopped importing gas and oil from Russia? See, why aren’t the Europeans really opposing more? Now right now, while we’re talking, I understand there’s a meeting in Britain of the NATO countries trying to decide what to do, but are they going to create a new organization, a new NATO without the United States? That’s what all the talk is here. And it’s as if Donald Trump has said, well, let them go their own way. We cannot afford to support NATO anymore. Well, he believes that because the German and European industries broke because they don’t have access to Russian oil or OPEC oil for the time being.
Europe has no choice but to either buy its arms from the United States or buy enough oil and gas from the United States to make its own very expensive arms at the cost of its domestic economy, at the cost of cutting back its social spending, and at the cost of putting the class war back in business.
D.K. Michael, I believe those threats to abandon NATO and things like that, they are simply made to press European leaders who are anyway, their level of understanding, maybe it’s a little bit better than Trump’s level, but not much. I don’t think there is any seriousness to that, because we all know that NATO is existing since its conception to keep Americans in, Germans down, and the Russians out as Lord Ismay said.
So I don’t give a damn. The Americans did that also during the Yugoslavia conflict. They were saying, oh, listen. We are going out and etc. And Europeans were frightened by America going out. Then when America comes in, it is terrible. They are frightened with America anyway, it is ridiculous. I mean, it’s a great opportunity for Europe to get liberated from the United States. But, unfortunately, there are not political forces in the continent to follow such an agenda, at least for the time being. Maybe there are some voices, for example, there is Oskar Lafontaine in Germany, Melanchon, I would not say exactly that, but he’s going to the same direction. But except those two cases, only too marginal forces areon such positions. And also the Ukraine incident has created a lot of confusion about what we are doing, what we’re not doing. But I want to ask you another thing. What is happening with the war itself? Do you think that America will be able to win this war?
M.H. I don’t think anybody sees a way in which the United States can win the war because what is winning? Iran is not going to give up. It’s because to give up is to turn over the government to the United States and become a dictatorship, to let Donald Trump promote an Iranian Boris Yeltsin to take over the economy and turn over the oil and the electric utilities and everything else to American investors, to basically end to replay, repeat the whole problem that you had under the Shah.
And the matter is they’re going to keep fighting. So the question is, how long can this occur? Well, it’s gone on about four weeks already, and the United States, at this rate of fighting, it will run out of bombs and run out of bullets and run out of missiles within four more weeks. What’s going to happen to them? Then when the United States has no more bombs and missiles and Iran is going to continue to bomb American oil, bases and the Arab sheikdoms in the OPEC countries to replace the sheikhdoms with a a basic real democracy representing the populations there, starting with countries with Shia populations, Jordan and Oman, and then spreading to the
D.K. And Bahrein…
M.H. And United Arab Sheikdoms and with the aim ultimately of Saudi Arabia itself. That’s the Iranian problem. And Iran is saying, well, if you other countries, Europe, Japan, East Asia, the global South, if you don’t do something to stop the United States, then we’re going to fight against the Arab OPEC countries. And if we can’t exploit oil because the United States has blown up our oil and electric utilities, the other countries will not have any oil or electricity or gas or desalinization either.
And if they don’t and we don’t, then you’re going to have a world depression. The price of inaction to you other countries of not standing together and blocking this attack on us by the United States, Europe, and especially the Sunni Arab countries. If you don’t stop that, then the price you’ll pay will be to suffer a depression at least as bad as the ‘30s, and it’ll probably mean the fall of your governments.
That’s the price. What are you going to do about it?
D.K. Are you satisfied by the position of Russian and Chinese government? How you appreciate the position of Russia and of China?
M.H. They expect that the future world order will be dominated by the alliance between China, Russia, and Iran. And other countries, the BRICS and the global South, will probably follow the organization of this new international economic order that is created institutionally by China, Russia, and Iran working together.
As an alternative to trade in dollars, an alternative to trade with United States as an alternate essentially, to be self -sufficient in their own economic sphere. And there’s now a critical mass. These countries together are large enough with their neighbors, Central Asia, East Asia, Africa, part of Latin America. These countries are enough to have enough self-sufficiency so that they can trade and finance and have a growing income and wealth without linkage with the United States and NATO.
D.K. Thank you very much, Michael. I hope that we’ll continue soon our debate, our discussion.
M.H. Thank you, Dimitri.
