How Will American Oligarchs Keep Control? There Aren’t Many Choices

By Thomas Neuburger

“The alternative to democracy is oligarchy. As Aristotle noted already in the 4th century BC, oligarchies turn themselves into hereditary aristocracies. This is the path to serfdom.” —Michael Hudson

Consider the following from the blurb for economist Michael Hudson’s latest book, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism:

The book explains why the U.S.-China conflict cannot simply be regarded as market competition between two industrial rivals. It is a broader conflict between different political economic systems - not only between capitalism and socialism as such, but between the logic of an industrial economy and that of a financialized rentier economy increasingly dependent on foreign subsidy and exploitation as its own domestic economy shrivels. Professor Hudson endeavors to revive classical political economy in order to reverse the neoclassical counter-revolution.

In an interview with the German magazine ViER (quoted here), Hudson was asked to expand on these ideas. What is the conflict between financialized and de-industrialized countries like United States and the mixed-economies of China and Russia really about? And why does he say the world’s at a unique “point of fracture”?

Hudson’s response to these questions is worth quoting in full. He starts with information that contains few surprises:

Today’s global fracture is dividing the world between two different economic philosophies: In the US/NATO West, finance capitalism is de-industrializing economies and has shifted manufacturing to Eurasian leadership, above all China, India and other Asian countries in conjunction with Russia providing basic raw materials and arms.

These countries are a basic extension of industrial capitalism evolving into socialism, that is, into a mixed economy with strong government infrastructure investment to provide education, health care, transportation and other basic needs by treating them as public utilities with subsidized or free services for these needs.

In the neoliberal US/NATO West, by contrast, this basic infrastructure is privatized as a rent-extracting natural monopoly.

But the continuation contains a seldom-asked question, at least in mainstream circles (emphasis mine):

The result is that the US/NATO West is left as a high-cost economy, with its housing, education and medical expenses increasingly debt financed, leaving less and less personal and business income to be invested in new means of production (capital formation). This poses an existential problem for Western finance capitalism: How can it maintain living standards in the face of de-industrialization, debt deflation and financialized rent-seeking impoverishing the 99% to enrich the One Percent?

Hudson’s answer to the rhetorical question?

The first U.S. aim is to deter Europe and Japan from seeking a more prosperous future [by preventing] closer trade and investment ties with Eurasia and the Shanghai Cooperation Organization (SCO, a more helpful way of thinking about the global fracture from the BRICS). To keep Europe and Japan as satellite economies, U.S. diplomats are insisting on a new economic Berlin Wall of sanctions to block trade between East and West.

For many decades U.S. diplomacy has meddled in European and Japanese internal politics, sponsoring pro-neoliberal officials into government leadership. These officials feel that their destiny (and also their personal political fortunes) is closely allied with U.S. leadership. Meanwhile, European politics has now become basically NATO politics run from the United States.

The problem is how to hold the Global South – Latin America, Africa and many Asian countries – in the US/NATO orbit. Sanctions against Russia have the effect of hurting the trade balance of these countries by sharply raising oil, gas and food prices (as well as prices for many metals) that they must import. Meanwhile, rising U.S. interest rates are drawing financial savings and bank credit into U.S.-dollar-denominated securities. This has raised the dollar’s exchange rate, making it much harder for SCO and Global South countries to pay their dollarized debt service falling due this year.

This forces a choice on these countries: either go without energy and food in order to pay foreign creditors – thereby putting international financial interests before their domestic economic survival – or [default] on their debts, as occurred in the 1980s after Mexico announced in 1982 that it could not pay foreign bondholders.

This choice for the Global South — to go without energy and food or default on debt — is little commented on in the West, partly because the choice is so new, an outgrowth of Ukraine War sanctions. But the problem is still real and will only get worse.

The rest of the interview deals with these problems, the one faced by Europe and the one faced in the Global South. And there’s this very stark, but true, reminder that “national parliaments are now subservient to NATO, whose policies are run from Washington.”

How Will U.S. Oligarchs Win in the U.S.?

But note in the first quote the even larger problem Hudson identifies: How can the West maintain living standards while also de-industrializing and impoverishing the 99%?

He answers it, indirectly, by talking about how the inflow of money from Europe and other U.S.-dominated countries like Japan keeps the rich in cash:

European economic shortages are a huge benefit to the United States, which is making enormous profits on more expensive oil (which is controlled largely by U.S. companies, followed by British and French oil companies). Europe’s replenishment of the arms that it donated to Ukraine also is a boon to the U.S. military-industrial complex, whose profits are soaring.

But the United States is not recycling these economic gains to Europe, which is looking like the big loser.

None of those profits is going to the people, however. Only the living standards of the “One Percent” are propped up. (By “One Percent” I mean the upper 10%, a group that comprises the actual oligarchs, plus all those well-paid souls who keep the oligarch ship afloat and its engines running.)

But that leaves us with the original question. How will our wealthy keep control while impoverish voters even more than they have? Hudson’s answer, implicit in this piece written during the 2020 election, is stark:

“The alternative to democracy is oligarchy. As Aristotle noted already in the 4th century BC, oligarchies turn themselves into hereditary aristocracies. This is the path to serfdom.”

Elsewhere in this piece he writes, “All this sounds like Rome at the end of the Republic in the 1st century BC.”

People make facile comparisons of modern America to the end of the Roman Republic — without fully realizing that at the end of the Roman Republic, the Republic did end.

So how will our oligarch do it — maintain control while impoverishing the rest of the country? There’s kind of only one answer — by ending the republic, both its fact and its pretense.

There may be other ways, but I can’t think of them.