Today jobs offshoring and the financialization of the economy are again enserfing the people, but the cause is debt, not armed invaders.
Today’s rentier class, unlike the one that emerged from feudalism, has never provided any service in exchange for the debt peonage that it has imposed.
Below is an excerpt from the Introduction to the German edition of Michael Hudson’s book, Killing the Host to be published in November by Klett-Cotta:
Today’s reversal of progressive values is a historical transition point much like what occurred from the Roman Republic to Empire during the century of Social War, 133-29 BC. Rome’s debtors and plebs lost in a wave of political violence. It was by murder that the oligarchic party prevented the reforms of Tiberius Gracchus in Rome after 133 BC. Julius Caesar suffered a similar fate in 44 BC after moving to take the demos into his camp. Other politicians urging debt cancellation also were killed.
Rome survived not by prosperity at home but by looting foreign regions.
Arminius made a brave stand to resist Rome in 9 AD in the Teutoburg forest. But by that time the die was cast. Over the next few centuries the oligarchs imposed debt bondage on a quarter of the population, plunging the imperial economy into serfdom.
Are we going down a similar road today, leading to debt peonage and war against countries daring to resist? As the modern Rome, the United States is backing creditor-oriented rules throughout its economic sphere. This book describes the cruel creditor rulings imposed on Argentina as setting legal precedent for holdouts and vulture funds to block any government from reaching agreement with bondholders to bring its debts in line with the ability to pay. The world’s debtor economies are to be treated as Germany was in the 1920s, or face being broken as Greece has been.
Western civilization stands at a turning point between creditor and debtor interests similar to that of Rome two thousand years ago – a clash over what kind of economic society will emerge for the rest of this century. Samuel Huntington coined the term “clash of civilizations” in 1992. But he was not referring to the West’s own internal financial war by today’s oligarchy to reverse the Enlightenment’s program to free industrial capitalism from post-feudal rent seeking and financialization.
Neoliberals depict today’s neo-rentier Counter-Enlightenment as the end of history, as if the conflict has been settled and there can be no revival of the classical struggle to make economies more equitable. That was Francis Fukuyama’s message in The End of History and the Last Man. Like Huntington’s essay it was published in 1992, in the wake of dissolution of the Soviet Union and its replacement by privatizers using shock therapy to destroy that nation’s industrial base. But in a February 1, 2012 interview with Der Spiegel, Fukuyama acknowledged that his paean to neoliberalism had been premature: “Obama had a big opportunity right at the middle of the crisis. That was around the time Newsweek carried the title: ‘We Are All Socialists Now.’ Obama’s team could have nationalized the banks and then sold them off piecemeal. But their whole view of what is possible and desirable is still very much shaped by the needs of these big banks.”
Europe is being asked to endorse the ECB supplying more liquidity to the banks, as if bank loans will finance new capital investment and employment, not deeper debt deflation. Voters are being asked to trust the trickle-down promise that privatizing the public domain will deliver infrastructure services more efficiently and at lower cost. The reality is that predatory tollbooth rents and interest charges will be factored into the prices that new monopolists set.
Such asset stripping and debt deflation can spread throughout the world only if no better alternative is seen. My aim in this book has been to outline such an alternative, based on the classical analytic tools and policy reform developed from the 17th through early 20th centuries to free economies from unearned rentier income and predatory finance.
A dream that history will work out for the best because of some natural selection of the most fair, productive and peaceful societies leaves out of account the threat posed by vested interests, capped by today’s financial oligarchy. Today’s debt deflation and austerity is not a survival of the technologically fittest mode of economic organization. It is a regressive rentier policy by post-feudal vested interests fighting to retain their special privileges and prevent themselves from being taxed and regulated.
The question is whether voters will let neoliberal managers concentrate power in the hands of the One Percent and treat debtors like Allied creditors treated Germany a century ago. Even worse, will they follow their Roman predecessors and drive their empire into a Dark Age?
It is a sign of the possible future that as the world’s leading financial and military power, the United States suffers from one of the most extreme concentrations of income and wealth. The One Percent have monopolized the gains that are reported, and these gains are not really an addition to national prosperity. They are a transfer of economic rent and interest – and property – from the 99 Percent to the top of the economic pyramid.
Today’s national income statistics do not label economic rent as such. A misleading intellectual map is drawn to distract attention from the actual dynamics at work. This book describes how high finance has politicized its power grab by using junk economics to depict the financial sector and its rent-extracting clients as “job creators,” not job destroyers. Using a rhetoric of “personal responsibility” to blame the victims for their indebtedness, its moral philosophy is that all debts must be paid, without regard for how this tears society apart.
There is an alternative. Achieving it requires understanding the dynamics at work and distinguishing between earned and unearned income, between productive and unproductive means of gaining wealth. That is the antidote to the neo-rentier power grab.
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