1. How to create 2014 talking points in four easy to follow steps

File this under, “Marx Proven Wrong By Progressives and Liberals Once Again”.

The question this time is the relation between industrial capital and finance capital. According to DSWright (whoever the fuck she/he is) Michael Hudson, a heterodox economist,

“has long claimed that Marx’s contention that ultimately industrial capitalism would triumph over finance capitalism was wrong.”

In fact, according to DSWright, bankers now dominate the economy and subject productive employment to the “rent-seeking” priorities of finance capital. Says Hudson, in 1998,

“Whereas the old industrial capitalism sought profits, the new finance capitalism seeks capital gains mainly in the form of higher land prices and prices for other rent-yielding assets.”

Industrial capital, in other words, only engages in healthy, wholesome profit-making, while finance capital seeks debt slavery and constantly rising physical and financial asset prices.

DSWright is happy to report Hudson’s correction of Marx has now been adopted into the arguments both of Joseph Stiglitz and of Paul Krugman. According to Stiglitz much of what goes on in the financial sector is unhealthy, vile rent seeking, not healthy, wholesome profit-making. Paul Krugman has recently declared America in the 21st century is now seeing “the growing importance of monopoly rents: profits that don’t represent returns on investment”. Krugman argues these monopoly rentiers with their market dominance actually may be prolonging the depression. The unprecedented duration of this depression is, “no puzzle here if rising profits reflect rents, not returns on investment.”

DSWright congratulates Stiglitz and Krugman for finally adopting an insight already well established in heterodox economics by Hudson:

“Though it may not be very consequential, it is nice to see mainstream economists acknowledge the truth.”

According to Hudson, Stiglitz, Krugman and DSWright then, Marx somehow screwed up when he argued (in DSWright’s words) “industrial capitalism would triumph over finance capitalism”. Now that Mr. Hudson, Mr. Stiglitz and Mr. Krugman have all agreed Marx was wrong, we can get back to the job of voting Democrat. The mid-term elections are coming fast and liberals need some banner around which to rally recalcitrant emoprogs.

After watching Obama murder children with impunity for six years, liberals must change the subject to those bad guys on Wall Street. How better to do this than to have suddenly happened on to this amazing correction to Marx, which ‘proves’ bad finance capital is oppressing virtuous industrial capital.

“Comrades, rise up! Goldman Sachs is oppressing our brothers at British Petroleum!”

Ha! You dumb fucks.

In fact, as Marx demonstrated, the case is exactly the opposite of the Stiglitz-Krugman-Hudson gang’s explanation. Industrial capital produces not only the healthy wholesome profits of industry, but also debt slavery and rent-seeking finance capital. Rent-seeking finance capital is only a disguise industrial capital dons when it’s no longer able to make healthy wholesome industrial profit.

So, let’s begin to expose this fucking farce by examining Michael Hudson’s 1998 paper. Perhaps we can show emoprogs that liberals are, once again, playing them for a sucker. Perhaps not — they are nothing if not dumb fucks.

Hudson begins by asking the question,

“Was Marx too optimistic?”

Marx was a product of his time, a Victorian-era scribbler with unbounded faith in the progressive potential of industrial capitalism. Marx, according to Hudson,

“expressed an optimistic faith that financial capital would become subordinate to industrial capital. He described the banking system as an ‘integument’ acting increasingly as the planning arm within industrial capitalism, bringing the world economy closer to international socialism.”

Additionally, we are told,

“Marx even endorsed free trade on the ground that it would speed up this evolutionary process.”

Finally, it turns out, Marx was no fan of the existing state:

An enemy of bureaucracy, he saw the governments of his day dominated by landed aristocracies, militarized nobilities or colonial satrapies. Their tendency was to act as reactionary impediments to the economic organism trying to evolve forward, prone as they were to special interest pleading by the vested interests that retained political control over the fiscal and lawmaking processes.

Imagine that Marxists: Karl Marx advocated measures to ‘accelerate’ the development of capitalism; stood foursquare in favor for free trade; and hated the state! Marx was a naive Victorian idealist, who only saw the magic of the invisible hand! He was not only the co-founder of scientific socialism — my God! — he just might have been the founder of neoliberalism!

Having laid out the list of lesser charges against this Victorian apologist for what are today called neoliberal policies, Hudson now turns to Marx’s chief defect: more insightful writers patiently tried to correct Marx on his errors, but to no avail:

“In England, John Hobson found the taproot of imperialism to be the expansion of finance capital.”

In America,

“Thorstein Veblen analyzed how pecuniary relations – its financial and monetary structure – distorted the economic system away from how it would be run rationally by engineers.”

But did Marx listen? Of course not. He was mired in his naive boundless faith in General Motors and its inevitable victory over Ally Bank.

Already by the end of the 1800s and the prelude to the Great War, British writers were warning the detachment of finance from industry was causing Britain to lose its industrial edge over continental Europe. While the continent had a more industry oriented approach to banking, in England finance capital stood aloof from industrial innovation.

“The commercial banking system limited its activities to advancing ready cash against export orders and extending other short-term business credit, duly collateralized. Matters are still the same way today.”

And then, at this point, for some very odd reason, Hudson interrupts the further development of his argument along these lines at the beginning of the Great War and moves to an alternate track. We thus lose 17 years of real history.

The Great War and its consequences for industry are entirely ignored. Completely missing is the impact military production had on the economy as the war took precedent over civilian employment of capital and the impact produced by the attendant employment of debased fiat for this purpose. Under the militarization of economic activity, the British state took the first steps towards bringing economic activity under its control. It employed its valueless fiat — debased from gold for the duration of the war — to effect this control.

Why doesn’t this figure in Hudson’s story? Why did he just fast forward history past this point? Because the inflation produced by this method of economic management can only be explained by policies of the state not finance capital. The first attempts to manage the total capital of society as a single whole were made under the duress of the first global war of redivision from 1914 to 1919. When this history is actually examined, it would appear that the first shoots of finance capital alleged dominance over industrial capital has its roots in the war-time domination of the state over economic activity.

Am I missing something here? Did not the state first replace commodity money with its own tokens in order to ensure its control over industrial output?

Perhaps this is too complex a point for dumb emoprogs like DSWright to grasp, so I will state it clearly: Finance capital comes to dominate industrial capital side by side with the fascist state domination material economic activity of society. The fascist state employs its valueless currency to direct economic activity producing a huge flow of currency into the economy. This flow produces both inflation (depreciation of the purchasing power of the currency) and financialization (fictitious currency seeking any outlet to become money-capital). This is why Michael Hudson completely avoids mentioning the unfortunate events called the Great War — which resulted in 20 million dead. The war triggers a decade of speculative activity that culminates in the Great Depression.

These facts are not in line with the world according to Michael Hudson, so we are fast forwarded to the “failure of the 1931 London Economic Conference [that] made the Great Depression inevitable.” Which is to say, an event occurring two years after the onset of the Great Depression, was the cause of the Great Depression.

They hand out degrees in economics for this bullshit.

In fairness, Michael Hudson may be implying that the initial contraction phase of the Great Depression was simply a really bad recession. Economic policies, he may be arguing, turned this really bad recession into a depression of unprecedented scale. Which is to say, Hudson may be making this argument, but he doesn’t have to, since Milton Friedman, adviser to the butcher of Chile, and godfather of monetarism has already made it for him. Now why would Michael Hudson, heterodox economist and part-time Keynesian, be adopting the argument of the adviser to General Pinochet? Because it is precisely the same argument as John Maynard Keynes — godfather of Keynesian economics. There is, in fact, no difference whatsoever between the economic policies of Keynes and those of Friedman and, therefore, no difference in policy recommendations of Ben Bernanke (neoliberal) and those of Paul Krugman (Keynesian).

Essentially, the neoliberal policies of Ben Bernanke are only the Keynesian policies of Paul Krugman applied to the rest of the world. Just as Krugman called on Washington to saddle the sub-prime borrowers with unserviceable debt in 2002, so Washington is saddling Greece and Spain with unserviceable debts today through the offices of the IMF.

Anyways, to continue with history as rewritten by Michael Hudson: When we left off, Michael had erased the Great War from history; the Great Depression is given only a single line in which it was explained as the effect of tight money policies of the pre-Keynesians; and, magically, the entirety of World War II, which produced 4 times the deaths of the Great War, also vanishes.

This war not only produced 80 million deaths, never even acknowledged by Hudson, it also laid waste to the productive capacity of Eurasia. The single industrial power to emerge from this catastrophe stronger than it went into it was the United States. These facts are glossed over by Michael Hudson with a simple and completely astonishing sentence:

“Yet capitalism emerged from World War II in such good shape that even Stalin announced to the Comintern that there would be no postwar economic crisis.”

By ‘capitalism’, clearly Hudson is only referring to the United States fascist state as is typical for bourgeois apologists. The health of ‘capitalism’ is equated with the health of the fascist state headquartered in Washington and has no other meaning for liberal and progressive apologists of fascism. Thus we find, according to Bernanke in his recent testimony before the House,

“The economic recovery has continued at a moderate pace in recent quarters despite the strong headwinds created by federal fiscal policy.”

By the phrase ‘economic recovery’, Bernanke of course mean the production of surplus value and this should not be confused with the actual conditions of the working class. Since the fascist state pays nothing for labor power, its only concern is the ever increasing mass of surplus value created by consuming it. And this, as Bernanke explained, is recovering at a modest pace.

Hudson continues with his Alice in Wonderland rewrite of history:

“In the Allied economies, consumers emerged from the war free of debt (for there had been few consumer goods to buy during the war, and hence little reason to borrow), and indeed with abundant savings accumulated during the war. There was no postwar inflation, nor the kind of postwar deflation that had strangled England’s economy after World War I.”

This is truly a magnificent statement. Seldom has one academic stuffed so much bullshit and so many lies into under 100 words. Actually Eisenhower ran in 1952 on the platform that US defense spending was creating what he called a false prosperity that generated unprecedented inflation for that time. According to Eisenhower, who is quoted at length in a blog post by Tom Walker:

“The inflation we suffer is not an accident; it is a policy. It is not, as the Administration would have us believe some queer and deadly kind of economic bacteria breathed into the atmosphere by Soviet communism… The point and purpose of this policy I have already indicated: to fool the people with a deceptive prosperity. The method is very simple: to give more people more money that is worth less… Furthermore Eisenhower identified the mainspring of that inflationary policy as the production of armaments: There is in certain quarters the view that national prosperity depends on the production of armaments and that any reduction in arms output might bring on another recession. Does this mean, then that the continued failure of our foreign policy is the only way to pay for the failure of our fiscal policy? According to this way of thinking, the success of our foreign policy would mean a depression.”

So Hudson is flat out lying when he argues there was no postwar inflation, nor postwar deflation. He is not simply misunderstanding facts, he is lying. In fact, Eisenhower won in 1952 making the case that the so-called US economy was trapped in a false prosperity of Cold War expenditures.

I must emphasize that Hudson is deliberately lying about the facts; he is not just another ignorant low information voter. His argument is carefully crafted to omit significant and readily available information — it is the deliberate falsification of history. This deliberate falsification of history then gets imported into the argument of some Obama-bot on firedoglake.com and used to convince emoprogs to stick with the Democrats in 2014. It is a political feat as flawlessly executed as any that will be found in turning GOP talking points into FOX News.

Here is how it goes: 1. Some ideologue masquerading as a ‘scholar’ somewhere invents a completely fictitious narrative; 2. it gets taken up by hitmen in the liberal punditocracy; 3. gains traction on the blogs; and 4. soon appears on MSNBC. Any day now we should begin to hear that GE Capital is ruthlessly oppressing the poor industrialists at General Electric. The argument to emoprogs is simple and direct:

The oppression of poor industrialists on Main Street by financial terrorists on Wall Street can be ended by winning a Democrat House majority that will pass Senator Elizabeth Warren’s bill.