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The US defines its political and economic reality in the rhetoric of free markets and democracy. Only problem is that China and many other countries in the world don’t recognize it. By Michael Hudson.

Mr Soros has expressed his ideological fury at the prospect of not being able to make the kind of easy money off China that he was able to siphon off when the Soviet Union was carved up and privatized.

On September 7, 2021, in his second mainstream editorial in a week, George Soros expressed his horror at the recommendation by BlackRock, the world’s largest asset manager, that financial managers should triple their investment in China.

Claiming that such investment would imperil US national security by helping China, Mr Soros stepped up his advocacy of US financial and trade sanctions.

China’s policy of shaping markets to promote overall prosperity, instead of letting the economic surplus be concentrated in the hands of corporate and foreign investors, is an existential threat to America’s neoliberal priorities, he says.

President Xi’s “Common Prosperity” program “seeks to reduce inequality by distributing the wealth of the rich to the general population. That does not augur well for foreign investors.” [1] To neoliberals, that is heresy.

Criticizing China’s “abrupt cancellation of a new issue by Alibaba’s Ant group in November 2020,” and “banishment of US-financed tutoring companies from China,” Mr Soros singles out Blackstone’s co-founder Stephen Schwarzman (his private equity firm, the largest absentee investor in US single-family home rentals, is not to be confused with the stock and bond asset-manager BlackRock under Larry Fink and former Goldman Sachs President John L Thornton) for seeking to make financial returns for their investors instead of treating China as an enemy state and looming Cold War adversary:

“The BlackRock initiative imperils the national security interests of the US and other democracies because the money invested in China will help prop up President Xi’s regime… Congress should pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China. The effort ought to enjoy bipartisan support.”

The New York Times published a prominent article defining the “Biden Doctrine” as seeing “China as America’s existential competitor; Russia as a disrupter; Iran and North Korea as nuclear proliferators, cyberthreats as ever-evolving and terrorism as spreading far beyond Afghanistan.”

Against these threats, the article depicts US strategy as representing “democracy,” the euphemism for countries with neoliberal governments that leave economic planning to Wall Street financial managers, and infrastructure in the hands of private investors. Nations that restrict monopolies and related rent-seeking activities are accused of being autocratic.

The problem, of course, is that although the United States, Germany and other nations grew into industrial powers in the 19th and 20th centuries by government-sponsored infrastructure, progressive taxation and anti-monopoly legislation, the post-1980 neoliberal rejection of these policies has led them into economic stagnation for the 99 Percent burdened by rising debt and other rentier overhead paid mainly to the Finance, Insurance and Real Estate (FIRE) sector.

China is thriving by following precisely the policies by which the former leading industrial nations grew rich before suffering from the neoliberal financialization disease. This contrast prompts The New York Times article’s thrust, summarized in its summary of what it hopes will become a Congressionally supported Biden Doctrine of escalating a New Cold War against non-neoliberalized economies, juxtaposing US-sponsored liberal-democratic imperialism against foreign socialism:

“Last month, Mr. Blinken warned that China and Russia were making the argument in public and in private that the United States is in decline - so it’s better to cast your lot with their authoritarian visions for the world than with our democratic one.” [2]

Mr Soros had seen the ending of the Cold War open the path for him and other foreign investors to use “shock therapy” to allow easy pickings in Russia. The much broader Asian Crisis of 1997 presented another grab-bag opportunity to buy up the most lucrative rent-yielding assets of foreign countries.

He is upset that President Xi is not emulating Boris Yeltsin and letting a client kleptocracy emerge to carve up China’s economy like Russia’s grabitizations privatized the post-Soviet economy in ways that made Russia’s stock market the world’s darling for a few years, 1995-97.

Right after the Asia Crisis, Bill Clinton’s administration admitted China to the World Trade Organization, giving US manufacturers and importers access to low-priced labor able to undersell US industrial labor. That helped stop US wage gains, while China used foreign investment as a means of upgrading its technology and labor to become economically self-reliant.

It has not let its monetary system or social organization become financially dependent on “markets” functioning as vehicles for the US control that Mr Soros hoped would occur when he began investing in China.

China recognized from the beginning that its insistence on maintaining control of its economy - steering it to promote overall prosperity, not to enrich a client oligarchy fronting for a foreign investor class - would create political opposition from US Cold War ideologues.

China therefore sought allies from Wall Street, offering profit-making opportunities for Goldman Sachs and other investors whose self-interest has indeed led them to oppose anti-China policies.

But China’s success has created so many billionaires that it is now moving to curtail exorbitant wealth. That policy has sharply cut prices for the leading Chinese stocks, prompting Mr Soros to warn US investors to bail out. His hope is that this will bring China to heel and reverse its policy of raising its peoples’ living standards instead of sending its economic gains to US and other foreign investors.

The reality is that China does not need US or other foreign money to develop. The Peoples’ Bank of China can create all the money that the domestic economy needs, while its export trade already is flooding it with dollars and pushing up its exchange rate, enabling it to buy all the imports and fund all the capital investment that it needs.

John McCain characterized Russia as a gas station with atom bombs (neglecting to acknowledge that it is now the world’s largest grain exporter, no longer dependent on the West for its food supply - thanks largely to US-sponsored trade sanctions).

The corollary image is the United States as a financialized and monopolized economy with atom bombs, sanctions and cyber threats, in danger of collapsing like the old Soviet Union but threatening to bring the entire world economy down with it if other countries do not subsidize its debt-ridden New Cold War economy.

Presenting itself as the world’s leading democracy despite its financial oligarchy at home and its support of client oligarchies abroad, the United States has consolidated and concentrated domestic financial power in the wake of the 2008 junk-mortgage and bank-fraud.

Policy making and resource allocation have passed out of the hands of meaningful electoral politics into those of the Finance, Insurance and Real Estate (FIRE) sector, and what Ray McGovern has called MICIMATT, the Military-Industrial-Congressional-Intelligence-Media-Academic-Think Tank complex, including the major foundations and NGOs.

These institutions dovetail to concentrate income and wealth in the hands of a FIRE-sector oligarchy just as the Roman Senate blocked reform by using veto power over popular legislation (backed by targeted political assassination), and Europe’s upper houses of parliament such as Britain’s House of Lords used similar chokehold power to resist government control in the public interest.

The rise of US-sponsored neoliberalism means that the 19th-century’s fight to free markets from predatory finance sponsoring rentier parasitism has failed in the West. This failure is celebrated as a victory for the rule of law, democracy, property rights and even free markets over the authority of public power to regulate private wealth-seeking.

Integrating the global economy along unipolar lines enabling US financial interests and those of allied NATO economies to appropriate the most profitable and highest rent-yielding assets of foreign countries is idealized as the natural evolution of civilization, not as the road to neoliberal serfdom and debt peonage embodied in what US officials call the “rules-based international order.”

What is the Rule of Law?

The United States refuses to join the World Court, or any international organization in which it does not have veto power. And it simply withdraws from international treaties and agreements that it has signed if its vested interests believe that these no longer serve their interests.

This always has been US policy, from the many treaties with Native American tribes broken by Andrew Jackson and his successors down through the US-Soviet agreements ending the Cold War in 1991 broken by Bill Clinton, to the treaty removing sanctions on Iran broken by Donald Trump. This policy has introduced a new term into the world’s diplomatic vocabulary to describe US diplomacy: non-agreement-capable.

The evangelistic neocon administration of George W Bush, effectively run by his Vice President Dick Cheney, followed the principle that: “We’re an empire now, and when we act, we create our own reality.” [3]

To impose this reality on other countries, US “intelligence” is selected, invented or censored to give the appearance of whatever reality is deemed to serve US interests at any given moment of time. Past and present reality is redefined at will to provide a guide or at least a rhetorical justification for action.

Whatever US diplomacy dictates is claimed to reflect the rule of law, giving the United States the right to define what is legal and what is not when it imposes economic and military sanctions against countries that do not follow pro-American policies. The resulting dictates laying down the law are always wrapped in the rhetoric of free markets and democracy.

What is a free market?

To the classical economists, the objective of 19th-century reform was to replace the rentier class’s political power with democratic power to create state policies to either tax away land rent and other economic rent, or to take (indeed, to return) land and natural resources to the public domain, along with natural monopolies such as transportation, communications and other basic infrastructure.

A free market was defined as one free from economic rent - most prominently the land rent imposed by heirs of the feudal warlord landlord class, whose economic role was purely extractive, not productive. Natural resource rent was also said to belong to the public domain as national patrimony, and monopoly rent was to be prevented by keeping natural monopolies in the public domain, or firmly regulating them if privatized.

The 20th century’s anti-classical reaction has inverted the concept of a free market, Orwellian Doublethink style, to create one “free” for rent-seekers to carve out free-lunch rent income. The result is a rentier economy in which land, natural resources and natural monopolies are privatized and, in due course, financialized to turn rent into a flow of interest payments to the financial sector as the economy is driven into debt to afford the rentier overhead and debt-financed asset-price inflation for rent-yielding assets.

The “freedom” of such markets is freedom from governments to tax away economic rent and regulate prices to limit rent extraction. As a result of this kind of freedom, an exponential growth of unearned rentier income and wealth accrues to an unproductive rentier sector diverting income away from the “real” production-and-consumption economy.

As for free trade, the United States also retains the right to impose tariffs at will (euphemized as “fair trade”) and levy fines and sanctions to prevent companies from selling technology to China. The aim is to concentrate technological monopolies in US hands.

Any “proliferation” of technology (which is treated much like nuclear weaponry as a national security issue) is deemed to be “unfair” and antithetical to US freedom to control the world’s trade and investment patterns in its own interest.

America’s attempt to promote “free markets” and “fair trade” globally and to intervene throughout the world to promote Free World members defined ipso facto as being democratic simply by virtue of being US allies is defended and justified by US claims that it is protecting democracy against autocracy.

In reality, today’s New Cold War is all about maintaining and extending such a captive US-oriented “free market” by force, in the tradition of Henry Kissinger’s coup in Chile to impose Chicago-style “free markets” and Hillary Clinton’s coups in Ukraine’s Maidan and Honduras and her NATO-backed destruction of Libya and assassination of Qadhafi.

What is democracy?

Aristotle wrote that many constitutions appear superficially to be democratic, but actually are oligarchic. Democracy always has been the deceptive euphemism for oligarchy making itself into a hereditary aristocracy. Democracies tend to evolve into oligarchies as creditors expropriate debtors (the “rule of law” guaranteeing a hierarchy of “property rights” with creditor claims at the top of the legal pyramid).

The move toward democratic political reform in the late 19th and early 20th centuries was supposed to create rent-free markets. But the dynamics of political democracy have been managed in a way that blocks economic democracy. The very meaning of “democracy” has effectively been degraded to mean opposition to the government’s power to act against the oligarchic rentier One Percent on behalf of the 99 Percent.

The resulting travesty of a democratic free market serves to block political attempts to use public power to promote the interests of the wage-earning population at large, and indeed of the industrial economy itself to avoid financial asset stripping and debt deflation of markets for industrial products.

In the language of nouveau-Western diplomacy, “democratic” has become a label for any pro-US regime, from the Baltic kleptocracies to Latin America’s military dictatorships. Countries using state power to regulate monopolies or to tax rentier income are denounced as “autocratic,” even if they have elected heads of state.

In this new Orwellian rhetoric of international diplomacy, Boris Yeltsin’s kleptocratic Russian regime was democratic, and the popular move by subsequent popularly elected governments in Russia to stop the corruption and depopulation is called “autocracy.”

What is autocracy and “authoritarianism”?

Foreign moves to defend against US financial takeovers and sponsorship of client oligarchies are denounced as authoritarian. In the US diplomatic vocabulary, “autocracy” refers to a government protecting the interests of its own population by resisting US financial takeover of its natural resources, basic infrastructure and most lucrative monopolies.

All successful economies throughout history have been mixed public/private economies. The proper role of government is to protect economies from a rentier oligarchy from emerging to polarize the economy at the expense of the population at large. This protection requires keeping control of money and credit, land and natural resources, basic infrastructure and natural monopolies in the hands of governments.

It is oligarchies that are autocratic in blocking reforms to overrule their rent-seeking by keeping basic needs and infrastructure in the public domain.

To confuse understanding, Rome’s oligarchy accused social reformers of “seeking kingship,” much as Greek oligarchies accused reformers of seeking “tyranny” - as if their reforms were merely for personal gain, not to promote general prosperity. In a similar vein, today’s neoliberal oligarchies accuse reforming governments of being autocratic. This Orwellian Doublethink is woven into the rhetoric of neoliberalism.

What is neoliberalism?

Neoliberalism is an exponentially expanding financial dynamic seeking to concentrate the world’s most profitable and highest rent-yielding resources in the hands of financial managers, mainly in the United State and its client oligarchies that act as proconsuls over foreign economies.

The liberal mass media, academia, and “think tank” lobbying institutions, policy foundations and NGOs sponsor the above-described rhetoric of free markets to create vehicles for capital flight, money laundering, tax evasion, deregulation and privatization (and the corruption that goes with emerging kleptocracies).

Neoliberal doctrine depicts all public moves to protect general prosperity from the burden of rentier overhead as being authoritarian autocracy “interfering” with property rights.

What are property rights?

In today’s financialized economies “property rights” mean the priority of creditor rights to foreclose on the housing, land and other property of debtors. (In antiquity that included the personal freedom of debtors condemned to debt bondage to their creditors.)

The World Bank has promoted creditor-oriented property rights from the former Soviet Union to Latin American indigenous communities in order to privatize hitherto communal or public property, including land occupied by squatters or local communities. The idea is that once communal or public property is privatized as individual rights, it can be pledged as collateral for loans, and duly forfeited or sold under economic duress.

The effect is to concentrate property in the hands of the financial sector. That in turn leads inevitably to a failed austerity-ridden economy.

What is a failed economy?

Economies fail because of the rising power of vested interests, primarily in the Finance, Insurance and Real Estate (FIRE) sector that control most of any rentier economy’s assets and wealth. A failed economy is one that cannot expand and hence is prone to polarization and collapse.

The collapse usually is a result of a rising rentier overhead burden - land rent, natural-resource rent and monopoly rent - while the financial sector replaces democratically elected governments as the economy’s central planner and resource allocator.

The FIRE sector is primarily a symbiosis between finance and real estate, now joined with insurance (headed by real estate insurance to protect the financial claims of mortgage lenders, health insurance for privatized health care in the United States).

The rentier business plan involves a highly political dimension seeking to centralize control of money and credit creation in the hands of a hereditary financial oligarchy seeking to carve out economic rent privileges made “free” from taxation, public collection or regulation.

Most of the resulting rental income is turned into a flow of interest, which is rent out or used to buy yet more rentier assets. The effect of lending primarily to buyers of assets, which are pledged as collateral for loans, is not to create new means of production but to inflate asset prices for property already in place.

The resulting finance-capital gains have become the easiest way to acquire fortunes, which take the form of rent-extracting claims on the economy, not new means of production to support “real” economic prosperity and rising living standards.

Barring radical “socialist” reform, financialized economies are doomed to become failed states because the exponentially growing expansion path of debt accumulating at compound interest plus new endogenous credit creation and “quantitative easing” far exceeds the production-and-consumption economy’s underlying growth rate in producing goods and services to carry this debt burden. These financial dynamics threaten to doom the US and its satellite economies to become failed states.

The underlying question is whether Western civilization itself has become a failed civilization as a consequence of the pro-creditor roots of its legal system and rentier property rights in oligarchic Rome. Rome’s debt-polarized economy led to a Dark Age in the West, which recovered only by looting Byzantium and subsequently the Near East, strengthened by the conquest of the New World and East and South Asia.

For the past 20 years, it has been China’s socialist growth that has primarily sustained Western prosperity. But this dynamic is being rejected, denounced as an existential threat precisely because it is successful socialism, not neoliberal exploitation.

In times past there always was some part of the globe to survive the collapsing imperial system’s depredations and carry on. But Super Decadence occurs when the whole world has become part of a neoliberalized imperial system and is being dragged down together, with no region able to resist the polarizing and impoverishing rentier dynamics imposed by the militarized imperial core.

Following the US lead, the West is cutting itself off from economic survival. Rejection of US-centered neoliberalism by China and other members of the Shanghai Cooperation Organization (SCO) is met by US trade and financial sanctions whose self-defeating effect is to drive these countries together to create a state regulatory system (“autocracy”) to resist dollarization, financialization and privatization. That is why they are being isolated as an existential threat to the dynamics of neoliberal rentier decadence.

The Alternative

It does not have to be this way, of course. China is defending itself not only by the productive industrial and agricultural economy its socialist government has sponsored, but by a guiding concept of how economies work. China’s economic managers have available to them the classical concepts of value, price and economic rent, that distinguish earned from unearned income, and productive labor and wealth from unproductive and predatory financial and rentier fortunes.

These are the concepts needed to uplift all society, the 99 Percent rather than just the One Percent. But the post-1980 neoliberal reaction has stripped these concepts away from the Western economic vocabulary and academic curriculum. The present economic stagnation, debt burden and locked-in zero interest rates are a policy choice by the West, not a product of inevitable technological determinism.

Note: Michael Hudson is the author of Killing The Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J Is For Junk Economics. Email him here. The above article was posted at CounterPunch.

[1] George Soros, “BlackRock’s China Blunder,” Wall Street Journal, September 7, 2021.
[2] Helene Cooper, Lara Jukes, Michael D. Shear and Michael Crowley, “In the Withdrawal from Afghanistan, a Biden Doctrine Surfaces,” The New York Times, September 5, 2021.
[3] Ron Suskind, “Faith, Certainty and the Presidency of George W. Bush,” New York Times Magazine, October 17, 2004, quoting Bush-Cheney strategist Karl Rove.

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  2. Just say “no” to drugs if you want, It’s your body. Can we allow our joke of a government to mandate vaccinations?

    By otis t on Sep 23, 2021

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