How Michael Hudson Explains America’s Annual $1.5T Military Expenditures

Eric Zuesse (blogs at https://theduran.com/author/eric-zuesse/)

On November 18th, the great economic historian Michael Hudson decimated the Nobel-Prize-winning (neoliberal-neoconservative, or pro-imperialism libertarian) economic theorists, in a conversation with the great geostrategic analyst Alexander Mercouris, by explaining something that all of those (all pro-imperialism libertarian) economic theorists (the mainstream economic theorists and pontificators) don’t even notice (which is why none of those — the most-prestigius economists) foresaw the 2008 economic crash), which is that America now spends, on its military, half of the world’s military expenditures, and also over half of the U.S. federal Government’s annually-authorized-by-Congress-and signed-by-the-President-into-law federal budgets. The military contractors that sell to the U.S. Government control the U.S. Government (via corruption), and this control became supercharged when the Soviet Union ended in 1991 and America’s military spending became disconnected from any authentic threat to U.S. national security and so all of its military spending became based upon fraudulent excuses such as ‘WMD in Iraq’. The sheer size of America’s global and national military expenditures is vastly underestimated, under-reported, and under-analyzed, but Hudson connected the dots in order to show how this vastly-out-of-proportion U.S. military came to be, and whom it has actually been benefitting.

However, before I present Hudson’s explanation, anyone who doubts that the summary I’ve just given of what the present situation is, should first click onto those two links (above here) in order to know that it certainly is so, because that reality is what Hudson explains in this interview.

Restructuring of the Global Economy – Michael Hudson, Alexander Mercouris & Glenn Diesen

“Restructuring of the Global Economy – Michael Hudson, Alexander Mercouris & Glenn Diesen”

The Duran, 18 November 2023.

2:15

MICHAEL HUDSON: Well, you said that the United States has

2:20

lost its competitiveness, and actually the United States decided it

2:25

didn’t want to compete, and this goes back to the Clinton ad Administration. Uh

2:31

in the 1990s, uh, the Clinton administration’s objective, and that of

2:36

the Democratic Party [its megadonor billionaires who control it] was basically a class war against labor, that how do we

2:41

lower the wages of labor so that we can increase the profitability. Well, the way

2:47

America had of lowering the wages of labor was: Let’s uh hire Asian labor,

2:54

especially Chinese labor, let’s let Chinese uh into a trade relationship with us into the the WTO, and then

3:01

instead of having to bid up the price of uh labor in our industrial centers Detroit and uh the South and uh the

3:09

Midwest, uh [we — the billionaires] will hire uh products made by Chinese labor that will keep down wages

3:17

here, and uh, America can be in a post-industrial economy; and during the

3:23

1980s and 90s all of the economic discussion was how do you have a

3:28

post-industrial economy. They they didn’t want to industrialize, they thought that

3:34

industrial labor with blue collar labor uh and in America, uh you’re not going to

3:39

have uh college graduates uh or even high school graduates wanting to have a

3:45

blue collar job. They want a service industry job, they want uh to make jobs

3:51

something that’s not industrial, a managerial job, so a new phrase came into

3:56

being, the professional managerial class, uh uh uh technology uh, and the idea of

4:04

uh American uh economic growth from the 1990s on, was instead of producing

4:10

manufactured goods, we will develop intellectual uh property monopolies,

4:15

especially in information technology [and] in pharmaceuticals, and uh, we will uh

4:21

America will make its uh uh economic growth in GDP not by making profits to

4:28

employ labor to produce more and more goods and services, but to have monopoly rents for our pharmaceuticals, so we can

4:36

make, uh uh pills that cost 10 cents each and sell them for $500 each. We can make

4:42

computer programs for uh automatic uh artificial intelligence

4:48

and for computer chips uh and for uh all of the information technology we have at

4:54

enormous markups, and we can live on our our economic rents, uh live off the fat

5:00

of the land as they used to say. We don’t have to have blue collar jobs. Everybody can uh work in an office and make money

5:06

that way. So, in a way what’s happened today is exactly what America [the billionaires who fund Democratic Party candidates] wanted. And

5:11

all of a sudden uh they’ve uh woken up to the fact, and said how can America run

5:17

the world and be number one if it doesn’t have a manufacturing power, if it’s dependent on other countries for

5:25

its, uh manufacturing, and now for its technology, uh and if it uh all of this

5:30

is financed by running into debt that the economy runs up for uh the military

5:36

spending abroad to prevent other countries from competing with the United States when actually it’s the United

5:43

States that has decided we want you to compete because your production and competition with us is what’s winning

5:50

the class war against labor, that your competition is what’s holding down uh the price of labor so they haven’t

5:57

really thought what does a post-industrial economy mean? Well, it turns out to be a financialized economy, uh and

6:04

uh you have today uh in the, uh, the election uh for

6:11

2024, uh, is being prepared uh the uh the bewilderment of the Democratic Party

6:17

here. If you look at the GDP, President Biden says you’re doing so well, look at

6:23

GDP and the vast majority of Americans, according to every poll uh in every part

6:29

of the country, says we’re not doing well at all, we’re doing awful, and uh it turns

6:35

out that when you look at what is uh the American GDP, well almost all of it is uh

6:42

the growth in prosperity the growth in uh financial uh benefits for the 1%

6:48

maybe for the 10% of the population and that the 1% and the 10% has uh increased

6:55

its wealth so much since uh the uh 2008 uh led the Federal Reserve to slash

7:03

interest rates that uh e the 1% and the 10% gain is larger than the loss for the

7:11

90%, so all that the uh President Biden can say is who are you going to believe,

7:16

are you going to look at the statistics or are you going to look at your own life and what you have to spend at the grocery store and what you have to spend

7:24

on rent and housing, as uh America turns away from a home owner’s economy into

7:31

a rental economy, is there’s a huge concentration of uh uh land and housing

7:37

uh in the hands of absentee landlords instead of uh private home buyers who

7:43

now cannot afford to buy a home when the interest rates are are soaring to over 7

7:48

and a half percent, uh in which case if if you buy a home with a 10 year mortgage, in

7:54

only 10 years the bank makes more money for uh for the mortgage than the seller

8:00

of the house makes, uh so indeed America’s found that yes uh what is the

8:06

post industrial economy, it’s a financial economy, and a financial economy has

8:11

savings on the asset side of the balance sheet, and debt on the uh liability side,

8:17

but uh the the savings on the asset side are held mainly by the 1% and the debt

8:23

on the liability side is owed by the 99%, so uh when President Biden said and the

8:30

economists profession, uh Paul Krugman and the Nobel Prize winners all say well

8:36

you don’t have to look at debt because we owe it to ourselves, well the we who owe it are the 99% and the ourselves are

8:44

the 1% and that’s what is uh leading uh the United States to uh be not a very

8:51

happy economy these days. ALEXANDER MERCOURIS: What you described — to a British

8:58

ear, and you know I am, I live, in Britain, I’m I’m in London — is not completely unfamiliar. I

9:05

mean, it’s like the kind of cycle that we went through ourselves in Britain. I mean

9:11

you had this um system that the British created basically in the late 19th

9:16

century: we have commodities flowing in — there’s, I think I think it was Keynes who talked about how if you

9:23

were a person of certain affluence in Britain just before the first world War

9:29

you could order things from all over the world and they would come to you — and we had a heavily financialized system: we

9:36

had the bank of England, we had the city of London, we had um our currency pegged

9:41

to Gold, we insisted that people to great extent trade with our currency, we

9:47

started to neglect our industrial base and rely increasingly on the profits of

9:54

our Empire, and you know the rental systems began to take hold — and one of the things that happened

10:02

in Britain is that, of course, wealth gradually began to drain upwards. It was,

10:08

it was like you know within the social system you saw, some people in late 19th century early 20th century Britain

10:15

becoming incredibly rich and building their houses and buying their

10:20

Rolls-Royce Silver Ghosts and sending their children to expensive schools and

10:26

living a very agreeable life. But the rest of the country going through a time

10:31

of shall we say economic atrophy. And, of course, that happened within a framework

10:37

of Empire and a framework of Imperial control, and it seems to me that’s one of the

10:43

big differences with the United States today, is that at least with the

10:49

British they could control it to some extent because they actually had a

10:55

proper formal Empire. The United States doesn’t have it in exactly the same way,

11:01

so you are grafting a late Imperial British

11:06

structure without having the mechanics of Empire as well defined as the British

11:13

did. Am I getting this completely wrong? HUDSON: No you’ve got the point, uh the the uh

11:21

the explanation of what happened is that Empires don’t pay. If you look at the

11:27

Britain in the 1930s, uh that was uh uh it certainly was uh solidifying its

11:32

Empire with Imperial preference and uh India and other countries had to save all their money uh in England, but all of

11:39

the money that Britain made from its Empire ended up being used to pay the

11:45

United States. So Britain had a uh a surplus with its Empire and a deficit

11:52

with trade with the United States and with U.S. firms. So it turned out that already in the 1930s the United States

11:59

was the beneficiary of the Empire, and of course that uh enabled the United States to uh write the rules of World Trade and

12:06

the uh uh the International Monetary Fund and the British Loan in 1944 and 45

12:13

uh so that England had to basically uh give up its Empire to the United States.

12:18

It had to end Imperial preference. It had to introduce free trade and free investment, which meant that India and

12:24

the Empire could spend all the money that they made during World War II anywhere they wanted, and

12:31

where did they want? Well the only country that had enough uh uh industry to uh give them what they wanted was the

12:39

United States. Well the United States is going through what England went through today The Empire really didn’t pay and

12:46

starting with the uh Korean war in 1951 uh the United States moved from a

12:52

position where uh it started in 1950, with 75% of the world’s gold held in the

13:00

United States. The Korean War pushed the United States into chronic balance of

13:06

payments deficit, and I’ve done the statistics that I’ve published in Super Imperialism and uh the entire American

13:14

balance of payments deficit was military spending abroad to protect the Empire.

13:21

The private sector in America was just exactly in balance: trade foreign

13:26

investment uh borrowing tourism all of that was balanced. The entire deficit was

13:32

military spending uh and uh to sort of uh it felt to lock in the Empire. Well

13:39

you you you’re seeing that today accelerating and the problem is uh how

13:44

can America finance uh uh the military spending abroad? Well ironically the uh

13:50

what happened was the military spending in Vietnam and Southeast Asia forced

13:56

America off the gold standard as you know in 1971, and what were foreign

14:02

central banks going to do with their uh with all of the dollars that were flowing in uh they weren’t going to do

14:09

what uh General DeGaul and Germany were doing and buying gold. All they could do

14:14

was uh say well we have to invest our uh money in secured Securities we’ll buy US

14:21

Treasury Securities. And so all the money that America spent abroad militarily was

14:27

sent back to the United States by by the central banks of Europe uh and other

14:33

payment surplus countries to finance the uh balance of payments deficit for the

14:39

war [the U.S. wars against the Soviet Union] so in effect the whole international monetary system was based on

14:45

IOUs for America’s military spending across the world. Well, you can imagine

14:51

what’s happened today, now that the United States has taken a very belligerent position in the world saying

14:58

it’s uh uh it’s it’s our way or we’re just going to smash things up. Uh the

15:04

United States, this system, has split the world into two opposing camps as I think

15:10

you’ve said on this show. I watch your show regularly, and this is what you’ve been talking about week after week after

15:16

week, how the world is dividing up and what are the dynamics uh of this. …

——

Hudson then went into the necessary replacement of the IMF, U.N., and of the other Truman-created post-WW-II international structures:

——

20:29

the creation of what really is a new economic order, and that’s what we’re seeing now, a whole different set of

20:35

institutions [and here Hudson is summarizing actually what were the objectives that FDR was aiming for but Truman sabotaged], with the, not as president Xi and President Putin have said, uh

20:42

not uh uh unipolar [which America’s billionaires insist upon], but multipolar [which Xi and Putin insist upon]; and multipolar means mutual gain [win-win] … instead of your gain is our loss, a zero sum gain [win-lose: what billionaires encourage the public to favor, such as by means of promoting competitive athletics, the military, etc.] which is the US

20:53

unipolar strategy. …

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Investigative historian Eric Zuesse’s new book, AMERICA’S EMPIRE OF EVIL: Hitler’s Posthumous Victory, and Why the Social Sciences Need to Change, is about how America took over the world after World War II in order to enslave it to U.S.-and-allied billionaires. Their cartels extract the world’s wealth by control of not only their ‘news’ media but the social ‘sciences’ — duping the public.