China's economic miracle was achieved by a switch from Marxist economics to National System Economics.

Asia Model economies are based on the economic theories of Friedrich List, not Adam Smith or Karl Marx.

Michael Hudson says he testified before grand juries to convict Lyndon LaRouche. But both of them assisted China's rise.

by Peter Myers

Date May 28, 2020; update January 17, 2023.

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(1) Wrong Explanations of China's Rise
(2) China's economic 'Miracle' came at the expense of the US and the West
(3) China is not a 'model' for other countries to develop
(4) Western and Japanese companies have transferred their most prized technologies to China
(5) Asia Model economies are based on the economic theories of Friedrich List, not Adam Smith or Karl Marx
(6) Michael Hudson, despite his Marxist background, is a Protectionist who advocates a Mixed Economy
(7) Hudson and Lyndon Larouche are Marxists, yet followers of National System Economics; China learned from both
(8) China's economic 'Miracle' was modelled on another 'Miracle', the Japanese postwar one
(9) Asia Model economies - derived from Friedrich List or from Confucianism?
(10) Ilana Mercer depicts EU as a Nazi project inspired by Friedrich List (2005)
(11) REPLY to Mercer: Protection and Free Trade - Friedrich List's "National System" (2006)

items 12 to 14 are from my newsletter #b2042, dated Jan 1, 2012:
(12) Asia Model economies - derived from List or from Confucianism? - John Craig
(13) National System Economics - Don Veitch and John Seale
(14) Genre and Background of the National System Economics article

items 15 and 19-to-23 are from my newsletter #b2043, dated Jan 2, 2012:
(15) Japanese imperial system was based on the PRUSSIAN system - Elaine Supkis
(16) Left economists praise China's economy, but others liken it to Nazi Germany
(17) Japan transferred a lot of technology to China after 1978, in lieu of Reparations - Ezra Vogel
(18) Ezra Vogel: Xi Jinping has undone the goodwill that Deng Xiaoping established
(19) Michael Hudson tells two interviewers "I'm Leon Trotsky's godson"
(20) Michael Hudson says he testified before grand juries to convict Lyndon LaRouche
(21) Michael Hudson says he asked ADL to help expose LaRouche; ADL were Schachtmanite Trots
(22) Asia Times was edited by ex-Larouche member Uwe Parpart - Larouche website says so
(22) EX-LAROUCHE writers
(24) Michael Hudson on the World Bank, IMF & Bank for International Settlements
(25) Michael Hudson says Zecharia Sitchin told him he works for Mossad
(26) List and Peshine Smith developed a rival economic theory to the British Empire's free trade doctrine - F. William Engdahl
(27) Michael Hudson addressed the Rosa Luxemburg Conference in January 2019
(28) Michael Hudson's Autobiography
(29) The Confucian Model as a Threat to Freedom - Eamonn Fingleton

(1) Wrong Explanations of China's Rise

by Peter Myers

Most commentaries about China's Economic Miracle explain it in terms of "Free Markets". But that misses the main point. If China's rise was simply a product of free markets, how is that other market economies - eg most Western countries - experienced a decline in those years, a hollowing-out of their economies?

World economy is to some extent a zero-sum game, and China's rise came at the expense of other countries. The Free Marketiers, being exponents of deregulation, privatization, open borders and laissez-faire, downplay the extent that China's rise was engineered by its leaders in a deliberate way, and that its economy remained protected and closed. China accepted those Western inputs it desired, but always on its own terms. Western companies bidding on technology projects had to agree to transfer technology to a Chinese 'partner'.

Contrary to the line that China developed by opening its markets, Stephen Schwarzman, co-founder of the Blackstone' investment group, noted of the China miracle: "they did it behind tariff walls"; China protected its economy while the West adopted Free Trade.

(2) China's economic 'Miracle' came at the expense of the US and the West

{quote} Blackstone's Schwarzman: China's economic 'miracle' came at the expense of the US and the West


UPDATED TUE, SEP 17 2019 8:28 PM EDT

Matthew J. Belvedere @MATT_BELVEDERE

Stephen Schwarzman, the billionaire co-founder of investment powerhouse Blackstone, told CNBC on Tuesday that China knows it must change its trade and business practices but it's reluctant to do so because of the spoils it's reaped by protecting its economy.

"China in the last 40 years had more growth, I think, than any country in history. It's an astonishing miracle what they did. But they did it behind tariff walls. They did it behind markets that are not accessible. They did it with other approaches to intellectual property than are shared in the developed world," said Schwarzman. "So their desire to give all that up and their growth rate is obviously low."

(3) China is not a 'model' for other countries to develop

by Peter Myers

China does not allow client countries to develop in the way it did. Instead, it wants to install infrastructure using Chinese workers and technology. Not only is there no transfer of technology to the client country, but that country often gets into debt to China and loses its sovereignty.

The case of Laos makes the point. Laos' debt to Chinese banks has resulted in its ceding control over its electricity grid to Chinese companies. Reuters reports,

Taking power - Chinese firm to run Laos electric grid amid default warnings

By Keith Zhai, Kay Johnson

(Reuters) - The poor, small Southeast Asian country of Laos is set to cede majority control of its electric grid to a Chinese company, as it struggles to stave off a potential debt default, people with direct knowledge of the agreement said. ...

Laos has spent heavily on hydroelectric schemes, many financed by China, with the aim of becoming "The Battery of Southeast Asia". But those projects, along with a new Chinese high speed railway, are at the centre of a debt crunch. ...

A study published in 2019 by the Australia-based Lowy Institute put Laos debt to China at 45 percent of GDP. ...

"Giving China a major stake in the 'Battery of Southeast Asia Plan' puts Laos fast on the track of becoming a pseudo-province of China," said Brian Eyler, Southeast Asia programme director of the Stimson Center think-tank in Washington.

That is not the way China itself industralized after the 1990s. It did not borrow from Western companies, but remained in control. China is getting other countries into debt, and then seizing assets, turning them into client states.

(4) Western and Japanese companies have transferred their most prized technologies to China

by Peter Myers

The speed of China's rise from basket case (around 1990), to the world's biggest economy (in 2020), is unprecedented in history.

The media still claim that the USA is the world's biggest economy; but Eamonn Fingleton explains why it's not:

"... the U.S. dollar has long been massively overvalued. Just how overvalued is suggested when you consider America's forty-year record of huge trade deficits. How low would the dollar have to go before we might see a real revival in industrial investment in the United States? A reasonable guess is that even a devaluation of as much as 75 or 80 percent would not have an appreciable effect. Yet a revaluation on that scale would imply that total U.S. gross domestic product would at a stroke be cut to less than China's and even Japan's."

(The rise of East Asia and an epochal threat to American freedoms
Posted on January 4, 2022 by Eamonn Fingleton

Western and Japanese companies have transferred their most prized technologies to China, which under Xi is revealing its Maoist face once again. They have handed over the Golden Goose to China, saving it decades of development. As Lenin said, 'The Capitalists will sell us the rope to hang them with'. How could they have done it?

They were enticed by the prospect of selling into China's huge internal market. China demanded that they share technology with a Chinese 'partner' company.

The Cold War was still under way, and both China & the USA saw the USSR as the greatest threat. The Sino-Vietnam war of 1979 showed that the Sino-Soviet split was for real. The US warned the USSR not to intervene in that war, despite its Treaty with Vietnam. During the 1980s, China was an ally of the USA in the Afghan War, supplying fighters and weapons. And China allowed the CIA to build and operate two spy bases in Xinjiang, to monitor Soviet nuclear tests.

After 1989, the West cooled, but Japan continued to invest in China and supply technology. Then later the West resumed. They saw China as a "big Tiger", whereas India was much less organised. One reason China was so organised, was that the Great Leap Forward and the Cultural Revolution had made it a basket case. Desperation is what drove the Chinese to seize every opportunity.

The USSR had a policy of reverse-engineering Western technology, so for China to do it was nothing new. Western companies transferring technology had no idea of the scale of the transfer under way; each company saw only its own case, not the big picture.

The other "Tigers" had not reverse-engineered technology, so the West assumed the same would apply to China. They forgot its history as a Great Civilization, its sense of humiliation over recent centuries, and determination to regain its dominant position as Central Kingdom. The Jewish Lobby dragged the West into Israel's wars in the Middle East, which distracted the West from China's rise.

But the Free Trade policies forced on the West by the Globalists have been the main reason for China's rise. With tariffs slashed, Western workers were sacrificed, and millions of jobs offshored from the West to China.

(5) Asia Model economies are based on the economic theories of Friedrich List, not Adam Smith or Karl Marx

by Peter Myers, May 27, 2020; update May 29, 2020.

This newsletter has been running for over 20 years. In years past we had debates about economics.

Arno Mong Daastoel of Norway was Moderator of the Gang8 forum on Economics (a Yahoo group). Michael Hudson was a participant. Both were in this mailing list too.

Arno introduced the ideas of Lyndon Larouche to this newsletter. Michael Hudson objected, because he'd had a very personal clash with Larouche, and testified against him to have him jailed for fraud.

Larouche and Hudson were both Trotskyists. Larouche was a devotee of Hudson's father Carlos, a Trotskyist leader in the Minneapolis strike:

Carlos Hudson used to visit Trotsky when he was in Mexico city; and used to drive Trotsky to visit Frida Kahlo. He even took Michael to Mexico to be 'christened' with Trotsky as his 'godfather'.

Michael Hudson's real name is 'Huckleberry'. That's because his father, a romantic, was captivated by the story of Huck Finn. 'Michael' was his nickname. He is now known as Michael H. Hudson, but usually omits the 'H'.

Michael Hudson is the most important dissident economist in the world today - the hope for those who want a fairer society. Despite his emotional ties to Trotskyism, Michael's own economic policies are like Bukharin's rather than Trotsky's or Stalin's. He favours the mixed economy - of China and Russia, and other countries which resist the "liberal" model.

Michael has written a number of book on economics, including two about the American System Economics developed in the mid to late Nineteenth Century. That theory was the driving force behind US economic development up to World War I. It was not based on Adam Smith (Free Trade) or David Ricardo (Comparative Advantage) but on the nationalist economic ideas of Friedrich List and Matthew Carey. Those ideas can be called National System Economics.

Australia also used such ideas in its economic development, from Federation in 1900 until Deregulation and Privatization in the late 1980s.

(6) Michael Hudson, despite his Marxist background, is a Protectionist who advocates a Mixed Economy

Michael, despite his Marxist background, is a Protectionist who advocates a Mixed Economy. His Ph.D. thesis was on this theme, and is online at the following link:

E Peshine Smith: A Study in Protectionist Growth Theory and American Sectionalism

Tuesday, December 4, 2012

NY University, PhD, 1968, Michael Hudson

{quote} Peshine Smith (1814 ­ 82) was probably the most sophisticated of the pre-Civil War protectionists. What he attempted was no less a task than to transform protectionist economic thought from a body of disparate and often self-contradictory parts into an integrated doctrine of economic growth, and to develop political economy as a quantitative engineering science.

The ideas in his Ph.D. thesis form the basis of his book America's Protectionist Takeoff 1815-1914: The Neglected American School of Political Economy (2010):

A companion book is Trade, Development and Foreign Debt: How Trade and Development concentrate economic power in the hands of doiminant nations (2009):

These and his other books establish Michael as the leading dissident economist in the world.

My disagreement with him, and ex-Larouche writers like F. William Engdahl, is that I believe that China is another one of those "dominant nations", a nascent empire no less dangerous that the Anglo-American one.

(7) Hudson and Lyndon Larouche are Marxists, yet followers of National System Economics; China learned from both

If Lyndon Larouche's ideas are similar to Hudson's, that's because, Michael says, Larouche plagiarized his Ph.D. Dissertation, i.e. used its ideas without attribution to Michael. Despite many similarities in their ideas, Michael regards Larouche as 'Far Right", a Nazi.

When Larouche was prosecuted for fraud, he was defended by Ramsey Clark: . And Revilo P. Oliver, a follower of Francis Parker Yockey, penned a piece in Larouche's defence:

The Mystery Of Larouche
by Professor Revilo P. Oliver (February 1992) . ==

Yockey was a Nazi who sided with the Soviet Union during the Cold War because, he said, the West is controlled by Jews. Thus the strange crossovers between the Far Left and the Far Right.

Here's Lyndon Larouche on List and Carey:

What Connects the Dots?
by Lyndon H. LaRouche
Executive Intelligence Review
February 17, 2006

{p. 10} All the crises inhering in the currently prevalent principal conflicts in so-called "economics" ideology, are rooted in the irreconcilable differences of moral and scientific principle which, categorically, separate the American System of political-economy of Franklin, Alexander Hamilton, Frederick List, Henry C. Carey, Abraham Lincoln, Franklin D. Roosevelt, et al., from the caricature of what had been then the already wretched British doctrine which has been promoted lately as the virtually economic-suicidal perversity of performance by the current U.S. Bush Administration.

Both Hudson and Larouche are Marxists and yet followers of National System Economics.

Larouche founded a movement which he called "The Fifth International", suggesting a Left orientation. Yet its social mores were conservative Christian. He wrote a book called There Are No Limits to Growth, which is online at the Chinese Larouche website:

Larouche wrote a lot about National System Economics. His economic theory is nowhere as advanced as Hudson's, but Larouche specialised in promoting massive infrastructure projects. Larouche writers promoted the concept of a Eurasian Landbridge. They envisaged standard-gauge high-speped passenger and freight rail networks spanning Eurasia, and from there to the Middle East, Africa, and even to the American mainland via Alaska.

When China adopted their ideas, in the form of the New Silk Road (Belt and Road), Larouche writers switched from their anti-communism of the years 1988 to 1993, to being avidly pro-China by 1995. Whereas in 1989, Lartouche's flag publication Executive Intelligence Review ran many articles about the Tiananmen massacre, in recent years its articles have been republished in China Daily.

See for yourself: search Google for "Larouche" "China Daily".

Executive Intelligence Review is archived at

Some of their articles from 1989-1990 are

Putin had cold feet about giving up the break-of-gauge; Russia has long found its 5 foot rail gauge a protection against invasion. So trains from Beijing to Moscow will undergo two gauge-changes.

Michael Hudson is also enamoured of the new Chinese regime. In a recent interview with Max Blumenthal and Ben Norton he said:

The Hard Fist of American Imperialism

By Michael Sunday, April 26, 2020 Interviews

Moderate Rebels, 24 April 2020 PART 2 OF 2 (Interview recorded on April 13, 2020)

Transcript ­ How The US Makes Countries Pay For Its Wars: Economics Of American Imperialism

With Michael Hudson

MICHAEL HUDSON: What makes China so threatening is that it's following the exact, identical policies that made America rich in the 19th century. It's a mixed economy. Its government is providing basic infrastructure at subsidized prices to lower the cost of living and doing business, so that its export industry can make money. It's subsidizing research and development, just like the United States did in the 19th century and early 20th century. [...]

I have gone back to China very often. I'm a professor at Peking University, and I have honorary professorships in Wuhan.. There are a number of articles on my website from the Chinese Academy of Social Sciences on de-dollarization, essentially how China can avoid the use of the dollar by becoming independent in agriculture, technology, and banking.

Yet Hudson does not realize that China's Belt & Road is based on the ideas of his old rival, Lyndon Larouche.

(8) China's economic 'Miracle' was modelled on another 'Miracle', the Japanese postwar one

By Peter Myers

In 1978, when Deng Xiaoping visited Japan and saw its economic miracle, he decided to switch China's economy to that model. But for the first ten years, his workers had to do menial jobs in coastal free-trade zones, for foreign multinationals and nearly no pay.

Japan's hierarchic society, culminating in the Keiretsu, was different from China's; China later found the South Korean chaebol a better model for it to follow; yet South Korea, like Taiwan, had been shaped by its Japanese occupation. China also used Lee Kwan Yew's Singapore as a model, and invited overseas Chinese to help build the new China.

Ezra Vogel describes Deng's 1978 visit to Japan: .

"I think that Deng's visit of one week in Japan is one of the great visits of the 20th century," he said. It was the first time in the 2,500 years of contact between the two countries that a Chinese leader had traveled to Japan, and the first time in history that a Chinese leader met a Japanese emperor. Crowds greeted Deng everywhere he went. He met Prime Minister Fukuda; Ohira, who had been foreign minister and was later prime minister; and Nakasone, who was later prime minister. "These are all what the Japanese would call omono. They were big people. They thought in the broad perspective. They had seen peace and war."

Deng went to Nissan to see new robots at work; he saw shinkansen, Japan's high-speed bullet trains. "Deng was a spontaneous person," and when he saw electronic ovens at Matsushita, the first time he'd ever seen anything like that, demonstrating how to warm a dumpling, he said, 'Oh, I'd like to eat that.' They pulled it out and he started munching away, saying how good it was," Professor Vogel said. Deng gave a press conference at the Tokyo Press Club with 400 reporters, something he had never done, had never had a need to do, in China. It was an amazing success because Deng was so well-informed, frank, witty, direct, to the point and full of good will. His trip to Japan was even more of a sensational success than his trip to the U.S. three months later. [...]

The Japanese were horrified by the 1989 Tiananmen Square incident, and disturbed by the ensuing "patriotism education" campaign, in which China's leaders sought to shore up their public support by stirring up anti-Japan sentiments. But when other countries began cutting off contacts after 1989, Japan made greater efforts to retain relations with China than the U.S. and Europe.

China's transformation in the 40 years since 1978 has been a 'miracle', but it was modelled on another 'miracle', the Japanese postwar one. And that one was based on another 'miracle, Hitler's 'miracle' economy from 1933.

So, the miracle was achieved by a switch from Marxist economics to National System Economics.

Unlike other National System Economies, (Nineteenth Century USA, Postwar Japan, and Australia from 1900 to late 1980s), in China's case totalitarianism remained part of the mix.

But that was also the case with Nazi Germany. Both regimes combine National System Economics with totalitarian repression. John Garnaut, an Australian journalist, son of Australia's Ambassador to China 1985-8 and familiar with many of China's leaders, called China's new system "National Socialism with Chinsse Characteristics":

National Socialism with Chinese Characteristics

Meet He Di, the insider trying to save the Chinese Communist Party from itself.

BY JOHN GARNAUT | NOVEMBER 15, 2012, 4:50 PM ==

Why would Larouche writers deny the Ukraine famine, and the Uighur & Tibet genocides?

For the same reason that Western Leftists in the 1930s denied the Ukraine Famine. And why many pro-China leftists now deny the Tiananmen Massacre 1989.

Larouche writers supposedly uphold the economy of List & Carey, not Marx & Stalin. So why defend Stalin?

One question that arose in debates in this newsetter, years ago, was whether the Asia Model economies should be considered as mainly List-based or Confucian-based. That issue is taken up in items 2 to 5.

(9) Asia Model economies - derived from Friedrich List or from Confucianism?

The Japanese economic system is Prussian, based on List's ideas, although at times Laissez-Faire has been ascendant.

You can read List's main book at

The National System of Political Economy by Friedrich List, 1841 translated by Sampson S. Lloyd, 1885

text at List-National-System.doc

(10) Ilana Mercer depicts EU as a Nazi project inspired by Friedrich List (2005)

Adieu to the Evil EU

by Ilana Mercer

Posted on June 10, 2005

[...] The sovereignty of European non-members is already constrained by the EU's burgeoning jurisdiction. But if ever its constitution goes into effect, the EU will assume unlimited powers ­ its laws usurping all laws enacted by national parliaments ­ and will concentrate these in a few unelected, grubby hands. (The Charter of Fundamental Rights and the Constitution, which will subsume the Charter, have been drafted without the consent of the people they will irrevocably bind.)

Dissembling Eurocrats justify this usurpation by claiming the EU would prevent wars in Europe. How exactly would they achieve this noble end? Why, by substituting the nation-state with deracinated, supranational institutions. They assert that national identity causes bigotry and bloodshed, hence, in Chancellor Helmut Kohl's words, "We have no desire to return to the nation state of old." Other neo-communists such as Romano Prodi have seconded the sentiment ­ and their quest to engineer a single European identity.

However, in his examination of the The Tainted Source of the Idea of European Union, classical liberal philosopher David Conway finds little to laud. The idea of the EU Conway traces to the writings of Friedrich List in the first half of the 19th century. "[A]s far as List was concerned, the main reason for European states to enter into such union was not to prevent war between them. It was, rather, to enable them better to wage economic war against other more economically advanced states, in List's day [and today], Britain and the USA."

Like the bureaucrats of Brussels, "List's vision of European union was less Anglophobic than anti-liberal." His ideas were seized upon by the Nazis ­ they referred to List when outlining their aspiration to create a European economic and monetary union. A July 1940 memorandum, written by the Reich Chancery, elaborates on a vision for a united Europe in which economic development is strictly supervised by the state and in which a fixed rate of exchange is mandated. (All the better to manipulate the money supply to fund the central government's profligacy. States can't fight inflation because they are forbidden to adjust interest rates). The Nazis also cited "lasting peace É freedom, prosperity, and security" as the impetus for European union. [...

(11) REPLY to Mercer: Protection and Free Trade - Friedrich List's "National System" (2006)

Here, Arno replies to Ilana Mercer; then I reply to Arno

Date: Sun, 15 Jan 2006 11:24:27 +0100 From: "Arno Mong Daastoel" <>

> List's vision of European union - > Vintage American propaganda from last June
> Adieu to the Evil EU
> by Ilana Mercer,, June 10, 2005

> "[A]s far as List was concerned, the main reason for European states to enter into such union was not to prevent war between them. It was, rather, to enable them better to wage economic war against other more economically advanced states, in List's day [and today], Britain and the USA."

Correct. But this was a war of defence against an established and superior force .

> "List's vision of European union was less Anglophobic than anti-liberal."

List was certainly no anti-liberal. He repeatedly explained that "free trade" and a "universal republic" was the ultimate goal. Indeed, he criticised repeatedly England for being protectionist, thereby creating a "dictatorship". He was expelled from Baden-Würtemberg (Germany) to the USA for his liberal-democratic activities.

> the present European Economic Community is simply a continuation of the Nazi project.


Reply (Peter M.):

But that article is just "Vintage American propaganda".

Karl Marx also advocated European Union.


The first part of List's program, a customs union, would potentially shut out English goods, thereby threatening British power and welfare.

The second part, railroad construction, would create effective markets in countries where there formerly were none, would elevate the productivity of business in these countries, would make army and supply movements within these countries much more efficient, and when laid into underdeveloped areas would open up new markets for the industry attached to this network. This would strengthen the industrial and political competitors of Great Britain. When these "new" areas happened to be adjacent to a British dominated territory, India, where both the Berlin- Baghdad railway and the Trans-Siberian were pointed more or less, this could easily be seen as a provocation and a direct threat.

The third reason, naval construction, was a direct threat to British naval supremacy and questioned the British tradition of setting the terms in all areas attached to the global seas. Additionally it challenged British defence of domestic supplies and communication with its overseas territories.[xx]

Therefore, all these three part of List's strategy of developing Germany and the European Continent, contributed to these two wars since their implementation challenged the hegemonist of world power. Whether List was right or wrong in promoting his ideas is certainly a matter of dispute. Nevertheless, there never was, nor is, any objective reason why one nation should monopolise technical and economic progress and thereby dominate world markets single-handed. List himself comments that,

At all times the weaker countries in Europe have collaborated to defend themselves against the pretensions of a dominant state. This has been called the balance of power. In the same way there has been united opposition to England's dominant position with regard to industry and trade. England has become so powerful economically that she is able to bring good fortune or ill-fortune to other nations, so long as those countries act in isolation. ... An attempt to set up a new Continental System, however, would endanger the prosperity not only of England but of all nations and ... the only satisfactory solution to the problem would be the establishment of world free trade. ...

In the face of strengthened American economic power, List advises England to ally with the powers on the European continent and become "the first among equals". However, Churchill later wrote that, "Whenever we have to choose between the Sea and the Continent, we shall always choose the open sea." (According to memory). This seems to have been right so far, but the development of modern transportation may slowly change the British sentiment in this regard. The Tories has been more Sea-oriented, following the strategy that Churchill pointed to. This has focused on the traditional link to the USA and the British Commonwealth, and in particular the dominions. The Imperial Preference policy was a pre-EU outgrowth of this policy, as is the efforts to construct a Trans-Atlantic Economic Project ("TEP") today. In their adherence to the Anglo-American "special relationship", the Tories have been trying to copy the Greek strategy of "Roman muscles, Greek Brains". Though their success in "guiding " the actions of their big brother has often been faulty. The Labour party has been more eager to connect firmer also to the Continent in order to secure benefits for domestic industry and secure some say on the continent - for instance in guiding the EU into the cover of the umbrella of the Anglo-American TEP, mentioned above.

List actively favoured an alliance between Britain and Germany -, as did Hitler later on. Both had, however, little understanding of the dominant British elite mentality and the lack of interest in any compromise and sharing of power with the Continent. List had perhaps forgotten the content of some of his earlier writings, quoted above. (* 1827 a, Letter II). (* 1841, pp.368-69) (* 1841, p.402) ...
{endquote} ==

items 12 to 14 are from newsletter b2042, dated Jan 1, 2012:

(12) Asia Model economies - derived from List or from Confucianism? - John Craig

From: "John Craig" <> Cc: "Arno Mong Daastoel" <>, "Dick Eastman" <>, "Michael Walsh" <> Subject: RE: Japan and China to trade in Yen and Yuan without using dollars Date: Sun, 1 Jan 2012 15:15:51 +1000


Japan's recent moves to encourage the use of the Chinese yuan for international trade (mainly in Asia) are simply a continuation of its efforts in recent decades to change the nature of international financial systems from one based on Western methods (which encourage initiative by rational individuals) to one based on decisions through intuitive groups ­ see <> Invisible Clash of Financial Systems.

The latter includes reference to Fingleton's conclusion that the economic models that have been used in Asia were originated by the Japanese military in Manchuria in the 1930s (and, if so, their dissemination is likely to be simply a continuation of Japan's pre-WWII vision of an Asian Co-prosperity Sphere). Those methods have their foundation in Confucianism (as a traditional East Asian technique for accelerating learning within hierarchical social networks) ­ see <> East Asia in Competing Civilizations

This can't be interpreted in terms of List's ideas about tariff protection as a means of providing security for capitalist investors. In Japan as in China national savings have been mobilized through state-linked banks and provided to state-linked (ie cronyist) enterprises that were expected to pursue nationalistic / mercantilist goals with limited regard to capitalistic considerations of profit. Thus opening one's currency as a basis for international trade is extremely hazardous for countries such as Japan and China (eg see <> Heading for a Crash?). The problems go well beyond questions about property bubbles. It is noteworthy that Japan has apparently set up China as the fall guy ­ ie the yuan, rather than the Yen, would take the major role (see <> Asian giants strike currency deals in move away from US dollar).

Japan's reasons for preferring this are pretty obvious from <> Why Japan can't deregulate its financial system. It was recently argued that China's leadership was very worried about the future - even though many other countries are worried about China's competition [<> Kid gloves for a cooling China]. Their focus, it was suggested, is on internal problems (eg dependence on high growth driven by exports to maintain social tranquillity; resistance to currency manipulation; inequality; the need for shifting to domestic demand; inflation and housing bubble; political transition in near future; pollution; aging population; protests; and international isolation). In my opinion China's biggest problem lies in the incompatibility of the social equality that is the basis of its nominal Communism and the social hierarchy that is intrinsic to the neo-Confucian system of socio-political-economy that Japan persuaded China's leaders to adopt discretely in the 1970s to generate an economic miracle (see <> Communism Versus Confucianism: The Continuing Contest in China)

Regards John Craig

Reply (Peter M.):

Confucianism provides the cultural/psychic/civilizational aspects of the Asia Model, with Daoism contributing too.

But the economic side draws on List and the National System school of economics. However, the derivation from List is in a tree-like structure (with him as root). Thus there's variation among the leaves/branches of the tree; implementation invoves casting the ideas within a cultural matrix.

Other thinkers elaborated along the way, and this varied from country to country - eg see Michael Hudson, America's Protectionist Takeoff 1815-1914: The Neglected American School of Political Economy. He writes,

"The leading American protectionists centred first around Matthew Carey in Philadelphia and included Hezekiah Niles, Daniel Raymond and Friedrich List, and later around Matthew's son Henry" (p. 19).

Australia's Protectionist and Developmentalist economy also derived from List and other thinkers he'd influenced. Alfred Deakin, King O'Malley (founder of the Commonwealth Bank), Denison Miller (head of the Commonwealth Bank), John Curtin, Ben Chifley and Jack McEwen were all in this tradition.

Australia itself had an "Asia Model" type economy from the 1940s to the 1980s, without the Confucianism. The memory of those days is what drives me - we did not know how lucky we were. That's why I become so annoyed with Americans who rant against "Socialism". They need to investigate their own Economic tradition, in the century before 1914; Michael Hudson's book would be a good place to start.

(13) National System Economics - Don Veitch and John Seale

The authors were ex-Larouche writers who retained Larouche's basic ideas but split from the cult. They came out against Larouche's affiliate in Australia, the Citizens Electoral Council, and later contributed to an ABC Four Corners documentary damning the Larouche movement in Australia; it was a hatchet job - the Larouche people were not given the chance to respond - Peter M.

National System Economics: The Executive Summary

by Don Veitch and John Seale

Published and distributed by David Syme College of National Economics, Public Administration & Business Ltd.

{p. 6} National System economics, until now not identified by that label, emerged as a coherent economic approach in the northeast of America in about the 1790s and developed through to the 1870s. Its chief advocates there were John Rae, Daniel Raymond, Friedrich List and Henry Carey.

The economic outlook of this 'school' spread to Germany, Japan and Russia. In Australia the chief spokesman for this school was David Syme through pages of The Age.

A Brief History Of Modern Economics

In the early period of England's growth, up until the 1840s, England was a mercantilist state, meaning the government promoted industry. Many of these laws she had learned from the practices of the Venetians and the successes gained from Jean-Baptiste Colbert (1619-1683), the King of France adviser, and the works of the English Mercantilists, Thomas Munn (1571- 1641) and William Petty. The mercantilists, like Munn, argued that a nation must have a surplus balance of trade, this would ensure the inflow of gold to England and build up the power of the monarch and the state.

A new tradition of economics developed, challenging the mercantilist view. The Physiocrats in France, argued that the soil was the source of all wealth, they constructed the first 'circular flow' model, and the writings of those like Thomas Mandeville (1670-1733) who argued in his Fable Of The Bees (1705) that private vices led to public virtues. Thus was born the early

{p. 7} morality of the emerging economics: follow individual self-interest, and the economy will prosper. Both Mandeville and the physiocrats provided much of the basis for Adam Smith (1723-1790) who wrote the Wealth Of Nations. Adam Smith's economics are the spiritual basis of modern economics.

With the successful conclusion of the American War of Independence (1777-1782), largely fought over Britain's economic relationships with America (taxation, imports), the American colonies sought a path of industrialisation and economic development. Such a path was argued by Alexander Hamilton (1757-1804), George Washington's most influential economic adviser. In the 1790s Hamilton wrote a number of reports to Congress, calling for a national bank and manufactures. In his writings he argued for a strong federal government and praised the beneficial effects of industry on developing the talents of the nation's people. He also praised Colbert. His advice was accepted by the young republic. Hamilton was the first of America's National System economists.

We now change the focus back to Britain. Adam Smith's advocacy of free trade, was gaining ground as policy, only delayed by the Napoleonic wars.

Jeremy Bentham (1748-1832) was to add his contribution arguing that man is an economic creature pursuing pleasure and avoiding pain, thus was born the utilitarian branch of liberal economics. In the 1820s Thomas Malthus, (1766-1834), a teacher at the British East India

{p. 8} Company's school (Hailebury College), continued the physiocratic arguments and wrote of the fine balance between population and economic resources, he argued against the poor laws, claiming that they only encouraged the poor to breed. David Ricardo (1772-1823), a former stockbroker, claimed that rents and profits declined over time and that the economic problem was one of distribution of produce amongst three competing classes, landowners, labourers, and proprietors. John Stuart Mill (1806-1870) a lifetime employee at the London HQ of the Brltish East India Company, consolidated this liberal economic traditlon arguing for market forces, but incidentally, defending the East India Company's opium monopoly.

These British economists, along with Nassau Senior, James Mill, J. McCulloch met in the Freemason's tavern in Great Queen Street, they were one of the first free trade 'think-tanks'. We can find their contemporary counterparts in the Mount Pelerin Society, Sydney Institute, the Institute of Public Affairs, the Tasman Institute and others.

In 1820 the merchants of London organised a petition demanding free trade as a matter of national policy. The petition was written by Thomas Tooke (1774-1858), but organised by Alexander

{p. 9} Baring (of Baring's bank) and read in parliament by David Ricardo. In October 1838 the Manchester cotton merchants met to form an association which later became the Anti-Corn Law League, the first modern mass agitation organisation. Their aim was cheap corn prices, and thus cheap wages. Its leader was Richard Cobden (1804-1865), a Manchester cotton merchant. They organised agitation for a repeal of the Corn Laws, later to follow was the repeal of the Navigation Acts, and by the early 1840s free trade was accepted national policy.

Free trade dogma was then forcefully instituted throughout the western world and particularly, the British Empire. Its golden rule was 'buy cheap and sell dear', and its effect was to cheapen wages and generally force prices down.

At this time British economics was a rigid, deductionist school that relied on a number of unchallengeable laws or axioms (class division, scarcity, declining rent, rational economic man, the existence of a benevolent 'invisible hand' - the market).

Back to America. The tradition of Hamilton, who died in a duel in 1804, was continued by Tench Coxe, Hamilton's assistant, who, it is claimed did much of the preparatory work for Hamilton. In 1787 Coxe had outlined similar ideas at a meeting in Benjamin Franklin's house.

Alexander Hamilton, and others, founded the Society For Establishing Useful Manufactures (SUM). It was to be capitalised at one million dollars and factories and mills were to be established at the Great Falls of the Passaic River, it was a grand plan to industrialise that part of the USA.

Henry Clay (1777-1852) argued for tariffs in Congress and was the first to use the term 'American System Economics', referring to a program of internal improvements' (what we would call

{p. 10} infrastructure today), and measures to build industry. His speech in Congress (30th-31st March 1824), is a classic argument in favour of tariffs: the need to develop the home market; the power of domestic production; a harmony between agricultural and secondary industry; the power of machinery.

In the 1820s and 1830s, opposition to British Imperial economics and support in favour of the development of native industry was nurtured in northeast USA by the circle around Mathew Carey (1760-1839), a confidant of Benjamin Franklin. Mathew Carey had been exiled from Ireland for political and economic agitation. Members of this 'salon' included, Alexander Everett, Willard Phillips, Francis Bowen. Essentially this was a salon for New England industrialists. They spread the word about the benefits of protection and the dangers of free trade. They provided the inspiration for the Wharton School of Business. In 1824 they were joined by the German exile, Friedrich List.

Friedrich List (1789-1846), who had led a campaign to develop a German Customs Union (the Zollverein), had been hounded out of Germany because of his advocacy of economic reform. He settled in America from 1826-1832. During that exile he developed one of America's first rail lines and was a forceful advocate of America's industrial development. He returned to Germany and is considered to be the father of German railways. In 1841, List published his classic work The National System Of Political Economy, in which he attacked Adam Smith's 'cosmopolitan' economics system, a system that measured 'exchange' rather than a nation's productive powers. List defended an historical-inductive method and condemned the 'deductive' a prion reasoning, a reasoning

{p. 11} that relies on flawed axioms and ignores reality.

Other significant writers who associated with this group were Daniel Raymond (The Elements Of Political Economy, 1821 ) who brilliantly attacked the principles of free trade and Smith's deductive method, and outlined a comprehensive system of producing public wealth through improving the quality of effective labour, both physical and mental qualities. Some 110 years before Keynes, Raymond anticipated the key role of consumption in economics. John Rae in his Principles (1834), attacked the axioms of Adam Smith and developed a new theory of capital accumulation which was taken up by neoclassical writers and the Austrians in particular (Boehm-Bawek).

In 1841, Henry Carey (1793-1879), the son of Mathew, published perhaps his most significant work, The Harmony Of Interests. This was a classic defence of tariffs, an outline of a theory of productive powers, highlighted the need for the producer to be close to the consumer, and proposed that a 'harmony of interests' between sectors of the economy, especially farmers and industry, was more in keeping with natural economic laws than the 'division of labour' and the 'class divisions' claimed by Malthus and Ricardo. He developed an argument about the human power of association, and advocated a development of the home market, where both buyers and sellers gained. Carey's book is a brilliant statement about the benefits of co-operation, as against competition.

A later writer in this tradition was Erasmus Peshine Smith (1814- 1882), who argued in A Manual Of Political Economy, that innovation is a source of progress, and that population increases (contrary to Malthus' assertions) are beneficial. Peshine Smith

{p. 12} became an important adviser to the Japanese Meiji Government and it is possible that he influenced Japan's economic development. He was a fierce advocate of natural law and wrote: "government is successful in the degree to which it becomes unnecessary!"

The writings of Friedrich List and Henry Carey were helpful in the economic development of Japan, and Russia. Carey's works were widely distributed in Japan after the Meiji restoration (1870s onward) In Czarist Russia, Count Serqei Witte (1849-1915) was a devotee of Friedrich List.

Sun Yat Sen, the founder of modern day China advocated an infrastructure program for China and was sympathetic to National System ideas.

{p. 13} The Influence Of National System Economics In Australia

Australia was founded, primarily, as a dumping ground for convicts. Plans such as that advocated by James Matra (1784), George Young (1785) saw Australia as an emporium, or a source of raw materials, or of commercial opportunities for aristocrats dispossessed from America, and Jeremy Bentham, in his Panopticon Versus New South Wales, advocated that New South Wales should be converted to a giant legal 'panopticon' where convicts either work for their bread or starve.

Other 'schemes' directed Australia to serve the interests of a few privileged people. George IV granted one million acres to the Australian Agricultural Company and 300,000 acres to the Van Diemen's Land Company to develop agriculture with convict and aborigine slave labour. The Wakefield scheme in the 1830s envisaged keeping land expensive and tying immigrants to feudal-like obligations.

But the gold rush changed the economic direction of the nation. David Syme challenged the land monopoly, and argued for industry to give opportunities for migrants.

David Syme (1824-1908), a migrant from Scotland via Germany and the Californian goldfields, from 1860 until his death in 1908

{p. 14} pursued an advocacy of the major principles of National System economics: a national bank, infrastructure, science and technology, improve the quality of labour, high wages, tariffs, and opposition to laissez-faire economics. Syme even opposed the way in which laissez-faire economists thought, that is, deductive reasoning (belief in a few unchallengeable 'laws'). In his book, Outlines Of An Industrial Science, a book that was acclaimed in the USA and northern Europe, Syme attacked the flawed axioms of Adam Smith's school and argued for judicious government intervention to develop a nation. He systematically demolished the concept of supply and demand, and man as a rational economic beast. He pointed out that competltion, which is the survival of the fittest, leads to monopoly. In his book and other writings, Syme acclaimed the works of Hamilton, Henry Carey and Horace Greeley.

The free trade lobby organised to combat these ideas. They clrculated the Cobden Club's ideas in the colonies - William Hearn (1826-1888), a free-trader became the first professor of economics at Melbourne University, writing Plutology: Or The Theory Of Efforts To Satisfy Human Wants, one of the first neoclassical texts. In it he heavily plagiarised the works of John Rae.

But David Syme's influence spread. He was an early influence on Alfred Deakin (1856-1917), converting him to protectionism during a famous walk over the Swanston St. bridge. Deakin visited India, and the USA investigating irrigation, infrastructure, and his influence was later to be felt in the policy of 'New Protectionism' in the first decade of the Commonwealth. A policy that matched tariff

{p. 15} protection with the payment of a liveable wage. His preoccupations were with protectionism, irrigation, factory legislation and federation.

Thus Syme is a founder of the liberal tradition within the conservative parties. Syme has also been categorised as a 'colonial socialist'. It is an interesting proposition that from the Syme tradition comes both the liberal and labor traditions in Australia. John Curtin (1885-1945) a great Labor Prime Minister, was a copy-boy at the offices of The Age.

The Syme policies advocating tariffs, Hamiltonian banking, industrial development, high wages for workers, and opposition to laissez-faire continued when the colonies federated. The battle for 'New Protectionism' was won by Deakin's allies, Hamiltonian banking was introduced by King O'Malley (1858-1953) who proclaimed 'I am the Alexande Hamilton of Australia', Andrew Fisher (1862-1928) developed paper money for Australia. Billy Hughes used the Commonwealth Bank to finance the Trans-Continental Railway, the purchase of ships for the nation's shipping line and to finance much of the war effort. In the 1920s Earle Page developed the rural credits divlsion of the Commonwealth Bank, and in the 1930s Edward 'Red Ted Theodore proposed a fiat note issue as a means of alleviating unemployment in the depression. All of these policy formulations come from a National System tradition.

Between 1942 and 1949 the Curtin and later Ben Chifley (1885-1951) Governments initiated an extensive program of postwar reconstruction and development. This envisaged the

{p. 16} revolutionary concept of full employment, a new central bank issuing credits for secondary industry, rural reconstruction infrastructure through a program of public works, a new national railway grid, a regional form of government encouragement for secondary industry especially an aluminium industry, motor vehicles and aircraft, and a special priority for northern development. The Snowy Mountains Hydroelectric Scheme, financed by the Commonwealth Bank was initiated In this period.

At the same time popular writers such as lon Idriess were advocating the Bradfield Plan for irrigation in the Murray-Darling Basin and the rehabilitation of Lake Eyre and feeder rivers. John Cob Crew Bradfield, the designer of the Sydney Harbour Bridge and Sydney's rail links, had proposed an extensive program of natlon building in a speech in 1942. He had long been a hero amongst populist development networks.

Adjunctive to these national and popular advocates of economic development in the 1950s and 1960s were Thomas Playford in South Australia and Henry Bolte in Victoria. Both were fierce advocates of government support for infrastructure, especially water, electricity, private enterprise. From their efforts there was an attachment to population increases, a harmony of interests between agrlculture and rural industry, and cultivation of the home market.

In the works of these leaders, the major principles of National System economics were: the use of government banks to fund infrastructure and private enterprise; tariffs; science and

{p. 17} technology, increasing population; develop the home market; increase productive powers; harmony of interests; progress and optimism. They all supported free-enterprise, condemned socialism and opposed the drift of free trade.

{Comment (Peter M.): they condemned Communism; but National System Economics itself is a kind of Socialism}

After H.V. 'Doc' Evatt's heavy handed attempt to nationalise the banks, and the end of the 'workingmen' tradition in the Labor Party, and it being subsumed by Fabian and overt Marxlst ideas, Labor languished in opposition for 23 years. The government of Gough Whitlam revived some of the postwar reconstruction deas, but failed because of its inability to finance such projects. Whitlam advocated a regional form of government through the Australian Assistance Plan, which involved building 30 new cities, and Rex Connor advocated a new power and resource capaclty for Australia.

In the 1980s and 1990s, free trade principles have come to dominate the economic agenda, forcefully promoted by free trade think-tanks such as the Sydney Institute, the Tasman Institute, the Institute of Public Affairs.

By the 1990s the Syme-Deakin, and Syme-Curtin tradition was not even a memory.

(14) Genre and Background of the National System Economics article

Peter Myers, January 1, 2012

The above article by Don Veitch and John Seale is an example of the "Larouche" genre.

However, the authors had long since fallen out with Lyndon Larouche, becoming bitter enemies, even though they preserved the same general mindset.

Arno Mong Daastoel, of Norway, who sent the material on List and Sun Yat Sen, and Professor Michael Hudson, of the US, also have connections with Larouche.

There's also a connection with Trotsky: about 50 years ago, Larouche himself was a Trotskyist.

And Michael Hudson is a Godson of Trotsky. Michael's parents, fervent devotees of Trotsky, took Michael as a baby to meet Trotsky in Mexico, for the "Christening".

Michael says that it means little to him; he does not feel beholden to Trotsky over it.

Arno used to be a Larouche disciple. Michael tried to talk him out of it, so Arno is only "lukewarm" now. But he, too, writes in the "Larouche" genre.

Michael knew Larouche decades ago; their ideas being similar, Larouche asked to use some of Michael's writing. Michael says that Larouche plagiarized it; and for that, he had Larouche imprisoned. At least, that's the gist of the story, so far as I understand it. I think that misappropriation of money was involved too. Larouche's disciples call for him to be "exonerated".

We feel Trotsky's influence today through the nonsectarian New Left (anti-Stalin Left - Feminism, Gay, other "minorities"); yet the Trotskyist parties - those mindful of doctrine and devoted to the master - are hopelessly divided into warring sects. So with the Larouche movement: one comes across numerous articles on the internet belonging to the "Larouche" genre, yet many of the authors had fallen out with Larouche over some matter or other, not least over Larouche's raving and excessive control over his followers.

In my view, the above National System Economics article by Don Veitch and John Seale is a very good summary, and should be widely disseminated. Yet I have some differences with it too:

1. Alexander Hamilton, although within the National System school and therefore partly a "good guy", promoted a privately-owned central bank.

See The Money Masters: How International Bankers Gained Control of America, by Patrick S. J. Carmack: money-masters.html.

We DO need a National Bank - a publicly owned one. But most Central Banks are subordinate to the Bank of International Settlements, which imposes policies from Basel (Basle) in Switzerland. If one does have a Central Bank, it should be publicly owned, and subject to parliament and government. We have some say over the latter, but none over "independent" Central Banks. If the economy is left in the hands of "Markets", Democracy is illusory. "Markets" just means "the Big End of Town"; or, worse still, "Foreign Investors".

2. Nation-building and Development are good, but within limits. There are environmental constraints to resource use, consumption and population growth. But National System Economics can operate within such limits. Take the low road; live simply, and in peace. Divide up the work so that all have a job, instead of some having excessive hours and others having none. Only a strong government can do that.

3. Whilst we rightly fear World Government as draconian, there are limits to Nationalism too - eg when it becomes Imperialism. Co-operation between countries is desirable; thus trade and population movement, provided that these are on a proportionate scale so that the economy and the existing polulation are safeguarded. ==

items 15 and 19-to-23 are from newsletter b2043, dated Jan 2, 2012:

(15) Japanese imperial system was based on the PRUSSIAN system - Elaine Supkis

Subject: Re: Asia Model economies - derived from List or from Confucianism? National System Economics From: Elaine Supkis <> Date: Sun, 1 Jan 2012 08:00:12 -0500

Confucius was anti-labor, anti-science and this is what the Chinese revolutionaries wanted to get rid of.

This is dead wrong.

The Japanese imperial system was very much based on the PRUSSIAN system especially Prussian schools. The uniforms, the standing at attention for the lecturer, I used to go to high school in Germany and trust me, this still was going on in the sixties there!

The 'free university' for any students who master the keyhole tests at age 12 and then age 19 is also Prussian. The melding of the schools with apprenticeships of the industries is also German.

Comment (Peter M.):

Well, the Maoists had their chance. They denounced Confucius, but what a mess they made of China. THAT is why Confucius was rehabilitated.

Yes, the Prussian connection to imperial Japan was well-known. Gavan McCormack once said to me, "It's a Prussian state."

But List developed his ideas in the US. They were used there, and in Australia, during the Nineteenth Century and this century too, until the Globalists took over.

There is nothing particularly Prussian about National System Economics.

The Japan Model of the 1970s & 80s was repressive, as you imply. It did, however, feature relative equality and a "lifetime employment" system, which is missed now. McCormack has revised his assessment of that period, giving it more credit.

And look how it has transformed China, since the Great Leap Forward and the Cultural Revolution left it devastated. In just 30 years it has gone from the scrapheap to chief creditor of the US.

Why aren't don't we find articles in the media about how this has been achieved? It doesn't fit the current Laissez Faire paradigm - that's why. They're assuming that it will collapse in another Asia Crisis, and that they'll then be able to buy it up cheap. But this won't happen. The Asia Crisis happened to non-Confucian countries. Rather, the Anglo-American system is the one that will collapse. And as they go down, they may try to take everyone else too. Better take to the hills, like me. Poverty now, but more chance of survival later.

(16) Left economists praise China's economy, but others liken it to Nazi Germany

- by Peter Myers, May 28, 2020

Michael Hudson is one of the leading 'Left' economists in the world. The son of Trotskyist leader Carlos Hudson, Michael identifies as a Trotskyist, and recently attended a conference commemorating Rosa Luxemburg.

Yet, while "street" Trots condemn China over Tibet and Xinjiang, Michael has attended several conferences in Beijing, and roundly applauds China's economic policies; in particular, its independence of the IMF, the World Bank, and the austerity policies pursued elsewhere.

In this youtube, he explains how the IMF makes loans to other countries, always in $ not local currency. The goal is not to help them out, not to get interest on the loan, but to foreclose and seize the assets which are collateral for the loan. These might be railroads, water supply systems, electricity or other utilities. When the recipient country's currency collapses, and it can't pay, the IMF seizes the collateral, forcing Privatization of the asset. In that way, the USA lives off the rest of the world: .

That youtube is part of his article

Resisting Empire

Dr Michael Hudson

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, and Distinguished Research Professor of Economics at the University of Missouri in Kansas City. He is also the author of J is for Junk Economics from (2017), Killing the Host from (2015), and his 1968 classic Super-Imperialism: The Economic Strategy of American Empire. His website is

Although Trots call themselves 'internationalists', Michael has written two books favouring the Protectionist economic system developed in the USA in the 19th century. One might think, then, then he would side with Trump in the trade war with China. But no.

Ellen Brown takes a similar line on China:

Neoliberalism has Met Its Match in China - Ellen Brown

AUG 07, 2019 ==

I agree with her and Michael that the Chinese economic model has defeated the western 'Liberal' one. But I remind both that Nazi Germany did the same in the 1930s. Henry C K Liu, another member of Gang8, pointed this out:

Nazism and the German economic miracle

By Henry C K Liu

Asia Times, May 24, 2005

[...] The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.

[...] After two and a half decades of economic reform toward neo-liberal market economy, China is still unable to accomplish in economic reconstruction what Nazi Germany managed in four years after coming to power, ie, full employment with a vibrant economy financed with sovereign credit without the need to export, which would challenge that of Britain, the then superpower. This is because China made the mistake of relying on foreign investment instead of using its own sovereign credit. The penalty for China is that it has to export the resultant wealth to pay for the foreign capital it did not need in the first place. The result after more than two decades is that while China has become a creditor to the US to the tune of nearing China's own gross domestic product (GDP), it continues to have to beg the US for investment capital.

[...] The financing of Nazi economic-recovery programs drew upon sovereign credit creation techniques already experimented prior to Hitler's appointment as chancellor. [...] Hitler resorted to "pre-financing" (Vorfinanzierung) by means of "work-creation bills" (Arbeitsbeschaffungswechseln), a classic response of using monetary measures to deal with a fiscal dilemma.

Under the scheme of "pre-financing" with work-creation bills, the Reich Finance Ministry distributed these WCBs (three months, renewable up to five years) to participating credit institutions and public agencies. Contractors and suppliers who required cash to participate in work-creation projects drew bills against the agency ordering the work or the appropriate credit institutions. These credit institutions then accepted (assumed liability for payment of) the bills, which, now treated as commercial paper, could rediscount the bills at the Reichsbank (central bank). The entire process of drawing, accepting and discounting WCBs provided the cash necessary to pay the contractors and suppliers. The experience of successful rollover every three months quickly established credit worthiness. The Reich Treasury undertook to redeem these bills, one-fifth of the total every year, between 1934 and 1938, as the economy and tax receipts recovered. As security for the bills, the Reich Treasury deposited with the credit institutions a corresponding amount of tax vouchers (Steuergutscheine) or other securities. As the Treasury redeemed WCBs, the tax vouchers were to be returned to the Treasury. Hitler increased the money supply in the German economy by creating special money for employment.

Nazi Germany did all this without Gold; its economy was fiat-based. Until then, it was thought that you could not operate an economy without Gold. See my article The Finance Policy of Nazi Germany: Feder, Schacht and Hitler, at Feder-Schacht-Hitler.doc.

In fairness to Michael and Ellen, I note that David Lloyd George, the British Prime Minister who brokered the Balfour Declaration, praised the economic achievements of Nazi Germany - that is, before the war broke out. He welcomed such economic expansion, instead of the Austerity practised elsewhere.

Nazi Germany faced an economic blocade, inaugurated when the Jewish lobby declared war, akin to "US Sanctions' today. It got around this trade embargo by bartering with neighbouring countries.

Is there a non-militaristic variant of Nazi economic policy? Richard A. Werner shows that there is - the postwar Japan Miracle. His book Princes of the Yen is about the role of Japan's central bank in the "miracle" years and the recent "crisis" years.

Werner was Professor and Chair of International Banking at the University of Southampton. He wrote:

{p. 5} The credit controls used by the war bureaucrats survived virtually unchanged into the postwar era. They took the form of the extralegal and secretive "window guidance" operated by the Bank of Japan. This "guidance" consisted of direct credit allocation quotas strictly enforced by the central bank. It was at the core of Japan's postwar economic success. It also explains the success of Korea and Taiwan, where the Japanese installed the same during the war, and where the postwar leaders continued to use it.

In the 1950s and 1960s, window guidance controls became instrumental in the emerging struggle for supremacy between the powerful Ministry of Finance and the legally subordinated Bank of Japan. While the ministry won the first political battle and avoided a change in the Bank of Japan Law (which had been introduced in 1942, largely as a translation of Hitler's Reichsbank Law of 1939), the Bank of Japan remained solely in charge of window guidance.

{p. 80} Two promising young Ministry of Finance officials, members of the small career-track elite, joined the increasingly outspoken and critical debate about the future of Japan's economic system. Both had taken time off from MoF for a stint in academia. One was Yukio Noguchi, who has ever since remained in academia, and the other is Eisuke Sakakibara, who subsequently rejoined the ministry and rose to become vice minister of finance in 1997. Twenty years before, in 1977, in a pathbreaking article ("Analysis of the MoF-BoJ Kingdom") in the highbrow magazine Chlo Koron, Noguchi and Sakakibara were the first and only public figures to clearly identify and acknowledge the true nature of Japan's economic system. They called it the "wartime system for total economic mobilization."

{endquotes} more at werner-princes-yen.html .

China adopted this system. Ezra Vogel wrote that when Deng Xiaoping visited Japan in October 1978, he was so astounded at its technology that he decided to copy the Japanese economic system in China; Japan, in turn, set up factories in China, and stood by China after 1989:

Unlike Nazi Germany, much of China's economy is publicly-owned. Unlike the Soviet Union, it has a vibrant private sector subject to state guidance (just as Japan's private sector is subject to state guidance).

After its first experiments with high-speed trains, China built a high-speed network covering most of China in just ten years, whereas the US attempt to connect San Francisco and Los Angeles by high-speed rail failed.

China's superior economic system has put the rest of the world on notice: get rid of Economic Liberalism, or be taken over.

Britain, the US, Canada, New Zealand and Australia are going the way Hitler envisaged for the Ukraine: becoming mere quarries and markets for industrial exporting countries, as well as destinations for immigration. And worse, our populations are being dumbed down.

Australians are perceiving China to be a threat, as Nazi Germany was a threat. ==

Also see Left economists praise China, but others liken it to Nazi Germany: china-nazi.html .

(17) Japan transferred a lot of technology to China after 1978, in lieu of Reparations - Ezra Vogel

Japan needs to apologise more, China needs to say thank you more, says famed prof

Ezra Vogel, one of the most respected East Asian scholars, gives his take on Sino-Japanese relations ahead of Chinese President Xi Jingping's first state visit to Japan, and also discusses the American view on Beijing.

By Derrick A Paulo Chua Dan Chyi and Chua Dan Chyi

13 Feb 2020 06:30AM (Updated: 08 Mar 2020 04:54AM)

SINGAPORE: He has spent six decades studying China and Japan, a time span that is only 15 years shy of the end of World War II.

In that time, the old wounds of Japanese war atrocities in China have yet to heal. And the question of whether Japan needs to apologise in the way Germany has is never far away.

Ezra Vogel, the famed 89-year scholar and Harvard University emeritus professor of social sciences, does not think it would change China's basic foreign policy considerations. But he agrees that Japan needs "to apologise more".

He also thinks China needs "to say thank you more" Ñ because the Japanese became major contributors of foreign aid to the Chinese after they signed their Treaty of Peace and Friendship.

"The Japanese feel that ... (they) were very generous, after 1978, in helping China. They were giving more aid, more technological assistance, to China than any other country," he says.

"That was given instead of reparations, and the Chinese leaders acknowledged privately at the time that that's what the meaning was. But the Chinese (leaders) haven't done so much publicly, and many Chinese are completely unaware of that." [...]

Just a few years ago, China and Japan had a bitter territorial dispute over the Senkaku/Diaoyu islands. And although Prof Vogel reckons that relations are likely to improve now, he doubts that the Japanese will "feel comfortable being real friends".

"They saw the pictures of Japanese businesses being trashed on television (and of) Chinese planes and ships ... near the Senkaku/Diaoyu islands (in 2013)," he cites.

"They look at the movies of WWII, which the Japanese have seen on television from China ... And (they're) worried that if Chinese domestic problems should get very serious ... it would be quite popular in China to become anti-Japanese again."

If they would "put in their textbooks more about the horrors they've done", and be more apologetic, he thinks it would make them less vulnerable to Chinese criticism.

"When things are tense, China can always pull out the lack of apology to create problems with Japan," he notes.

Many younger Japanese, however, are "tired" of hearing the same old thing. "They say, 'Why should I apologise for things that happened before I was born?' And they say, ''We've apologised already. Why's China pushing us?'" says the professor.

"The Japanese know they did bad things in WWII. They realise a lot of countries have done bad things. And they want to improve relations. But they don't feel that they're uniquely bad people."

Mr Xi's current overtures to Japan come not only a few years after bilateral tensions had been heightened, but also a decade after China overtook Japan as the world's second-largest economy. That has since meant a "readjustment" of their relationship.

"(The Chinese) feel that they're now in a strong position, that the power they worry about isn't Japan but the US," says Prof Vogel. [...]

(18) Ezra Vogel: Xi Jinping has undone the goodwill that Deng Xiaoping established


October 15,2015 Special Forum

Xi Jinping Compared to Deng Xiaoping: Two Consequential Leaders of China

Ezra Vogel, Harvard University

Author of the preeminent biography of Deng Xiaoping, Deng Xiaoping and the Transformation of China, Ezra Vogel agreed to draw comparisons with Xi Jinping. We presented widely shared impressions of Xi and asked Vogel to assess the similarities and differences from Deng. ...

EZRA VOGEL: First, the level of experience of the two leaders differed greatly. Deng was familiar with the outside world after five years of living in France and also one year in the Soviet Union, as well as many meetings with foreign leaders. Given Zhou Enlai's incapacitation in 1973-1975, Deng was running China's foreign relations. During the period 1956-1965, he managed China's bureaucracy, developing a vast network of connections to officials in Beijing and beyond. He knew how things worked in the Party Central, and he was welcomed back as the leader by many who had been desperately awaiting some return to orderly governance. He was well prepared to assume power. In contrast, Xi's career was in local areas, not in Beijing, and he had virtually no experience in foreign countries and in meeting foreign leaders. As part of a generation sent to the countryside and cut off during the long period of the Cultural Revolution, Xi had little experience with the Beijing bureaucracy or with foreigners. He lacked close ties with key top officials. His two-year stint in the People's Liberation Army (PLA) pales in comparison with Deng's twelve years as political commissar in the war against Japan, culminating as political commissar of the Second Field Army and as political commissar over half a million troops in the decisive Huai Hai Command. During the Cultural Revolution, Deng had three and a half years to reflect on what he had learned from his time in power and to contemplate what China needed. Xi's work experience and background as a regional leader did not provide him with the range of experience or the opportunity for quiet reflection on how to govern the country.

Second, the condition of China when each took power was strikingly different. Deng needed a totally new approach in the face of chaos and the disastrous failures of the Great Leap Forward and the Cultural Revolution. Xi inherited a strong country whose modernization was far along, having opened its economy to the outside world following market principles. He could turn his attention to new ways to control some things gone badly, such as corruption, working within China's established structure. Deng had to establish a new order, forging ties to the outside world and radically changing the underlying structure of China's domestic system to make way for a market economy open to the influences of the outside world. Thus, the two leaders faced the world from very different starting points. Deng chose to "lie low," establishing good relations with all other countries in order for China to regain its footing. Xi led a confident China, emboldened by its own modernization and by the financial crisis in the West as well as a rapidly strengthening military.

Third, Deng and Xi had different styles of governance. Deng did not need a formal title. He had a range of high positions, including a decade as general secretary of the Party; he had led China in the revolutionary period. He had worked closely with Mao and Zhou Enlai and was the obvious heir apparent. His low-key approach meant that he delegated power to those he knew. Xi needed to boost his own stature with official titles and create a formal structure to take hold of diverse lines of control. As a micromanager, he makes all the final decisions himself on key matters. Deng read reports in detail, providing broad oversight and guiding the introduction of key policies, while relying on other officials to manage operations. [...]

EZRA VOGEL: For Deng, good relations with the major powers were of paramount importance. He knew foreign leaders, valued their goodwill, and understood the necessity of establishing close relations in promoting the importing of foreign technology and capital. Deng considered good relations with major foreign countries to be more important than border issues. I do not think that he would have let territorial issues interfere with these priorities. He would, thus, have been less assertive, more careful to prevent estranged relations with other powers, including the United States and Japan. Deng was not prone to bravado. In this respect, Deng's firm leadership in early 1992 showcased his priority for increasing FDI and wealth. He would, I think, also have been cautious about allowing companies to engage in economic cyber theft and in accelerating military spending in a manner that would arouse distrust. To be sure, Xi inherited a country that was much stronger and more confident than the country that Deng governed. On the eve of Xi's ascendancy in late 2012, China's conduct toward the United States and other states at the ASEAN Regional Forum (ARF) meeting reflected a much higher degree of confidence in China's power than in the years Deng was China's top ruler. [...]

EZRA VOGEL: Ideology. For Deng, this was not a high priority. He had watched for decades as it was used as an excuse for interfering with pragmatic policy making. Moreover, he had long disagreed with officials who looked to the Soviet Union as a fountainhead of ideological orthodoxy or a model. [...]

If Mao had been determined to eradicate symbols of Confucianism and Xi proved tolerant of reincorporating some of them into an ideological amalgam, Deng placed little importance on this potential element of ideology. Even before 1949, some Chinese blamed Confucian traditions for the troubles that led away from convergence with the West. Others believed that they provided a legacy in China that helped bring modernization. Deng saw no reason to blame China's slow modernization on Confucianism and was too much influenced by the May Fourth Movement in his youth to expect that China's salvation required a revival of Confucian themes. Deng wanted China to learn from Western thought as well as Western material successes.

On another aspect of ideological identity, anti-imperialism, Deng saw little need to play this card, which could provoke Japan and Western countries. In contrast to his successors, beginning with Jiang Zemin, he did not rally Chinese behind this cause. Textbooks and other publications continued to voice anti-imperialist narratives; Deng did not intervene to uproot this legacy. In this respect too, Deng was less committed to any particular ideology and more concerned about what would work to maintain discipline and keep public support.

History. Another dimension of national identity is history, including claims of pride or superiority about premodern history. These became pronounced toward the end of Hu Jintao's tenure as China's leader and have been emphasized even more under Xi Jinping. Deng was less concerned with history. Unlike recent glorification of the tribute system and even swagger about the "harmonious world" China forged in its benevolent outreach to Asian neighbors, Deng came from the generation who had striven to throw off the backwardness that left China defenseless against the West and Japan, and ready to seek lessons from the West. Deng was concerned about retaking Hong Kong and Taiwan to overcome the century of "humiliation," but less concerned about other territorial claims. He avoided arousing passions against the West or Japan centered on history. He had fought against the Japanese, but he focused on what was needed for cooperation with countries of the world, including Japan, that China had fought against in WWII, and other countries that Chinese volunteers fought against in the Korean War. Xi did not stop the large numbers of movies and TV shows that featured the fights against the barbarous Japanese. As showcased at the September 3, 2015 commemoration of the end of the war, Xi was more willing than Deng to remind the Chinese public of the Japanese horrors during World War II. [...]

More recently, under Xi, historical national identity has been reconstructed in the struggle to draw a firmer line supporting Chinese claims in the South China Sea and the extension of Chinese influence around the world, sometimes at the expense of American influence. Deng took pride in the history of the Chinese people, but he accepted the Enlightenment in the West as the shared starting point for modernity and was prepared to narrow the differences with capitalist countries. He anticipated a long period ahead until the mid-twenty-first century of catching up as part of an international community and not challenging that order. Nationalism was part of his agenda, but he wanted modernization and believed this required maintaining good relationships with the major countries of the world. [...]

Deng's handling of Mao sought to preserve the aura of authority in the Communist Party, but said that Mao's comments at any one time were not necessarily applicable at another time. They needed to be understood in context and in line with the overall purposes. He stated that China should follow the essence of Maoism, which was "to seek the true way from facts." He also acknowledged that Mao should be judged 70 percent correct, which is very good for any leader. He acknowledged that Mao made errors in his later years, but those errors were the errors of "all of us," not Mao alone.

As a hero in the anti-Japanese war, Deng had the political confidence to encourage better relations between Japan and China. He wanted China to take a low posture in international affairs and never to seek to become a hegemon. Xi Jinping has been willing to allow a higher level of anti-Japanese mood, focusing on the history of Japanese aggression. He has been more willing to support the assertion of Chinese territorial claims in the South China Sea and the East China Sea.

Xi has allowed more attention to China's historical humiliation than Deng did, linking it to assertions that other states are trying to contain China. Deng was impressed with the wisdom of Lee Kuan-yew and various Hong Kong businessmen about positively respecting Chinese, tradition while acting vigorously and not defensively to embrace the international community. Deng was removed from decision making in 1989-1991 when a conservative backlash placed constraints on market forces, but in 1992, at age 87, he made a vigorous assertion of the importance of openness to market forces.

Xi has allowed Chinese media to take a more critical stance toward Japan and the United States. It is unlikely, if Deng were still alive, that he would have supported such assertiveness.. Deng was more committed to learning from these countries, maintaining good ties to them, and not championing ideology or national identity in a manner that would cause others to be wary of China's intentions.

(19) Michael Hudson tells two interviewers "I'm Leon Trotsky's godson"

Interview with Michael Hudson

Louis Proyect Sat, 12 Jul 2003 14:14:13 -0700

Counterpunch, July 11, 2003

An Interview with Economist Michael Hudson

The Coming Financial Reality


[...] On July 1st, as the state legislatures began their new fiscal year, I spoke with Leon Trotsky's godson, heterodox economist and historian Michael Hudson, one of the few with both real experience inside the financial services sector. ==

The Road to Surviving Progress

December 1, 2011 By Mark Leiren-Young

[...] Michael Hudson. When we met Michael Hudson, this brilliant economist, economic historian, he's the one who introduces us to the whole subject of debt pollution and the ecological impact of Wall Street. We imagine, because he began his career as a young man working for the Chase Manhattan Bank and for David Rockefeller that there must have been a "road to Damascus" transformative moment in his life before he became a radical economist. So on the way to the interview Ñ he lives in Forest Hills in New York, and we were going to interview him in Manhattan Ñ on the cab coming into the city he tells us ...

[...] And I said, "Well, Michael, would you be prepared in the interview to talk about how you got from working for David Rockefeller to, today, your critique of financial capitalism? You know, your transformative moment?" And he said to me, "What are you talking about?" I said, "You know, your road to Damascus moment." He said, "There was no road to Damascus moment. I'm Leon Trotsky's godson."

(20) Michael Hudson says he testified before grand juries to convict Lyndon LaRouche

Re: [A-List] William Engdahl?

from [Hudsonmi]

To: a-list@xxxxxxxxxxxxxxxxxxx Subject: Re: [A-List] William Engdahl? From: Hudsonmi@xxxxxxx Date: Tue, 8 Mar 2005 11:54:48 EST Cc: engdahl@xxxxxxxxxxx, amd@xxxxxxxxxxx Delivery-date: Tue, 08 Mar 2005 10:28:38 -0700 List-archive: <>

Dear A-list, I met Bill Engdahl around 1980 at LaRouche's EIR offices in New York, when I was trying to find out what they were all about. (Truth-in-advertising: I later went around the United States testifying before grand juries to convict LaRouche and his leading financial fraudsters. He paid Mordedai Levy money to hurt me and Ramsey Clark, which was one reason he was sent up -- to the prison where my father was sent as one of the Minneapolis 17 in 1941. LaRouche had a hero-worship of my father and an obsession with my own background and writings, which is why I looked into just who he was.) At that time Engdahl was a "regular" member, and remained so for nearly two decades. A few years ago he called me and told me he had left. (Many of LaRouche's followers have come to me when they left.) He expressed his growing disgust with LaRouche for the latter's refusal to countenance any ideas not his own or that did not serve his clients. Bill seems seriously to have broken, as have many others who have gone on to successful Wall St. careers, such as David Goldman, Nic "Criton" Zoakis and other loonies whom I suspect have really not changed their colors. But Bill Engdahl does indeed seem to have dropped his connections. I recommended his book to Pluto (my own publisher), and I think his interpretation deserves to be considered. I don't see the ideology-for-sale dirty tricks or misrepresentation that LaRouche typically plays. I do believe in handling all Larouchies and former members at arms length, however. Twenty years is a long time to have spent in the company of psychos. (I'm sending a copy of this to Mr. Engdahl as we've developed a civil correspondence.)

Michael Hudson

(21) Michael Hudson says he asked ADL to help expose LaRouche; ADL were Schachtmanite Trots

Re: [A-List] William Engdahl?

from [Hudsonmi]

To: a-list@xxxxxxxxxxxxxxxxxxx Subject: Re: [A-List] William Engdahl? From: Hudsonmi@xxxxxxx Date: Sun, 13 Mar 2005 11:22:15 EST Delivery-date: Sun, 13 Mar 2005 14:30:22 -0700 List-archive: <>

Dear A-List, Regarding the "anti-Semitic" slander, I have an interesting story. Both Dennis King and I tried to get ADL support for our exposure of LaRouche. the ADL refused to do anyithing against LaRouche, because they explained that they agreed with his politics! These were old Schachtmanites who had become ultra-rightists. (I've blocked out the head of their research department's name.) In Dennis's talks with them, they made it clear that they put support of right-wing politics above any concern with anti-Semitism. So of all the arguments against LaRouche, I don't think anti-Semitism should be one of them. Rather, LaRouche cultivated Jewish followers who were breaking away from their parents (usually CP members, I think) and replaced them. Only the Jewish members ever made any Jewish jokes in my presence. If anything, LaRouche had an obsession with the Queen of England. I imagine that when he was along writing at 4 AM he would pace around his desk stamping, muttering, "I am Queen Elizabeth. I am Queen Elizabeth," until he got up enough energy to keep on writing some more of his stream of consciousness. Michael Hudson

(22) Asia Times was edited by ex-Larouche member Uwe Parpart - Larouche website says so

A close look at "Confessions of a Coward":

David Goldman is not telling the full truth about his years in the LaRouche movement

[...] Goldman and Parpart (also known as Uwe Henke "von" Parpart) would remain closely associated with each other after leaving the LaRouche movement. Parpart edited Asia Times, where Goldman became the celebrated pseudonymous columnist "Spengler." ==

Destroying the house that Gandhi built March 15, 2002

By Uwe Parpart, Asia Times Online Editor

(23) EX-LAROUCHE writers

Nicholas F. Benton
Robert Dreyfuss
F. William Engdahl ·
David P. Goldman (David P. Goldman, a.k.a. Spengler)
Victor Gunnarsson
Laurent Murawiec
Webster Tarpley ·

also see

Jonathan Tennenbaum, who writes many articles at Asia Times, was previously a major contributor to Executive Intelligence Review and other Larouche publications.

Matthew Ehret, Jon Rappoport and Pepe Escobar are spreading the Larouche line in conspiracy circles.

If one subtracts the 'reptilian' theme from David Icke's writings, his line turns out to be very similar to Larouche's.

Larouche publications brand the Green movement as 'Nazi' (they say Hitler was a Green) or as a 'British' conspiracy. They oppose renewable energy and limits on resource and energy use, and promote nuclear power, especially new types of reactors.

Living Marxism Magazine, subsequently LM Magazine and now Spiked Online, takes a line very similar to Larouche publications, with the difference that LM / Spiked is Zionist, i.e. they are Neocons. LM grew out of the (Trotskyist) Revolutionary Communist Party, and was substantially Jewish, just like the early Larouche writers. Another difference is that Spiked writers are now writing for the Times of London and republished in Murdoch publications elsewhere, e.g. in Australia; and also feature in Quadrant Magazine.

(24) Michael Hudson on the World Bank, IMF & Bank for International Settlements

The World Bank and IMF 2019


JUNE 26, 2019

Michael Hudson: ...

The IMF was in charge of short-term foreign currency loans. Its aim was to prevent countries from imposing capital controls to protect their balance of payments. Many countries had a dual exchange rate: one for trade in goods and services, the other rate for capital movements. The function of the IMF and World Bank was essentially to make other countries borrow in dollars, not in their own currencies, and to make sure that if they could not pay their dollar-denominated debts, they had to impose austerity on the domestic economy ­ while subsidizing their import and export sectors and protecting foreign investors, creditors and client oligarchies from loss.

The IMF developed a junk-economics model pretending that any country can pay any amount of debt to the creditors if it just impoverishes its labor enough. So when countries were unable to pay their debt service, the IMF tells them to raise their interest rates to bring on a depression ­ austerity ­ and break up the labor unions. That is euphemized as "rationalizing labor markets." The rationalizing is essentially to disable labor unions and the public sector. The aim ­ and effect ­ is to prevent countries from essentially following the line of development that had made the United States rich ­ by public subsidy and protection of domestic agriculture, public subsidy and protection of industry and an active government sector promoting a New Deal democracy. The IMF was essentially promoting and forcing other countries to balance their trade deficits by letting American and other investors buy control of their commanding heights, mainly their infrastructure monopolies, and to subsidize their capital flight.

BONNIE FAULKNER: Now, Michael, when you began speaking about the IMF and monetary controls, you mentioned that there were two exchange rates of currency in countries. What were you referring to?

MICHAEL HUDSON: When I went to work on Wall Street in the '60s, I was balance-of-payments economist for Chase Manhattan, and we used the IMF's monthly International Financial Statistics every month. At the top of each country's statistics would be the exchange-rate figures. Many countries had two rates: one for goods and services, which was set normally by the market, and then a different exchange rate that was managed for capital movements. That was because countries were trying to prevent capital flight. They didn't want their wealthy classes or foreign investors to make a run on their own currency ­ an ever-present threat in Latin America.

The IMF and the World Bank backed the cosmopolitan classes, the wealthy. Instead of letting countries control their capital outflows and prevent capital flight, the IMF's job is to protect the richest One Percent and foreign investors from balance-of-payments problems. The World Bank and American diplomacy have steered them into a chronic currency crisis. The IMF enables its wealthy constituency to move their money out of the country without taking a foreign-exchange loss. It makes loans to support capital flight out of domestic currencies into the dollar or other hard currencies. The IMF calls this a "stabilization" program. It is never effective in helping the debtor economy pay foreign debts out of growth. Instead, the IMF uses currency depreciation and sell-offs of public infrastructure and other assets to foreign investors after the flight capital has left and currency collapses. Wall Street speculators have sold the local currency short to make a killing, George-Soros style.

When the debtor-country currency collapses, the debts that these Latin American countries owe are in dollars, and now have to pay much more in their own currency to carry and pay off these debts. We're talking about enormous penalty rates in domestic currency for these countries to pay foreign-currency debts ­ basically taking on to finance a non-development policy and to subsidize capital flight when that policy "fails" to achieve its pretended objective of growth.

All hyperinflations of Latin America ­ Chile early on, like Germany after World War I ­ come from trying to pay foreign debts beyond the ability to be paid. Local currency is thrown onto the foreign-exchange market for dollars, lowering the exchange rate. That increases import prices, raising a price umbrella for domestic products.

(25) Michael Hudson says Zecharia Sitchin told him he works for Mossad

Subject: Re: [Fwd: New Age Genre & the Olympic Games] Date: Wed, 26 Feb 2003 08:43:21 EST From: To:

I visited Mr. Sitchen at his office once. He told me he worked for Israeli intelligence.


(26) List and Peshine Smith developed a rival economic theory to the British Empire's free trade doctrine - F. William Engdahl

A Century of War: Anglo-American Oil Politics and the New World Order

by F. William Engdahl

1st English edition published 1993.

{p. 10} A new weekly propaganda journal of these powerful City of London merchant and finance interests, The Economist, was founded in 1843 with the explicit purpose of agitating for the repeal of the Corn Laws.

The British Tory Party of Sir Robert Peel pushed through the fateful Corn Law Repeal in May 1846, a turning point for the worse not only in British, but in world history. Repeal opened the door to a flood of cheap products in agriculture, which created ruin among not only English but also other nations' farmers. The

{p. 11} merchants' simple dictum, "buy cheap...sell dear," was raised to the level of national economic strategy. Consumption was deemed the sole purpose of production.

Britain's domestic agriculture and farmers were ruined by the loss of the Corn Laws protectionism. Irish farmers were emiserated, as their largest export market suddenly lowered food prices drastically, as a result of Corn Law repeal. The mass starvation and emigration of Irish peasants and their families in the late 1840's - the tragic Irish Potato Famine of 1845-6 and its aftermath - was a direct consequence of this "free trade" policy of Britain. England's prior policy toward Ireland prohibited development of a strong self-sufficient manufacture, demanding it remain the economically captive bread basket to supply England's needs. Now that bread basket itself was destroyed in pursuit of the fictional free trade.

After 1846, Hindu peasants from Britain's Indian colony, with their dirt poor wage cost, competed against British and Irish farmers, for the market of the British "consumer." Wage levels inside Britain began falling with the price of bread. The English Poor Laws granted compensation for workers earning below human subsistence wage, with income supplement payments pegged to the price of a loaf of wheat bread. Thus, as bread prices plunged, so did living standards in England.

In effect, repeal of Corn Laws protectionism opened the floodgates throughout the British Empire to a "cheap labor policy." The only ones to benefit, following an initial surge of cheap food prices in England, were the giant international London trading houses, and the merchant banks which financed them. The class separations of British society were aggravated by a growing separation of a tiny number of very wealthy from the growing masses of very poor, as a lawful consequence of "free trade."1

E. Peshine Smith, an American economist and fierce opponent of British free trade, writing at the time, summarized the effect of the British Empire's free trade hegemony over the world economy of the 1850's: "Such has been the policy which still controls the legislation of Great Britain. It has, in practice, regarded the nation collectively as a gigantic trader, with the rest of the world, possessing a great stock of goods, not for use, but for sale, endeavouring to produce them cheaply, so that it might undersell rival shopkeepers; and looking upon the wages paid to its own people as so much lost to the profits of the establishment."

{p. 12} Peshine Smith contrasted this "nation as giant shopkeeper" doctrine of the Britain of Adam Smith and company to the growing national economic thinking emerging on the Continent of Europe in the 1850's, especially under the German Zollverein and other national economic policies of Friedrich List.

"Their policy will be dictated by the instincts of producers, and not that of shopkeepers. They will look to the aggregate of production, not to the rate of profits in trade, as the test of national prosperity. Accordingly, the great Continental nations, France, Russia and the German States - united in the Zollverein or Customs Union - have practically repudiated the idea which has so long controlled the commercial policy of England. What England has gained by that policy is thus described by one of her own learned and respected writers, Joseph Kay, who speaks of that nation as the one 'where the aristocracy is richer and more powerful than any other country in the world, the poor are more oppressed, more pauperized, more numerous in comparison to the other classes, more irreligious and very much worse educated than the poor of any other European nation, solely excepting uncivilized Russia and Turkey, enslaved Italy, mis- governed Portugal and revolutionized Spain'."

{endquote} more at engdahl.html .

(27) Michael Hudson addressed the Rosa Luxemburg Conference in January 2019

Rosa Luxemberg was a German Jewish communist revolutionary, a supporter of the Bolshevik Revolution but critical of the Red Terror; she was broadly in the Trotskyist camp.

She belonged to the Spartacist League (Spartakusbund). This Trotskyist webpage says

"Rosa Luxemburg clearly named her organization after Adam Weishaupt founder of the Illuminati. All of the revolutionaries of the French Revolutionary (1789) era took names based of heroes of the Roman Republican times. There was Gracchus Babbeuf, and Adam Weishaupt (Spartacus.)"

By January 1, 1919, the Spartacist League was calling itself the Communist Party of Germany (KPD). With her partner Karl Liebknecht, Rosa Luxemberg attempted to bring a Communist revolution to Germany during the Spartacist uprising.

A century later, Michael Hudson addressed a conference to commemorate her.

Here is the program - Program of the XXIVth International Rosa Luxemburg Conference: .

The theme of the conference was "Socialism or Barbarism": .

These webpages at Hudson's site mention it:

Leszek Kolakowski assesses Rosa Luxemberg in his book Main Currents of Marxism: Its Origin, Growth And Dissolution, 2. The Golden Age (Translated from the Polish by P. S. Falla, OUP Oxford 1981):

{p. 85} Rosa Luxemberg criticized Bolshevik tyranny in the same way as Kautsky, but not for the same reasons. Kautsky defended democracy on general grounds that were not specifically Marxist but might also be recognized by liberals, whereas Rosa Luxemburg was actuated by her Marxist faith in the unique value of the spontaneous political activity of the masses. She brushed aside the arguments of Kautsky and the Mensheviks about Russia's economic backwardness and the desirability of a coalition with the liberal bourgeoisie. This, she said, would be a desertion of the revolutionary cause. The Bolsheviks had been right to start the revolution when they did and to bank on its spreading to the rest of the world. Here Rosa Luxemburg was in agreement with Trotsky and Lenin: the party should seize power when it was politically feasible, to do so, regardless of doctrinaire objections about economic maturity - always on the assumption, which was generally accepted, that a socialist revolution in Russia could only succeed if it touched off a revolution throughout Europe. She also rejected the social democratic principle

{p. 86} that the party must first gain a majority and only then think about taking power. This was 'parliamentary cretinism': the proper course was to use revolutionary tactics to gain a majority, not the other way round.

This did not mean, however, that the party, having seized power despite the majority of the population, should maintain itself by terror and reject all normal forms of political freedom and representation. The turning-point of the Russian Revolution was the dispersal of the Constituent Assembly. Lenin and Trotsky had done away with general elections altogether, basing their power on the Soviets. Trotsky declared that the Assembly summoned before October was reactionary and that universal suffrage was needless as it did not truly reflect the state of feeling of the masses. But, Rosa Luxemburg replied, the masses could influence their representatives after the elections and make them change course, and the more democratic the system, the more effective such pressure could be. Democratic institutions were not perfect, but to abolish them was much worse, as it paralysed the political life of the masses.

(28) Michael Hudson's Autobiography

Life & Thought: An Autobiography

By Michael

Monday, August 6, 2018 Interviews

This interview was conducted at Peking University for the Second World Conference, May 7, 2018. It was conducted by Lau Kin Chi of the Global University for Sustainability. A visual transcription is available here.

I was born in Minneapolis, which is the only city in the world that was a Trotskyist city. During the 1930s it was a center of Trotskyism and my parents worked with Leon Trotsky in Mexico. When I was 3 years old my father was put in jail under the Smith Act as a political prisoner for having the works of Lenin and Marx on his shelves and for being one of the leaders of the Minneapolis general strikes from 1934 to 1936. So I grew up knowing many members of the Russian Revolution, members of the Central Committee when Lenin was in power.

When my father got out of jail we moved to Chicago and where he got a job editing Traffic World and Traffic Supply News. He had graduated from the University of Minnesota with a Master of Business in 1929 and the depression came. He had wanted to go to Latin America to become a millionaire and when the Depression came he thought that capitalism wasn't fair and that's what made him a Trotskyist and he became editor of the Northwest Organizer which was the labor newspaper. So when I grew up I had the old German Communist Party members, Americans, they would all come to the house and tell me the stories of the revolution so that when I grew up I was supposed, expected to lead a revolution if conditions were right. So down through my teens we discussed what are the right revolutionary conditions.

But I was not that interested at the time in politics, I was fascinated with physics, with chemistry and more and more with music.

When I went to the University of Chicago which was a grade school and high school for gifted children. My father had the highest IQ in the federal penitentiary system, I'm told, and so they thought his kid must be smart and they gave me a test and put me in a very good school. My formative year was really the tenth grade I think when I was 14 years old. We had a right wing teacher Curtis Edgett in social science. He kept calling me a commie. He had a sign over his blackboard in the room, "Give them all with the Rosenberg's got." The Rosenbergs were the Stalinist spies, but when I asked, "What do you mean ­ the Communists?" he said, "No, I mean the Jews."

Well, he would call me a Stalinist, a communist. But we also had a Stalinist classmate, Danny Landau. He called me a fascist, because I was a Trotskyist. So in the high school I was the reasonable voice in the middle. "It's the only time in my life I had been in the middle. My friends and I would come into the classroom, my fellow students would carry the works of Lenin and put them on our adjoining desks, to quote from.

When my father was in jail, one of the things he did was to compile a dictionary of all the things Lenin and Trotsky had said about various subjects. I would raise my hand and the other professor would say where did Lenin say that and I'd say in volume 6 page 322 and my student yes yes here it is. I like being hated by the right wing because it made me a lot of friends and so while the Stalinist called me a fascist and the fascists called me a communist I recruited many members into the socialist youth groups in Chicago.

My parents had worked with Leon Trotsky in Mexico as did many Minneapolis people, so I was very happy being in an adversarial position and somehow being in an adversarial position never hurt at all. My interest was music at that time and I studied piano and basically studied to be a conductor.

When I graduated in 1959 from the University of Chicago where my degree was in Germanic philology and history of culture but while I was there I was also studying full-time music primarily the series of Heinrich Schenker the German music theorist. In 1960 when Leon Trotsky's widow Natalia died, the executor of his estate Max Schachtman assigned me the copyrights, saying that since I was Trotsky's godson, I should do a publishing company. So I wrote. I'd had a correspondence with György Lukács, the Hungarian literary critic and he gave me his copyrights and I came to New York, thinking that I would start a publishing company while I studied conducting with Dimitri Mitropoulos, who was the conductor of the New York Philharmonic.

Well I couldn't get anybody to publish these or other works. Lukács insisted that I have a student of his, Arthur Kahn, do the translation of his work. It was an awful translation. I wanted to edit it and he wouldn't let any editing be done, so I sort of gave up doing that.

Then, an event happened that changed my life. My best friend growing up was Gavin MacFadyen. You may know him as a famous documentary film maker and founder in London of the Centre for Investigative Journalism. He had introduced me to Terence McCarthy who was an Irish communist and was the translator of Marx's Theories of Surplus Value. In one evening we talked about changes in the water level in America. The sunspot cycle and the water level would go up and down, causing a crop failure that would lead to an autumnal drain of money from the stock and bond market, causing a periodic financial crisis. To me, that was so beautiful, so aesthetic, that I decided on the spot to become an economist and Terence said that he would become my mentor if I would read all of the bibliography of Marx's Theories of Surplus Value.

So that's how I came to meet most of the rare economics book dealers in New York City. I ended up working for Augustus Kelley part time as an editor and writing introductions to some of the reprints of economic classics that he published. In exchange for writing introductions, he would give me books. I had a very large library of books, including many American protectionist writers, many economists that are missing from the normal history of economic thought.

Meanwhile, I had to go and make a living. I got to New York with only $15 in my pocket and in 1959 $15, you know, I could buy a little bit. I spent maybe a little bit in a dirty hotel in Greenwich Village. Then I took a walk and there was a folk music bar and I thought, "oh nice folk music, let me go in." I went into the bar to listen to a guitar.

Somebody came up to me and said, "Ah, Huck Hudson." When I grew up my name was Huck because my father's favorite book was Mark Twain's Huckleberry Finn. It was John Herold, who had stayed at my house in Chicago when he was going to the University of Wisconsin and visiting my friend Gavin. He had become a folk singer. He offered to let me stay with him until I could get a job and find a place to rent. So I moved out of the hotel into his house after just one night, and got a job as a French typist for Wonder Bread. That was when I went to an employment agency, and the only thing I could do that most other people couldn't do was to type fast and in French and German. So I did that for a little bit and then I decided to enroll in an economics course and get a master's degree at New York University.

The advantage of New York University was the teachers were all part-time, they didn't want my mind, all they wanted was my money. That was fine with me. I got to keep my mind and not be brainwashed. They said, "Do you have any background in economics?" I said, "No, my background's in music and cultural history. My mentor at Chicago in cultural history was Eugen Jolles, and he introduced me to the work of Spengler and Egon Friedell, Nietzsche and other writers. So that was my literary background."

I registered at NYU and got a job with the Savings Banks Trust Company, which was the one commercial bank that all the savings banks put their own reserves in. There were 135 savings banks in New York and there are none anymore, they've all been cannibalized, they've been bought out by the commercial banks. But my job was to trace the savings in New York, how it grew exponentially and compare this to how it was lent out for mortgages. The chart of these deposits was like a heartbeat. The deposits in savings banks would grow every quarter when the dividends were paid. So I saw basically that people left their savings in the bank to grow automatically, exponentially by interest. I saw that this recycling of interest-bearing debt was pushed back into the housing market to bid up housing prices.

Real estate is something that is not taught in any course in the United States economics. 80 percent of bank loans in America, England and much of Europe are real estate loans, but in the textbooks that students learn economics from, it is as if banks lend money to industry. Banks don't lend a penny to industry to invest in capital goods and hire people. They lend money to buy out industry, to take it over, to cannibalize it and to strip assets, but not to create capital. They lend it as mortgages, they basically lend against assets, against homes, commercial real estate, stocks or bonds or some assets. So that I realized that in the textbooks, picture of how finance works were completely different from what I was taught at NYU. I had to take a money and banking course taught by an ideological Greek professor Stephen Rousseas, who had never worked in a bank in his life Ñ none of my professors had ever worked in a bank, everything they know from the textbooks Ñ and he had an article by a man who subsequently became a friend of mine, Hyman Minsky, who thought that the business cycle could be explained by savings banks putting their reserves in the commercial banking system that would be lent out to the economy. I said, "Look, what you called a commercial banking system is one bank, the bank I work for and we don't make any loans at all to the economy. We buy bonds."

So I got a C-plus in the course, he said I didn't understand textbook economics. I realized that there was an absolute contradiction between how the real economy worked and what was in the textbooks. After I worked for the Savings Banks Trust for three years, in December 1964, I finished all my coursework and went to work as a balance of payments economist for the Chase Manhattan Bank. That was the most formative employment I ever had, because the balance of payments is also a topic that is not taught in any university. I taught it at the New School later, but universities don't teach about the balance of payments. It's all a simplistic monetary theory.

What I had to do, after I finished my coursework, was writing the dissertation. Terence McCarthy suggested I write on concepts of productivity, because there are many different Ñ what is productive, what's unproductive. There was a professor at the New York University, Solomon Fabricant, as in the word "fabricate". He was the head of the National Bureau of Economic Research. I went into his office he said, "The first thing I want you to do, I want you to join the CIA. I'm recruiting." He showed me a copy of the CIA's first published report in America, when the CIA first went public. It was on Russia's gold stock, saying that it didn't have enough native gold in its rivers or mines to be credit-worthy. I looked at it and said, "You must know that this is all a lie. I work for the Chase Manhattan Bank. Our customer is Anaconda Copper Co. Anaconda has bought gold bars from the Soviet Union and the gold bars are not made from gold they pan out of the river. They're made as an electrolytic by-product of copper refining. What you should do is forecast the copper output of Russia, when you electrolytically refine copper, gold and silver fall to the bottom and it's the residue that is responsible for most of the gold stock, not only of Russia but for other copper producers such as Chile."

He said, "well okay you're not good at joining the CIA". I couldn't believe he didn't know about my background, but that didn't matter. I told him I wanted to write my dissertation about concepts of productivity, as I was interested in classical economics. As a Marxist I'd seen how Marxism grew out of classical economics, grew out of the economics of the French Physiocrats, Adam Smith, John Stuart Mill and so forth. The concept of circular flow was always critical to me, the concept of economics is a systems and systems analysis, which was just becoming popular in the 1960s. Fabricant said, "These theories are worthless. If these theories would have been relevant, then they would have been successful and remained in the textbooks. If a theory is no longer held it's because it's died out in a Darwinian struggle for existence and is irrelevant." So I talked to a professor who had become a friend, a former communist who was a business cycle professor, Gerhart Bry. He was a refugee from Germany. We had a discussion about some of the books that I was buying from other book dealers and I wrote my dissertation on Erasmus Peshine Smith, who wrote the Manual of Political Economy that became the Republican Party doctrine in 1853. I decided to write about the American protectionists with Prof. Bry and had no problem at all getting the PhD until I had my orals. And again, NYU didn't have anyone teaching money and banking on a full-time basis at Washington Square which is the center of NYU. So I thought there's a money and banking professor uptown, Walter Haines, who wrote a textbook. He must know about banking. I passed all the orals of all the professors I'd studied with, economic history, third world development, but the money and banking man said I knew nothing about banking, that my idea of how banking worked was not at all what was in the textbooks and I had to retake the orals after reading about a fictitious world. So I became aware of the fact that academic economics is very fictitious. It has nothing to do about the real world. It was really a parallel universe theory, to say that if the world worked this way, then the existing distribution of income would be fair, everybody would get what they deserve, there's no income that's unearned, everything is fair, and you have to accept the world the way it is. And I never accepted the way the world as it was, because of the way I grew up. As I mentioned, when I grew up in Chicago I thought that the years of World War Two were when everybody was drafted into jail because everybody who would be at the house was in jail during the war for trying to lead strikes or being political or being left-wing, and only later did I realize there was actual fighting going on and they weren't just putting in people who read Marx and radical leadership there.

I worked at Chase Manhattan until 1967, then finally I had to quit to finish the dissertation. I spent a year on that. At Chase I had become the specialist in the oil industry's balance of payments. When the Vietnam War began and escalated, President Johnson in January 1965, right after I joined the bank in December 1964, passed the voluntary ­ in reality, compulsory ­ foreign investment rules blocking American companies from investing more than 5% of the growth of the previous year's investment. The oil industry objected to that. They came to David Rockefeller and said we've got to convince the government that we're ripping off other countries so fast, we're able to exploit them so rapidly, that it really helps the US balance of payments to let us continue investing more abroad. Can you help us show this statistically?

So David Rockefeller asked me to do a study of the balance of payments of the oil industry. Rockefeller said, "We don't want to have Chase's oil and gas department do it, because they would be thought of as lobbyists. Nobody knows who you are, so you're neutral. We want to know what the real facts are, and if they're what we think they are, we'll publish what you write; if we don't like it we'll keep it to ourselves, but please just give us the facts." He said, "You can ask the oil companies all the questions you want. They will fill out the forms you design for a statistical accounting format. We'll give you a year to write it all up." To me this was wonderful. Oil was the key sector internationally. It turned out I found out that the average dollar that actually was invested abroad by oil companies was recaptured by the US economy within 18 months. The payback period was that fast.

The report that I wrote was put on the desk of every senator and every representative in the United States and I was celebrated for being the economist of the oil industry. So this taught me everything about the balance of payments which, as I said, is a topic that's not taught in any university. So I finished that, finished the dissertation, and then I developed a methodology for the overall US balance of payments. Most of the balance of payment statistics were changed when they designed the gross national product accounts. The accounts now treat exports and imports as if they were paid for fully for cash. So if you make a million dollars worth of grain exports, you are assumed to bring a million dollars into the economy. And if you export a million dollars of arms, of military, it all comes back.

What I found out is that only a portion actually of exports actually comes back. And imports have an even lower balance-of-payment costs as compared to their nominal valuation. For instance, all of America's oil imports are from American oil companies, so if you pay a hundred dollars for oil, maybe thirty dollars of that is profit, thirty dollars is compensation to American management, thirty dollars is the use of American exports to physical equipment, oil drilling equipment and others to produce the oil.

The closest people that I worked with for the study were at the Standard Oil Company, which was always very close to the Rockefellers, as you know. So I went over the statistics and I said, "In the balance of payments, I can't find where Standard Oil makes the profit. Does it make the profit by producing oil at the production end? Or does it make it selling it at the gas stations, at the retail sales end?" The treasurer of Standard Oil said, "Ah I can tell you where we make them. We make them right here in my office." I asked how. "What countries could I find this in? I don't find it in Europe, I don't find it in Asia, I don't find it in Latin America or Africa." He said, "Ah, do you see at the very end of the geography headings for international earnings, there's something called international?"

I said, "Yes that always confused me. Where is it? I thought all these foreign countries were international." He explained that "international" means countries that are not really countries. They're Liberia and Panama, countries that only use the US dollar, not their own currency. So the oil industry doesn't have a currency risk. They are flags of convenience and they don't have any income tax. He explained to me that Standard Oil sold its oil at a very low price from the Near East to Liberia or Panama or Lagos, or wherever they have a flag of convenience and no income tax. Then they would sell it at a very high price to its refineries in Europe and America, at such a high price that these "downstream" affiliates don't make any income. So there's no tax to pay. For all US oil investment in Europe, there's no tax to pay because the oil companies' accountants price it so high, and pay so little per barrel to third world countries such as Saudi Arabia, that they only get a royalty. Standard Oil and other U.S. oil companies ­ and also mining companies ­ don't earn an income there, because they sell it so low, all the profits are reported to be taken in Liberia or Panama. These are non-countries.

That gave me the clue about what people these days talk about money laundering. In the last few months that I worked for Chase Manhattan in 1967, I was going up to my office on the ninth floor and a man got on the elevator and said, "I was just coming to your office, Michael. Here is a report. I'm from the State Department (I assumed that this meant CIA). "We want to calculate how much money the US could get if we set up bank branches and became the bank for all the criminal capital in the world." He said, "We figured out we can finance, (and he said this in an elevator), we can finance the Vietnam War with all the drug money coming into America, all of the criminal money. Can you make a calculation of how much that might be?"

So I spent three months figuring out how much money goes to Switzerland, from drug dealings, what's the dollar volume of drug dealings. They helped me with all sorts of statistics on that, and said, "We can become the criminal capital of the world and it'll finance the dollar and this will enable us to afford the spending to defeat communism in Vietnam and elsewhere. If we don't do that, the bomb throwers will come to New York." So I became a specialist in money laundering! Nothing could have better prepared me to understand how the global economy works! I had all the statistics, I had the help of the government people explaining to me how the CIA worked with drug dealing and other criminals and kidnappers to raise the money so it would be off the balance sheet funding and Congress didn't have to approve it when they would kill people and sponsor revolutions. They were completely open with me about this. I realized they'd never done a security check on me.

So I wanted to do a study of the balance of payments of the whole United States. I went to work for Arthur Andersen, which was at that time was one of the Big Five accounting firms in the United States. Later it was convicted of fraud when it got involved in the Enron scandal and was closed down. But I was working before the other people went to jail, before they closed down Arthur Andersen. So I spent a year applying my balance of payments analysis to the US balance of payments. When I finally finished, I found that the entire US balance of payments deficit in the 1960s, since the Vietnam War, the entire balance of payments deficit was military spending abroad. The private sector's trade and investment was exactly in balance; tourism, trade and investment were exactly in balance. All the deficit was military.

So I turned in my statistics. My boss Mr. Barsanti, came in to me three days later and he said, "I'm afraid we have to fire you." I asked, "What happened?" He said, "Well, we sent it to Robert McNamara." (who was the Secretary of Defense and then became an even more dangerous person with the World Bank, which probably is more dangerous to the world than the American military. But that's another story). Mr. Barsanti said that McNamara said that Arthur Andersen would never get another government contract if it published my report.

In all of the Pentagon Papers that later came out of McNamara's regime, there's no discussion at all of the balance-of-payments cost of the Vietnam War. This is what was driving America off gold. At Chase Manhattan from 1964 until I left, every Friday the Federal Reserve would come out with its goal, its weekly statistics. We could trace the gold stock. Everybody was talking about General de Gaulle cashing in the gold, because Vietnam was a French colony and the American soldiers and army would have to use French banks, the dollars would go to France and de Gaulle would cash it in for gold. Well, Germany actually was cashing in more gold than de Gaulle, but they didn't make speeches about it. So I could see that the war spending was going to drive America off gold. There were three people, known as the Columbia Group, saying the Vietnam War was going to destroy the American monetary system as we know it. The group was composed of Terence McCarthy, my mentor; Seymour Melman, a professor at Columbia University's School of Industrial Engineering where Terence also taught; and myself. We would basically go around the New York City giving speeches.

My first article that I wrote for publish was at Ramparts Magazine, called "The Sieve of Gold," about how the Vietnam War was going to force America off gold, which it did, of course, in 1971 when President Nixon in August stopped the gold. Meanwhile, I took my balance of payments study to New York University's Business School and they said, "Oh this is great! We'll publish it." So I was able to immediately get it published.

That led me to be invited to give a lecture at the Graduate Faculty of the New School for Social Research in New York. At the time I was analyzing the Vietnam War, I had to analyze copper prices. Every soldier in Vietnam used one ton of copper per year, I think that it's as if they were fighting each other with ingots of copper. So I was forecasting copper prices by looking at the troop build-up, one ton of copper per army person, and forecasting that the price of copper would go up. So I was known for a while as Mr. Copper. As I said, Anaconda was Chase's main client, and Kennecott was the client of Citibank, and they're a group of commodity people in Wall Street that just love copper. I love copper and when one head of the group said, "Aluminum is a shit metal," I felt the same way that copper is nice.

By 1968 the largest item of theft in the United States was copper, people were stripping the copper drainpipes off churches, as well as the wires that go into houses. Thieves would pull every copper scrap as prices were going up, so I became aware of the recycling phenomenon and the degree to which the sources of metal were not just mining the earth but the recycling of various things.

I ended up working for a while for Continental Oil as their economist, and then while I was doing it, they bought the Baghdad copper company at my recommendation because I could see the war was going to go on for a while. They also got into real estate. Well then they moved up to Connecticut and I decided to become a professor at the New School, because I never had a course in trade theory and the only way to learn about a topic is to teach it. So I gave the course in trade theory, and then was hired as a full-time faculty member in 1970 and taught national income analysis, using Marx's Theories of Surplus Value as my textbook. This infuriated the department head, Robert Heilbroner, whose idea of Marx was what he had for breakfast and how he felt later, and did he really have an affair with his maid. There was not much economic analysis, and he was furious that I would teach a national income course. He said, "You're a Wall Street thug! You know only one third of the economics students are from business, one third are foreign students from the UN, and one third sort of radicals who are left-wing." He just assumed that I was there for the business school students. I never once discussed politics at the New School. I realized that Heilbroner's idea of Marxism was Stalinism, as a very crude idea. He brought in a Stalinist, Steve Hymer, ostensibly to teach trade theory, and I said, "That's fine, I'll teach monetary theory and banking theory.

Hymer was a proselytizer for LSD. He would tell the students to take LSD and then listen to his course. About a year after he joined, he went to the American Economic Association meeting in Montreal, had students take LSD and stand on their head. On the way back to New York he drove his car into a truck and his group died. It's really dangerous to take LSD when you're driving.

The foreign students were coming into my office and saying, "Is this man CIA? Why would he want us to take LSD unless he wants to, you know, deport us or arrest us or make us into a spy?" So I was the guy they would come to and that made Heilbroner think all the more that I must be a Wall Street plant.

Finally, the dollar went off gold in 1971. I took a number of articles that I'd written and wrote my first book, Super Imperialism: The Economic Strategy of American Empire. It came out in September, 1972. Well just at that time I was invited almost every year to give a lecture at the annual meeting of Drexel Burnham. Like Arthur Andersen, they also were deemed a criminal enterprise whose leaders ended up having to go to jail for fraud. They joked that I was their token Shabbat goyim. My friend Andre Sharon there also was a protege of Terence McCarthy said, "We're going to have an annual meeting, we're going to introduce you to Herman Kahn," who was a brilliant military theorist. Andre said, "He's going to talk to you, he talks very fast, he's a brilliant guy. After he hears you speak, he's going to offer you a job. You probably can't understand what he's saying, but just say yes. You've got to get out of academia, you don't belong there."

So I gave the speech about the oil industry and how America was exploiting the world and how going off gold meant that there was only one thing that foreign countries could do with their balance-of-payments surpluses. These dollars were being thrown off by the US balance-of-payments deficit for military spending. Foreign central banks henceforth would have to buy Treasury bonds. So the military would spend dollars abroad, pump the dollars into the European and Asian economies, which then would lend the money back to the United States government by buying bonds, to finance the war and their own military encirclement.

After I told that to the Wall Street meeting, Herman Kahn said, "This is brilliant. We've run rings around the British imperialists. This is a great story. Leave academia, I will triple your salary if you'll come to work for me."

I said, "Well, I was hoping my students will go on and spread my ideas." He said, "Look, you're hoping that someday one of your students will be a senator, may be president. You join the Hudson Institute." (It was named after the river not after me, but my ancestor discovered the river). He added, "I'll take you to the White House next month. It doesn't matter who's president. Wouldn't you rather wait until somebody becomes elected president, and then you become their advisor, instead of hoping that one of your students from the New School might get elected?"

So I immediately joined the Hudson Institute, and was paid the same salary he was. I was the number two man and we disagreed on everything. He was a right-winger, a Zionist and I was a left-winger. We had the big study that the Institute did, the corporate environment study, telling corporations what's happening in the world. It ended up I got most of the clients.

One day right after my book came out in September, I was buying Tibetan art at that time, and Chinese art, I was a specialist in Asian art as a hobby, and I got a call. I woke up in the morning and I had written a note about the $3,500 that I owed art dealers, and I wondered what I was going to do. I got a call from I think the Royal Bank of Canada saying, "We've just made 20 million dollars by reading your book and the last paragraph on how prices were going to go up. What do you charge to come and give a lecture for us?" I said, "Oh, $3,500", and they said okay. So I thought this was wonderful.

They organized my lecture through a stock brokerage company, Molson Rousseau, in Montreal. Everybody who came to listen to me would have to generate stock trading fees of $3,500 and they would give me the envelope with cash.

Everybody loved it, so they invited me back two months later. Apparently they did not know that I worked at the Hudson Institute at that time. (I worked at home most of each month.) They called Herman Kahn and asked him. They just told him, "The last person we paid is $3,500." He said, "Well you know I'm a famous author, you have to pay me $4,000." So they paid him $4,000. That went over very nicely.

Then I got a call: "People really like this series we're doing. Will you come back again?" I said, "What are you going to pay?" They said, $3,500." I said, "Well, I understand you paid Herman Kahn $4,000. I'll have to charge $4,500." "Okay, we'll get more people." They came, I gave the speech.

Then they called Herman the next month. He said, "I understand you're paying Michael $4,500. I'm his boss. You'll have to pay me $5,000." We ultimately got them up to $6,500 and they said, "I think you guys are playing a game with us." And so $6,500 a month supplemented my $45,000 a year from the Hudson Institute.

I went all around the world with Herman. We went to Korea, Japan and France, basically talking about the balance of payments. Herman weighed over 400 pounds. One day, we were in France, we were packing at the hotel, and he asked me to hand him his pants from the closet. As far as my arms would reach, it wasn't big enough for what went around his waist. One day after we came back, we had to go to the White House for a meeting on oil and the balance of payments. And who should be the Undersecretary of the Treasury but my old mentor from Standard Oil who had explained to me how offshore banking centers worked. He explained to Herman and me that he told the Saudi Arabians, "You can charge whatever you want for oil." This was right after America quadrupled the price of grain to finance the Vietnam War in 1972-73, and OPEC responded by quadrupling the price of oil. The Undersecretary of the Treasury explained to me that they could charge whatever they wanted for oil. He knew that the higher they charged, the more the American companies would be able to charge on domestic oil. But the Saudis had to recycle all of their dollars into the United States, into Treasury bonds or the stock market. "You can't buy American companies, you can only buy stocks or bonds, and you have to price your oil in dollars. If you don't, we'll consider that an act of war."

So here I was right in the middle of understanding how imperialism really worked. This was not what is in most textbooks. Most don't talk about the balance of payments, but the key to financial imperialism is the balance of payments. The United States fights to prevent other countries from going back to the gold standard, because at the time America went off gold in August 1971, every American dollar bill was backed 25% by gold at $35 an ounce. Well, finally there was no more surplus gold, and that's what forced America off gold. Its price immediately went way up. As an American citizen, I wasn't allowed to buy gold. So I knew it was coming but I couldn't make any money off it. Instead I bought Tibetan and Indian art, Asian art primarily.

To make a long story short, I became a financial advisor to the Canadian government as a result of the stock brokerage work in Montreal. They said, "We need somebody who knows the American stock and bond market". I was at that time the highest paid economist per diem in the United States for financial analysis. So I got a call saying, "They're going to want to hire you but there's only one way in which they can tell how intelligent you are. Do you know about wine?"

When I grew up at the University of Chicago, the university paid its professors so badly that to make more money, their ideal was to be a wine steward at the Pump Room, which was the fancy restaurant in Chicago. It was featured in the Blues Brothers comedy with John Belushi. Anyway, I took a sommelier course, got a license, and brought two bottles, one Richebourg and one La Tâche that I bought in the remainder carton at an uptown store. I gave them to my host in Ottawa and the government guys said, "That's the guy we want."

So I wrote a study that Canada didn't have to borrow money abroad for the provinces to invest domestically. They could create their own money. Basically, what I wrote was the first example of what's now called Modern Monetary Theory, that governments can create their own money, their own credit. They don't need a foreign-currency backing for it, and so all basically the same circular flow analysis that I'd developed from my history of thought. a Physiocratic analysis.

One of the top investment analysts for the Royal Bank decided to become the head of personnel. He said he thought that it's a personality problem that economists can't understand how the world works, that there's a particular kind of dumb person that becomes an economist. It's a kind of autism, of thinking abstractly without a sense of economic reality. So he got me an appointment with the Secretary of State of Canada. In Canada the Secretary of State is in charge of education, films and culture. So I became Canada's cultural adviser, which is what I thought was fine all along, and I wrote a report.

Around that time I also was an economic adviser to the United Nations Institute for Training and Research, UNITAR, writing their reports on North/South debt, the foreign debt of third world countries, denominated in dollars, and how this was deranging their economies. They had a meeting in Mexico financed by the Mexican president and I was invited down there. I gave a report saying that there was no way that the third-world debts can be paid.

My first job I worked on at Chase Manhattan was to estimate how much export revenue Argentina, Brazil and Chile could make. The idea was that all of their export earnings could enable them to pay interest on money borrowed from US banks. The idea was that the entire trade surplus should be pledged as debt service to the American banks. My job was to think how much that was, and what should Chase's share be. So, at the Mexican UNITAR conference, I said that these debts cannot be paid, therefore they should not be paid, they should be canceled.

There was quite a stir over that. Well at the end of the conference they had the rapporteurs summarizing the papers. The US rapporteur said that Dr. Hudson has given a report saying that third-world countries should export more in order to pay their debts. I stood up slowly and said, "I must insist that the President of Mexico offer a public explanation, apology to me and the conference. This rapporteur has inverted and reversed everything I said. I believe he has a covert purpose. I'm pulling out the American delegation and I'm pulling out the Canadian delegation too. We cannot be a part of this travesty."

Then I walked out, wondering what's gonna happen! The Russian delegate came out laughing and said, "Ah! You've dominated the whole conference. You've made chaos out of it. You've embarrassed the CIA. This is fantastic. Here's my card in New York."

Later that evening I was told, "You know, they're looking for you to beat you up." Well as it happened an old girlfriend of mine was in a group who were in Mexico for an art exhibition. They were surrealist artists from Amherst, and they were also doing a surrealist ballet. So I went to the ballet with them and they said, "Look! The thugs are there." So I hid out with them on the stage in their ballet. The goons were looking in the audience and I was on the stage and we were all just surrealistic. Nobody knew how to dance or anything, it was all just surrealistic. And they, you know, the goons all went home. I learned that if they can't find you, they usually give up and leave you alone.

I went back to New York, but I realized that the debt issue was so controversial ­ the idea that debt couldn't be paid. I spent about a year and I'd got through medieval period, Europe, World War One, and then even Greece and Rome. But then I found Ñ it was about 1980, 1981, at that time I sold my house on the Lower Side and moved into a loft near Wall Street which was very low price there at that time, (I bought it for $20,000. Later I sold it for $580,000 but that's another story), it shows you the real estate in New York, but at that time nobody wanted to live in lofts, and I wanted a big loft because I had a big library at that time and a lot of art that I wanted to keep.

So basically I stopped working. I realized that in the Bible there was the Jubilee Year and there were references to Sumer and Babylonia and that there was a background of the biblical debt cancellations, almost the same word for deror in Hebrew is andurarum in Babylonian. I found that there was all this material and that had never been written in anywhere outside of the field of assyriology. There was no economic history of the ancient Near East, no economic history of Sumer and Babylonia. It was all about religion and some culture, Gilgamesh and all that, but not what I was most interested in, which was the debt cancellations. So I wrote a draft of what I could find by 1984. And one of my friends was the Ice Age archaeologist Alex Marshak. Although he lived in New York, he was connected to Harvard's Peabody Museum. He showed it to the head of the Peabody, Karl Lamberg-Karlovsky, who told me, "This is great! Nobody else is working on it." He appointed me a fellow of the Peabody Museum in Babylonian economic archeology.

I thought, "This is wonderful, this is really what I want to do." So I spent the next maybe three years writing the first draft of what became the book that's being published in a few months, "É and forgive them their debts": Credit and Redemption from Bronze Age Finance to the Jubilee Year. I submitted it to the University of California Press. They sent it to scholars to referee, who said that it was impossible that debts could be cancelled. Their argument was that if debts were cancelled, who would lend money? That's what Rabbi Hillel argued in the Judaic tradition. I said, "Most debts were not the result of loans. Most debts were when the crops would fail and the cultivators could not pay the palace for the fees they'd run up, the rental fees for the land, the fees for the water, for the draught animals, or the beer lady for the beer that they'd drunk.

So every ruler, when they would take the throne in Sumer and Babylonia, for a thousand years, would start their rule by cancelling the debts with a clean slate, an amnesty. It's the same amnesty of the kind that Egypt's Rosetta Stone commemorates. Everybody knows that the Rosetta Stone has trilingual inscriptions of Greek, Egyptian and Coptic. But few know that it's a fiscal debt cancellation.

That's what we call cognitive dissonance, people can't imagine that the debts were cancelled. I realized that this was very controversial, and so my Harvard colleague, Karl Lamberg-Karlovsky, suggested that we hold a series of meetings, and asked me to organize them. He said that we would hold a colloquium for each controversial chapter of my book. We decided to have a meeting every two years, and invite every major specialist from early Sumer, the Neo-Sumerian period, Babylonia, other Near Eastern realms, and Egypt. Their role was to collect everything they had on whatever the meetings' topic would be.

Since I was in New York, I worked with the leading Hebraic linguist Baruch Levine at NYU. I needed someone who was respected in the linguistic field to invite people, because most Sumerologists, readers of cuneiform, stayed away from economics, because the mainstream economic idea of how society developed is as if Margaret Thatcher would have created civilization. How would she have done it, or Milton Friedman, or what we call vulgar Marxists who think that it was the idea that seemed plausible to Engels when he wrote The Origin of the Family, Private Property and the State. That's not how early history actually occurred.

So the Sumerologists wouldn't talk to economists. But because I was now an archaeologist with Harvard in the anthropology department, they agreed to come to the conference. The first meeting, in 1994, was on privatization in the ancient Near East and classical antiquity. Harvard published that. Two years later, we moved on to the second volume, which was on land use and real estate ownership: How did property ownership come into being.

Then, we had planned from the very beginning for the third colloquium volume. That was on debt and economic renewal in the ancient Near East. I asked for everything that people could find about debt cancellations. We found that these occurred all the way through the first millennium. Herodotus talked about debt cancellations in Babylonia. It was a tradition remaining in the Near East for new rulers taking the throne to cancel agrarian debts, to start their reign with the economy in balance. Already in Hammurabi's time 1750 BC, scribes would calculate the growth of compound interest, and at that time it was 20% interest. This growth diagram is the same exponential chart that I'd drawn up in the savings banks in the 1960s to trace the growth of American debt. So they were quite aware of the fact that debts couldn't be paid and that, if you insisted on them be paid, you would have debtors falling into bondage. So they freed the bond servants, or for debtors had sold their means of self-support, the land, they returned the land that had been sold under economic distress. The word "distress" means the collateral that you've pledged to a creditor. It's an Irish term basically. So we published that volume. By that time I'd got the people Baruch and Karl and I had invited ­ the leaders of their fields ­ agreeing with my interpretation. We then followed it up with another meeting at the British Museum on the origins of money and accounting, and the idea that money was created not for barter, not for trade in goods and services, but to denominate debts. If a cultivator owed a debt, how did he get money?

So we did the history of money. Then, the one thing we hadn't done finally was the origins of labor and what it was paid. That took ten years to complete, and we found that the origins of labor was organized basically in the palace economy, the palaces and temples. The main use of such organized labor from the Neolithic and Bronze Age to classical antiquity was to fight in the army and to work as corvée labor to build public infrastructure.

So how do you get a supply of labor? You assign it land tenure. Land rights were created to assign families enough to support themselves so that they could perform corvée labor and fight in the army. So taxes came first, then came land tenure, based on what labor you had to supply. Attempts to substitute someone to work on the corvée became the basis for paying labor.

So all of the payments came from what today would be called the public sector. That's not really a very good term. It was really the palatial sector, the palace and the temples, as opposed to the community-based family on the land.

So we had a new analysis of the origins of property, not just individuals grabbing, as Engels had thought. Property was created by the public sector, by the palaces, as assignment of land as needed. How much land area is needed in order to supply the labor for the public infrastructure, corvée work and service in the army? This was the reverse of what's taught in economic textbooks today, which is, as I said, how Margaret Thatcher and right-wingers and Donald Trump would have designed an economy if they went back in a time machine.

So after organizing and editing these five volumes, I'm now writing my own popular version, starting with a history of debt. Then will come Temples of Enterprise, a series of books on classical antiquity. I'm now following up with Greece and Rome. Throughout early Greece and Rome, the main fight was between creditors and debtors. Creditors ended up grabbing the land. The same fight occurred all the way down through the Byzantine Empire. The most divisive tension throughout history, from 3rd-millennium Sumer to 2nd-millennium Babylonia to the 9th and 10th century in the Byzantine Empire is between the palace wanting to collect taxes and have labor for the army, and creditors wanting this land and labor for themselves.

This way of getting the economic surplus is not the way that Marx described it as being obtained under capitalism, by employing labor to produce goods to sell at a profit. It was by debt and taking interest in ultimately foreclosing in land, which was the real objective.

In the 9th century there was a big fight against strong royal power. It was sort of like Donald Trump and the Tea Party Republicans are fighting against the state, like the privatization in the Soviet Union fighting against the state. The Byzantine emperor invited general Bardas to a big meal. The general said, "There's only one thing that you should do if you want to end the warfare. You have to tax the wealthy families so that they don't have any surplus at all. You have to give them so much burden that they can't fight against you. You have to prevent the polarization of wealth, because if you let the private sector make an enormous amount of wealth, they're going to try to fight against you and keep all the wealth for themselves that you and the palace are now getting."

This idea was expressed all the way back in the 7th century 6th century BC with Thrasybulus and Periander of Corinth. When Thrasybulus took Periander's herald to a field of grain and said, "Here's what you should do." The land was a field of grain and he took a scythe and he cut off the tops, to make all the grain of equal height. So Periander went back and exiled the wealthy families, seized their property.

There was probably a bit of fighting there, and that is basically the fight throughout history.

So that's what I've been working on for the last 20 years.

Question: How did you take up the interest in Chinese economy?

Hudson: As Samir Amin said at the meeting yesterday, China is the economy that is trying to be the exception to the Western economic model. That model is forcing a choice between civilization and barbarism. The West is moving rapidly into economic barbarism and militarism. As you can see, the austerity program of the Euro is destroying the economy there. The United States is cutting taxes on the rich, while indebting the working class very highly. The one country that is independent and not taking the advice of the World Bank and the International Monetary Fund is China.

So we're hoping to do what we can to make the Chinese economy successfully resistant. What that means is how is China going to handle its real estate, how is it going to handle its debt, how is it going to handle its tax system.

What I'm trying to do is what David Harvey was trying to do in the speech he gave yesterday: getting Chinese Marxists to read volume 2 and especially volume 3 of Capital, where Marx discusses the dynamics of finance.

Marxism is much more than volume 1 of Capital. You have to read volumes 2 and 3, and especially the elaboration that Marx wrote in the drafts that he left for volumes 2 and 3, his Theories of Surplus Value where he discusses the history of economic thought leading up to him. You realize how Marx was the last great economist in the classical tradition. He showed that capitalism itself is revolutionary, capitalism itself is driving forward, and of course he expected it to lead toward socialism, as indeed it seemed to be doing in the nineteenth century.

But it's not working out that way. Everything changed in World War One. Afterward you had an anti-classical economics, which really was an anti-Marxist economics. The fight for marginalist theory, for Austrian theory, the fight for junk economics that we have today, is basically a fight against Marxism, because Marx showed the logical conclusion to which the Physiocrats, Adam Smith, John Stuart Mill, Ricardo and Malthus, the conclusion it was all leading was the synthesis that he made. It was later developed by people like Thorstein Veblen and Simon Patten in the United States. So I'm hoping that I can contribute what I can to help China's economy to avoid the financialization process and dynamic that is destroying the West.

(29) The Confucian Model as a Threat to Freedom - Eamonn Fingleton

The rise of East Asia and an epochal threat to American freedoms

Posted on January 4, 2022

By Eamonn Fingleton

(This article appears in the January-February 2022 issue of The American Conservative. To read it in pdf form, please click here.)


The Confucian model

The economic system behind East Asia's rise represents an epochal threat to human freedom.

JANUARY 24, 2022|12:01 AM


In April 1998 Sony Corporation chairman Norio Ohga made world headlines with this comment: ÒThe Japanese economy is on the verge of collapsing.Ó

In reality nothing in Sony's own experience supported such an assessment. On the contrary, Sony's business actually boomed right through the 1990s. More generally Japanese industrial corporations continued strongly to gain share from American rivals. Yet they all talked as if Japan was a hopeless basket case.

Even the president of Toyota Motor Hiroshi Okuda joined in, suggesting Japan could cause a Òworld-wide financial crash.Ó This despite the fact that Toyota's sales soared fully 95 percent in the 1990s. Between 1989 and 2019, moreover, Toyota went from little more than one-quarter of General Motors's revenues to nearly twice as large.

As for Sony's Ohga, his talk was even more puzzling. In the quarterly accounting period of his remark, Sony's sales in the Japanese market actually increased by 14.7 per cent. The wider picture was also impressive: measured against 1989 (the last year of Japan's 1980s boom), Sony's profits in 1998 were up fully 131 percent! As if that wasn't enough, the 1990s counted as the decade when Sony finally buried such once formidable American rivals as Motorola, RCA, and Zenith.

This is cognitive dissonance on a vast scale. So what was really going on? In truth Japan's alleged economic disaster of the 1990s was a fake funk: Japanese leaders just pretended their economy was collapsing. There was method in their madness: they desperately wanted Washington to cut Tokyo some slack in trade negotiations. This was at a time when Americans had never been more incandescent with rage about Japan's closed markets. The gambit worked in spades. Not only did Washington back off trying to open Japan but it has never subsequently tried any further market opening efforts.

I have explained more about Japan's 1990s fake funk in a New York Times commentary. (

For now let's note that the issue of Japan's true performance is of first order historic importance because of its implications for (1) the rise of China, and (2) for the coming triumph of authoritarianism around the world. Both China and Japan operate essentially the same authoritarian Ñ and almost universally misunderstood and underestimated Ñ economic model. Let's call this the Confucian model.

China runs about twenty years behind Japan, as is obvious in, for instance, the global car industry. This means it has a lot of technologically easy catchup growth ahead of it. Combine this with the fact that China boasts four times America's population (and eleven times Japan's) and it is hard to exaggerate how dominant Beijing will be by 2050.

Invented in the desperately poor circumstances of early-1950s Japan (and thus a memorable instance of necessity playing mother to invention!), the Confucian model has long been powerfully shaping economic outcomes in South Korea and Taiwan as well as, of course, in China and Japan.

The model's key function is to force-feed the growth process. Admittedly in the case of Japan, growth lately has been lower than it was in the 1980s. But this reflects factors external to the model: in particular, as economists like Paul Krugman and William Cline have pointed out, Japan's growth has been greatly curtailed by a uniquely jolting demographic switchback (the echo of a major effort begun in 1948 to reduce the population).

Of course, those in the West who cling to the belief that the model failed Japan see little reason to worry about a rising China.

On the other hand, for those who realize that the model greatly alleviated Japan's uniquely difficult demographic problems, it is clear that the Confucian model presents a devastating challenge to the United States. Japan never lost its mojo in recent decades and the prospect is that China will not either.

We will discuss some of the Confucian model's key features in a moment. First though let's note that this model is fundamentally incompatible with America's hopes for a global rollout of free markets. There are two immediate problems:

1. The Confucian model is not only protectionist but is unalterably so. Other aspects of the model cannot work without a protected home market.

2. The Confucian model features a complex lattice-work of corporate structures that clearly conflicts with American free-market capitalism. Not the least of these structures is cartels, which are, of course, strictly forbidden under U.S. law. Another problem is Japan's keiretsus and other similar corporate groupings (these latter are known as chaebols in South Korea, qiye jituans in China, and quangxi jituans in Taiwan). As we will see, such structures are undoubtedly on balance helpful in improving East Asian productivity.

Let's be clear: the Confucian system makes considerable use of markets and this, of course, encourages hopes in Washington for a general trend towards greater freedom in East Asia. In reality, however, top officials throughout the region claim the right to overrule market forces almost at will. Moreover they often use cartels and keiretsus as power vectors that help them reach deeply into the system's internal workings. ÒUndesirable elementsÓ quickly discover there is nowhere to hide.

A key difference is in how corporate executives see their responsibilities. Whereas in the United States they focus on profits almost to the exclusion of everything else, in East Asia worker productivity gets priority.

To understand the Confucian system the best starting point is its savings strategy. If a nation's savers save more, corporations can invest more. If corporations invest more, workers can produce more. Equipped with the most advanced production machinery (robots, for instance, in the car industry), nations can quickly leap to the forefront in productivity. Economic growth is thereby stimulated.

Of course, savers need a return and here is where protectionism is so important. Corporations earn super-high profits in the home market and these are then applied to looking after the various sources of capital. Meanwhile producers can aggressively cut prices in export markets.

For an economy to keep growing, savers must keep saving. This is where the Confucian model really comes into its own again. The model's most important Ñ and most counterintuitive Ñ feature is its savings process.

With few exceptions, American observers assume that culture is sufficient to explain the region's super-high savings rates. Supposedly Confucianism instills in everyone a powerful tendency to frugality.

This, however, does not fit the facts. In former times when East Asian nations seemed more Confucian than they are today, they were often notably weak savers. Japan's savings rate remained low well into the 1950s. Singapore, South Korea, and China followed a similar pattern, with low savings rates as late as the 1960s, 1970s, and 1980s respectively.

In reality it is only when East Asian nations begin to adopt other aspects of the Confucian model Ñ in particular the model's aggressively mercantilist trade policy Ñ that their savings rates take off.

Behind all this is a policy virtually unheard of in latter day America: suppressed consumption. By discouraging consumption, top officials ensure that an economy's savings rate is strongly stimulated.

To anyone tutored in modern American economic thought, the idea of suppressing consumption may seem to be bordering on insanity. But that is not how things look in modern East Asia. Nor is it how things looked to U.S. economic planners in former times. Soon after Pearl Harbor, the United States began tightly suppressing consumption. The program started with rubber tires and in April 1942, rationing was extended to cars, sugar, typewriters, and gasoline. By the end of the war, the program also included coffee, shoes, stoves, meats, processed foods, and bicycles. Lo and behold, the result was a preternatural increase in the savings rate: according to the economist Laura Nicolae, U.S. households' excess savings during the war totaled nearly 40 percent of national income.

In modern East Asia, the effort to suppress consumption is less direct but it is equally effective. For a start East Asian governments restrict the import of key consumer products. Another important strategy is to minimize consumer credit. Mortgage finance is largely or totally unavailable in many parts of the region. Credit cards are also hard to come by. This point is often missed because American correspondents tend to conflate debit cards with credit cards. According to Fitch Ratings recently, fewer than 30 percent of Chinese adults had at least one credit card, compared to 79 percent in the United States.

Meanwhile in many East Asian nations, zoning is so tight that housing is rendered stunningly expensive. Restricted living space means consumers consume less electricity and gas. They also buy fewer appliances and items of furniture.

According to the Australia-based statistical website, of the ten nations with the world's most expensive city-center housing recently, six were in East Asia. In descending order they were Hong Kong, Singapore, South Korea, Japan, Taiwan, and China.

One further point needs to be noted: much of East Asia's saving takes the form of corporate profits. Certain special corporations make huge profits through oligopolistic control of, for instance, urban land.

Now let's consider the Confucian model's approach to employment. This is perhaps the area where the East Asian model diverges most obviously from American capitalism.

As a matter of employer etiquette, major East Asian employers do not hire from direct competitors. Moreover they rarely resort to lay-offs, even in the worst recessions. This creates by default a rather settled system of long-term employment.

Orthodox American economists regard East Asia's no-layoffs policy as Òinefficient.Ó But the region's passionately patriotic government officials see things differently: any calculation of the benefits to society from American-style hire-and-fire should, they believe, be netted for the cost to the public purse of unemployment benefit.

The psychological advantages that accrue to employers from a no-layoffs policy are a lot more beneficial than is understood in modern America. For a start East Asian workforces feature a far greater degree of long-term accountability. They are also impressively long on teamwork. Because the East Asian employment system expects employees to commit for the long term, there are rarely second chances for employees who fall out with their first employer. That means that workers are considerably more cooperative in taking on tough assignments. Certainly East Asian employers enjoy the observed advantage that at all times they have at their disposal battalions of hard-working employees willing to be sent anywhere and do anything to further their employer's agenda.

Another advantage of the East Asian system is that it provides employers with a much greater incentive to invest in worker skills. By contrast American employers have to worry that any workers they train may be quickly hired away by rival employers.

In recessions, East Asian employers beat the bushes to find other work for their workers. They will even go to the extent of inventing ÒbusyworkÓ but generally things don't get that bad and even in a recession East Asian corporations rarely run out of useful work to do.

Moreover the degree to which East Asian corporations can cut export prices and still come out ahead is greater than Americans typically understand. A key point is that there is a big difference in the way that labor costs necessarily must be accounted for. In the terminology of the accounting profession, wage costs count as a fixed cost for East Asian employers, whereas they are a variable one for American employers. This has crucial implications because so long as variable costs are covered, East Asian corporations can keep discounting their prices. Hence in large part the reason why in a recession East Asian corporations can quote almost preternaturally low prices.

Faced with the never-undersold nature of East Asian competition, American employers often enter a process of terminal shrinkage. They slash jobs in a recession but rarely fully restore these in a recovery. Instead they may resort to outsourcing, which they consider to make particular sense in the early, tentative stages of a recovery. A devastating ratchet effect is therefore at work in which over the long haul the Americans keep losing market share.

All that said, even East Asian corporations hardly emerge unscathed from a global recession. In withstanding the strains, however, they have an important cushion in undervalued home currencies. Put another way, the U.S. dollar has long been massively overvalued. Just how overvalued is suggested when you consider America's forty-year record of huge trade deficits. How low would the dollar have to go before we might see a real revival in industrial investment in the United States? A reasonable guess is that even a devaluation of as much as 75 or 80 percent would not have an appreciable effect. Yet a revaluation on that scale would imply that total U.S. gross domestic product would at a stroke be cut to less than China's and even Japan's. No U.S. Presidential administration is likely to contemplate such a haircut. Meanwhile the big exporting nations Ñ including Germany, as well as China and Japan Ñ will probably for several years to come continue to prop up the dollar as a quid pro quo for continued access to the American market. Remember that these nations' top priority is not financial but rather industrial and they therefore aspire to continue to hone their production skills. The super-long production runs provided by an open American market are an important help in this regard.

Let's briefly consider some other features of the Confucian system. Perhaps the most troublesome from an American point of view is cartels.

The one thing every American first-year economics student seems to know is that cartels are bad! They not only cheat consumers but featherbed inefficient industrial processes. Or so orthodox American thinkers vociferously proclaim.

In East Asia the view is different. East Asian cartels are quasi-regulated institutions answerable at all times to the national interest. Yes, members of such cartels fix prices but, no, they don't necessarily shut down all forms of competition. Rather cartel members are generally encouraged to compete on quality and service. As for unrestrained free-market pricing, this is seen as wasteful because this diverts executive attention away from the weightier matter of delivering ever higher quality at ever lower production cost. The problem of gimmicky pricing incidentally can be particularly acute in the most capital-intensive industries, which are precisely the industries with the best prospects of creating well-paid rank-and-file jobs going forward.

Another advantage of cartels is in standard setting. In former times, industrial standards typically originated in the United States. Not anymore. Most standards these days emerge from East Asia. This is important because those who set standards tend to favor their own interests.

Then there is perhaps the most important advantage of East Asian-style cartels: they reduce the cost of research and development. This is because they divide up research projects among cartel members and thus minimize duplication. This feature alone may make all the difference, as it is not unusual for leading manufacturing corporations elsewhere in the world to spend as much as 5 percent of sales on research and development. East Asian cartels get far more innovation for their money and this benefit is passed on to each member.

Much, much could be said but already it should be clear that the United States desperately needs to take a closer look at the Confucian model. The conclusion is epochal: a system that rivals Soviet communism in its grim suppression of individualism is now powerfully outperforming American free-market capitalism. The outperformance is most obvious in international trade but on closer examination the Confucian system's superior wealth-creating capabilities are evident almost right across the board.

In short we are witnessing a fundamental revolution in the human condition. The world is transitioning from an era when free societies did well precisely because they were free, to a new era in which authoritarian societies are doing well precisely because they are authoritarian.

In one sentence, authoritarianism is set to inherit the earth.

Eamonn Fingleton is the author of In the Jaws of the Dragon: America's Fate in the Coming Era of Chinese Hegemony (New York: St. Martin's Press, 2008).


Xi Jingping said, "We will never do to Mao what Khrushchev did to Stalin".

But that's wrong. Deng already did to Mao what Khrushchev did to Stalin. It's just that he did it more discreetly. In executing the Gang of Four, Deng was repudiating Mao - Mao being the fifth of the Gang.

Xi made the above comment in assessing why the Soviet Union fell - he blamed Gorbachev primarily, but also Khrushchev secondarily.

There is a huge difference between the two. Gorbachev is an advocate of Convergence towards World Government. The changes he made to the Soviet Union were made towards that goal.

Khrushchev was never an advocate of such policies.

There is no need for Xi to restore Mao. But there is a need to rein in Capitalism and restore the safety net ('Iron Rice Bowl'). In recent decades Chinese workers have been forced to work '996', ie 9am to 9pm, 6 days a week. This is slavery. They have been thrown to the 'mercy' of the marketplace, like slaves seeking owners.

Now the 'foreign investors', fleeing China, are seeking to impose such conditions on other countries - Indonesia and India, for example. Such lowering of labor conditions is an attack on workers everywhere.

Left economists praise China, but others liken it to Nazi Germany: china-nazi.html .

Discussion with Larry Romanoff on White America, the Jewish Lobby and the China Lobby. Larry Romanoff denies the Tiananmen massacre of 1989, and claims that Covid-19 was a US attack on China. His ideas have been taken up by leftist writers at Global Research and by Zhao Lijian of China's Foreign Ministry. But what is Romanoff's real agenda? Larry-Romanoff.html .

More on the Larouche movement:

Larouche (EIR) writers lead many conspiracy theorists astray: coronavirus.html .

Larouche & Executive Intelligence Review (EIR) writers deny the Genocides in Tibet & Xinjiang: genocide-uighur-tibet.html .

Blaming the British: Claims that the One-World conspiracy is "British" (not Jewish): british-conspiracy.html .

Sir James Goldsmith argues that Free Trade and Modern Agriculture are Destroying Society: goldsmith.html .

A website that has a similar line to Larouche writers, but without the pro-China advocacy, is Great Game India: .


Copyright: Peter Myers asserts the right to be identified as the author of the material written by him on this website, being material that is not otherwise attributed to another author.

Write to me at contact.html.