DECEMBER 9, 2016
…By contrast, under Thatcherism or Clintonism (or whatever you want to call it), the idea is to turn infrastructure, roads and even the sidewalks over to the monopolists financed by Wall Street. They then begin charging rent as an access fee. The result is to make America a high cost economy. So when Donald Trump come sin and says that he’ going to make America great again, what he means is competitive again. But how can you make it competitive if you make Americans pay so much more in healthcare? They now pay as much in healthcare as an Asian would earn in an entire year. If you were to give Americans all their food and clothing, and everything they buy and self for nothing, they still couldn’t compete. That’s because of all the costs that wage earners have to pay out of their wages, but other countries provide by their government: government healthcare, government services, government roads and so forth.
This was America’s economic development strategy in the 19th century. It’s what made the United States the most competitive country in the world, and enabled it to undersell others. It’s also what made Germany competitive. It’s what made Japan competitive. But all this is being undone now, as if the world that existed before 1980 – before Margaret Thatcher, before Ronald Reagan, even before Bill Clinton – didn’t really exist. There’s been an expurgation of the basic tools of economic thought, of the vocabulary that was developed to distinguish between profits that are actually earned on capital investment and hiring people as compared to economic rent, which is a toll booth to extort money over and above the actual cost of production.
PERIES: You said something really important, which is that people (at least in this election cycle) started to believe that Donald Trump was a job creator rather than a job destroyer. What did you mean by that, and how have people been led down the garden path?
HUDSON: I didn’t mean that they actually believed that he is a job creator. He wanted to convince them that he was a job creator. And it’s true, he did hire a lot of workers and contractors. But probably not as many jobs as were lost by people gambling at his resorts. I teach at Kansas City, and one student did a study of why people go bankrupt there. It turns out that they have a ship that is docked in the river, and people can go and gamble. Most of the people who have declared bankruptcy have found themselves in a financial squeeze where they can’t afford to pay their rent. They lost their jobs. They think that there’s only one way to be able to pay the rent and not be out in the street. They’ve got to play for a 100 to 1 payoff. If they lose, it’s that or nothing.
So for them it’s actually rational. They’re probably going to lose, but the only way they can keep their head above water is to win the lottery. But of course, most end up losing. So Donald Trump’s hope is to convince workers that perhaps they can be a millionaire – and if they win the lottery, wouldn’t they like not to be taxed? If so, then be nice to today’s millionaires, because you might win the lottery and rise out of the working class.
That’s the illusion of “labor capitalism.” It’s a nice trick if you can pull it off. But I think it’s a myth – one that people want to believe. Lobbyists who represent Wall Street elites and the real estate interests want to promote the hope among voters that they might become capitalists, at least in miniature. But Donald Trump’s father started him out with a few million. The odds are stacked against most people. A good economic theory would show how these odds are stacked against them. It would show why people are getting poorer and poorer since 2008.
For the last 8 years, the Obama administration has overseen a long downturn for 95% of the population. All the growth has been at the top 5%. We’ve got to show them this fact.
PERIES: Yet when we heard President Obama speaking at various rallies to support Clinton’s candidacy, in terms of his own legacy, all he talked about was how much better off we are in terms of what he inherited in 2008. Which is true?
HUDSON: I think that Obama’s attempt to put a happy face on most peoples’ poverty was the kiss of death for Hillary. That was what lost her the election. Imagine Hillary going to the country and saying, just think of how much better off you are than you were 8 years ago. Most people must have thought, “Wait a minute! I’m not better off. I’m worse off. My real wages have gone down.” Indeed, if you’re 95 out of 100 Americans, your real wages have gone down. You’re being squeezed by healthcare. Your housing costs are going up. All your costs are going up, while your working conditions are getting worse. I think most voters thought, “I’m not better off at all. What is this? Who are Hillary and Obama trying to kid?”
Their feeling was one of revolt. So they said, “They can’t fool me anymore. No matter how bad the opposite party is, we’ve got to throw them out. Even if we can’t vote for someone good, at least we can keep throwing out the bad guys.” Maybe like on a roulette wheel, a good candidate may come along going some day, like a winning number.
Unfortunately that’s not how it works.
PERIES: So let’s talk about the kind of mythologies that are being sold to the people, like what I was just talking about in terms of President Obama on the campaign trail telling people that they’re better off than they really are. How are they being sold these mythologies, and what are some of the terminologies that you cover in your book that tricks people into believing what they’re being told?
HUDSON: One way that he tries to convince them that they’re better off is to cite the statistic that GDP, gross domestic product, is going up. It’s true. For the overall economy, gross domestic product actually has gone up since 2008. The problem is, it’s only gone up for 5% of the population. But it’s gone up so much for Wall Street, so much for 5% of the population, that it’s larger than the decline suffered by the 95%.
I don’t know if I’ve talked about this on your show before, but I was just in Germany at an archeological conference where we were talking about the Roman empire turning into the Dark Age and feudalism. One critic said that there’s been a new economic approach, a new economic archeology. In this new view, there really wasn’t a Dark Age, because it turns out they’ve found so much luxury trade among the very rich – the landowners and warlords – that despite the fact the population was being turned into serfs, the rich were doing quite fine. Archaeologists have found nice pottery and luxury at the top of the pyramid. There was so much money that maybe there was actual growth. So they call transition to serfdom and just peonage for the population “growth,” because so much wealth was being squeezed out for the top.
The question is, is that really growth, or not? If President Obama and Hillary convince people that GDP is going up but you haven’t shared in it, something is wrong with you. This is a “blame the victim” rhetoric. She’s blaming the victims for not participating in the growth that was enjoyed by Goldman Sachs and Wall Street, by Chase Manhattan and other bankers that were not thrown in jail.
Most people didn’t want to think of themselves as victims, and they thought that Donald Trump was going to do something about them apart from just making himself rich….