How Bankers Became the Top Exploiters of the Economy
How Bankers Became the Top Exploiters of the Economy by Michael Hudson
The Next System Project’s Adam Simpson sat down with renowned economist and economic historian Michael Hudson to discuss economic deceptions old and new in the interview below. Michael Hudson is Distinguished Research Professor of Economics at the University of Missouri, Kansas City and a prolific writer about the global economy and predatory financial practices. Among his latest books are Killing the Host: How Financial Parasites and Debt Bondage to Ensure the Global Economy and its follow-up J is for Junk Economics.
The transcript below has been edited for clarity.
Adam Simpson: So, Michael, I’m really glad to talk to you today. First, I want to get to know a bit more about you before we dive into your new book. I’ve heard you referred to as a heterodox economist. What does that mean? How did you become heterodox?
Michael Hudson: “Heterodox” is a recent term coined mainly by the University of Missouri at Kansas City where I’m a professor along with Randall Wray and Stephanie Kelton and other members of the Modern Monetary Theory (MMT) school of thought. The term simply means not mainstream. We’re basically classical economists. We do what classical economics used to do, which is to distinguish between earned and unearned income. and between productive versus unproductive labor. And we see that banks create credit – which governments could create just as easily, along more socially and economically productive lines. We see budget deficits as providing the economy with money to fuel growth. That’s why Stephanie calls us “Deficit Owls” instead of the Republican and Clintonite Deficit Hawks who prefer commercial banks to provide the credit that the economy needs.
We look at how the economy, goods and services and labor, exists within the context of wealth and assets and debt. And this is how people looked at the economy before there was anti-classical reaction in the 1890’s. We look at how land ownership, banks and credit shape the framework within which the economy operates – at interest.
So we’re classical economists. Hyman Minsky was the main modern monetary theorist. Heterodox meant that he got his ideas largely from Marx. You can say classical political economy reached its logical conclusion with Marx. Capital was the last great work of classical economics, and showed where its logic was leading. Marx showed that capitalism itself was revolutionary. Capitalism was a continually self-transforming system. And so we’re looking at how the economy changes, not how it might settle at equilibrium without political change. It evolves, in what Marx called the laws of motion. So we’re putting the political back into what used to be political economy – before the “political” was stripped out a century ago and it moved toward today’s more tunnel-visioned “economics.”
Adam Simpson: Interesting. I also want to know about your own personal history. I didn’t know that was a deliberate term coined by the people who called themselves heterodox economists.
Michael Hudson: Others called ’em Commies!
Adam Simpson: Ha! But I’m wondering your own personal trajectory into this field. I understand that ‘heterodox’ is not something unique to you within your family. I myself am actually the black sheep of a very far-right leaning household. But I understand that’s not your own background—you come from a family that’s always been engaged in activism and left politics. Is that correct?
Michael Hudson: I was born in Minneapolis. That was probably the only Trotskyist city in the world – the center of Trotskyism in the 1930s. It was the only city where becoming a Trotskyist was a career advancement prospect. My father, Carlos Hudson, had graduated in 1929 from the University of Minnesota Business School with an MBA degree and wanted to become a millionaire. I think he wanted to go into mining in Latin America. Then the Depression came and he decided that capitalism wasn’t fair. He joined the Trotskyists, the Socialist Workers Party. And when Trotsky was exiled to Mexico, most of his bodyguards and co-workers came from Minneapolis.