A distinguished and liberal economic historian, Prof. Michael Hudson has laid bare the secret of the present American dilemma—why we suffer a declining and artificial economy and a widening chasm between the rich and the rest.  The interest-collecting rich absorb ever more of the national income.  “Instead of creating a mutually beneficial symbiosis with the economy of production and consumption,” writes Hudson, “today’s financial parasitism siphons off income needed to invest and grow.”

“A financialized economy,” he adds, “becomes a mortuary when the host economy becomes a meal for the financial free luncher that takes interest, fees and other charges without contributing to production.”

Contrary to official capitalist wisdom, debt does not create economic growth.  This idea is a swindle.  Interest to the very rich, the author shows, does not produce anything.  It does not multiply creatively into new enterprises and jobs; it merely diverts ever-greater proportions of earnings that might be fruitfully invested.  The proof is all around us.  How could the vast unpayable federal debt, which absorbs much of the government’s income just for the interest to bondholders, foreign and domestic, possibly be an economic stimulus?  How can the immense and near universal burden of personal mortgage and credit-card debt possibly indicate a healthy economy and commonwealth?

Hudson presents a good case, but with a bit too much academic clutter.  The matter is simple, obvious to anybody except a politician, a captive economist, or a media flack, and it ought to be conveyed to the people at every opportunity.  Debt is killing us.  Every wise man in recorded history has affirmed that debt is not a good thing.  Debt can destroy a family, a government, a society.  Hudson’s prolific work has been mostly in ancient economic history.  Because of that, and because of the widespread misrepresentation of early American history among the respectable intelligentsia, he is ignorant of America’s part in the historical record.

Alexander Hamilton, an upwardly mobile immigrant bastard with a Napoleon complex, declared that “a public debt is a public blessing.”  Troubled but not surprised, Jefferson noted a connection between debt and cruel taxation that undermined the independence of the citizens, warning that “we must not let our rulers load us with perpetual debt.”  Weighed down by government debt, the people would have to labor ever harder to pay the debt-holders, leaving them  “no time to think, no means of calling the mismanagers to account.”  Jefferson avowed as a core principle that “the earth belongs in usufruct to the living,” but the living had no right to consume the earnings of posterity.

Antebellum statesmen like John Taylor of Caroline and John C. Calhoun and economists like William Gouge and Condy Raguet made the same case.  After the War Between the States, so did William Graham Sumner, Thomas E. Watson, and countless other public men and thinkers.  Republicans (and their predecessors) have always been the party of bankers and bondholders, service to the rich being for them a natural and essential function of the federal government.  Opposition to public debt was long a plank of the Democratic platform, but Democrats today are just as guilty as the Republicans in regard to the issue.  In 1876 August Belmont, the American agent of the Rothschilds, bought off the last real Democratic opposition to perpetual debt.  Lip service to the virtue of “low public debt” continued until Franklin Roosevelt discovered Keynes and declared that debt is no problem “because we owe it to ourselves”—“ourselves” being a conveniently vague and collective being.

“The great political question confronting the remainder of the 21st century,” Hudson argues, “is which sector will receive enough income to survive without losses degrading to its position: the industrial host economy or its creditors?”  Hudson is a socialist who hopes that government, somehow, might be persuaded to support the people rather than the wealthy.  The bipartisan bailout of misbehaving bankers and brokers that we saw a few years ago, and the failure of a multitude of presidential candidates to mention the matter, is not promising.

 

[Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy, by Michael Hudson (Petrolia, CA: CounterPunch Books) 440 pp., $32.95]