As if Poverty and Debt Will Make Us Rich

Photograph Source: Jay Tamboli – CC BY 2.0

I’ve been the president of my union local since May 2021. A couple weeks ago we shook hands with the negotiating team for the City of Burlington, Vermont on a contract that beat most everyone’s expectations. Some of the highlights are a minimum 12% wage increase over the first two years and the first paid family leave clause in any municipal contract in Vermont. Meanwhile, another set of negotiations with the local school district seem to be heading in the opposite direction. Sitting in these two different negotiations while also reading economist Michael Hudson’s latest book, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism, provides me with a unique vantage point regarding that destination. Working people carry on their lives knowing on some level that it could all go to hell no matter how much they are getting paid. At the same time, they seem to still believe enough in the ability of US capitalism to adjust itself, thereby making the future less intimidating than it would be with no such faith.

While both sides in the negotiations attempted to predict the future of the economy over the next four years, Hudson’s warnings that the basis of the current phase of capitalism resides in the creation of debt and the manipulation of that debt by the financial industry loomed ominously in my brain. Indeed, the very fact that an economic entity that produces nothing but debt for most of the world’s people is considered an industry should be ominous enough. Yet, cities, corporations, individuals with retirement accounts and students with student loans stumble on, borrowing and processing debt as if it were a promise of a better future instead of just a promissory note. Then again, what other choices do they have?

That question is not necessarily answered in Hudson’s text. What is answered, however, is how the world economy—especially that part of it tied into Washington and Wall Street—got to this point. Originally presented as a series of lectures at China’s Global University for Sustainability, The Destiny of Civilization is a fairly plainspoken and incredibly astute history of US capitalism, especially in its most recent phase known as neoliberalism. It is also an economic textbook of a kind one will rarely see in any university economics syllabus today.

Hudson’s fundamental argument is that the US-led capitalist economy is a a rentier economy; an economy based on the accumulation of income received without actually working or providing intrinsic value. This is the essence of feudalism, where the noblemen extracted goods, labor, money and other benefits from those who lived on and farmed the land (peasants or serfs, if you will) claimed by nobility. This often left the peasantry with little to no food after he paid his fee/rent to the aristocrat that claimed the land. When capitalism began to create its won wealth for the early capitalists, some of the latter’s earliest actions were to create laws taxing this unearned income. This allowed them to build infrastructure and ultimately provide public services for those the capitalists hired. According to Hudson, the capitalists wished to tax the rentier economy—nobility, landlords, etc.–out of existence. Unfortunately for the working people of the world, this did not occur. Instead, as the biggest capitalists accumulated more and more wealth through their exploitation of labor and their influence in government, they became the new rentier class. Their agenda included first and foremost an end to taxes on their wealth.

This brings us to today, when governments of the democracies are nothing but tools of the wealthy and the fire sale on public infrastructure is still raging. Schools, health care, roadways, parks, even the military and law enforcement; everything is on the block and those with the highest bid have no shame in taking it for their own. To destroy or privatize and sell back to those who created it as they see fit. The role that government once played in preventing this dictatorship of wealth is gone for all practical purposes. Hudson explains why and how this occurred. In doing so, he uses the words of Adam Smith, John Stuart Mill and others associated with the theories of capitalism to prove his point (and theirs) that the current system we know as neoliberalism is not the same system those writers had in mind. It is, however, what socialists like Rosa Luxemburg predicted would occur as the process of financialization assumed its current dominant position in the world capitalist economy. We know from looking around us that it is an economy enforced by wars, but also through loans and other economic tools designed to impoverish whole nations; something Hudson calls financial conquest. As he writes, these tools are presented to the loan recipients as if their impoverishment will make them rich.

Part of Hudson’s intentions seems to be to warn the Chinese of the pitfalls untaxed and unearned income can bring. It is his contention that China would be smart to maintain control of certain parts of its economy—resources, infrastructure creation including education and health care, even housing—and to fight against those in its wealthy class who want to privatize these things. Hudson argues is this that gives China its economic power. Likewise, it is this which makes the US consider China its enemy. The billionaire class that now owns the White House and Congress has no interest in allowing the US government to tax their gross accumulation of wealth, not to rebuild highways or educate its citizens. Their motivation is greed and the current system feeds that greed beyond what us regular folk can even begin to comprehend.

The Destiny of Civilization is an important book that should not be ignored. Forward thinking faculty should introduce it into their courses—economics, history, wherever they can fit it. More importantly, the rest of us should also read it. The analysis it provides is concise, clearly written, and one of the most important one can find anywhere. This is how the US economy really works. At home and abroad. The fact that it doesn’t work for working people, middle class citizens, or the youth doesn’t mean it will change or go away because it doesn’t work. As Hudson makes clear, it works precisely for those who created it and that doesn’t include you or me. The future can be a continuation of the neoliberal nightmare we are in, a fascist nightmare of which we caught a glimpse of under Trump, or a socialist and democratic society that works towards sustaining the world and its people, not impoverishing the lot of them for the benefit of the very few.

Ron Jacobs is the author of Daydream Sunset: Sixties Counterculture in the Seventies published by CounterPunch Books. He has a new book, titled Nowhere Land: Journeys Through a Broken Nation coming out in Spring 2024.   He lives in Vermont. He can be reached at: