With every major financial recovery since the second World War beginning in a place of greater debt than the one before it, how could we not have foreseen the financial crisis of 2008? In this episode of Meet the Renegades, economics professor and author, Michael Hudson argues we did.
How could an economy that created so much debt also save the banks rather than the economy itself after 2008? Michael discusses the phenomenon of debt deflation and how the economic curriculum should change in education.
“If you’re teaching economics, you should begin with the relationship between finance and the economy, between the build up of debt and the ability to pay.”
Michael discusses the ‘Great Moderation’ – the image of a healthy economy in which job productivity was increasing, labor complacency was at an all-time low but reflected a terrible financial position. He argues that ‘traumatized’ workers were too in debt to fight for better working conditions leading up to the 2008 financial crisis, and how this reflects neo-classical ideas.
“A free market is where the 1% get to smash the 99% without any ability of the 99% to fight back; a free market is where people do what they’re told a free market is.”
What is un-earned wealth? Is all wealth earned wealth? Referencing John Bates Clark’s philosophy, being that un-earned income does not exist, Michael examines how these ideals are present in our economy today, which we see reflected in Wall Street and the ‘criminal class’. Michael explains where we see un-earned income or ‘economic rent’ in our economy today and how we’re trained to believe that this is the way it needs to be when in fact, it doesn’t.
“You don’t need intelligence to make money, all you need is greed.”
Michael offers a solution, urging the importance of writing down the debt and keeping basic services in the public sector, ridding the economy of financial tumours (the Donald Trumps of the world) through a proper tax policy based upon the this public sector model.