Episode 196 – The New Cold War with Ben Norton

Macro N Cheese – Episode 196
The New Cold War with Ben Norton
October 28, 2022

 

[00:00:05.220] – Ben Norton [intro/music]

The capitalist class is so parasitic. It is completely based on financial speculation, and it’s based on corporate raiding and buybacks of stocks. It’s all imaginary, fictitious financial capital. And they have such a chokehold on the political system in the US, that they refuse to even impose their own reforms that they need to save capitalism from self-destruction.

[00:00:31.760] – Ben Norton [intro/music]

The U.S. government and European governments are involved in every single way in this war, except for just having thousands of troops on the ground. Aside from that, it’s a NATO war against Russia.

[00:01:35.140] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.140] – Steve Grumbine

All right. This is Steve with Macro N Cheese. Today’s guest is Ben Norton. He is a journalist from Multipolarista.com. You can find Ben on Twitter, where he is prolific, and his YouTube channel as well. Ben is a master of all subjects foreign policy. I’ve really enjoyed catching up on his work. I recently had Ben join me on the Rogue Scholar.

Please check that out. We talk about Tulsi Gabbard and the incoming grift. Today, we’re going to take a deeper dive into the geopolitical issues surrounding not only the Ukraine / Russia crisis, but the larger Cold War emerging with China and the non-U.S., non-NATO countries dividing the world in two as we watch U.S. Dominance taking a major hit. Ben, thank you so much for joining me today, sir.

[00:02:40.800] – Ben Norton

My pleasure being here. Thanks for having me.

[00:02:42.810] – Grumbine

I want to start this off by saying I listened to Joe Biden when he was addressing Congress at his State of the Union address, and he said, we’re in competition with China and other countries to win the 21st century. And then a year later, he says, to compete for the jobs of the future, we need a level playing field with China and other competitors.

And so each step along the way, Biden has isolated China before anything happened. You almost get the feeling that this was a bit of a foreshadowing, going back even to 2015 and 2016, as Hillary lost the presidency to Donald Trump. We saw the foreshadowing even then. And so here we are in 2022. We’ve got a war raging in Ukraine and Russia, with NATO on the front doorstep, creeping into Russia’s territory, violating everything I knew about the purpose of NATO and neoliberalism on display doing its thing.

And you’ve written quite extensively about it. I really appreciate your work in this space. It helps center some of my thoughts as well. Why don’t you lay out the story here? What’s going on right now?

[00:03:56.060] – Norton

Well, I think you set the stage very well and I’ll just continue from where you left off. We have to understand what neoliberalism is. And people talk about neoliberalism simply as a set of policies. That is, privatization, deregulation, opening markets to foreign capital, cutting social programs, austerity measures; those are all policies. But neoliberalism is a larger system and I argue, based on the work of Michael Hudson, an economist who has greatly influenced me in my worldview.

We have to understand that neoliberalism is a particular phase of the capitalist world system. And of course capitalism has gone through different stages throughout history. Neoliberalism is the phase of finance-dominated monopoly capital and specifically it is the phase of US unipolar hegemony and it’s inextricably tied to US imperialism and US foreign policy.

It’s not a coincidence that neoliberalism emerges in the 1980s with the fundamental crisis going on in the Soviet Union and the Eastern Block socialist countries and eventually they’re overthrown in 1991 and then neoliberalism reigns supreme around the world. So at the same moment when the US is the unipolar hegemon of the planet dominating the entire world, it’s also imposing neoliberalism everywhere.

And that explains the obsession with regime change operations and overthrowing independent governments. Of course that’s not just done for fun, it’s done for economic reasons. It’s done to overthrow state-led economies, to implement mass privatizations and to forcibly integrate those countries economies into the neoliberal system.

So in the case of Iraq, no one here is praising Saddam Hussein. The reality though is that Saddam Hussein did oversee a largely state-led economic model—you can call it resource nationalism—in which large parts of the economy were state-owned. The oil resources were owned by the state and that was used to fund social programs.

Other significant industries were owned by the state and all of that was privatized after the US invasion and the US government parachuted in interns from the American Enterprise Institute, this right wing DC think tank, into the Green Zone. And quite literally these young interns got their career started overseeing mass privatizations in the implementation of neoliberal policies on Iraq.

And of course we saw the exact same in other countries, Libya being an example. Libya had a socialist economic model in which all of the oil was owned by the state, in which education and health care were free, even housing was provided to people, even cars were provided to families when they got married. It was a very state-led economy.

And of course what happened in 2011, NATO destroyed this state and not only imposed neoliberal policies but also imposed anarchy and chaos. So we have to understand how neoliberalism is inextricably linked to imperialism. Of course all capitalism is linked to imperialism going back to Lenin’s famous book, “Imperialism, the Highest Stage of Capitalism.”

But we have to understand specifically that neoliberalism is imposed through institutions, right? It’s not simply an ideology. That ideology is materially reinforced. It’s mandated by the International Monetary Fund, which is controlled by the US. By the World Bank, which is controlled by the US. Now, of course, that unipolar system has been fundamentally in decline and we see the economic rise of China, especially after the 2008 financial crash when China was continuing to grow significantly.

And China now has the largest economy in the world in terms of purchasing power parity. We also saw the rise of Russia, the rise of Iran, the rise of India and Indonesia. So the reality is that with the rise of Asia and the decline in US unipolar hegemony, that has happened at the same moment as the decline in neoliberalism because neoliberalism was predicated on this financial parasitic form of capitalism that had to impose itself in the entire world in order to extract wealth largely from the global south.

And now that that system can no longer extract wealth from the global south in the same unaccountable way, it’s fundamentally in crisis. And that’s going to probably force many of these imperialist countries back to a Keynesian model of capitalism. And we can talk about that. But the reality is that that unipolar moment is what allowed the neoliberal era to function. And US imperialism and neoliberalism are two sides of the same coin.

[00:08:39.190] – Grumbine

I don’t disagree. One of the things that I had pulled up was a copy of “Imperialism the Highest Stage of Capitalism” in chapter Nine. If you read it, it’s almost as if you were reading a finance journal from 2022. It sounds like he knew exactly what was coming. Global finance capital is so predatory and so malevolent, I don’t see any real meaningful value other than to enrich the wealthiest.

And I think it’s why we have that champagne glass view of the economy where everybody down at the bottom is suffocated by the top. It’s impossible to believe that this could last.

[00:09:21.410] – Norton

Yeah, and I think that’s what we’re seeing now with this fundamental crisis where we see in the United States itself, there is basically an irreconcilable conflict in the internal political system with these two factions of the capitalist party that basically have the same economic policies but are tearing each other apart on cultural policies and there’s political paralysis inside the country.

And then internationally we see more and more war. The US is pushing the world toward World War III, potential nuclear war over this proxy war in Ukraine. And we also see the rise, especially, of China and the US government going to extreme lengths to try to kneecap the Chinese economy. The Biden administration this October imposed very aggressive sanctions aimed at trying to destroy China’s tech sector.

And of course it’s going to have blowback. These actions always have consequences. And the reality is that – you mentioned Lenin’s “Imperialism, the Highest Stage of Capitalism,” which was written in 1916, and I agree, it is still so accurate and so prescient for today – but there are also differences at the same time that we should keep in mind. There are two things.

First of all, he wrote that before the Bolshevik revolution—there were no socialist governments when he wrote “Imperialism, the Highest Stage of Capitalism.” That has fundamentally changed the way imperialism in the capitalist world system works, the existence of socialist countries. And furthermore, one of the other significant differences is Lenin emphasized the centrality of finance capital in imperialism.

And this isn’t a criticism of him, but no one in 1916 could have imagined the level of financialization of the economy, especially the US economy, and also deindustrialization. Let’s not forget that deindustrialization is something quite new in the history of capitalism. This is something that really emerges with the rise of neoliberalism, especially starting in the ’70s, going into the ’80s forward, and this neoliberal phase of globalization.

And we have seen that there are actually now even different opposing models of capitalism. I’m not saying that other forms of capitalism are better. I’m a socialist. I recognize that they all have these contradictions and they all rely on exploitation. But there is a significant difference in that the form of capitalism that Lenin was talking about over 100 years ago in some ways could be unrecognizable compared to the form of capitalism that the US has today, which is a purely speculative financial capitalism with very little domestic production.

All of that domestic production has been offshored and the US economy estimates vary, but they say that over 90% is in the service sector and depends how you define service sector, but there’s very little production. And this is an argument that Michael Hudson has been making that we have to also distinguish not only socialism from capitalism, but also industrial capitalism from finance capitalism.

Because Lenin was writing at a time in which these were still industrial capitalist powers that were fighting basically over their own imperial ambitions. So you had the German empire, and the French empire, and the British empire. What we’ve seen in the neoliberal era is that, especially after World War II and then increasingly after the end of the first Cold War in 1991, the US empire basically absorbed a lot of those European empires.

It absorbed a lot of the British Empire after World War II and it absorbed parts of the other European empires and we’ve seen them largely subordinated to the US empire, and it’s all run by finance capital. And that is something unique in the historical development of capitalism. And it’s obviously a fundamentally unsustainable system because the only way that you can operate an economy that has been completely deindustrialized is through the extraction of wealth from the other parts of the world which are in the global south where production is concentrated.

So the entire neoliberal model was predicated on production happening in poor countries in the global south where labor can be super-exploited because of its very low wages. And then those resources are then exported into the imperial core, into the U.S., and into Europe. But that model can only work if you can keep wages in the periphery as low as possible.

However, the imperialists have faced a problem. There have been rising wages in a lot of these countries in the global south, China being the prime example. Real wages in China have skyrocketed over the past few decades because the state-led economic model, but also in other countries—Indonesia, Vietnam, even India. So with the rise of wages, you can no longer have these extremely cheap consumer goods.

And that means that the deindustrialized model is going to become too prohibitively expensive and you have to reindustrialize parts of your economy in order to produce local goods. And the Trump administration claimed that it was going to try to bring jobs back to the US and redo industrialization. Of course, Trump was a charlatan and a fraud. He didn’t do that in any way. 

But if the capitalist class really wants to try to save capitalism, that’s what they would have to do. But of course, we see that the capitalist class is so parasitic, it is completely based on financial speculation and it’s based on corporate raiding and buybacks of stock. It’s all imaginary, fictitious financial capital. And they have such a chokehold on the political system in the US that they refuse to even impose their own reforms, that they need to save capitalism from self-destruction. It’s a really incredible moment.

[00:15:10.750] – Grumbine

It really is. I want to go back to one of the statements you made in the beginning. Michael Hudson has been with us a couple of different times. He’s recently done Real Progressives Live with us that we’ll be releasing here shortly. But I come from a Modern Monetary Theory school, which Michael Hudson was one of the practitioners.

Steve Keen, Warren Mosler, Stephanie Kelton and others have been involved in this. One of the things that is fundamentally frustrating is that many of these states purposely clamp down on their ability to do the things that they could do. Because to acknowledge that the state is the currency issuer versus letting us believe that it’s like some independent actor, they can wash their hands of their responsibility to do the right thing, and they can act like they’re feckless and incapable of making the change that needs to be made.

But because of the capture of the state and the complicity of those in state power, here we are at this moment in time where we have used debt peonage to enslave the global South to this model. And as they realize we don’t have to play this game anymore. Now Biden is trying to buy time by putting sanctions on them, by isolating them, by Balkanizing the world so that he can in turn catch up for 50 years of slack in the United States from allowing us to fall apart.

All the other things that go into a state that has allowed itself to become a dilapidated amoeba. I think around the world we see the impacts of the dissolution of civility in the United States. Do you think there will be a hot war with China and Russia, or do you think that this will remain a cold war?

[00:16:57.260] – Norton

That’s the question that the world is asking at this moment. And unfortunately, I think all of the signs show that the US is serious about waging a hot war with China. We already see, basically a hot war with Russia via Ukraine. And the war in Ukraine is not simply between Ukraine and Russia. It’s between Russia and NATO. Ukraine is a proxy for NATO.

The New York Times has acknowledged that the CIA is actively on the ground overseeing the war. We know that there are over 20 European countries and the US and Canada that have military forces involved in a command operation based in Germany and based largely out of Poland as well, which is of course the western neighbor of Ukraine.

And we know that there are special operations forces from the US, France, Canada, Britain, Germany on the ground in Ukraine overseeing this war. Basically, the US government and European governments are involved in every single way in this war except for just having thousands of troops on the ground. Aside from that, it’s a NATO war against Russia.

So they’re already at war with Russia, but the real goal is they want war with China. And of course they would like to see a new government in Russia. Biden himself said that when he visited Poland, he said the US goal is regime change in the Kremlin. And of course they want to install someone who is a more obedient US puppet, like Boris Yeltsin was, who will privatize all of the state-owned industries in Russia.

Now, Russia, it does not have a socialist government, obviously like it did under the Soviet Union, but it’s also not the same as this super-financialized, parasitic, neoliberal model. Russia has a mixed economy in which around 30% to 50% of GDP comes from state-owned industry, which is largely just resource extraction and export, specifically gas, oil and minerals.

Russia also is the world’s largest producer of wheat and fertilizer, but those are private companies. But the hydrocarbons industry is run by the state. And the biggest company in Russia is Gazprom, which is a state-owned gas giant that exports the gas. And also the biggest bank in Russia is Sberbank, which is a state-owned bank. So some parts of the economy are state-owned.

And Putin, again, he’s not a socialist. I’m not a fan of Putin, but he has disciplined the oligarchs. And the country does have some state control over the economy that it didn’t have in the 1990s when it was total cowboy, free market, laissez-faire capitalism. So of course, the US and European capitalists, they want to privatize all of that and sell it all off to western corporations.

They are salivating about that, especially having all this extremely cheap Russian energy. But the real prize is China. That’s what they really are aiming for. They see China as the systematic threat to western hegemony because China has the largest economy in the world, according to purchasing power parity measurement, and it continues to grow significantly faster than the US and European economies.

And let’s not forget that US so-called economic growth is largely pseudoscience. Most of that is stock buybacks. It’s actually just asset inflation. It’s not actually real economic growth, it’s asset inflation of real estate, of stocks, as Michael Hudson often says, the FIRE sector: Finance Insurance, and Real Estate. So when people talk about the inflation that we’ve seen in terms of actual products that people buy on a daily basis, that has hurt average consumers in terms of food, in terms of energy prices, that inflation is real.

But we’ve actually seen asset price inflation over many decades that has skyrocketed. And that’s where a lot of so-called US economic growth is. Whereas China is actual real economic growth because it’s based on production. And this gets back to the point about Modern Monetary Theory. Obviously, I agree with them. With Hudson, with Bill Black, with Stephanie Kelton, all of them.

I think they’re brilliant. But I think what Michael Hudson does, some of the others don’t do, is that Michael Hudson’s analysis goes a step further and understands also the role of imperialism in this analysis of Modern Monetary Theory because the reality is that a country can engage in Modern Monetary Theory if its economy is based on production.

In that case, Modern Monetary Theory can work very well, especially if you want to engage in infrastructure projects and fund social programs. But your economy has to be predicated on production because that’s what gives your currency value. It’s based on production. Other countries want to import your products. The US economic model is not based on production, it’s based on extraction and financial speculation.

And that’s the reason that the US could potentially engage in Modern Monetary Theory is because of the power of the US dollar as the global reserve currency. But the power of the US dollar as the global reserve currency is maintained through the iron fist of the US military. For instance, Muammar Gaddafi in Libya was trying to get off the dollar and create a Pan-African gold-backed currency.

And of course, as you know, ever since the Nixon shock, when Nixon took the US dollar off of gold in 1971 with a freely floating fiat currency, that means that the US dollar value is maintained through neocolonialism and imperialist force of the US military. Whereas other countries whose economies are actually based on production, like China, can engage in Modern Monetary Theory policies because their currency is ultimately backed by something valuable that other countries want, namely production.

Or Venezuela has been trying to do this with tagging their currency to oil, to something physical. But the reality is that the US economy is not based on production. And I think this is the fundamental contradiction we have to go back to and constantly focus on, because all these neoliberal fake economists, they always fundamentally refuse to engage with that reality.

They think, as Milton Friedman said, all forms of economic activity are equal, production, rent extraction, financial speculation. According to the neoliberals, that’s all the same. It’s all equally valid. That’s an insane world view. And the reality is that if your economy is not based on production, the only way your economic model can continue is by extracting resources and wealth and products and exploiting the labor of other countries, which is imperialism.

[00:23:34.900] – Grumbine

With the way that the powers that be are executing the economy, it’s hard to disagree with your assessment. The one thing I would caveat is, Japan, who are not the world reserve currency. We can see a case study in how an MMT lens would help us understand how their economy is thriving. MMT is not something to be done or implemented, it’s a lens.

And China is kicking our ass because they understand the power of state currency. It’s not just the power of production. Yes, that’s true. But they understand the fact that it’s the availability of real resources. And we have allowed lies that we’ve been told to infect the way we view economics in general. What we’re seeing right now is the effect of the United States not being a good global citizen.

And their import model based on extraction is not advantageous. It may be advantageous in terms of cheap goods and services, but we see the flaws of this kind of structure, and it’s not good for anyone.

[00:24:38.010] – Norton

One quick note. I just want to point out, and I agree with you in terms of Japan, which is often cited because Japan has over 200% debt-to-GDP ratio. And people point out that Japan is able to have economic growth. But let’s not forget, half of Japan’s debt is internal debt. It’s not external debt. So people often compare Japan’s debt to Greece’s debt.

Technically, Japan has a higher debt-to-GDP ratio, but Greece’s debt is external debt, and it’s denominated in, of course, the euro. And Greece can’t print the euro, whereas the Central Bank of Japan can print its own currency, the yen. So we always have to distinguish external from internal debt, because internal debt is not necessarily a problem, if the country can just print more currency to pardon that debt. But if your debt is denominated in a foreign currency that you can’t print, then of course you’re screwed. And that plays into the IMF.

[00:25:29.670] – Grumbine

Yes. So when the United States sells bonds, you can only purchase a US bond with US dollars. So in essence, it’s taking money out of the economy and putting it into this yellow form to be transferred back into a green form later. In the case of foreign debt. It’s debt denominated in a foreign currency. So in other words, if China is selling goods and services into the United States, getting trillions of dollars in US money, and it’s looking at these US dollars and saying, ‘we need some of those to pay for fuel or to facilitate transactions, we don’t need all these US dollars, so why don’t we earn interest?’

So they’ll take that money and put it into a Treasury, which is an interest-bearing account that allows them to gain money but also defends a positive interest rate. So in my opinion—and I think that this is an MMT opinion—foreign debt would be something like, let’s say, Pakistan. It only has, let’s say, 10 billion in US foreign reserve dollars and the cost of repairs are, let’s say, 50.

They’ve got to take on foreign debt to be able to procure services that they can’t produce internally. That’s a different story than China taking US dollar holdings and then investing them. I just wanted to make that distinction that I think is worth mentioning. Moving on, the IMF, which is famous for imposing structural adjustments and running roughshod over countries, they’re already talking about the recovery, reconstruction, and modernization of Ukraine.

They’ve already got their hooks into Ukraine. They had their hooks into Russia. Russia said, we’re not paying our debt. And they gave the finger to the IMF, which I think is pretty amazing in and of itself. Putin showed it’s really the real resources – we’ve got the oil. What do you think about the IMF’s approach to making an offer they can’t refuse, where they have to give up public services, not do any protectionary things against big predator countries and global nationals? What do you think about the IMF’s approach to bringing new people into the fold?

[00:27:43.690] – Norton

Well, the IMF is an arm of US imperial power—political power and economic power. Let’s not forget that the United States has veto influence, has veto vote power over IMF decisions. And of course, let’s not forget also that IMF debt is always denominated in US dollars. So it’s a tool of economic power used by the US to trap these countries in debt.

And again, this is one of the structural ways in which neoliberalism imposed itself, again, because if you want to have an actual materialist analysis of economics and history and how politics works, it’s not based simply on idealism, in the sense of ideas moving history, ideas changing the forces of history. It’s based on material reality, that’s materialist analysis.

And it’s not just because people wanted to impose neoliberal policies. They were forced to impose neoliberal policies. Because of balance of payment issues, they have to get the bailout from the IMF. If they want to build infrastructure, they have to get a big loan from the World Bank. And of course, the World Bank also has the same kind of neoliberal structural adjustment requirements.

The difference now is that there are other opportunities for countries, especially in the global South, outside of the IMF and the World Bank. China has its own banks. The BRICS system — Brazil, Russia, India, China, South Africa — has their own bank, known as the BRICS Bank, which is challenging the World Bank.

And they also have a fund structure to challenge the IMF for balance of payment issues. So that’s one of the reasons that there is this crisis in neoliberalism because there are other alternatives for countries that don’t want to continue with the old Washington consensus of the Chicago Boys. And Russia’s an example of this. Again, I’m not romanticizing the Russian economy.

I don’t think it’s necessarily a good economic model to emulate. But we should understand that the Russian economic model is not the same as the IMF neoliberal economic model. It is largely a kind of resource nationalist model of a mixed economy with elements of, you could say, Keynesianism, elements of this kind of neoliberalism.

But there’s still financial capital and a stock market and everything in Russia. But the reality is that the Russian government understands that you have to have state oversight of certain parts of the economy because otherwise it’s natural resources which provide the bulk of its GDP, or at least a plurality of its GDP. If it doesn’t have strategic control over its natural resources, those are going to be exploited by foreign corporations.

Not only does that hurt the economy and the stability of the country, but it genuinely hurts its national security. So that’s why a lot of these countries, even though they’re not necessarily socialists, they understand that they have to have strategic control of their natural resources. Iran is an example as well. Iran certainly is not a socialist government — no one’s calling to model your own country after Iran.

But Iran also has state ownership of natural resources. People talk a lot about the famous CIA coup against Mohammad Mosaddegh, the first-ever democratically elected Prime Minister of Iran. And in 1953 the US government overthrew Mosaddegh because he nationalized the oil industry going against what is today BP, which was the Anglo-Iranian oil company, and that was backed by the CIA and MI6.

But the reality is that today we see that the Iranian government also still has state ownership of the oil and other large parts of the economy. So what I’m getting at here is that this crisis that we’re seeing—the new Cold War, the political conflict between the US and Europe on one side and China, Russia and Iran on the other side—it is not simply rooted in a difference in political worldview.

It is also an economic conflict. It is a conflict between the financialized neoliberal economic model that is predicated on deindustrialization and import and trapping countries in global South in debt in order to extract their wealth. That is the model of the US, and increasingly the European Union as well, which has become more and more neoliberal.

That model is contrasting with, of course, China’s socialist model, but also with the mixed economy model of a kind of state-led oversight over the natural resources and resource nationalism with a mixed economy in Russia and Iran. So this new cold war is also fundamentally an economic conflict and we can’t understand the crisis we see around the world today without understanding that.

And of course the IMF has always been an instrument of US power which is why the US is so angry that there are now alternatives, including the bank that China has and including the BRICS Bank.

[00:33:10.710] – Intermission

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[00:33:36.560] – Grumbine

You wrote a great piece back in August that leads us into some further depth on this subject and it’s titled “West’s Neoliberal ‘Age of Abundance’ is Over as War and Sanctions Boomerang Home.” I find it interesting you start off with France’s president Macron warned of the end of an era of abundance as western wars and sanctions are boomeranging back at home.

The neoliberal phase of capitalism is collapsing. Having lost cheap Russian energy and cheap labor and consumer goods from China and with regime change ops failing. Take us through this.

[00:34:14.210] – Norton

So like I said earlier, we have to understand neoliberalism as a particular phase of capitalism dominated by US imperialism. So let’s start with the last point I mentioned: regime change operation. Any country around the world, any government that tries to have state oversight over the economy opposing neoliberalism was overthrown through regime change.

So the US invaded Grenada to overthrow a socialist government. The US invaded and overthrew Panama’s government. The US overthrew the Sandanistas in Nicaragua in 1999, after a decade of a terrorist war by the Contras. The US has carried out coups all across Latin America and other parts of the global south to overthrow socialist governments.

And then in 1990 NATO destroyed the last socialist government in Europe which was Yugoslavia. Then in 2003 the US invaded Iraq—and again, this isn’t to romanticize Saddam Hussein, but he had a state-led economic model based on state ownership of the natural resources—overthrew the Iraqi model, and mass privatization. Then in Libya in 2011.

Then they tried to do the same thing in Syria which also has a state-led economic model. So any country around the world that poses a challenge to that neoliberal model, the US military will simply overthrow them or they’ll have like a color revolution like we saw in the 1990s with the series of color revolutions backed by the US to overthrow these state-led economic models in Eastern Europe.

So that’s a form of how imperialism functions—is simply overthrowing any government that refuses to implement neoliberalism. That’s how neoliberalism imposed itself in many countries. Then there’s the other element of this. As I said earlier, if you offshore your production and your economy is based on imports, then you have to be able to find a way to exploit cheap labor, which is going to come from the global South, and find raw materials and extract those raw materials.

And also production doesn’t even happen usually in the US. So they extract the raw materials from one country and send those to another country and then the production happens there. So China was of course the country where the production happened largely. And now what has changed is with the significant rise in the standard of living of Chinese workers, that means that production of those goods in China has become more expensive.

I did that report you mentioned in August when French President Macron, who let’s not forget, is an investment banker. He gave a speech about the end of abundance. And of course, when he says the end of abundance, he means for French workers. He doesn’t mean for French capitalists because at the same time as he gave that speech, French corporations actually have record profits.

They have the highest-level profits now than they’ve had in many years. That’s not a coincidence, of course. So he means the end of abundance for French workers. And at the same time, when he made that speech, I made this argument. Well, fast forward a month and a few weeks ago, the de facto Foreign minister of the European Union, the top foreign policy official, named Joseph Borel, he gave the speech internally at a EU ambassador’s conference.

So this is a speech for people who work for the EU. This is not a speech for the general public. And in the speech he acknowledged that the moment of prosperity (he used the term “prosperity;” Macron said “abundance”) is over. And he specifically said because Chinese laborers now are paid significantly more. And that means consumer goods are more expensive and Europe and the US are losing access to China’s market and they lost the cheap Russian energy they relied on after the 1990s.

So after overthrowing the Soviet Union in 1991, the US, and to a lesser extent the European Union, which was in its infant stages that day—let’s not forget the EU is still very new. It was like the European Community and then it became the European Union. And a lot of countries in the European Community didn’t even adopt the euro until later, right?

They still had their own domestic national currencies. So anyway, the point is that this unipolar order that was emerging in 1991, it imposed neoliberal shock therapy in the former Soviet Union. According to UNICEF, which is part of the UN they published a report after a decade of neoliberal shock therapy in 2001 acknowledging that it led to millions of excess deaths.

It led to tens of millions of Russians being pushed into poverty. It led to an increase in mortality rates significantly, the average life expectancy of a Russian decreased by six to eight years and there was a huge increase in diseases like AIDS and other diseases. So public health crisis, so neoliberal shock therapy led to a humanitarian catastrophe and literally millions of deaths in Russia.

And we saw mass privatization of huge parts of the economy selling off all the former state industries for pennies on the dollar, including the natural resources which were being exploited by western corporations. Now, Russia has imposed more state control, not over all of the economy—it’s not socialism—but specifically over resources, and in particular the oil and gas sector.

So most of the oil and gas in Russia is extracted by state-owned companies and then that revenue is used to fund social programs. And now in the past few years, Europe has been trying to decrease its imports of Russian energy. But the problem is that the reason that the European Union as recently as the beginning of 2022 still imported the plurality of its oil and gas from Russia is because it was cheaper than any other country, specifically pipeline gas from Russia.

If you look at what’s happening now, the European Union is importing extremely expensive liquefied natural gas, LNG, from the United States. Obviously they have to send that over the ocean, which makes it expensive to transport. And it’s now five to ten times as expensive as the extremely cheap pipeline gas that Russia was sending through Nordstream, which was destroyed, likely by the US, in this explosion attacking Nordstream.

But also it has pipelines that go through Ukraine and it has a pipeline that goes through Turkey, and a pipeline that goes through Belarus and Poland. So Europe was getting very cheap pipeline gas from Russia which meant that it allowed European industry to be competitive because even though European workers are paid good wages, the governments were able to maintain low production costs by keeping energy costs low and paying for infrastructure and health care and education.

Which means that if you’re a European company, you don’t have to pay for healthcare for your workers because the government pays for healthcare, which keeps production costs low, which makes your industries more competitive. But we’ve seen the gradual privatization of the health sector in Europe. We’ve seen cuts to education, which means that workers have to make more money in order to pay for good education.

And now we see extremely high energy costs, which means that large parts of industry in Europe are going to go bankrupt unless they offshore. So we’re now seeing, especially now with the European Union pledging that it’s not going to import extremely cheap Russian energy, it means that it’s become extremely expensive to pay for energy.

So we see German capitalists—and let’s not forget that German industry is at the heart of the European Union, and also industry in northern Italy—and we’ve seen industrialists, capitalists in Germany and northern Italy warning that they’re going to have to offshore their production and leave Europe because they can no longer pay, because they’re no longer competitive, because of the extremely high cost of energy.

So we’re seeing the deindustrialization of the European economies as well going along simultaneously with the neoliberalization of the European welfare states. So the exact same neoliberal financialized model of the industrialization that the US imposed is now being imposed on Europe as well. So we’re seeing the destruction of the European economy while Europe is being subordinated to US imperialism in order to fight this new Cold War against Russia and China. And the war has already started against Russia and unfortunately, I think it’s going to get significantly worse with China as well.

[00:42:49.020] – Grumbine

I’m glad you bring that up. I have been fascinated with the One Belt, One Road initiative and the US is feeling a little bit of jealousy because they see China on the rise. It’s quite obvious that the United States and its austerity measures that it takes on its own citizens and the lack of fundamental spending on necessary infrastructure has fallen so far behind, it seems like the only way they could catch up was to isolate China and Russia.

What are your thoughts on One Belt, One Road, the jealousy of the United States and a lack of foresight that neoliberal capitalism has pushed onto the US for short-term gains minus the long-term benefits? And where do you think this goes?

[00:43:36.790] – Norton

Well, unfortunately, I think it goes toward war. This is what you asked about earlier because what’s happening now. This new Cold War is about trying to save imperialism and specifically save neoliberalism because the entire neoliberal model, as I’ve been stressing here, is predicated on imperial domination of the world, austerity measures being imposed around the world, and deindustrialization and financialization and extraction of wealth from the global South in order to send that wealth into the imperial core.

And that system is in decline, so the U.S. is trying to wage war in order to save that system. And the main threats to that system are China and also, to a lesser extent, Russia and Iran. So the U.S. does not have an economic advantage anymore. China has the largest economy and China continues to grow. And again, it’s real economic growth, unlike the fake economic growth in the U.S. which is all asset price inflation and stock buybacks and financial rating by hedge funds.

What the US does have an advantage in is military power. The US is still by far the largest military power in the world. It has 800 foreign military bases. China has one foreign military base and that is part of UN anti-piracy operations in Djibouti. Russia has seven or eight foreign military bases. The US has 800. The US spends, on paper, nearly $900 billion per year on its military.

In reality, it’s well over a trillion per year. And that’s not considering the trillions more that are off the books. The Pentagon failed its first-ever audit. So the US does have overwhelming military force. The US spends more than the next nine largest military spenders in the world combined, or the other 180 countries in the world combined, on its military.

So the US can destroy China and Russia and that’s what they’re going to try to do in order to save that model. Because again, that economic model is not based on production, it’s based on extraction. And if you can no longer extract, your economic model is going to collapse. And that’s what we’re seeing now. So at the same time, this gets to the other part of your question, which is that what we’re seeing is this serious conflict where China’s economy is actually based on production and infrastructure development and this is all overseen by the state.

Whereas in the U.S., you can’t have infrastructure development because, one, you’re not allowed to have deficit spending and obviously you need deficit spending in order to build infrastructure. This gets back to MMT and all of that. And under neoliberal orthodoxy, it’s not allowed, which means you can’t build new infrastructure.

And the only way you can do it is through public-private partnerships, which are always corrupt. It’s always just a corporate giveaway to enrich a bunch of capitalist oligarchs. And China’s infrastructure development is all overseen by state companies with financing from state-owned banks. And it’s done as part of a planned economy.

The U.S. is not a planned economy. Well, Michael Hudson often points out that it’s the most centrally planned economy, but it’s planned on Wall Street. But it’s not planned to actually meet human need. It’s planned to maximize profit. So this gets into China’s Belt and Road Initiative. We should understand that the Belt and Road goes back to 2013 when Xi Jinping came in.

And when Xi came in as President and General Secretary in China, he moved China back toward the left. And this is a complicated discussion, but the Chinese government and the Communist Party of China have taken different paths of development. And from the reform period of Deng Xiaoping, where there was partial privatization—not full-on privatization, it’s exaggerated; it wasn’t full-on neoliberalism, it was partial privatization.

The argument made was that the Communist Party is going to maintain strategic control over the commanding heights of the economy, over the financial sector of the banks, over telecommunications, over land—all land is state-owned in China and it’s only rented, but it all belongs to the state, so if you want to buy land, you’re buying it from the state for like 50 years or whatever, but it still belongs to the state.

So the land remains in state hands, the banking sector remains in state hands, large parts of the construction industry with state-owned companies were in state hands. So it became a socialist model, but not like the Soviet Union where everything was owned by the state. And there is partial reforms and partial privatization.

And the argument made was that China said that we want to build up the productive forces in our economy because China in the 1970s was still very poor and it was largely an agricultural economy, and they wanted to develop industrial production and technological production. So they allowed in foreign capital, however, under the condition that if foreign companies came into China, then they would allow China to develop its own industry using the technology that those foreign companies were sharing with them.

So this gets to this whole idea of China supposedly violating Western intellectual property. But part of that is because the agreement these companies made is that, okay, sweet, we can exploit cheap Chinese labor, but in return, we have to share intellectual property with China so China can start developing its own industry.

And after China began developing its own tech sector and with state support and protectionism and this model of Import Substitution Industrialization (ISI) as opposed to the export-oriented neoliberal model, China developed its own domestic industry, and the economy grew drastically. The standard of living rose, and all of this. And this brings us to 2013.

And Xi Jinping comes in, and he’s from more of the left wing of the party. He makes the assessment that China has now gotten to the point of development of the economy and the productive forces, where now the main goal is no longer simply growth. The main goal now needs to be fighting inequality and fighting poverty and raising the living standards of poor and working people in China.

And this gives us to the 18th Congress of the Communist Party of China, which is when Xi Jinping came to power this October of 2022. We just saw the 20th Party congress. We’ll go back every five years as a Party Congress to go back ten years before. And this is when Xi Jinping comes in. And in the 18th Party Congress, in the 19th Party Congress, the Communist Party of China says its goal is now to fight what it calls to combat uneven development.

That is to say that in rural areas of China there’s more poverty. They want to raise the living standards in rural areas and bring them to a better standard, like in the urban areas, which tend to have a higher living standard and less poverty. So we saw massive poverty reduction programs. As of last year, China announced that it had eradicated extreme poverty.

So that means that since the Chinese Revolution in 1949, 850,000,000 people in China were lifted out of extreme poverty. And now the goal is no longer simply growing the economy as fast as possible with double digit GDP growth, it’s to have high-quality growth based on better forms of employment. And full employment is the goal. And also less inequality. So more income redistribution, increasing taxes on the rich, forcing billionaires to give up part of their wealth.

So that’s what we see now. And so the reason I spent so much time talking about that is because that strategy comes at the same time as the announcement of the Belt and Road Initiative. So we need to understand the shift of the Communist Party of China with the rise of Xi Jinping. And in 2013, when Xi Jinping came to power, he visited Kazakhstan and he announced the creation of the New Silk Road.

So while China is taking this new path and trying to focus on fighting inequality, it’s also focused on economic integration with Asia. And it starts with the New Silk Road. And the idea is that China wants to integrate with Central Asia with Kazakhstan and Tajikistan. And Kyrgyzstan and Pakistan. So Pakistan has the China-Pakistan Economic Corridor (CPEC).

And we also see the growth of Russian and Chinese integration economically. We see the Power of Siberia pipelines. There’s now going to be a third pipeline between Russia and China. So you see more and more economic integration of Asia. So all this comes at the same time as China is taking a different left-wing path. And then we see that the New Silk Road expands into One Belt, One Road, and the belt was going to become the belt of ports.

So they were going to build a port on the southern coast of Pakistan, on the southern coast of Iran. So the idea is to create a string of pearls, as they called it, part of One Belt, One Road. And then as they continued to expand, so many countries in the world, largely in the global south, wanted to become part of the One Belt, One Road Initiative.

So it expanded simply into the Belt and Road initiative. Now it’s not one belt and one road, it’s many belts and many roads. And what this is part of is China recognizes that as it moves into a new era of its economic development, it still has to have production at the core of its economy. It can’t deindustrialize, or it’s going to get into the trap of the Western neoliberal economies.

So it needs to continue production. And one of the ways of doing that is through infrastructure development around the world and integration of Asia. So the last thing I’ll say here is that Jeffrey Sachs, he’s an interesting guy, he used to be like a neoliberal economist. He was actually involved in overseeing the neoliberal shock therapy in the former Soviet Union.

But he kind of had a “come to Jesus” moment and he had a change of heart. He’s become more of like a kind of Keynesian, and he’s really come to criticize US foreign policy, and he’s become a rare voice of reason in the US establishment circles. And the point that he’s pointed out, which I think is crucial to understand, is that in the 18th century, over half of global GDP came from Asia.

And if you throw in Asia and Africa, it was over 70% of global GDP. Came from what you could call Asia and Africa and then parts of Latin America and then the US and Europe are responsible for less than 30% of GDP globally. And of course, with the rise of European colonialism and US imperialism, that share of US and European percentage of global GDP significantly increased to over half, to over 60%.

But what we’ve seen in the past 50 or 60 years with the era of decolonisation and the rise of Asian economies, is that Asia has once again returned to where it was 300 years ago, where it represents over half of global GDP. And China’s goal is to move the center of the global economy back to Asia. And that’s what we’re seeing now. And this war in Ukraine is part of that.

It’s part of Russia’s integration into Asia, and it’s part of the US trying to force Europe to cut off its economy and its economic integration with Russia and Asia and instead economically subordinate itself to the US. So this new Cold war is all about the US trying to halt the process of Eurasian integration and prevent China from economically integrating Asia and cutting out the US and trying to keep this transatlantic model of economic domination, in which the center of the global economy is based, in the transatlantic access of the US. And Europe.

[00:55:22.910] – Grumbine

One final thought before we close out. First of all, I really want to thank you. You’ve been amazing. I am so happy to have made the connection with you, Ben. One of the questions I have as a socialist in the United States, where clearly socialism doesn’t even have a toehold, much less a presence, how would you message to other socialists in this neoliberal Hellscape?

Should we be looking at the political sphere for any solutions? We talked the other day about organizing and being part of other groups. But is there a place in the American political system for socialists to exact any kind of influence? How should we view the world? Because I see a tremendous amount of disconnect between what is happening in the world today in terms of the US political sphere, which seems largely like theater, and the rest of the world and what’s happening. I don’t see a real, honest, coherent approach at this point to how a socialist might exist in society today.

[00:56:29.960] – Norton

Well, a few thoughts. One, in terms of what people can do concretely in their daily life, we talked about that in our other discussion. People really can and should organize their workplaces, strengthen the labor movement, become involved in an organization, join a socialist organization or Socialist Party. In order to be a socialist, in order to be on the left, you have to be involved in collective struggle.

That’s how change happens. So people should get involved. But in terms of also understanding how we should think about socialism in terms of global politics, the reason the US can’t have socialism at this moment is because it’s an empire. And in order to have socialism, we have to end the US empire. And that would be good for people in the US.

In addition to good for people around the world who are exploited by the US empire. Why do we have these 804 military bases? Why does the US still have troops, tens of thousands of troops in Japan, Germany, and South Korea since the 40’s and the early 50s? Why? It’s not to make the standard of living of workers in the US or Germany or Japan or South Korea better.

No. It’s to maintain this globe-spanning empire. And that is genuinely bad for the people of the world and bad for workers in the US. These trillions and trillions of dollars spent on war. Now, obviously, I agree with the argument of MMT theorists that when the US wants to wage a war, it doesn’t wait for the budget to be approved by Congress.

It just creates the money, imaginary fictitious capital, by adding keystrokes into accounts. Yeah, I mean, it’s imaginary in order to wage war in Iraq. But the point is that that is wealth created. That or imaginary wealth, but that could be done to fund healthcare and education. The reason they don’t do that is because it’s an empire.

They need to keep their own population disciplined, which means that they can’t provide them a welfare state and health care and education because they need workers to be precarious so they don’t demand things, they instead beg. That is part of this process of economic subordination. You know, Noam Chomsky often points out that student debt is part of a disciplinary apparatus.

We know that the US. Government could forgive all of the federal student debt overnight if Biden forgave a small percentage of it. The US could forgive all of it. And actually, not only would it not hurt the economy, it would probably have a positive impact on the economy. It’s not about making life better.

It’s about maintaining the discipline over workers so they don’t demand better conditions, so they don’t demand higher pay. We see, right now, the Fed is talking about disciplining the workforce because wages are too high, and they need to increase interest rates in order to cause an arbitrary recession, in order to bring wages down. So this is all part of this economic model that is predicated on imperialism.

So we need to understand that if we can end imperialism, then we can develop socialism, but we can’t develop socialism under imperialism. And that’s why it’s so important to understand that in order to be a socialist, you have to also be an anti-imperialist. And fighting against imperialism is also good for workers in the United States. And also, at the same time, we don’t need war with any of these countries.

War is only good for capitalists everywhere and anywhere. War is always a racket, as Smedley Butler said. People should read Smedley Butler. People don’t even know who he is in many cases, especially young people because he’s been written out of history. Smedley Butler was the highest ranking military officer in the United States.

He oversaw US wars and military occupations in Latin America and parts of Asia. And he saw directly how imperialism functions. And he wrote a book called “War is a Racket.” He became a socialist, he became an anti-imperialist. And he said that Al Capone, the legendary gangster, he operated in three districts. I was a gangster for capitalism. I operated on three continents.

And he talks about how the US military overthrew independent governments to try to steal natural resources. That’s how imperialism functions. So a lot of people talk about how they don’t care about foreign policy because they think it’s so irrelevant to them and it doesn’t affect them, but it does directly affect them.

We need to understand again that this is part of a global capitalist system. And if we want to fight for socialism, we also have to fight against imperialism. That’s just the point I really want to stress, and that’s why I’m at work. I’m a socialist. I don’t hide that in any way. I’m a leftist, and I say that openly in my analysis.

But we always have to have an international perspective. It’s important, of course, to focus on what’s going on domestically in US politics. The labor movement struggles against the far right and racism and all that. Those are all good, but we also have to always have the international perspective as well.

[01:01:16.310] – Grumbine

I love this conversation. One of the things that I got from this is that the interrelationship between domestic policy and imperialism and foreign policy, they’re inseparable. To see end-to-end in the system, you must go outside of the domestic US and see how the tentacles stretch out across the globe. And you have been instrumental.

Michael Hudson. Steve Keen. Jason Hickel. Many of the friends I have in the MMT movement are very much internationalist in this space as well. They’re seeing the world much the way you’ve just laid it out. And I really appreciate your angle on this. Ben, tell everybody once again where we can find your work.

[01:01:58.610] – Norton

People can go to multipolarista.com. You’ll find the YouTube channel, it’s called Multipolarista as well. And it’s all there. And I tweet a lot at Benjamin Norton and everything that we talk about today is what I report on; the new Cold War, geopolitics, imperialism, economics. I have Michael Hudson on regularly. And thanks for having me. It was fun conversation.

[01:02:19.980] – Grumbine

Absolutely. This is Steve Grumbine. My guest, Ben Norton. Macro N Cheese. We are out of here.

[01:02:33.260] – End credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressive Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.