“Creating Wealth” through Debt: The West&apos;s Finance-Capitalist Road

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World Review of Political Economy

Volume 10, Issue 2

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“Creating Wealth” through Debt: The West's Finance-Capitalist Road

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Author(s): Michael Hudson

Publication date (Print): 1 July 2019

Journal: World Review of Political Economy

Publisher: Pluto Journals

Keywords: Capitalism, financialization, debt, crisis, rentier

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Abstract

Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the economy with carrying charges. What policies are best suited for China to avoid this neo- rentier disease while raising living standards in a fair and efficient low-cost economy? The most pressing policy challenge is to keep down the cost of housing. Rising housing prices mean larger and larger debts extracting interest out of the economy. The strongest way to prevent this is to tax away the rise in land prices, collecting the rental value for the government instead of letting it be pledged to the banks as mortgage interest. The same logic applies to public collection of natural resource and monopoly rents. The US and European business schools are part of the problem, not part of the solution. They teach the tactics of asset stripping and how to replace industrial engineering with financial engineering, as if financialization creates wealth faster than the debt burden. Having rapidly pulled ahead over the past three decades, China must remain free of rentier ideology that imagines wealth to be created by debt-leveraged inflation of real-estate and financial asset prices.

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Journal

Journal ID (doi): 10.2307/j50005553

Journal ID (jcode): worlrevipoliecon

Title: World Review of Political Economy

Publisher: Pluto Journals

ISSN: 2042-891X

ISSN: 2042-8928

Publication date (Print): 1 July 2019

Volume: 10

Issue: 2 ( doiID: 10.13169/worlrevipoliecon.10.issue-2 )

Pages: 171-190

Article

Publisher ID: worlrevipoliecon.10.2.0171

DOI: 10.13169/worlrevipoliecon.10.2.0171

SO-VID: 0ed78047-474f-4f5f-91cf-736c1769efd0

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lang eng

ScienceOpen disciplines: Political economics

Keywords: crisis,Capitalism,financialization,rentier,debt

References

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[1] Congressional Budget Office of US Government. 2014. “The Distribution of Household Income and Federal Taxes 2011.” Accessed March 30, 2019. https://www.cbo.gov/sites/default/files/113th-congress-2013–2014/reports/49440-distribution-income-and-taxes-2.pdf.

[2] George, H. 1891. The Condition of Labor. Accessed March 30, 2019. http://www.wealthandwant.com/pdf/George_The_Condition_of_Labor.pdf.

[3] Hayek, F. A. 1944. The Road to Serfdom. Chicago, IL: University of Chicago Press.

[4] Jensen, M. C. 2003. A Theory of the Firm: Governance, Residual Claims, and Organizational Forms. Cambridge, MA: Harvard University Press.

[5] Klein, N. 2008. The Shock Doctrine: The Rise of Disaster Capitalism. London: Picador.

[6] Marx, K. 1906. Capital, vol. I. Chicago: Charles H. Kerr.

[7] Marx, K. 1909a. Capital, vol. II. Chicago: Charles H. Kerr.

[8] Marx, K. 1909b. Capital, vol. III. Chicago: Charles H. Kerr.

[9] Marx, K. 1956. Theories of Surplus Value, part I. Moscow: Foreign Languages Publishing House.

[10] Marx, K. 1968. Theories of Surplus Value, part II. Moscow: Foreign Languages Publishing House.

[11] Marx, K. 1971. Theories of Surplus Value, part III. Moscow: Foreign Languages Publishing House.

[12] Marx, K. 1973. Grundrisse. London: Penguin.

[13] Mill, J. S. 1848. Principles of Political Economy, with Some of Their Applications to Social Philosophy. Accessed 18 April, 2019. http://www.gutenberg.org/files/30107/30107-pdf.pdf.

[14] Wray, L. R. 2009. “The Rise and Fall of Money Manager Capitalism: A Minskian Approach.” Accessed March 30, 2019. http://www.levyinstitute.org/pubs/Wray_Rise_and_Fall.pdf.