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One day after we came back, we had to go to the White House for a meeting on oil and the
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balance of payments.
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And who should be the Undersecretary of the Treasury but my old mentor from Standard Oil
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who had explained to me how offshore banking centers worked.
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He explained to Herman and me that he told the Saudi Arabians, “You can charge whatever
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you want for oil.”
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This was right after America quadrupled the price of grain to finance the Vietnam War
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in 1972-73, and OPEC responded by quadrupling the price of oil.
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The Undersecretary of the Treasury explained to me that they could charge whatever they
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wanted for oil.
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He knew that the higher they charged, the more the American companies would be able
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to charge on domestic oil.
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But the Saudis had to recycle all of their dollars into the United States, into Treasury
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bonds or the stock market.
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“You can’t buy American companies, you can only buy stocks or bonds, and you have to
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price your oil in dollars.
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If you don’t, we’ll consider that an act of war.”
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So here I was right in the middle of understanding how imperialism really worked.
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This was not what is in most textbooks.
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Most don’t talk about the balance of payments, but the key to financial imperialism is the
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balance of payments.
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The United States fights to prevent other countries from going back to the gold standard,
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because at the time America went off gold in August 1971, every American dollar bill
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was backed 25% by gold at $35 an ounce.
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Well, finally there was no more surplus gold, and that’s what forced America off gold.
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Its price immediately went way up.
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As an American citizen, I wasn’t allowed to buy gold.
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So I knew it was coming but I couldn’t make any money off it.
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Instead I bought Tibetan and Indian art, Asian art primarily.
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To make a long story short, I became a financial advisor to the Canadian government as a result
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of the stock brokerage work in Montreal.
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They said, “We need somebody who knows the American stock and bond market”.
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I was at that time the highest paid economist per diem in the United States for financial
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analysis.
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So I got a call saying, “They’re going to want to hire you but there’s only one way
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in which they can tell how intelligent you are.
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Do you know about wine?”
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When I grew up at the University of Chicago, the university paid its professors so badly
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that to make more money, their ideal was to be a wine steward at the Pump Room, which
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was the fancy restaurant in Chicago.
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It was featured in the Blues Brothers comedy with John Belushi.
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Anyway, I took a sommelier course, got a license, and brought two bottles, one Richebourg and
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one La Tâche that I bought in the remainder carton at an uptown store.
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I gave them to my host in Ottawa and the government guys said, “That’s the guy we want.”
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So I wrote a study that Canada didn’t have to borrow money abroad for the provinces to
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invest domestically.
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They could create their own money.
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Basically, what I wrote was the first example of what’s now called Modern Monetary Theory,
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that governments can create their own money, their own credit.
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They don’t need a foreign-currency backing for it, and so all basically the same circular
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flow analysis that I’d developed from my history of thought.
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a Physiocratic analysis.
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One of the top investment analysts for the Royal Bank decided to become the head of personnel.
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He said he thought that it’s a personality problem that economists can’t understand how
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the world works, that there’s a particular kind of dumb person that becomes an economist.
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It’s a kind of autism, of thinking abstractly without a sense of economic reality.
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So he got me an appointment with the Secretary of State of Canada.
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In Canada the Secretary of State is in charge of education, films and culture.
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So I became Canada’s cultural adviser, which is what I thought was fine all along, and
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I wrote a report.
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Around that time I also was an economic adviser to the
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United Nations Institute for Training and Research, UNITAR, writing their reports on
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North/South debt, the foreign debt of third world countries, denominated in dollars, and
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how this was deranging their economies.
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They had a meeting in Mexico financed by the Mexican president and I was invited down there.
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I gave a report saying that there was no way that the third-world debts can be paid.
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My first job I worked on at Chase Manhattan was to estimate how much export revenue Argentina,
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Brazil and Chile could make.
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The idea was that all of their export earnings could enable them to pay interest on money
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borrowed from US banks.
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The idea was that the entire trade surplus should be pledged as debt service to the American
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banks.
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My job was to think how much that was, and what should Chase’s share be.
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So, at the Mexican UNITAR conference, I said that these debts cannot be paid, therefore
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they should not be paid, they should be canceled.
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There was quite a stir over that.
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Well at the end of the conference they had the rapporteurs summarizing the papers.
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The US rapporteur said that Dr. Hudson has given a report saying that third-world countries
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should export more in order to pay their debts.
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I stood up slowly and said, “I must insist that the President of Mexico offer a public
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explanation, apology to me and the conference.
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This rapporteur has inverted and reversed everything I said.
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I believe he has a covert purpose.
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I’m pulling out the American delegation and I’m pulling out the Canadian delegation too.
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We cannot be a part of this travesty.”
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Then I walked out, wondering what’s gonna happen!
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The Russian delegate came out laughing and said, “Ah!
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You’ve dominated the whole conference.
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You’ve made chaos out of it.
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You’ve embarrassed the CIA.
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This is fantastic.
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Here’s my card in New York.”
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Later that evening I was told, “You know, they’re looking for you to beat you up.”
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Well as it happened an old girlfriend of mine was in a group who were in Mexico for an
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art exhibition.
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They were surrealist artists from Amherst, and they were also doing a surrealist ballet.
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So I went to the ballet with them and they said, “Look!
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The thugs are there.”
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So I hid out with them on the stage in their ballet.
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The goons were looking in the audience and I was on the stage and we were all just surrealistic.
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Nobody knew how to dance or anything, it was all just surrealistic.
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And they, you know, the goons all went home.
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I learned that if they can’t find you, they usually give up and leave you alone.
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I went back to New York, but I realized that the debt issue was so controversial –
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the idea that debt couldn’t be paid.
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I spent about a year and I’d got through medieval period, Europe, World War One, and then even
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Greece and Rome.
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But then I found — it was about 1980, 1981, at that time I sold my house on the Lower
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Side and moved into a loft near Wall Street which was very low price there at that time,
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(I bought it for $20,000.
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Later I sold it for $580,000 but that’s another story), it shows you the real estate in New
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York, but at that time nobody wanted to live in lofts, and I wanted a big loft because
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I had a big library at that time and a lot of art that I wanted to keep.
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So basically I stopped working.
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I realized that in the Bible there was the Jubilee Year and there were references to
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Sumer and Babylonia and that there was a background of the biblical debt cancellations, almost
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the same word for deror in Hebrew is andurarum in Babylonian.
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I found that there was all this material and that had never been written in anywhere outside
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of the field of assyriology.
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There was no economic history of the ancient Near East, no economic history of Sumer and
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Babylonia.
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It was all about religion and some culture, Gilgamesh and all that, but not what I was
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most interested in, which was the debt cancellations.
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So I wrote a draft of what I could find by 1984.
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And one of my friends was the Ice Age archaeologist Alex Marshak.
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Although he lived in New York, he was connected to Harvard’s Peabody Museum.
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He showed it to the head of the Peabody, Karl Lamberg-Karlovsky, who told me, “This is great!
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Nobody else is working on it.”
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He appointed me a fellow of the Peabody Museum in Babylonian economic archeology.
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I thought, “This is wonderful, this is really what I want to do.”
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So I spent the next maybe three years writing the first draft of what became the book that’s
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being published in a few months, “… and forgive them their debts”: Credit and Redemption
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from Bronze Age Finance to the Jubilee Year.
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I submitted it to the University of California Press.
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They sent it to scholars to referee, who said that it was impossible that debts could be
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cancelled.
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Their argument was that if debts were cancelled, who would lend money?
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That’s what Rabbi Hillel argued in the Judaic tradition.
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I said, “Most debts were not the result of loans.
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Most debts were when the crops would fail and the cultivators could not pay the palace
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for the fees they’d run up, the rental fees for the land, the fees for the water, for
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the draught animals, or the beer lady for the beer that they’d drunk.
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So every ruler, when they would take the throne in Sumer and Babylonia, for a thousand years,
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would start their rule by cancelling the debts with a clean slate, an amnesty.
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It’s the same amnesty of the kind that Egypt’s Rosetta Stone commemorates.
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Everybody knows that the Rosetta Stone has trilingual inscriptions of Greek, Egyptian
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and Coptic.
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But few know that it’s a fiscal debt cancellation.
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That’s what we call cognitive dissonance, people can’t imagine that the debts were cancelled.
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I realized that this was very controversial, and so my Harvard colleague, Karl Lamberg-Karlovsky,
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suggested that we hold a series of meetings, and asked me to organize them.
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He said that we would hold a colloquium for each controversial chapter of my book.
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We decided to have a meeting every two years, and invite every major specialist from early
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Sumer, the Neo-Sumerian period, Babylonia, other Near Eastern realms, and Egypt.
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Their role was to collect everything they had on whatever the meetings’ topic would
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be.
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Since I was in New York, I worked with the leading Hebraic linguist Baruch Levine at
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NYU.
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I needed someone who was respected in the linguistic field to invite people, because
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most Sumerologists, readers of cuneiform, stayed away from economics, because the mainstream
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economic idea of how society developed is as if Margaret Thatcher would have created
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civilization.
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How would she have done it, or Milton Friedman, or what we call vulgar Marxists who think
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that it was the idea that seemed plausible to Engels when he wrote The Origin of the
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Family, Private Property and the State.
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That’s not how early history actually occurred.
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So the Sumerologists wouldn’t talk to economists.
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But because I was now an archaeologist with Harvard in the anthropology department, they
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agreed to come to the conference.
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The first meeting, in 1994, was on privatization in the ancient Near East and classical antiquity.
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Harvard published that.
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Two years later, we moved on to the second volume, which was on land use and real estate
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ownership: How did property ownership come into being.
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Then, we had planned from the very beginning for the third colloquium volume.
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That was on debt and economic renewal in the ancient Near East.
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I asked for everything that people could find about debt cancellations.
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We found that these occurred all the way through the first millennium.
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Herodotus talked about debt cancellations in Babylonia.
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It was a tradition remaining in the Near East for new rulers taking the throne to cancel
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agrarian debts, to start their reign with the economy in balance.
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Already in Hammurabi’s time 1750 BC, scribes would calculate the growth of compound interest,
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and at that time it was 20% interest.
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This growth diagram is the same exponential chart that I’d drawn up in the savings banks
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in the 1960s to trace the growth of American debt.
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So they were quite aware of the fact that debts couldn’t be paid and that, if you
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insisted on them be paid, you would have debtors falling into bondage.
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So they freed the bond servants, or for debtors had sold their means of self-support, the
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land, they returned the land that had been sold under economic distress.
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The word “distress” means the collateral that you’ve pledged to a creditor.
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It’s an Irish term basically.
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So we published that volume.
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By that time I’d got the people Baruch and Karl and I had invited – the leaders of
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their fields – agreeing with my interpretation.
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We then followed it up with another meeting at the British Museum on the origins of money
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and accounting, and the idea that money was created not for barter, not for trade in goods
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and services, but to denominate debts.
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If a cultivator owed a debt, how did he get money?
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So we did the history of money.
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Then, the one thing we hadn’t done finally was the origins of labor and what it was paid.
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That took ten years to complete, and we found that the origins of labor was organized basically
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in the palace economy, the palaces and temples.
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The main use of such organized labor from the Neolithic and Bronze Age to classical
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antiquity was to fight in the army and to work as corvée labor to build public infrastructure.
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So how do you get a supply of labor?
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You assign it land tenure.
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Land rights were created to assign families enough to support themselves so that they
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could perform corvée labor and fight in the army.
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So taxes came first, then came land tenure, based on what labor you had to supply.
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Attempts to substitute someone to work on the corvée became the basis for paying labor.
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So all of the payments came from what today would be called the public sector.
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That’s not really a very good term.
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It was really the palatial sector, the palace and the temples, as opposed to the community-based
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family on the land.
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So we had a new analysis of the origins of property, not just individuals grabbing,
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as Engels had thought.
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Property was created by the public sector, by the palaces, as assignment of land as needed.
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How much land area is needed in order to supply the labor for the public infrastructure, corvée
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work and service in the army?
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This was the reverse of what’s taught in economic textbooks today, which is, as I said, how
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Margaret Thatcher and right-wingers and Donald Trump would have designed an economy if they
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went back in a time machine.
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So after organizing and editing these five volumes, I’m now writing my own popular version,
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starting with a history of debt.
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Then will come Temples of Enterprise, a series of books on classical antiquity.
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I’m now following up with Greece and Rome.
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Throughout early Greece and Rome, the main fight was between creditors and debtors.
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Creditors ended up grabbing the land.
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The same fight occurred all the way down through the Byzantine Empire.
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The most divisive tension throughout history, from 3rd-millennium Sumer to 2nd-millennium
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Babylonia to the 9th and 10th century in the Byzantine Empire is between the palace wanting
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to collect taxes and have labor for the army, and creditors wanting this land and labor
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for themselves.
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This way of getting the economic surplus is not the way that Marx described it as being
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obtained under capitalism, by employing labor to produce goods to sell at a profit.
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It was by debt and taking interest in ultimately foreclosing in land, which was the real objective.
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In the 9th century there was a big
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fight against strong royal power.
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It was sort of like Donald Trump and the Tea Party Republicans are fighting against the
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state, like the privatization in the Soviet Union fighting against the state.
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The Byzantine emperor invited general Bardas to a big meal.
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The general said, “There’s only one thing that you should do if you want to end the
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warfare.
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You have to tax the wealthy families so that they don’t have any surplus at all.
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You have to give them so much burden that they can’t fight against you.
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You have to prevent the polarization of wealth, because if you let the private sector make
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an enormous amount of wealth, they’re going to try to fight against you and keep all the
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wealth for themselves that you and the palace are now getting.”
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This idea was expressed all the way back in the 7th century 6th century BC with Thrasybulus
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and Periander of Corinth.
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When Thrasybulus took Periander’s herald to a field of grain and said, “Here’s what you
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should do.”
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The land was a field of grain and he took a scythe and he cut off the tops, to make
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all the grain of equal height.
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So Periander went back and exiled the wealthy families, seized their property.
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There was probably a bit of fighting there, and that is basically the fight throughout
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history.
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So that’s what I’ve been working on for the last 20 years.
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Question: How did you take up the interest in Chinese economy?
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Hudson: As Samir Amin said at the meeting yesterday, China is the economy that is trying
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to be the exception to the Western economic model.
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That model is forcing a choice between civilization and barbarism.
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The West is moving rapidly into economic barbarism and militarism.
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As you can see, the austerity program of the Euro is destroying the economy there.
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The United States is cutting taxes on the rich, while indebting the working class very
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highly.
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The one country that is independent and not taking the advice of the World Bank and the
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International Monetary Fund is China.
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So we’re hoping to do what we can to make the Chinese economy successfully resistant.
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What that means is how is China going to handle its real estate, how is it going to handle
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its debt, how is it going to handle its tax system.
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What I’m trying to do is what David Harvey was trying to do in the speech he gave yesterday:
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getting Chinese Marxists to read volume 2 and especially volume 3 of Capital, where
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Marx discusses the dynamics of finance.
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Marxism is much more than volume 1 of Capital.
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You have to read volumes 2 and 3, and especially the elaboration that Marx wrote in the drafts
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that he left for volumes 2 and 3, his Theories of Surplus Value where he discusses the history
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of economic thought leading up to him.
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You realize how Marx was the last great economist in the classical tradition.
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He showed that capitalism itself is revolutionary, capitalism itself is driving forward, and
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of course he expected it to lead toward socialism, as indeed it seemed to be doing in the nineteenth
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century.
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But it’s not working out that way.
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Everything changed in World War One.
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Afterward you had an anti-classical economics, which really was an anti-Marxist economics.
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The fight for marginalist theory, for Austrian theory, the fight for junk economics that
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we have today, is basically a fight against Marxism, because Marx showed the logical conclusion
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to which the Physiocrats, Adam Smith, John Stuart Mill, Ricardo and Malthus, the conclusion
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it was all leading was the synthesis that he made.
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It was later developed by people like Thorstein Veblen and Simon Patten in the United States.
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So I’m hoping that I can contribute what I can to help China’s economy to avoid the financialization
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process and dynamic that is destroying the West.