40:11
One day after we came back, we had to go to the White House for a meeting on oil and the
40:19
balance of payments.
40:20
And who should be the Undersecretary of the Treasury but my old mentor from Standard Oil
40:27
who had explained to me how offshore banking centers worked.
40:32
He explained to Herman and me that he told the Saudi Arabians, “You can charge whatever
40:36
you want for oil.”
40:37
This was right after America quadrupled the price of grain to finance the Vietnam War
40:42
in 1972-73, and OPEC responded by quadrupling the price of oil.
40:50
The Undersecretary of the Treasury explained to me that they could charge whatever they
40:55
wanted for oil.
40:56
He knew that the higher they charged, the more the American companies would be able
40:59
to charge on domestic oil.
41:01
But the Saudis had to recycle all of their dollars into the United States, into Treasury
41:06
bonds or the stock market.
41:07
“You can’t buy American companies, you can only buy stocks or bonds, and you have to
41:15
price your oil in dollars.
41:17
If you don’t, we’ll consider that an act of war.”
41:19
So here I was right in the middle of understanding how imperialism really worked.
41:25
This was not what is in most textbooks.
41:29
Most don’t talk about the balance of payments, but the key to financial imperialism is the
41:35
balance of payments.
41:37
The United States fights to prevent other countries from going back to the gold standard,
41:43
because at the time America went off gold in August 1971, every American dollar bill
41:52
was backed 25% by gold at $35 an ounce.
41:57
Well, finally there was no more surplus gold, and that’s what forced America off gold.
42:02
Its price immediately went way up.
42:05
As an American citizen, I wasn’t allowed to buy gold.
42:09
So I knew it was coming but I couldn’t make any money off it.
42:13
Instead I bought Tibetan and Indian art, Asian art primarily.
42:19
To make a long story short, I became a financial advisor to the Canadian government as a result
42:30
of the stock brokerage work in Montreal.
42:33
They said, “We need somebody who knows the American stock and bond market”.
42:36
I was at that time the highest paid economist per diem in the United States for financial
42:43
analysis.
42:44
So I got a call saying, “They’re going to want to hire you but there’s only one way
42:49
in which they can tell how intelligent you are.
42:53
Do you know about wine?”
42:56
When I grew up at the University of Chicago, the university paid its professors so badly
43:02
that to make more money, their ideal was to be a wine steward at the Pump Room, which
43:09
was the fancy restaurant in Chicago.
43:12
It was featured in the Blues Brothers comedy with John Belushi.
43:21
Anyway, I took a sommelier course, got a license, and brought two bottles, one Richebourg and
43:29
one La Tâche that I bought in the remainder carton at an uptown store.
43:36
I gave them to my host in Ottawa and the government guys said, “That’s the guy we want.”
43:42
So I wrote a study that Canada didn’t have to borrow money abroad for the provinces to
43:52
invest domestically.
43:54
They could create their own money.
43:56
Basically, what I wrote was the first example of what’s now called Modern Monetary Theory,
44:02
that governments can create their own money, their own credit.
44:07
They don’t need a foreign-currency backing for it, and so all basically the same circular
44:12
flow analysis that I’d developed from my history of thought.
44:18
a Physiocratic analysis.
44:32
One of the top investment analysts for the Royal Bank decided to become the head of personnel.
44:41
He said he thought that it’s a personality problem that economists can’t understand how
44:47
the world works, that there’s a particular kind of dumb person that becomes an economist.
44:54
It’s a kind of autism, of thinking abstractly without a sense of economic reality.
45:03
So he got me an appointment with the Secretary of State of Canada.
45:11
In Canada the Secretary of State is in charge of education, films and culture.
45:17
So I became Canada’s cultural adviser, which is what I thought was fine all along, and
45:24
I wrote a report.
45:29
Around that time I also was an economic adviser to the
45:32
United Nations Institute for Training and Research, UNITAR, writing their reports on
45:37
North/South debt, the foreign debt of third world countries, denominated in dollars, and
45:44
how this was deranging their economies.
45:48
They had a meeting in Mexico financed by the Mexican president and I was invited down there.
45:59
I gave a report saying that there was no way that the third-world debts can be paid.
46:07
My first job I worked on at Chase Manhattan was to estimate how much export revenue Argentina,
46:18
Brazil and Chile could make.
46:21
The idea was that all of their export earnings could enable them to pay interest on money
46:29
borrowed from US banks.
46:30
The idea was that the entire trade surplus should be pledged as debt service to the American
46:36
banks.
46:37
My job was to think how much that was, and what should Chase’s share be.
46:42
So, at the Mexican UNITAR conference, I said that these debts cannot be paid, therefore
46:50
they should not be paid, they should be canceled.
46:54
There was quite a stir over that.
46:55
Well at the end of the conference they had the rapporteurs summarizing the papers.
47:00
The US rapporteur said that Dr. Hudson has given a report saying that third-world countries
47:07
should export more in order to pay their debts.
47:10
I stood up slowly and said, “I must insist that the President of Mexico offer a public
47:17
explanation, apology to me and the conference.
47:21
This rapporteur has inverted and reversed everything I said.
47:26
I believe he has a covert purpose.
47:28
I’m pulling out the American delegation and I’m pulling out the Canadian delegation too.
47:33
We cannot be a part of this travesty.”
47:35
Then I walked out, wondering what’s gonna happen!
47:39
The Russian delegate came out laughing and said, “Ah!
47:45
You’ve dominated the whole conference.
47:47
You’ve made chaos out of it.
47:50
You’ve embarrassed the CIA.
47:51
This is fantastic.
47:53
Here’s my card in New York.”
47:59
Later that evening I was told, “You know, they’re looking for you to beat you up.”
48:02
Well as it happened an old girlfriend of mine was in a group who were in Mexico for an
48:08
art exhibition.
48:10
They were surrealist artists from Amherst, and they were also doing a surrealist ballet.
48:15
So I went to the ballet with them and they said, “Look!
48:19
The thugs are there.”
48:21
So I hid out with them on the stage in their ballet.
48:24
The goons were looking in the audience and I was on the stage and we were all just surrealistic.
48:29
Nobody knew how to dance or anything, it was all just surrealistic.
48:32
And they, you know, the goons all went home.
48:34
I learned that if they can’t find you, they usually give up and leave you alone.
48:38
I went back to New York, but I realized that the debt issue was so controversial –
48:44
the idea that debt couldn’t be paid.
48:53
I spent about a year and I’d got through medieval period, Europe, World War One, and then even
49:02
Greece and Rome.
49:03
But then I found — it was about 1980, 1981, at that time I sold my house on the Lower
49:12
Side and moved into a loft near Wall Street which was very low price there at that time,
49:19
(I bought it for $20,000.
49:22
Later I sold it for $580,000 but that’s another story), it shows you the real estate in New
49:26
York, but at that time nobody wanted to live in lofts, and I wanted a big loft because
49:31
I had a big library at that time and a lot of art that I wanted to keep.
49:36
So basically I stopped working.
49:39
I realized that in the Bible there was the Jubilee Year and there were references to
49:47
Sumer and Babylonia and that there was a background of the biblical debt cancellations, almost
49:55
the same word for deror in Hebrew is andurarum in Babylonian.
50:00
I found that there was all this material and that had never been written in anywhere outside
50:06
of the field of assyriology.
50:07
There was no economic history of the ancient Near East, no economic history of Sumer and
50:10
Babylonia.
50:11
It was all about religion and some culture, Gilgamesh and all that, but not what I was
50:17
most interested in, which was the debt cancellations.
50:19
So I wrote a draft of what I could find by 1984.
50:25
And one of my friends was the Ice Age archaeologist Alex Marshak.
50:33
Although he lived in New York, he was connected to Harvard’s Peabody Museum.
50:38
He showed it to the head of the Peabody, Karl Lamberg-Karlovsky, who told me, “This is great!
50:44
Nobody else is working on it.”
50:47
He appointed me a fellow of the Peabody Museum in Babylonian economic archeology.
50:53
I thought, “This is wonderful, this is really what I want to do.”
50:56
So I spent the next maybe three years writing the first draft of what became the book that’s
51:03
being published in a few months, “… and forgive them their debts”: Credit and Redemption
51:09
from Bronze Age Finance to the Jubilee Year.
51:12
I submitted it to the University of California Press.
51:17
They sent it to scholars to referee, who said that it was impossible that debts could be
51:20
cancelled.
51:21
Their argument was that if debts were cancelled, who would lend money?
51:24
That’s what Rabbi Hillel argued in the Judaic tradition.
51:29
I said, “Most debts were not the result of loans.
51:32
Most debts were when the crops would fail and the cultivators could not pay the palace
51:38
for the fees they’d run up, the rental fees for the land, the fees for the water, for
51:44
the draught animals, or the beer lady for the beer that they’d drunk.
51:49
So every ruler, when they would take the throne in Sumer and Babylonia, for a thousand years,
51:55
would start their rule by cancelling the debts with a clean slate, an amnesty.
52:00
It’s the same amnesty of the kind that Egypt’s Rosetta Stone commemorates.
52:04
Everybody knows that the Rosetta Stone has trilingual inscriptions of Greek, Egyptian
52:13
and Coptic.
52:14
But few know that it’s a fiscal debt cancellation.
52:17
That’s what we call cognitive dissonance, people can’t imagine that the debts were cancelled.
52:23
I realized that this was very controversial, and so my Harvard colleague, Karl Lamberg-Karlovsky,
52:33
suggested that we hold a series of meetings, and asked me to organize them.
52:39
He said that we would hold a colloquium for each controversial chapter of my book.
52:43
We decided to have a meeting every two years, and invite every major specialist from early
52:47
Sumer, the Neo-Sumerian period, Babylonia, other Near Eastern realms, and Egypt.
52:52
Their role was to collect everything they had on whatever the meetings’ topic would
52:58
be.
52:59
Since I was in New York, I worked with the leading Hebraic linguist Baruch Levine at
53:07
NYU.
53:08
I needed someone who was respected in the linguistic field to invite people, because
53:15
most Sumerologists, readers of cuneiform, stayed away from economics, because the mainstream
53:21
economic idea of how society developed is as if Margaret Thatcher would have created
53:29
civilization.
53:32
How would she have done it, or Milton Friedman, or what we call vulgar Marxists who think
53:41
that it was the idea that seemed plausible to Engels when he wrote The Origin of the
53:47
Family, Private Property and the State.
53:50
That’s not how early history actually occurred.
53:51
So the Sumerologists wouldn’t talk to economists.
53:55
But because I was now an archaeologist with Harvard in the anthropology department, they
54:02
agreed to come to the conference.
54:04
The first meeting, in 1994, was on privatization in the ancient Near East and classical antiquity.
54:14
Harvard published that.
54:15
Two years later, we moved on to the second volume, which was on land use and real estate
54:21
ownership: How did property ownership come into being.
54:26
Then, we had planned from the very beginning for the third colloquium volume.
54:31
That was on debt and economic renewal in the ancient Near East.
54:34
I asked for everything that people could find about debt cancellations.
54:37
We found that these occurred all the way through the first millennium.
54:40
Herodotus talked about debt cancellations in Babylonia.
54:45
It was a tradition remaining in the Near East for new rulers taking the throne to cancel
54:50
agrarian debts, to start their reign with the economy in balance.
54:55
Already in Hammurabi’s time 1750 BC, scribes would calculate the growth of compound interest,
55:05
and at that time it was 20% interest.
55:08
This growth diagram is the same exponential chart that I’d drawn up in the savings banks
55:17
in the 1960s to trace the growth of American debt.
55:20
So they were quite aware of the fact that debts couldn’t be paid and that, if you
55:25
insisted on them be paid, you would have debtors falling into bondage.
55:30
So they freed the bond servants, or for debtors had sold their means of self-support, the
55:37
land, they returned the land that had been sold under economic distress.
55:43
The word “distress” means the collateral that you’ve pledged to a creditor.
55:50
It’s an Irish term basically.
55:57
So we published that volume.
56:01
By that time I’d got the people Baruch and Karl and I had invited – the leaders of
56:12
their fields – agreeing with my interpretation.
56:17
We then followed it up with another meeting at the British Museum on the origins of money
56:23
and accounting, and the idea that money was created not for barter, not for trade in goods
56:32
and services, but to denominate debts.
56:35
If a cultivator owed a debt, how did he get money?
56:38
So we did the history of money.
56:40
Then, the one thing we hadn’t done finally was the origins of labor and what it was paid.
56:45
That took ten years to complete, and we found that the origins of labor was organized basically
56:55
in the palace economy, the palaces and temples.
56:58
The main use of such organized labor from the Neolithic and Bronze Age to classical
57:05
antiquity was to fight in the army and to work as corvée labor to build public infrastructure.
57:12
So how do you get a supply of labor?
57:18
You assign it land tenure.
57:23
Land rights were created to assign families enough to support themselves so that they
57:33
could perform corvée labor and fight in the army.
57:37
So taxes came first, then came land tenure, based on what labor you had to supply.
57:49
Attempts to substitute someone to work on the corvée became the basis for paying labor.
57:56
So all of the payments came from what today would be called the public sector.
58:01
That’s not really a very good term.
58:04
It was really the palatial sector, the palace and the temples, as opposed to the community-based
58:10
family on the land.
58:12
So we had a new analysis of the origins of property, not just individuals grabbing,
58:22
as Engels had thought.
58:25
Property was created by the public sector, by the palaces, as assignment of land as needed.
58:32
How much land area is needed in order to supply the labor for the public infrastructure, corvée
58:40
work and service in the army?
58:42
This was the reverse of what’s taught in economic textbooks today, which is, as I said, how
58:51
Margaret Thatcher and right-wingers and Donald Trump would have designed an economy if they
58:56
went back in a time machine.
58:59
So after organizing and editing these five volumes, I’m now writing my own popular version,
59:07
starting with a history of debt.
59:08
Then will come Temples of Enterprise, a series of books on classical antiquity.
59:14
I’m now following up with Greece and Rome.
59:18
Throughout early Greece and Rome, the main fight was between creditors and debtors.
59:26
Creditors ended up grabbing the land.
59:28
The same fight occurred all the way down through the Byzantine Empire.
59:34
The most divisive tension throughout history, from 3rd-millennium Sumer to 2nd-millennium
59:40
Babylonia to the 9th and 10th century in the Byzantine Empire is between the palace wanting
59:47
to collect taxes and have labor for the army, and creditors wanting this land and labor
59:56
for themselves.
59:59
This way of getting the economic surplus is not the way that Marx described it as being
60:07
obtained under capitalism, by employing labor to produce goods to sell at a profit.
60:12
It was by debt and taking interest in ultimately foreclosing in land, which was the real objective.
60:21
In the 9th century there was a big
60:36
fight against strong royal power.
60:38
It was sort of like Donald Trump and the Tea Party Republicans are fighting against the
60:45
state, like the privatization in the Soviet Union fighting against the state.
60:51
The Byzantine emperor invited general Bardas to a big meal.
60:57
The general said, “There’s only one thing that you should do if you want to end the
61:03
warfare.
61:04
You have to tax the wealthy families so that they don’t have any surplus at all.
61:08
You have to give them so much burden that they can’t fight against you.
61:12
You have to prevent the polarization of wealth, because if you let the private sector make
61:19
an enormous amount of wealth, they’re going to try to fight against you and keep all the
61:24
wealth for themselves that you and the palace are now getting.”
61:28
This idea was expressed all the way back in the 7th century 6th century BC with Thrasybulus
61:34
and Periander of Corinth.
61:37
When Thrasybulus took Periander’s herald to a field of grain and said, “Here’s what you
61:46
should do.”
61:47
The land was a field of grain and he took a scythe and he cut off the tops, to make
61:53
all the grain of equal height.
61:54
So Periander went back and exiled the wealthy families, seized their property.
62:01
There was probably a bit of fighting there, and that is basically the fight throughout
62:05
history.
62:08
So that’s what I’ve been working on for the last 20 years.
62:13
Question: How did you take up the interest in Chinese economy?
62:25
Hudson: As Samir Amin said at the meeting yesterday, China is the economy that is trying
62:31
to be the exception to the Western economic model.
62:35
That model is forcing a choice between civilization and barbarism.
62:42
The West is moving rapidly into economic barbarism and militarism.
62:47
As you can see, the austerity program of the Euro is destroying the economy there.
62:56
The United States is cutting taxes on the rich, while indebting the working class very
63:04
highly.
63:06
The one country that is independent and not taking the advice of the World Bank and the
63:12
International Monetary Fund is China.
63:14
So we’re hoping to do what we can to make the Chinese economy successfully resistant.
63:21
What that means is how is China going to handle its real estate, how is it going to handle
63:26
its debt, how is it going to handle its tax system.
63:31
What I’m trying to do is what David Harvey was trying to do in the speech he gave yesterday:
63:39
getting Chinese Marxists to read volume 2 and especially volume 3 of Capital, where
63:45
Marx discusses the dynamics of finance.
63:50
Marxism is much more than volume 1 of Capital.
63:53
You have to read volumes 2 and 3, and especially the elaboration that Marx wrote in the drafts
64:00
that he left for volumes 2 and 3, his Theories of Surplus Value where he discusses the history
64:08
of economic thought leading up to him.
64:11
You realize how Marx was the last great economist in the classical tradition.
64:18
He showed that capitalism itself is revolutionary, capitalism itself is driving forward, and
64:24
of course he expected it to lead toward socialism, as indeed it seemed to be doing in the nineteenth
64:31
century.
64:32
But it’s not working out that way.
64:37
Everything changed in World War One.
64:39
Afterward you had an anti-classical economics, which really was an anti-Marxist economics.
64:47
The fight for marginalist theory, for Austrian theory, the fight for junk economics that
64:54
we have today, is basically a fight against Marxism, because Marx showed the logical conclusion
65:01
to which the Physiocrats, Adam Smith, John Stuart Mill, Ricardo and Malthus, the conclusion
65:07
it was all leading was the synthesis that he made.
65:12
It was later developed by people like Thorstein Veblen and Simon Patten in the United States.
65:19
So I’m hoping that I can contribute what I can to help China’s economy to avoid the financialization
65:29
process and dynamic that is destroying the West.