Transcription – 2025.03.26 – Glenn Diesen
Prof. Michael Hudson: Economic Collapse in Europe
GLENN DIESEN:
Hi everyone and welcome. Today is the 26th of March 2025 and I am joined by Michael Hudson, a household name in the world of economics.
The world is changing very rapidly, we see. The US seems to be adjusting to multipolarity. It needs to have a new priority. Europe seemingly is less of a priority, while there seems to be a need to make peace with Russia. And we see that on the European side, rather than pulling back from the proxy war against Russia, the Europeans insist now that they will continue the war without the United States, which is a bit doubtful, but it also gets worse. (They will be) using money they don't have to build weapons that won't be produced for many years. And the purpose of defeating Russia isn't clearly defined how that would actually work. So a lot of this doesn't make sense, and a lot of people have been trying to make sense of it.
So how do you see the economic and political narratives that have led Europe down this path?
MICHAEL HUDSON: Well, you're quite right, Glenn, when you say it doesn't make sense. And the situation today is very different. When I began 60 years ago as an economist, and I stopped calling myself an economist and began calling myself a futurist when I worked with the Hudson Institute and the Futures Group, and being a futurist you could go beyond economics. It was very easy to explain why countries were acting in the way they acted. You just said, "well what's their self-interest?" And if they understood what their self-interest was, then you just plan it all out and say, does it intersect with other countries' self-interest? How do you put them together?
And obviously, as you've discussed all along and have just said, the seemingly obvious European, especially German self-interest, is to be complementary with Russia – to do exactly what it was doing for the last few decades, to get energy from Russia and give Russia what it needs (industrial goods, industrial investment to make its own cars and automobiles and consumer goods).
So the real question is, how do you explain why Europe seems not to be acting in its self-interest and taking this bellicose Cold War split that it's doing today?
Well, you pointed out before that it's all about the narrative, that somehow there is a false narrative that overwhelms the natural reality. And I think it's natural for people to understand "what is reality" and it's more difficult to make them twist it around and to accept a false narrative.
And I've been trying to figure out why would Europe, and especially Germany, and especially the new leader, Merz, from BlackRock, have this idea that the future of Europe lies in fighting with Russia. And I think I've got the answer. And that is, they have a false economic narrative that underlines everything, a false worldview. It's the worldview that underlies the way that the Eurozone was set up. It's a false economic view.
In America, we call it "military Keynesianism." The idea is that if you spend money on the military budget, that's going to create investment and employment, and that is a way of injecting government money into the economy by running deficits.
Well, the problem for Europe is the Eurozone's rule that prevents it from running a deficit of more than just, I think, 5% of GDP.
Europe, especially right now, has so many social spending programs that it needs (including subsidizing families so that they can afford to buy the energy that they're not buying from Russia anymore, but have to buy from the United States at four times the price of LNG, liquefied natural gas). How do you get around this? Well, think of what Donald Trump was trying to get Europe to do, saying, well, you've got to believe the framework, the myth that Russia is going to attack Europe and trying to recreate the old Soviet empire. Well, we know that that's not the case, because no country can afford to invade another country, a big country, anymore. It would take 10 or 20 million Russian troops. And the big thing is, Europe doesn't have anything now that Russia particularly wants.
What I think Merz's idea is, "well, if we say that we are defending ourselves against an enemy, then all of a sudden we have a national security excuse for going beyond the constraint of the Eurozone on how much money we can spend. And if we say that we're spending militarily (I think he's talked about almost a trillion Euros on spending rearmament on European industry), then somehow that is going to spur German, French, maybe even English economic recovery."
Well, the obvious question is, do you really need to go to war or have a warlike narrative in order to enable the government to pump money into the economy, to promote a Keynesian policy of economic recovery? Obviously Europe needs to recover right now economically, it's in a mess. Its industry has been closing down because of the end of Nord Stream and the end of importing (oil) from Russia.
There's a kind of idea that only economists would have, a kind of tunnel vision that thinks that somehow, if you pump money into the economy, it's all going to be amorphous and fungible and turned into GDP, and that can be a recovery. (on criticism of GDP)
And (that is the) only way that I can explain why Europe is following such an unrealistic policy; to believe that it has to conjure up fears of war with Russia over Ukraine, and indeed sabotage any attempt by the United States to end its conflict with Russia (so it (the US) can pursue other conflicts elsewhere), is this tunnel vision of economists that thinks that somehow you have to go to war in order to let the government spend money into the economy to revive the economy as if that's going to revive the economy.
Well, you can just imagine the silliness of (this) thinking, almost a trillion euros for arms. It's going to take many years to do this, many years of investment. All right, that investment is going to employ labor and expand the economy. But the problem is who's going to buy the arms?
Producing arms is not like producing washing machines and cars which consumers can use. It's not like producing capital goods and machinery that investors can use. There's really no use for arms except to have them destroyed by other people going to war with each other.
And it really is the West that's going to war with the rest of the world. I don't think the rest of the world has many needs for arms except to defend itself against the new Cold War from the West. And so, obviously, you're not going to have Asia and the United States buying European arms to fight each other.
So, Europe is producing all of this enormous investment. Instead of investing and increasing living standards and increasing production of consumer goods or capital goods, it's producing useless goods (weapons). And this is how economists think. They don't think of use-values. They don't think of a critical, path analysis of "what do we need in order to get prosperity?" It's the neoliberal junk economics of a sort of bastardized Keynesianism.
The only way that you can explain why Europe is acting so much against its self-interest is the tunnel vision of thinking like an economist.
GLENN DIESEN: Interesting you mention "military Keynesianism." You know, the former Greek finance minister, Yanis Varoufakis, he also warned that this is a dead end, especially for the Germans. This idea that you just build enough weapons and this will create jobs, and with the jobs, there's money, and then suddenly you have an economy.
But Europe has some real problems though, in terms of deindustrialization. Indeed, this is a very critical time to have these economic problems, because the industries of the world are largely shifting now. That is, with digitalization, we're entering what many refer to as the Fourth Industrial Revolution, in which digital technologies have more ability to manipulate the physical world. It's a point in time where we should really be investing in the technologies of the future, trying to catch up a bit with the Americans and the Chinese. But instead of industrializing, we're (Europe) now going to prepare for war instead. (As for the Germans, they can't build cars anymore competitively. So now the idea is that they should make tanks instead). But this is not how economics works, as you said. You're literally building things which should be blown up.
What do you see with the motivation of a "concentrating" power? Because it does occur to me that making very hawkish radicals, such as Kaja Kallas to be the EU foreign policy chief (a person who says she doesn't believe in diplomacy, she wants to destroy Russia, break it up in pieces – and indeed, there's more and more criticism towards her very vile rhetoric, it goes well beyond what the EU has a consensus around the language that should be used). I say this because in 1870 to 1871, you had this Franco-Prussian War. They often argue that if the Germans didn't provoke it, at least they took advantage of it, because by having this external threat, they were able to then bring together the German states. Do you see this also being, I guess we are speculating to some extent, a possible motivation?
MICHAEL HUDSON: Well that motivation is certainly backfiring, because what you're seeing is that the strength of this German-French-British "new Cold War militarism" is breaking up the European community.
One of the reasons is, when you mention Miss Kallas and her friend von der Leyen, you see, how can the EU leadership be so pro-war, whereas the voters of Europe, especially in Germany but throughout Europe, don't want war. How is it that the EU bureaucracy is able to put in warmongers who have almost a traumatic hatred of Russia, an emotional wanting to go to war with them, that is not shared by the voters and the population at large? Well, the result is, I think, that at some point you're already having Hungary, the Czechs, even questions by Meloni and many Frenchmen. Do we really want to be a part of this?
How can we remain, is it possible to remain in the whole political way in which the European community has been structured, with somehow unelected war promoters, war hawks (like Kallas and von der Leyen) in charge of European foreign policy, (putting) all of their fellow neocons and neoliberals in the EU leadership. It's as if the EU leadership is opposed to the individual countries. How long can Europe really stay together without countries beginning to withdraw? Already, Hungary has said, "Well, you know, we're going to veto these levies on us to try to fight Russia. We don't want to fight Russia. We want gas from Russia. We want the way it used to be before 2022." Other countries are saying the same thing.
So what you've described is actually splitting up Europe, and it looks like the only way that Europe can escape from this false narrative and this false economics is by somehow breaking up and starting all over again with a new structure. And you look at, how did all this come to be in the first place?
Well, it was largely US influence (on) the way that Europe (was) shaped, that the United States pressed a design of Europe. Not only the Eurozone with its monetary rules following "University of Chicago right-wing economics," but the whole politics going back to Operation Gladio in Italy and other countries.
The United States has been sponsoring, through non-governmental organizations, all sorts of the political leadership of Europe today. That is how people like Baerbach and the Greens got promoted. People that you think, "How can these people ever have risen and gotten so many credentials?" And well, a lot of that's by the US maneuvering to do to Europe what it did with putting Tony Blair in, for instance, in England. The idea is to find Tony Blairs for Germany, France, Italy, and other countries, who will be very loyal to US policy and the Cold War.
And that loyalty to the US is what's splitting up Europe today.
Well, you've seen the European politicians who say, "No, we're breaking away from the United States. The United States wants peace, or at least Trump wants peace with Putin, but we certainly don't. And we're not going to spend this 5% of our GDP on military arms on buying American arms, as Donald Trump had hoped. We're going to spend it on buying German arms." And there's an attempt to use this anti-Americanism to reinforce what they think is a way of solidifying the European countries, but it's not re-solidifying it.
Especially as the economic situation gets worse and worse: as Germany de-industrializes and loses its heavy industry, its fertilizer industry, all the industries that were dependent on imports of raw materials from Russia, and as Europe agrees with the United States to cut itself off from China/trade with China. It's not exactly in its own self-interest, but it's in the idea of its self-interest based on this false narrative – as a false economics narrative as well as a false political narrative. And that's the problem.
And given the role of the mass media in Germany and other countries, you're not really getting much of the other side of the issue. And you've just seen in Germany (talking about) let's ban the AFD, the Alternative for Deutschland, just like other countries, just like Romania is trying to ban the anti-war candidates. You're having a suspension of liberty. And you're also having Germany ban advocates of peace in Gaza, defenders of Gaza, or just Germans who say, "We don't want genocide, we want peace." All of this is being banned, (including) visitors who are coming to give speeches or discussing the war in Gaza are turned away.
You're having this antithesis of everything that the cover story of the European Union, of prosperity and democracy, was supposed to promote.
GLENN DIESEN: I'm thinking that part of the problem for the Europeans is also that they got trapped in narratives. I spoke recently with George Beebe, the former CIA director for Russia analysis. And he wrote an interesting article where he was going somewhat in the same direction, that the Europeans have now really locked themselves in a corner with this idea that it was an unprovoked full-scale invasion to wipe Ukraine off the map, (Putin) is a new Hitler, attempting to restore the Soviet Union. All of those narratives which have been spun.
And it's interesting because this has kind of been Trump's key strength. He seems to be able to just ignore everything, he ignores key narratives. He just begins to push interests where other politicians will be trapped into these common narratives.
Now, what's fascinating with the Europeans is they were pulled to a big extent along with Biden. Because keep in mind, for all these years, the Europeans were very well aware that all this NATO expansionism, especially in Ukraine, was a red line, something that would likely trigger a war.
But they got on board with the Biden train, which was as anti-Russian as could be. And I think the Europeans prepared themselves as well. That is, they "made" Kaja Kallas (again, not the brightest tool in the shed), but "she's a wartime leader," they said, "she's very hawkish on Russia, this is what we need."
And now it's very difficult to steer the ship around. As you suggested as well, there's a lack of independent media in Europe these days. So there's very little ability to challenge the narrative-driven media with actual facts. It's very hard to turn around.
But at some point it has to be forced around, doesn't it? Because, while many Europeans now have this great ambition to learn to live without the Americans, Kaja Kallas made a statement that, "the world, the free world, needs a new leader, so we're done with America." (She talks a big game, but she's not a prime minister or anything).
(But) we have independent nation states in Europe, and not the whole continent is ready to break off with the Americans, especially the British. (They seem to be more hawkish on Russia, but they also would like to be the main partner of America). So there will be huge fragmentations here. And I also wonder, Poland is one of the most anti-Russian countries we have on the continent as well, but if Germany is going to arm itself to the teeth again, does Poland want to divorce itself from the United States, which is kind of its "safety blanket" when it's stuck between the Germans and the Russians.
I just don't see unity in Europe based on going against both the Russians and Americans at the same time. Indeed, you might end up in a horror situation for the Europeans, where the Americans and Russians come together to put pressure on the Europeans for not falling in line on the Ukraine issue. But I want to ask you about the feasibility of this whole thing, because obviously Europe or the Europeans are in panic.
We see France, Germany and Britain, you know, they will arm themselves. Financial Times wrote recently that the main challenge now was to convert European welfare states to warfare states, suggesting that they might need a heavy dose of war propaganda if you're going to have the public consent to this.
So what are the political and economic considerations here? Do you see this as being feasible?
MICHAEL HUDSON: A warfare state is not a state, as the name implies, that is going to provide welfare for the population at large. So what are they going to vote for? Are they going to vote for their self-interest, which is better living standards? Or are they going to say, "we're going to pay higher prices for the gas and for electricity and for heating our homes. We're going to have much lower living standards, but it's all worth it just to fight Russia."
You're going to have a conflict between the narrative of "we need war in order to save the world," and the reality of somebody making a big sacrifice. And also the reality of other countries' response, especially of France and England being the dangerous triggers here. President Putin has said, "Alright, they're going to be more active in providing Ukraine with missiles, long-distance missiles, that can hit Russian territory.
We're not going to pretend that all this fighting in Ukraine is about Ukraine. It's really about NATO and behind NATO, the United States wanting to break up Europe and divide Europe. And since we know that the fight (is with) NATO, and in Europe, that it's led by Macron in France and now Starmer in Britain, if a missile made by France or England hits Russia, we're going to respond not against the Ukrainian territory that launched it, but against the country that made the missile. (So we're) going to respond against Britain."
Will it be London? Will it be some British manufacturing territory? Will it be Paris or one of the Parisian military production plants?"
So there's a possibility of a Russian response that realizes that it's just a charade to pretend that all of this fighting is in Ukraine. That's the point that Putin and Lavrov have been making in their discussions with the Americans. They're saying, "Look, forget Ukraine. We really would be better off not even discussing it right now. Let's talk about the whole roots of the new Cold War. Let's talk about the fact that when the Soviet Union broke up in 1991, NATO should have been dismantled also." That's when Putin said, and the Russians said, "maybe we should join NATO and all be together."
They want to go back to try to undo this whole salami carving up Russia bit by bit and deal with the underlying economic structure.
That's what the European governments are against. If they're against restructuring, going back and de-structuring the whole Cold War apparatus (economic apparatus and political apparatus) that's been put in place since 1991, this cannot be done smoothly. It's got to trigger (some sort of) consciousness. There has to be a critical mass of the population realizing what the problem is. Well, you're seeing this to some extent in Germany, but really, from my point of view, the only party that has a reality-based economics is the Sarah Wagenknecht group. And she hardly got to the 5% cutoff point to get into the government.
So it's like Europe is in a pre-collapse situation, a pre-crisis situation. But in the end, you cannot keep a false narrative going when reality becomes stronger and stronger. And the gap between reality and "the narrative" becomes so strained that finally people realize, "that doesn't work."
What you need is an alternative to be put forth. And there are political alternatives, yes let's not fight with Russia, but there hasn't been an economic alternative to how, if we don't fight with Russia, then how are we going to re-establish prosperity in Germany and in the other European countries? If it's not by producing more military goods, how are we going to restructure the economy in a better way than the way in which the Eurozone was set up originally? Without an economic discussion of that kind of alternative, you're seeing Germany and Europe just go into a blind alley that is getting tighter and tighter and at some point just has to explode.
The real questions are:
Does Europe really have to go to war to be able to spend money creation into the economy to employ labor and somehow re-industrialize?
How can it even re-industrialize and make arms without getting gas and energy and oil and other raw materials from Russia and without trading with China?
How can it re-industrialize if it's cutting itself off from the rest of the world that's growing so much more rapidly?
And even from the United States, how can it go it alone when it's already de-industrialized so much? When it's already cut off? It's what would seem to be all of its natural potential sources of strength that it's now lost.
There's no realistic way of explaining it, except that they have a set of false assumptions and false ideas of how an economy, even a society works.
GLENN DIESEN: It seems to be some distortion about the image of Europe itself versus the rest of the world, because we see now the EU being quite hawkish on China. And then suddenly the Europeans would like to get some cooperation going. They invited Xi Jinping to come over to Brussels and he's not going to come. And part of the reason is the way the Europeans have been behaving. But the assumption kind of appears to have been, you know, we play tough with the Chinese and then we offer the carrot and invite them over and then they would come running.
But it turns out that's not happening anymore. I think it's very difficult for the Europeans to adjust to this new world because, again, it's been almost 500 years of a very European centric world where the Europeans, we, have been the subject. The rest of the world were the objects. We got to organize the whole world around us. And now suddenly it's been turned on itself a bit. We no longer have a seat at the table. We find ourselves on the menu instead. It's a bit strange to see.
Again, that's why the Ukraine war is so interesting because now you have the Americans and the Russians effectively negotiating a peace in Europe, moving the pieces around and the Europeans find out that they don't have a seat at the table. They are the new pieces.
It appears this would be an ideal time to revisit some of the mistakes we made after the Cold War. Because after the Cold War, a lot of European countries (also America, by the way) realized that re-dividing the continent and returning to bloc politics would revive the Cold War. And while it would alienate and create conflicts with the Russians, at least it would cement America's presence in Europe.
But now that the United States is planning to reorient itself, it's very openly saying "you (Europe) are not a priority anymore." We're left with the conflict with Russia. And it kind of begs the question, what is the point of this?
But I did pick up on something you said, which was, you used the word collapse.
I don't see that as an exaggeration, because if we're going to have this economic plan, which doesn't work, (that is, cut ourselves off from every center of power and then arm ourselves), (we have) to get the population to accept the idea that the good times are over, there's no more welfare and prosperity because now we have to tighten our belts to fight Russia.
In order to sell this story, you need so much propaganda. There's not going to be an ability to pursue basic national interest. You're going to have more political dissent, which has to be undermined. The narrative has to be elevated above the facts. And the economics doesn't work. The politics won't fit anymore. And as you said, eventually, reality will catch up and punch holes in the narrative.
And then do you think it's a possibility that, if not Europe, at least the EU could move towards a collapse?
MICHAEL HUDSON: Well, we're in a pre-collapse situation. Before you have a collapse, there's going to be a slow crash. The current trend is going to mean that living standards and industrial profits and employment are slowly getting worse and worse and worse. There can't be a crash until you have a revolutionary situation, and a revolutionary situation is having an alternative. And without an alternative, there's not a crash, there's just a slow crash, a slow tightening, slowly going down as the economy deteriorates.
You mentioned (just now) that Europe wants to get tough with China. You can't get tough with China. You can't threaten China or Russia, because there's nothing that China or Russia needs in Europe. That's what is really so shocking to the European mentality, that the world can get along without Europe at all.
Putin and Lavrov said, "we hoped to have a symbiotic relationship with European industry and technology and complementary economies. But we realized that won't work, so we have re-shifted focus eastward to Eurasia and to BRICS. We realized that we don't need Europe anymore, now that Europe has lost the industrial appeal that it had before Nord Stream in 2022, there's really nothing that it has to offer. And we, (Russia), certainly don't want to take it over because it would be an albatross for whoever takes Europe as a protectorate under its wings. We (Russia) don't want that."
It's very hard, I think, for Europeans to realize that they're not needed anymore, that they've lost their place in the world. I think most politicians in every country try to do what Trump has said, "Make America great again." In Europe, they'll say, "Well, let's make Europe great again." Or, "Europe is great." Or, "Let's recover our greatness."
Instead they've taken steps that seem so irreversible that they can't do anything. And what they've created is, I won't say a counter-narrative on the part of Russia and China because narratives are usually artificial false views of the world, but a counter-reality. And I think that last week, Foreign Minister Lavrov said, "Here is how Russia and our allies are viewing Europe." And it's a brief quote:
"Over the past 500 years, when the West was more or less formed in the form in which it has survived to this day, all the tragedies of the world originated in Europe, or happened thanks to European politics, colonialism, wars, crusaders, the Crimean War, Napoleon, the First World War, Adolf Hitler, all of that came from Europe."
Well President Putin, in his way, said, all this really goes back to the 11th century, when the Great Schism in the Roman Church broke from the Eastern Orthodox Church in Constantinople. And the Romans said, "We have to take over Christianity. We have to create a united Europe under the control of Rome."
And so the first thing they did, after about 1051 or so, when they had the Great Schism, was they began to say, "How are we going to defeat and destroy Turkey, Constantinople, by extension all the areas that the Orthodox Church controlled?"
The answer was that they hired Norman warlords in Europe.
The first warlords they hired was in the 1070s, when they went to one of them and said, "Well, we'll give you Southern Italy and Sicily, which right now is a Byzantine area. If you get rid of the Byzantines and make that Catholic, we'll bless you as the king."
They then went to William, the conqueror of England, and said, "Well, if you conquer England right now, it's not really paying us very much money. So we'll bless you as the king of England if you pledge fealty to Rome."
And the whole Crusades was really a crusade to destroy the Greek Orthodox Church in Spain, in Southern Italy, in the Balkan area. In every area, the Roman church had warlords taking over.
In order to finance it, the military spending, the church abolished its opposition to usury. It created international banking to finance war lending.
You can see how this whole attempt to integrate Europe from the very beginning was an alternative to what was the economic center of the day, the prosperous center, which was Constantinople and its prosperity that was spreading further eastward. In that sense, the Russians are looking at Europe and saying, "We thought that there could be peace, but there is not only this underlying religious difference (of which Putin seems to think is very important), but there's also a cultural difference: that we very much like China, we're trying to achieve alliance with other countries by mutual gain, win-win situations. What can we offer you in exchange for integrating your economy and politics, and hence your political and military alignment with us?"
The Western way, as you see with Donald Trump, is exactly the opposite. I think Trump is providing a model that I'm afraid Europe is taking.
Trump is sort of saying, "We're going to impose tariffs and sanctions on every other country of the world, awful sanctions to every country. We're saying we can destroy your economy." And the other countries, Mexico and France and Canada, for starters, are saying, "Well, don't do that."
Then Trump will say, "Okay, if we don't destroy you, what are you going to do that benefits us?" He's done the same to law firms in the United States, the same to universities. We're going to pull all of your (funding) if you don't follow a Zionist policy for us. And they'll say, "Well, what do we have to do to get the funding back so that we can do research and development?" And Trump is laying down the neocon policies they have to take. Columbia University has led the surrender.
I think this is the mentality that Europe is trying to emulate, but it doesn't have anything to threaten other countries with.
It can't threaten them with sanctions because other countries can say, "Okay, don't trade with us. We don't need you. We're self-sufficient by ourselves."
The whole rest of the world is trying to be self-sufficient, and almost every region is trying to be self-sufficient so that there's no dependency on other countries, so that it can follow its own self-interest.
But Europe has destroyed its own self-sufficiency by Nord Stream and by the sanctions against Russia, and by seizing Russia's 300 billion dollars that was in Belgium and the Euroclerc.
Europe has isolated itself from the rest of the world. How on earth can it have anything to gain militarily or politically, even if militarily successful? What can it gain from the rest of the world by isolating itself when the whole rest of the world is divided into new regional geographic groupings? It's as if Western Eurasia, Europe, is a kind of abandoned area. I won't say it's a rust belt like the United States abandoned industrial cities, but it's more than that.
What it thought of as its national identity, its historical understanding, its idea that it is a political, moral, intellectual leader of the world has become a fantasy. How do you ever undergo the psychological healing of that kind of self-inflicted wound that has been sweeping Europe like a disease over the last few years?
GLENN DIESEN: Yes, this self-harm has almost become an expression of solidarity or virtue that we're willing to sacrifice all national interest to stand up against our evil opponent. I feel that we need to replace some of our social scientists and political scientists with psychologists because it's becoming a very strange thing to observe.
But I agree with this focus on diversification because I think there's a point which has been, to some extent, lost over the past decade. That is when Russia began to organize its economy towards the East, really intensifying it since 2014.
Many saw it as they're trying to elevate their own market value for Europe so they have more bargaining power to integrate with Europe on a more equal footing, or to join an anti-European bloc. But all possible hypotheses were all very Europe-centric. That is, how does Russia want to reorganize its position towards Europe based on this?
But the main idea for the Russians was that they want to make Europe matter less, (to continue) trade with them, but that it shouldn't be as important anymore. Russia shouldn't have to be pro-European or anti-European. We (Russia) just shouldn't have to focus on Europe as much as we've done in the past. And I think this is quite distinctive.
You see this now in the political sphere, how they're organizing, of course the economy reorganizing to the East. And it falls in all spheres. You see it (with) technology, the industries, with new transportation corridors by land and sea, the payment systems, the new banks, the trade in currencies, establishing new commodity exchanges, insurance systems. It's quite extensive in the economic as well.
But you mentioned the culture, because in the Cold War, at least towards the end of the Cold War, there was still hostility between our governments. But among the Soviet public and the Russians, there was a sentiment that the Western way of life/lifestyle was quite attractive. This is kind of gone now. They don't want to remodel, shape their countries like the West anymore. So I think that is quite new.
And you mentioned something else which I found interesting, which is on the economic side, the EU, which has begun to steal the Russian national reserves.
Well, so far, they have taken the proceeds from these reserves, suggesting that it's okay, that it's not theft if they take it. But now there's talk about seizing the full 300 billion. And some are suggesting that in the future peace deal, Russia should have to give up that money, maybe transfer it into a reconstruction fund.
Even if the Russians accepted such a reconstruction fund, there would be pressure (for them) to get something back in return. So either way, this is already theft. They're not just freezing funds, which is also devastating for trust, but there's actually a theft.
So how have you seen the world reacting to this? I mean, gold is up, is this a consequence of it?
Or if you (hypothetically) gave a speech for the European Union, what would be your main warning against what has been done here? Because this is truly dramatic, it hasn't been done before. And again, I think the Europeans get swept up in their own narratives and morality that; Russia attacked Ukraine so it's just fair that they have to repay for reconstruction. But this has never happened before.
America, the Europeans, have also invaded other countries, the idea that the rest of the world should go and seize "our" money and hand it over to the countries we invaded…This will just diminish trust in the entire international financial system. So how do you see this impacting the world?
MICHAEL HUDSON: Well, Glenn, you begin by mentioning Europe's opponents, and that's the problem.
Europe views the whole rest of the world as negotiating with an opponent. Think of how different the rhetoric of European diplomacy is from that of Putin in Russia. Putin always refers to other countries as his partners, as in the only way that we can have relations with each other that are voluntary is that each of us gain. So we're partners, we're not opponents.
Europe has followed, really, the Donald Trump view, just like Trump says, America has to be the "gainer" in any transaction. Europe has to be the gainer, because the rest of the world is viewed as an opponent by Europe. And with that psychology, with that attitude, which is just what Lavrov was talking about, they are doomed to failure. And you can, the 300 billion dollars that the EuroClear seized.
I can imagine Putin has a very good answer. He'll say: "Well, of course, we're going to spend the 300 billion on reconstruction. No, we're quite happy to do that. We're going to, there's been an enormous destruction of civilian buildings and territory in Luhansk, in Donetsk, and the other Russian provinces, the parts of Ukraine that have now joined Russia. We realize that it's going to take 300 billion dollars to reconstruct. So we're going to do this.
Unfortunately, we don't see any reason to spend any of this 300 billion on European construction firms or European industrial firms in helping rebuild these areas, because you've fallen into economic obsolescence, as a result of your economic obsolescence. (It didn't have to be technological obsolescence, although (Europe} is way behind Asia in that, but it's really economic obsolescence). And quite frankly, you charge too much because of the way you've privatized and neoliberalized your economy.
So, yes, we'll spend the 300 billion, but I think we're going to have other countries participate, because we don't have a large enough industrial population to do that. We're going to hire Asians and other people from other areas to do this construction, but have no fear. This 300 billion will be spent on reconstructing attacks on the civilian areas that the Europeans and Americans have destroyed by backing the neo-Nazi regime in Ukraine."
What do you think of that rhetoric?
GLENN DIESEN: This sounds familiar. This is my thought as well, this is what the Russians want to spend on Donetsk, Lugansk, Zaporozhye, Kherson.
Also, if you look at all the problems of the Europeans cutting themselves off from these other centers of power, that is first the Russians, then de-risking from the Chinese, and then burning down a lot of bridges. And at this point, the Americans decide that they are more or less de-prioritizing Europe. And now, of course, things are bad enough, as we're paying a lot of money for energy, which causes deindustrialization, then the goal is to just build weapons and somehow this is going to be the solution.
But making matters much worse is, even if the war in Ukraine finishes tomorrow, the reconstruction of the country is going to be a huge mess for years to come. And the Americans seem to, well at least Trump, appears to be washing his hands with this and handing it over to the Europeans. So the Europeans will have a big mess to finance over the coming years. And it's very hard to see how any of this could not result in a massive crisis and even as you said, collapse.
But I guess my final question is on the alternatives here, because as the old system, or the old, dies, countries want to look for alternatives. Europe doesn't seem to have any alternatives yet, but the rest of the world does.
They seem to be looking towards institutions such as BRICS to reorganize technological, industrial cooperation, to have physical connectivity with corridors, and of course, financial connectivity. So they are doing all of this, and it appears to be intensifying under BRICS.
But with Trump, for all the talk about multipolarity, doesn't like the idea of BRICS de-dollarizing. Has this train already left the station, or do you think Trump can stop it? Because he threatened that, he said, "BRICS is pretty much done already, because I threatened to put tariffs on them if they don't use our dollar." But this fails to appreciate the main problem.
The reason why they're diversifying through the BRICS institution is because they do not trust the US dollar anymore, because all the economic levers of power can be weaponized.
And by threatening to further weaponize dependence on the U.S. in order to maintain dependence on the U.S., surely he must be aware of this contradiction that threatening other countries with sanctions only will convince them of the need to diversify and decouple. Still, America is not a weak country, it has a lot of economic power. So do you see Trump being able to stop this thing, or is it too late?
MICHAEL HUDSON: Well, America has become a weak economy, even though it's not a weak country. It has the atom bomb. It has a political influence to get other countries to impose sanctions against countries that don't follow American policy.
But the fact is that Trump and the United States is in almost as weak a position as Europe is. There's nothing that it has to offer other countries, except, "we will not hurt you if you do what we tell you to do. What we'll do for you is not bomb you." Well, that's not really offering very much.
You mentioned Ukraine in the following issue, and how about the reconstruction of Ukraine? What is left of Ukraine? And it's not going to be very much. Nobody's going to fix it. Nobody has the money, and nobody cares, just like they don't seem to care about Gaza.
Ukraine has run up enormous debts to the International Monetary Fund, to Europe, to other people, and other countries and official institutions, and it can't pay. Europe is not going to pay. The United States is not going to pay. Russia certainly is not going to pay. Russia is going to be concerned with rebuilding that part of Russia that used to be Ukraine. So that's going forward.
And again, there's nothing that either Russia or China needs from the United States or Europe. Again and again, every week in the Financial Times, you have some German or European saying "it's unfair for China to export more to us than we're exporting to it." And China's response is the same every week, "Well, you know, we'd love to import more from you.
For instance, that Dutch firm that's making the engraving equipment, you know, 10 or 20 million dollars per machine. We'd love to buy it. You're refusing to trade with us because you're following the American sanctions. So you're not willing to sell us anything that we want. Because again, you're viewing us as America's enemy and you've thrown all of your bets on the American side. And that's why our trade is bad."
Well, the Europeans then have the narrative again saying, "well, if we import more from another country, that's dependency."
The whole idea of free trade for two centuries has been your trading in order to make a gain. The gains from trade theory is what international economics is all about.
Well, Europe's politicians say there are no gains from trade. Any trade is only a dependency that lets other countries stop the trade if they want to hurt us. Well, of course, Russia never stopped the trade with Europe, it's Europe that stopped the trade with (Russia).
So other countries are fearful of even trading with Europe or the United States to establish a dependency that would enable Trump in America or Mertz in Europe to say, "all right, we're going to try to destabilize your economy by stopping our exports to you that you need. And we're going to interrupt your supply chains." No other country is willing to let its supply chains be based on Europe or the United States. Their supply chains are based on each other. And so the supply chains that are being split up are in Europe and the United States now without Trump's tariffs right now.
So you're seeing an economic crisis in the United States caused by Trump's idea that somehow you can isolate the United States and re-industrialize almost overnight, as if he can create factories in the remaining three years of his administration instead of over a 10-year planning period. I won't even get into what the US problems are, but the United States and Europe together have painted themselves into a corner that they can't get out of.
And that's why it's impossible to make a prediction of how Europe and the United States are going to achieve their self-interest when they don't understand what their self-interest is.
They don't understand how the economy really works, and how do you anticipate and project the future of a continent, Europe or the United States, that doesn't understand how the economy works, or its self-interest, and is floundering?
That's what you're seeing right now. And there are so many possibilities of floundering. The scattershot approach of Trump is, I think, what you're going to be seeing in Europe, try this, try this, but it's just flailing without any idea of how to go about creating a productive economy to do in Europe what China has done to rebuild its economy, or what Russia is trying to do to rebuild its economy. That's what's so striking in all of this. It doesn't make sense from a materialistic approach to history.
GLENN DIESEN: I guess this is a problem of having had a unipolar moment. That is, the whole world was excessively dependent on the collective West, while the West was less dependent on any one state or region, which meant that any concern about economic dependency being weaponized was only a problem for others. Now (they're) waking up to this reality and uncertain how to react.
Again, I wish we would revive some of the ideas from Alexander Hamilton or Friedrich List or Sergei Vitti, someone who's defining industrialization and economic power more as an intrinsic part of political independence. But still, one doesn't have to cut oneself off from the world. The sufficient thing is to diversify, to just have a variety of partners. And this is what the rest of the world is doing, but we are not.
And I always make this point because it's quite shocking what's happening in Europe.
The main idea is that the United States is weakening and is going to other places. So a rational, sensible policy would be to diversify ties. That is to, yes, keep a hand out to the Americans, but also reach out to the Russians, Chinese, and other centers of power and diversify, and also find a way of seeking some collective bargaining power based on shared national interest within the EU bloc.
But instead, we're surrounded by these political midgets who can't accept that we have moved on and that the world is changing.
So they're trying to reach out and show their value to the United States by subordinating themselves even further, just doing anything America says, and then hoping that this would convince America that Europe is still an important partner so America won't leave us.
But again, America has less resources, and shifting those resources and focusing on other places. But it's just, the willingness to accept reality is completely gone. And again, this is not an exaggeration. I see the political leadership in Germany accusing, saying, "well, the reason we have economic trouble is because the Russians cut off the energy supply to us." They did not. It was the Germans who cut this. And how is it possible that they get away with this? And also, Nord Stream (was) tried to (be) pinned on the Russians. Then we found out it wasn't the Russians, (so) now nobody wants to talk about it anymore because there's no more, no good narratives left.
It's such a huge mess.
I think the first step towards fixing Europe and the political West would be to first address, well, restore some reason and rationality, because I think we lost this a while ago when we got entangled in our own narratives.
Anyways, Michael Hudson, I've already kept you way too long. So yeah, thank you so much again for taking the time. And it's always a great pleasure to speak with you.
MICHAEL HUDSON: Well, I hope that you're successful, Glenn, in trying to raise the concept of rationality and reality to the rest of Europe.
GLENN DIESEN: As political realists, the assumption is always the rational state. So the foundation of political theory is now missing. It's quite a troubling time. Anyways, thanks again.
MICHAEL HUDSON: Yeah, well, thank you for having me.
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