Finance Capitalism versus Industrial Capitalism: The Rentier Resurgence and Takeover

Michael Hudson has published the article Finance Capitalism versus Industrial Capitalism: The Rentier Resurgence and Takeover.


Marx and many of his less radical contemporary reformers saw the historical role of industrial capitalism as being to clear away the legacy of feudalism—the landlords, bankers, and monopolists extracting economic rent without producing real value. However, that reform movement failed. Today, the finance, insurance, and real estate (FIRE) sector has regained control of government, creating neo-rentier economies.

The aim of this postindustrial finance capitalism is the opposite of industrial capitalism as known to nineteenth-century economists: it seeks wealth primarily through the extraction of economic rent, not industrial capital formation.

Tax favoritism for real estate, privatization of oil and mineral extraction, and banking and infrastructure monopolies add to the cost of living and doing business. Labor is increasingly exploited by bank debt, student debt, and credit card debt while housing and other prices are inflated on credit, leaving less income to spend on goods and services as economies suffer debt deflation.

Today’s new Cold War is a fight to internationalize this rentier capitalism by globally privatizing and financializing transportation, education, health care, prisons and policing, the post office and communications, and other sectors that formerly were kept in the public domain. In Western economies, such privatizations have reversed the drive of industrial capitalism. In addition to monopoly prices for privatized services, financial managers are cannibalizing industry by leveraging debt and high-dividend payouts to increase stock prices.

This article explains so much of what we and our politicians need to understand to govern the USA.

Here are a couple of excerpts that hint at all that is in the article.

The economy as a whole has suffered. Debt-fueled housing costs in the United States are so high that if all Americans were given their physical consumer goods for free — their food, clothing and so forth — they still could not compete with workers in China or most other countries. That factor is a major reason why the US economy is deindustrializing. Thus, this policy of creating wealth by financialization undercuts the logic of industrial capitalism.
Another reason for deindustrialization is the rising cost of living stemming from conversion of public infrastructure into privatized monopolies. As the United States and Germany overtook British industrial capitalism, a major key to industrial advantage was recognized to be public investment in roads, railroads, and other transportation; education; public health; communications; and other basic infrastructure.

The last paragraph from above explains why the policy of privatizing old infrastructure to “pay for” new infrastructure is so insane. We seem to have no understanding of why we built the old infrastructure, and why we need to add more.

This article is from the first chapter of the upcoming book «Cold War 2.0. The Geopolitical Economics of Finance Capitalism vs. Industrial Capitalism»

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