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RADHIKA DESAI: Hello everyone and welcome to this ninth Geopolitical Economy Hour, the fortnightly show on the political and geopolitical economy of our times. I’m Radhika Desai.

MICHAEL HUDSON: And I’m Michael Hudson.

RADHIKA DESAI: And today we have a special guest, Professor Mick Dunford. Mick is Professor Emeritus at Sussex University and a visiting scholar at the Chinese Academy of Sciences and his work focuses on world development, especially of Eurasia and China.

Mick is going to help us discuss the political and geopolitical economy today of the Ukraine conflict. The conflict is dragging on. The much anticipated spring offensive has started and is sputtering.

Western propaganda is beginning to portray what we know is in many cases a bloodbath for Ukraine as a triumph. President Zelensky is jetting around European capitals, eliciting very uncertain promises of help.

Western powers are filling Ukraine with what somebody recently called a zoo of incompatible weapons and weapon systems of different vintages.

The EU continues imposing ever newer sets of sanctions while President Biden continues to proclaim his support for Ukraine’s cause as long as it takes to regain its 1991 borders, which of course includes Crimea.

So all of this is going on. We know there is much that is puzzling about the conflict.

And today what we want to do is follow the money on the conflict. Wars are not just fought with arms, strategies and tactics. Armies march, as they say, on their bellies.

So what is the political and geopolitical economy of this conflict?

While the mainstream press makes it sound as if the West is involved in the conflict entirely altruistically, standing up for Western values and democracy, even as it supports, by the way, an ever-more fascist government in Kiev, a few critical sources do focus on the profits that are being made by arms production.

But what we think we will be able to show in the course of this hour is that, in fact, the underlying political economy and geopolitical economy is far more complex.

So what we’ve decided to do is organize the conversation by country and region.

So we will first discuss the points relating to Ukraine. Then we’ll come to Russia. Then we’ll come to Europe. Then we’ll go to the US. Then we’ll discuss China and then the rest of the world.

So that’s roughly how we want to do it.

And so beginning with Ukraine, what I find really remarkable about the whole sort of economic situation in Ukraine is that normally when a country is at war, you’d expect that the country pulls together, the government creates policies that are egalitarian.

You know, in the course of the conflict in the Second World War in Britain, there was talk of fair shares and equal sacrifices.

But what you find in Ukraine now is absolutely the opposite. What you are looking at in Ukraine is what we may call neoliberalism on steroids.

The Zelensky government, even as it is conducting a war, which is very often a kind of “show war” anyway, but it is supposedly at war, it is fighting a great enemy.

Meanwhile, the government is implementing exceedingly anti-labor legislation. It has banned the opposition that will try to resist that. And it is privatizing all sorts of state assets in order to finance the war.

So you’re essentially selling off the family silver in order to pay for an ongoing expense.

And what’s more, the privatizations include the very, very fertile land of Ukraine. And it is not being privatized to ordinary farmers or anything. On the contrary, the land is being sold off to large agribusiness.

So every time you hear about, you know, how urgent it is that Ukrainian grain has to get out to world markets, it’s not the interest of ordinary farmers that are being protected, Ukrainian farmers. On the contrary, these big agribusinesses must get their products out for sale. So this is what’s going on.

And in many other ways as well, private enterprise is deeply involved. Every time there is a loan being given to Ukraine, private sector operators, big financial institutions are involved. And of course, the IMF has is funneling money to Ukraine in various ways and so on.

Don’t you think, Michael, isn’t that really quite an exceptional state of things for a country at war?

MICHAEL HUDSON: Well, it certainly is.

And in the press discussion every day, it’s obviously about the military, but the military discussion about whether there’s going to be a counterattack by Ukraine, the military situation is, all what they’re really talking about is, Ukraine has to make some victory so that it can now negotiate peace with the Russians and install exactly the neoliberal policy that you’ve described. There’s no way in which that can happen.

I think we should say at the beginning what the other side has to say. And I think Russia’s foreign secretary Lavrov made it clear on May 4th.

[Lavrov] said, ““Everyone understands the geopolitical nature of what is happening, and everyone understands that without resolving the main geopolitical problem, which is the desire of the West to maintain its hegemony and dictate to everyone and all its will, it is impossible to solve any crises either in Ukraine or in other parts of the world.”

So you can see right now how the U.S. has been preparing for that. Every day, certainly in the New York Times and the Washington Post, there is a list of all of the war crimes that Russia has been allegedly committing in Ukraine, beginning with faked-up massacres, the Bakhmut massacre, and all of the attacks.

So the U.S. is accumulating a bill that now the New York Times says is $2 trillion that Ukraine will have to pay the West in order to become solvent once the fighting is over.

And the U.S. says, — Well, we’re already preparing a war crimes trial in the International Criminal Court against Russia for what this is going to be, a list of damages to charge Russia so that Ukraine can begin to pay.

But of course, the war crimes trial is going to take years and years. And in the meantime, Ukraine is going to have to sell off exactly all of its assets that you have mentioned.

It’ll have to sell off its agriculture to Monsanto. It’ll sell off its gas rights to Chevron. The U.S. has hired BlackRock, the Wall Street firm, to make a repertory of all of the assets Ukraine has and how they will be sold to U.S. buyers.

Well, the whole question is, what will happen? Will that really be sold off?

Well, how can it be sold off if the sellers are a government that was installed by a coup d’etat, a government which actually itself has become a terrorist government, and the money that is received for these special privileges are actually turned over to the kleptocrats and to the government officials to put in their own accounts, and much of it has actually been recycled into campaigns for the U.S. Congress, the U.S. senators and U.S. politicians.

And that is sort of a key economic aspect of this that hasn’t been discussed apart from Hunter Biden’s laptop, where he promised to pay Hunter Biden and the big man, presumably the father, to act as lobbyists for Ukraine.

And we know that much of the money that has been donated to Ukraine has been paid by Ukraine on public relations agencies and lobbyists to pay senators and representatives.

But also, when you have BlackRock in charge of neoliberalizing and carving up the Ukrainian economy, the senators and congressmen can expect campaign contributions not only from Ukraine but from BlackRock, from Chevron, from all of the other companies that are able to buy a killing there.

Well, what is the response?

And I think what I want to point out is that Russia obviously needs its own criminal court.

It needs a shadow court to say, — Yes, of course there has been the aggressor must pay reparations. The aggressor in this case is the U.S. and NATO. We are owed money. We’re not the payees.

— And these assets in Ukraine, especially in the Russian part that are now part of Russia, are not Ukraine’s to sell. They are our assets now. They are Russian assets. And we are not going to sell them to the West, and we are not going to install a neoliberal program that is being proposed by the West.

So there’s obviously going to be a standoff for a number of years.

That standoff will have to go beyond just an international criminal court by the global majority, but a whole set of counter-institutions to counter, for instance, the IMF, which is lending money to Ukraine in violation of its articles of agreement, lending to a country at war, lending to a government that is anything but democratic to fight the war.

So I think we may have a little back and forth here before we finish Ukraine, but to get into this, the fact that the economic solution can only be settled on the battlefield. Everybody agrees with that.

The U.S. is expecting Ukraine to win enough on the battlefield so that they can say, let’s stop and talk.

And Russia has made it very clear, we’re not going to stop and talk. We are going to continue to put our national security demands up front, and this is not something that’s going to end this year or next year or even the year after.

RADHIKA DESAI: Mick, please go ahead.

MICK DUNFORD: Okay. I just want to pick up on what Michael said about the way in which neoliberalism is seen as the way forward from this point in time.

And I want to do that by talking about the way in which neoliberalism, the way in which a particular path to transition, the way in which a country in which ethnic nationalists came to power through a series of successive color revolutions, laid the foundations, many of the foundations for the current crisis.

I’d like Paul to show a slide, if he would.

It’s very interesting, you know, that in 1991, the Ukrainian ethnic nationalists, of whom Gorbachev had actually warned Bush, envisaged that Ukraine would very quickly become another France.

In fact, what happened was that Ukraine, in a sense, actually went backwards. In 1989 to 1991, there were a series of transformations in Europe in which many of the communist countries in Europe collapsed and undertook transitions to capitalism.

And in 1989, there was an attempted color revolution, which failed in China.

This chart simply depicts the growth of GDP in a number of these transition countries from 1989. 1989 is equal to 100.

Of the East European countries, the one that did best was Poland. It reached, by 2019, an index of 251.7. But Poland received huge sums of cohesion fund support from the European Union.

Of these countries, the one that did second best was actually Belarus, which did not adopt a neoliberal path.

If however, you look at Ukraine, you find that it, in 2019, right before the major impact of the current conflict, but obviously reflecting in part the conflict that started in 2014, stood at just 56.8. 56% of where it was in 1989.

That represents a catastrophic economic collapse as a result of the path of transition that was adopted in that country.

If one looks at China, I record the Chinese index. The Chinese index, starting at 100 in 1989, in 2019 was 1,480.

I want you to just think about those two numbers. You can compare Poland, 251.7, Belarus, 56.8, China, 1,480.

So in a sense, this particular neoliberal path led to an economic catastrophe.

It also led to a demographic catastrophe because the country had 51.3 million people in 1989, 1993. It had dropped to about 41 million by 2014. Today it is probably about 31 million.

About 5.5 million refugees are in China, another 4.5 million in the European Union.

Its population has collapsed because deaths exceed births. So it has very little prospect of seeing sustained population growth in the years to come.

So in a sense, I just wanted to document these economic and demographic aspects of a catastrophe that has led to this tragedy.

RADHIKA DESAI: That really is very important.

What we are seeing now in the context of the war is that these policies are actually being further enhanced, including by the fact that the Zelensky government has used the excuse of the war to ban all opposition, which means that the opposition to these policies cannot be voiced, essentially.

And of course, what you are also saying about the demographic collapse, both before and then during the war, with so many refugees in Russia and elsewhere, I think it also shows that, the irony of the fact is that everyone who says stand up for Ukraine and we are going to defend Ukraine is actually contributing to the systematic destruction of Ukraine.

This is one of the ironies of the present situation.

Another thing about the sort of political economy of all this that really strikes me as extremely, I mean, scandalously hypocritical, shockingly hypocritical, is that all the arms that are being sent, especially by the United States, but also by other countries, they are always portrayed as, we are giving Ukraine arms.

None of these arms are being given. The United States and other countries are selling these arms. And if Ukraine cannot pay, as it indeed cannot, they are running up a tab.

At the end of this war, whatever entity that survives to which the name Ukraine can be stuck will be saddled with this bill.

And I don’t think all the money that they will confiscate from this Russian oligarch or that Russian oligarch, Central Bank reserves and whatnot, will come anywhere near to paying for this.

And so essentially, whoever the people who remain in Ukraine, will be working very hard to pay off this debt.

And again, it is a debt, remember, that has been incurred for a completely illegitimate purpose.

Ukraine was not very prosperous, but it would have retained what little 56.8% of its 1989 prosperity. It would have retained that substantially and maybe even done better had they signed the Minsk agreements.

But the West, by egging Ukraine on not to sign the Minsk agreements, has essentially created this situation.

And what’s more, Western corporations, financial, agribusiness and all sorts are basically already profiting from it.

They were profiting, as Mick, you pointed out, already before this conflict began, through all the color revolutions and the implementation of neoliberal policies and so on, which goes back certainly to 2014 and much earlier than that as well.

But also in the context of the present war, while the war is going on, while the country is at war, Western corporations are benefiting by buying up productive assets and essentially exploiting Ukrainian labor essentially with a labor legislation that is totally loaded in favor of big corporations.

MICHAEL HUDSON: Well, the question is, what is Ukraine going to be for all of this?

When you talk about the neoliberalism, there’s no way that this neoliberal program can be applied to Donetsk or to Luhansk or to Odessa, if that’s taken over.

So what we’re talking about is a kind of rough state of Ukraine in which it’s possible even Luhansk may be turned over to Poland. It’s going to be carved up.

So the argument is going to be: What is the Ukraine that is going to pay these debts?

And certainly any agreements that the proxy government has made and any debts that they’ve run into can be repudiated on the grounds of odious debts.

Now obviously if the United States imposes a puppet government, a client oligarchy, they’re not going to raise the issue of odious debts.

As you just pointed out, the political system is such that labor has no representation there.

So you would have a Ukraine that’s lost half of its population that’s living abroad now and there’s nothing to go back to for it.

And much of the population is in the Russian speakers. So there’s going to be literally something that is not really a country.

You can think of it as an economic entity that somehow controls the raw materials we’ve mentioned, the land that’s not poisoned by uranium bullets and made radioactive.

You’re talking about a kind of, not really a country. Even the definition of how to put in the new laws is going to have to await a settlement of the political boundaries that I don’t see happening within the foreseeable future.

RADHIKA DESAI: So absolutely. I mean, basically what we are all ending up saying is that the war has simply been the occasion for further acceleration of neoliberal transformation of Ukraine, that’s what the West is getting.

Meanwhile, of course, ordinary Ukrainians, many of them may be even quite idealistic, are being signed up to go and fight and die for a cause which is not even the cause of their liberation, but a cause of the destruction of their country.

I mean, this is the horrific situation in Ukraine. Maybe if we are done with Ukraine, we can, Mick, did you want to add anything more about Ukraine?

MICK DUNFORD: I mean, no, the only thing I would have added is that, I mean, if you look at Mariupol, I mean, there’s already quite a significant process of reconstruction of housing, with people being provided with new accommodation.

There’ve been quite major investments in transport infrastructure. There’ve been attempts to address the problems of water supply of the Crimea.

So I suspect that those parts of Ukraine that have become parts of the Russian Federation may well see very substantial public investment in order to try to, well, so much has been destroyed, to actually restore the infrastructure and to start to reestablish public services and maybe to get some of these economic activities working again to provide people with livelihoods.

But obviously that will involve massive financial investments and very careful planning.

RADHIKA DESAI: Absolutely, and that’s a good segue into our next topic, which is Russia.So, I would say, what are the most general things you can say about the situation in Russia?

Well, recall that when the conflict began, President Biden claimed that he was going to impose such sanctions that were going to, what was, how did he put it? That we were going to reduce the ruble to rubble and that we were going to set back the Russian economy, massively destroy the Russian economy.

Instead, what we’ve seen is that the Russian economy has actually proved very resilient. And in fact, in many ways, the sanctions have been boomeranging, causing more harm to the imposers of the sanctions, whether it’s the European Union or the US itself, particularly the dollar system and so on, instead of hurting Russia.

So Russia has proved resilient against sanctions.

And this story itself also goes back to 2014, because in 2014, as people may recall, a first batch of sanctions were imposed on Russia.

And in response to those sanctions, the Russian government did undertake a number of initiatives to essentially sanctions-proof its economy.

And one of the big success stories of that sanction-proofing was in fact, the Russian agricultural sector, which in fact has been, has proven to be a success story.

And Russia is today a major exporter, not only of grain and food products and so on, but it also exports fertilizers, as we saw in an earlier phase of the conflict, when there was a great deal of concern about the disruption of supplies of fertilizer from Russia.

And Russia has also, over the last year or so, demonstrated a capacity for keeping up production.

One of the other things that occurs to me is that, in the West, with all the weapons being supplied and sold to Ukraine, the stockpiles have been depleted, whereas Russia has demonstrated a capacity to continue manufacturing weapons and essentially to win wars in Russia.

So in that sense, and last point I’d like to make is that all of this has been done in a context where, although the government has stepped up its level of state intervention in order to create a more productive economy, become more of a developmental state, there are many in Russia who argue that not enough has been done on this front and more can be done.

The central banks policies, the Russian central banks policies could be more anti-neoliberal than they are.

The government could also essentially mobilize the economy on a war footing.

And actually, instead of how, for Russia, the IMF predicted that the Russian economy would be set back by about 12 to 14%. And in the end, in 2022, it was set back by a mere 2%.

But many people would argue, Sergei Glazyev is one of them, who says, actually, if you mobilize the economy, you would not only not have a setback of a mere 2%, which is certainly something to celebrate, but actually have a Russian economic boom, which could still be possible.

MICHAEL HUDSON: Well, what Russia wants to do is to turn what is going to be a victory militarily in Ukraine into an overall new economic order. That’s what both Putin and Lavrov have talked about.

And they’ve also pointed out that economic and political resolutions of the Ukraine conflict go together.

So, Russia at the very outset is going to ask Ukraine and the United States to admit that the fake massacre in Bucha and other accusations of war crimes were faked.

And Russia is going to, I would hope, make its own list of Ukrainian, American, and British war crimes against Ukraine, including now-depleted uranium, and present its own bill for money that is owed, which probably will be much more.

There will be a whole argument about who started the war.

Did the war start in 2014 with the coup d’etat?

Or did it start with the buildup of Ukrainian [forces] to attack Luhansk and Donetsk just before February of last year?

Or did it just start with Russia coming in as every American official document says, unprovoked?

Well, the war crimes trial is going to be run by the Russians, probably with other Global South, world majority countries, China and others.

And the objective is going to be to restructure not only NATO-Ukraine, but NATO-China and US relations with the global majority altogether.

And what Russia realizes is that whatever comes out of this, whatever peace agreement is negotiated can only be established on the battlefield. That’s why Russia cannot afford to lose the war.

And why in the New York Times, Mr. Friedman comes out and says, Russia has now expanded right to the tip of NATO. It’s Russia that’s expanding to NATO instead of NATO expanding out to Russia.

So I think what Russia is going to come out with is its own Monroe Doctrine.

And it’s going to say, keep out of the Black Sea and keep also out of the Northern Pacific.

It can coordinate this with China, keeping foreign ships out of the China Straits. The Ukraine war is going to set a whole model for what’s happening in Taiwan, in China, and all over the world, far outside of Ukraine.

And the United States essentially has seized the holdings of Russian oligarchs. And we’ve talked about seizing Russia’s reserves.

And these holdings of Russian oligarchs were bought with the money that they paid the privatized companies to US and foreign borrowers.

So Russia can economically respond by nullifying all foreign holdings of Russian stocks that are held by US holders and NATO holders.

Say, — Wait a minute, you’ve not only stolen from Ukraine, you’ve stolen in Russia. Let’s have a global settlement of all this.

— You did to Russia first what you did to Ukraine. We’re going to cancel all stocks and bonds owed to US and NATO holders. Simply nullify them to reverse the sell-off of the Russian industry.

And that could be a model for the same thing to be done to Ukraine in calculating the damages and reparations that America, Britain, and Germany owe to Ukraine.

RADHIKA DESAI: Mick, please go ahead.

MICK DUNFORD: Yes, I mean, Michael spoke about a new economic order.

I think it’s quite interesting to ask why, when from the 1990s, Russia put forward proposals for economic integration of Eurasia from Lisbon to Vladivostok, when it spoke about indivisible security, when it expected that the verbal and written commitments made to Gorbachev concerning the non-expansion of NATO would be respected, and we now learn from Jeffrey Sachs that NATO started to plan the inclusion, even of Ukraine in 1991, 1992, which is astonishing.

But in a sense, these constructive proposals were repudiated by the United States and also by the European Union. An important question one needs to ask is why.

I mean, obviously there are many reasons and there are complicated explanations, but clearly what this conflict has done is, it’s disrupted the Belts and Road Initiative, it’s divided Russia and Germany.

It obviously is presumably intended to prevent the emergence of a significant Eurasian land power that could challenge the leadership of the United States.

In the case of the EU, the EU is only interested in economic integration on its terms, which means, which it says respect its values, but what it means by its values are a political order in which it’s easy to interfere externally, and an economic order in which all resources are essentially available to sale to everyone and anyone, which tends to deny less-developed parts of the world the prospects of engaging in a form of catch-up development.

I think it’s in the light of that bitter experience that Russia’s formulated a new foreign policy, and that new foreign policy is extremely interesting because it involves on the one hand, a reorientation of Russia towards the East, the establishment of closer relationships with East Asia, with Southeast Asia, with India.

But it also involves the redefinition of Russia as a “civilization state”.

I mean, for a long time, since Peter the Great, Russia in a sense modeled itself on the West, and I think it’s the malfeasance of the West has actually persuaded it that there has to be another way forward.

And in a sense, this notion of a civilization state is a notion that’s also used in relation to China, you could use it in relation to India, in relation to the countries of the Islamic world.

And the thing that’s quite interesting about it is if you actually say, look, you look at East Asia, until 1894, East Asia was at peace for 300 years.

If you just look at China, it was at peace for 500 years. These countries did not engage in forms of external expansion and colonialism.

So in a sense, there’s a profound difference in the kind of civilization or values of these East Asian civilizations and Western civilization in which capitalism emerged, imperialism and colonialism.

And in a sense, that’s associated with a radically different conception of the international order that I think Russia has now come to in its close relationship with China, and especially in terms of the way in which it’s defined its new foreign policy.

And that, in a sense, is a hope that we might all, in the years ahead, come to live in a more peaceful world in which we’re not constantly faced with a succession of wars as we have been basically in the last 500 years, since the rise of Western colonialism and imperialism.

RADHIKA DESAI: No, that’s exactly the word. The word you ended with is exactly what I was going to talk about, because it is about imperialism.

You said Jeffrey Sachs noted that the Americans were planning as early as 1990, 1991 to integrate Ukraine into NATO, et cetera.

The reason for that is that essentially what has ruled the world, what has determined how the different parts of the world relate to each other for the last couple of hundred years has been Western imperialism.

Why do we have Western imperialism? Because of Western capitalism.

What is the purpose of Western imperialism?

To constantly open up more and more parts of the world so that Western corporations based in the West could have access to markets, to investment opportunities and profit opportunities and cheap labor and cheap materials.

Russia has always been seen as a big prize for the West.

Essentially, the Anglo-American interest, so to speak, the so-called liberal and the most aggressively imperialist interest of the West has always looked upon Russia as being too big and therefore something that should be broken down.

And this is also important.

It’s also important to talk about this because Western imperialism is often ignored while the Russian empire or the Chinese empire, and we are always being told that these countries are being imperialist.

But as you rightly pointed out, these civilizations have lived peacefully and they have been used to living peacefully for centuries.

Whereas what you have seen with the onset of Western capitalism is nothing but endless war. And the purpose of these wars is exactly this.

So I think that, and I also like to make one, I mean, I completely agree with you that, of course, since Peter the Great and Catherine the Great, Russia did look to the West.

But the purpose of looking to the West was not in fact to model itself on the West, but rather to essentially partner with the West to create Russian prosperity.

But because the West is imperialist, it is precisely this prosperity that was not possible in close relation with the West.

That is why the pinnacle of Russian productive achievement was under the Soviet Union when it was not in fact connected with the West.

So in that sense, I would say that what Russia has realized now, and this was very clear in my last visit to Russia, two quick reminiscences.

Number one, we attended a major economic conference and even like two or three years ago, that conference would have been dominated by neoliberal intellectuals.

This time around, the overwhelming majority of the speakers were decidedly anti-neoliberal.

There were a couple of neoliberals, but they were sort of one or two in a sea of general consensus about creating a developmental state in Russia, having closer relations with China, and moving away from the West.

So that’s number one.

Number two, another conference I attended, began by the chair.

Again, this took place in the home of neoliberalism in Russia which is the Higher School of Economics, which was set up after 1991 precisely to be a sort of beehive for neoliberal thinking.

This is where the session began by the chair, essentially the first speaker, essentially saying that when this war ends, Russia will no longer turn to the West.

That chapter is finished. Russia is looking to the East.

And the session ended with the chair saying, the fact of the matter is, Russia does not want to become closer to the West. The West is boring. The East is where everything is happening.

So in that sense, yes, the Washington consensus has now been universally rejected and the longstanding question of whether Russia is European or Eurasian has been decisively settled.

So in this sense, I would say that there are many trends essentially moving in an anti-neoliberal direction.

There is room for more and I think Russia can come out of this as a much more productive society, provided it manages to not just build resilience against sanctions, but actually learn how a mixed —

The graph showed that in the period since 1989, China has essentially increased its GDP by almost 15 times. Other countries like Russia can do it too. Russia has a lot of potential, but it needs to have the right policies.

And I think this is the direction in which the present situation is pushing Russia. And of course, as both of you pointed out, this is creating a, we sometimes call it a multipolar world.

It’s certainly dividing the world away from the West and creating new relationships between countries, particularly the closeness between Russia and China is very important here.

MICHAEL HUDSON: Well, the Ukrainian and Russian situation in many ways has inverted the whole traditional drive of imperialism.

You and I have spoken for decades about imperialism being economic.

And even when Karl Marx talked about British expansion into India, he gave a speech before the chartists saying, — Well, at least English imperialism is going to break down the backwardness of India and other countries. And it’s going to introduce capitalism. And that’ll be the first step toward socialism in these countries.

This is not what is occurring in Ukraine or in the neoliberal breakup of Russia.

And in fact, you can look at Ukraine and Russia in the last 30 years and say, the whole geopolitical theory of economic priority, the idea that economics drives politics, doesn’t seem to be the case today.

Neither industry nor labor is benefiting.

You’re seeing Germany already agreeing to subsidize the high gas and oil prices to support buying its liquid national gas from the United States. It’s six times the price that Russia was charging. That’s not economic.

You have German industry unable to stop the dismantling of German industry by dismantling the energy trade and the food trade with Russia that was what gave German industry its competitive advantage. That’s now gone. And that’s irreversible.

Not because of anything that President Putin is saying, we’re turning eastward. But because the US demands to turn Europe into a client oligarchies has made it irreversible.

If the German government supports industry by saying, — Okay, we’re going to give money to the industry so it can depend entirely on the United States for materials we used to import from Russia, then, given the fact that we have to balance our budget according to the EU rules, we’re going to have to cut back social spending.

— Especially now that we have to vastly increase our arms spending to replace all of the old obsolete arms that we’ve sent to Ukraine with brand-new U.S. arms, there really isn’t going to be any opportunity for a social democratic economic program in Germany.

Well, it’s hard to say how economic self-interest justifies this inversion, this reversal of European policy, because it’s led to America’s destruction of German industry. And not only that, but by destroying German industry, you’ve destroyed the demand for skilled labor.

Are we going to see German labor emigrating just like it has from the Baltic states, 20 percent loss in population from Latvia, Estonia, and Lithuania?

But there’s another thing that also Europe has lost by this. And when Russia and China are turning away from Europe, they’re not turning away from the Europe that was going social democratic, from the Europe that actually held out ideals in times past, but from the fact that Europe is no longer social democratic.

It’s lost its former socialist labor policy. Germany’s Linke Party has broken up over the Ukraine war, and the United States political meddling has turned Europe’s social democratic and labor parties into neoliberal proxies, the Tony Blairism of German politics and French politics and all over Europe.

So the result is that not only a client political oligarchy, but also a client political labor force. There’s no labor movement in Europe to oppose what’s happening here.

What if economics governed European policy? Well, after 1991, Europe hoped at least to gain economic dominance over Central Europe, Russia, and, as you pointed out, Ukraine. But now it’s losing Eurasia.

Annalena Baerbock says that any kind of trade is a risk. And if you trade with Russia or China, she said, then you’re taking the risk that they can do to Europe what America does to the rest of the world.

They can cut you off with sanctions and disrupt your economy by refusing to export to you. And Europe can only be safe if it doesn’t export, import anything that it needs from China or Russia or the rest of the global majority.

Only the United States can be depended upon to help Europe develop, just as it helped Germany develop by blowing up the Nord Stream pipelines and restructuring its energy trade.

So this is the craziness of what Germany’s foreign minister herself is saying.

I don’t know how you can ever say that this is an economic explanation of things. The fact is, it’s ethnic and racist hatred of Russia. It’s Nazism. It’s not social democracy.

Europe has now embraced Nazism, and I think this is best symbolized over the weekend by the Zelenskys meeting with the Pope wearing two Nazi symbols on his shirt, just to make it very clear, hey, maybe we can reestablish the papal Nazi pact of the 1930s and the red line and everything.

So Europe has lost its profitable investment future with Russia, and now it seems China too, and it’s completely tied itself to the United States.

How do you explain that economically in terms of self-interest? You can’t.

RADHIKA DESAI: Mick, we’re still discussing Russia, right?

MICHAEL HUDSON: Well, it’s Europe too.

MICK DUNFORD: I started to talk about Europe. Can you show the second slide? I’ll make a comment.

Michael just talked about the way in which some of the decisions, the extraordinary decisions made by the political leaders of European countries, and the ways in which the complete absence, it seems, of any strategic autonomy in Europe has led to actions that make a bad situation worse.

They make a bad situation worse in the sense that they’ve disrupted relationships with Russia, especially energy relationships, food relationships, and also de-risking generates serious risks where Europe is very, very dependent upon a whole range of intermediate goods that are actually produced in China and supplied to European industry by China.

European industries, and indeed all the G7 industries, face serious challenges in any case which are to some extent linked to the fact that after the economic crisis in the 1970s, neoliberalism was in a sense adopted as a solution.

It was adopted as a solution in the sense when you saw this offshoring of industry, you did indeed see increases in the profitability of companies that offshored.

But if you actually look at the productivity growth of the G7 countries, this is the average productivity growth, labor productivity, hourly productivity, you can see that it has basically steadily declined.

So in a sense, the economic performance of the G7, which includes a number of major European countries and of course the United States, Canada, and so on, has progressively declined.

And it’s declined because of a decline in productive investment, which partly reflects profitability considerations and the relative profitability of investments in financial activities and a whole series of speculative activities linked to real estate and to stock markets and so on.

So the first challenge that Europe already faces is in a sense the challenge of overcoming that relative decline in productivity.

I think the other thing that’s very striking about what is happening as far as Europe is concerned is that because of the way in which the world order is changing, the kind of resources available for the former colonial powers are more diminished.

So in that situation, the United States is seeking to seize a much larger share of these resources for itself by requiring Europe, for example, to purchase expensive US energy rather than Russian energy through new measures which are designed to perhaps encourage the relocation of European industries in the United States.

So in a sense, what you see is a kind of inter-imperial rivalry between Europe and the United States, with the United States exploiting its dominant position in order to secure a greater volume of resources for itself.

RADHIKA DESAI: Absolutely, Mick.

You use the term inter-imperial rivalry, but I would say that essentially going back to even the 19th century and certainly in the 20th century, the United States has always wanted to essentially contain or roll back European imperialisms in order to open up the world economy to itself.

That has always been its goal. It’s continuing to attempt this, even though, of course, it is farther away from realization than ever before. The rest of the world economy is turning away from it.

We’re basically now on to discussing Europe. And I want to say a couple of things about that.

But I did want to say one final thing about Russia before we leave that topic entirely.

And that is that, basically what is happening now can be explained by what happened to post-communist Russia.

Essentially Russia was plunged into economic chaos and retardation in the 1990s under shock therapy. And in the 2000s, under Putin’s leadership, you know, Putin managed to stabilize Russia to a considerable extent.

But already then it was very clear that if the West had its way, this is what would happen to Russia, what happened to Russia in the 1990s.

And in the course of the period over the next two decades, what the Putin government tried to do is to try to say to the West that, — Look, we would like to have good relations with you, but not on those terms. You have to accept our own interests and naturally economic interests, security interests and so on.

And that possibility of essentially trying to have a more balanced relationship with the West has been destroyed. The West has basically refused it. It has continued to expand NATO.

So now this decisive reorientation of Russia, the realization that the West no longer has anything to offer Russia that is valuable. This is, you know, this has that history.

Coming to Europe, to me, the headline in terms of discussing what’s happening in Europe is, are they crazy?

Why are they undertaking such a suicidal policy where their industrial base is being destroyed, as Michael, you pointed out.

And also the industrial base is being destroyed now quite actively with the destruction of the Nord Stream pipeline, the cutting off of the most sensible source of energy for Europe, which is energy from Russia.

And then making moreover Europe reliant on energy from the United States, which not only is more expensive, so creating economic problems, but also setting Europe back from its climate goals because imported LNG, LNG shipped from the United States to Europe will have a carbon footprint which is 8 to 10 times higher than natural gas being supplied by pipeline from Russia.

So in all of these ways, the Europeans seem to be intent on a degree of self destruction that I think is amazing. And I still don’t fully understand what animates it.

But I can certainly know two things. Number one, there is considerable public discontent.

And number two, there is also a presumed, I mean, I think there is a fair degree of discontent in the elite classes because the industrialists’ interests are being destroyed as well.

So what is going to happen in Europe is an open question.

Certainly we can see the Europeans, they may have gone along with, or at least they may have appeared to go along with the United States with imposing sanctions and so on.

But if you look closely at the sanctions, they’re also designed to minimize the impact on Europe.

And the fact of the matter is, Europe’s reliance on Russian energy may have decreased, but Russian energy is still being pumped to Europe even as we speak.

But in terms of extending this hostility that is now being directed from Europe to Russia, we can see that the Europeans are certainly hesitating and looking at that. So there is that dimension.

We will have to see how long this unity that the West has proclaimed, the unity they have found over the conflict over Ukraine, how long it will last and how long it will be before the economic hurt that is being inflicted on Europe will essentially produce some kind of pushback.

MICHAEL HUDSON: Well, Radhika, you asked the question, are they crazy?

Well, in a way, yes, they are in the sense that you and I each have gone to the Rosa Luxemburg Foundation meetings in Berlin, and I’ve spent quite a bit of time in East Germany.

They were traumatized by the Soviet occupation there, so traumatized that it’s almost an unthinking opposition to anything that Russia does.

And it’s this anti-Russia feeling that America has been able to fan and encourage that has led the Germans to say, — Yes, we’re willing to sacrifice our industry. We saw what happened under Russia. Now let’s turn to the United States.

Not realizing that what the United States is doing is going to be equally bad as what happened in East Germany. They were tapping Angela Merkel’s phones. There’s still wiretapping.

My main source of Russian information is Johnson’s Russia List.

Johnson just went to France and Germany to take a vacation two weeks ago and said that he was surprised to find that you can’t get any access to RT or Russian news on the internet. Everything’s blocked. There’s total thought control in Europe.

This again is a total inversion of everything that was supposed to be democratic. And this is pushed to the really insane point that when Baerbock says, — Anything we import from Russia or China can potentially be used for the military.

— If you import Russian food, that could be used to feed Russian soldiers to fight in Ukraine. And so that food is military. We can’t rely on for national security purposes on that.

— We’ve got to follow the Dutch and not permit the exportation of ultraviolet scanning machinery to information technology chips. We’ve got to really break off all trade.

Well, as you know, when so much trade is already with Russia and China and Eurasia, having a sharp cutoff is going to mean a prolonged depression there.

And there’s no indication that a European depression is going to lead to a left-wing solution.

If the U.S. has its way, it will lead to a 1930 Nazi-type solution, just as the United States has promoted in Ukraine and in the other countries that it’s taken forward.

So Europe may end up looking like a Latin American dictatorship, like Chile under Pinochet.

MICK DUNFORD: One also needs to recognize that in some respects, the structure of the economies of Europe, you know, have some parallels with the structure of the economies of North America.

There are economies with very high GDPs, but actually their GDP enormously overstates their real wealth in many ways, in part because the GDP includes all sorts of imputations.

It includes a whole series of immaterial services, you know, that basically derive from intangible assets that are associated with what copyright, patent, trademarks, intellectual property rights and the control of supply chains.

So a significant amount of European wealth in a sense derives also from those sorts of sources.

This control over IP, for example, is associated with excessive markups, high service payments.

It prevents the diffusion of technologies, of products that could make considerable contributions to the improvement of human livelihoods throughout the world because they remain so expensive.

In fact, we know that what in a sense drives development is the rapid diffusion, adoption, repetition of investments. But this system, you know, prevents it.

But this system is one which generates large rents, you know, for economically advanced countries and associated with these rents are a lot of interests that are not connected with manufacturing industry and maybe that seem prepared to sacrifice it and to sacrifice the people who work in it in order to preserve some alternative kind of future.

To me, that world is scarcely viable outside of a kind of colonial and imperial world order.

And in that sense, I agree absolutely with what you’re saying about the naivety and apparent stupidity, gross stupidity of many of the leaders of European countries.

RADHIKA DESAI: No, exactly. And you make a very important point, Mick.

The GDP of many Western countries, particularly the United States, is vastly exaggerated for the reasons you state. And also because finance in particular constitutes such a large part of this.

And essentially, what is finance? Finance is actually not production. Finance only involves the transfer of wealth from some to others.

So that in a certain sense, the very thing which is harming the US economy, which is creating inequality, is actually counted as economic wealth.

And of course, the making of financial profits only benefits a small number of people to enjoy the labor of other people for next to nothing. I mean, that’s essentially what it is.

I also want to say one other thing, which is, obviously, one of the implications of what all of us have been saying is that it is important — today, you showed the labor productivity graph.

What would be required to turn that around? What would be required to increase labor productivity in European countries, Western countries more generally?

It would be some kind of industrial policy. It would be a set of policies which are totally the opposite of neoliberalism, monetary policies, fiscal policies, industrial policies, everything the opposite of neoliberalism.

But after 40 years of applying neoliberalism, it is a moot question whether these countries are ever going to be in a position to be able to implement serious industrial policy.

The very structure of these societies, the relationship between states and capitalist classes has changed to such an extent.

So increasingly, I’ve been noting that both in the United States and in Europe, industrial policy is being revived as a topic of discussion. Everybody’s saying we need industrial policy.

But if you look closely, if you read between the lines, what is passing for industrial policy is essentially a policy which is neoliberalism, which is to say, giving more and more subsidies to big corporations.

So the Germans under the rubric of industrial policy are essentially discussing whether they should give subsidies to IBM or to some German manufacturers or what have you. But that’s all it is.

And that’s not industrial policy. It’s just the continuation of neoliberalism.

Why? Because neoliberalism, for all the talk of free markets and free trade, has ever been only about governments favoring big corporations by giving them all sorts of goodies, cheap credit, privatizing assets at fire sale prices so these companies get ever bigger, giving them subsidies in the name of R&D, and of course, providing all sorts of other services.

So really it seems as though the road out of all this for Europe is also going to be very difficult, even if there arise forces that are determined to seek to attempt that.

MICHAEL HUDSON: What you’ve described as neoliberalism is exactly what Mick has called a rentier policy. And a rentier policy pretends to be economic growth, but it’s really overhead.

RADHIKA DESAI: Absolutely. So we will bring this ninth Geopolitical Economy Hour to an end. And see you next time. We will continue this discussion then. Bye-bye.

By Michael Hudson

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