Friday, November 06, 2020

What Makes China So Competitive

theanalysis |   But what I’m getting at is a progressive people’s movement and the progressives that have been elected to Congress, what should they be demanding? What do real solutions look like?

Michael Hudson: What they should be demanding is something that cannot be done within the existing two-party system. First of all, the way to keep down housing prices and to get the cities and states out of their deficit is to tax unearned income. Tax the land, have a real estate tax that’ll collect all this rent that is being paid right now to the banks as mortgage interest. Either you pay the banks the contractual interest that they’re due on all of these loans, and you go broke. Or you realize the banks have become averse to economic welfare. You have to let the financial system go and replace it with banking and credit as a public utility.

That’s what makes China so competitive. Why is China able to outstrip American labor? The Chinese have almost; I’d say, an equal standard of living from everything that I’ve seen there. Well, the reason is that China is doing exactly what the United States did to become an industrial power in the late 19th century. China has public utilities, public enterprises providing basic needs, and basic public services at a subsidized rate or freely, such as education, it’s free. Foreign labor doesn’t have education debt like the United States. Education is free. Health care is public. It’s provided freely. There’s no huge limit.

Paul Jay:  Let me say, I think that’s not quite as rosy as it appears. My understanding is that while health care is supposed to be free and public, that you actually have to wind up having to pay doctors some cash, or you really can’t get in to see them.

Michael Hudson: Yes, that is fair. I do acknowledge that fact. But the most important public utility to answer the question that you brought up, the important thing is that banking and finance in China is a public utility. The government is the creditor. When there’s a pandemic like this and companies cannot afford to pay the debts or have to lay off labor, the government, as a banker, can say, OK, we’re just not going to collect the debt and force you to go under and force you to lay off your labor force.

It’s easy to cancel debts when you, the public, and the government are the creditor. Because you’re canceling debts owed to yourself, and that’s one of the main reasons why banking should be a public utility.