nakedcapitalism | Ross What do you think was revealed in 2020 that we all intuitively knew but couldn’t actually see because it hadn’t crystallized?
Michael Hudson Well, it’s obvious that the economy never recovered from the Obama depression after he bailed out the banks, not the economy. So the question is, how long can the economy limp along without recovery?
Well, it’s obvious now that the debts can’t be paid, but the coronavirus only catalyzed that. It’s made it even clearer. So in a sense, the Biden administration is going to be picking up just where the Obama administration left off, namely with huge evictions. Obama evicted about 10 million families. Most of them were black and Hispanic, lower income families who were the victims of the chump mortgages. Biden’s going to start his administration by kicking out probably another five million families. Again, black and Hispanic families are going to be the big losers because they were the people who had the highest coronavirus or were the first to be laid off. So it’s going to begin with a large eviction.
This reverses the trend in homeownership going up to 2008. It’s been going down, and this is going to continue now. People somehow imagined that there was going to be a recovery, that somehow we could recover from the post 2008 breakdown. But now it’s obvious we can’t recover. You’re going to have the polarization of the economy that has been occurring for the last 12 years. It will simply accelerate.
Ross What do you think are the megatrends that we should be looking at in 2021? What do you think is the direction of travel, if you like, for so-called developed economies?
Michael Hudson Well, the big trend in any economy is the growth of debt, because the debt grows exponentially. The economy has painted itself into a debt corner. We can see that in real estate. We can see that for small business. There’s also almost no way to recover. The Federal Reserve has been printing quantitative easing to keep stock and bonds high. But for the real economy, the trend is polarization and lower employment.
The trend also is that state and local finances are broke, especially in the biggest cities, New York City, San Francisco and Los Angeles. They’re not getting income tax revenue from the unemployed or closed businesses. They’re not getting the real estate tax with so many defaults and mortgage arrears. In New York City there’s talk of cutting back the subways by 70 percent. People will be afraid to take the subways when they’re overcrowded with people with the virus. So you’re having a breakdown not only in state and local finances, but of public services that are state run – public transportation services, health services, education is being downsized. Everything that is funded out of state and local budgets is going to suffer.
And living standards are going to be very sharply downward as people realize how many services they got are dependent on public infrastructure.
Ross Which, of course, opens the door for vulture funds and predatory capital, whether it be private equity, VCs or whatever else to come in and do public infrastructure deals?
Michael Hudson Well, you’ll have privatizations. The American economy will be privatized because the states can’t support their transportation system and other systems. The pressure to privatize subway and transport system, schools are going to be more privatized, as jails have been in the United States. So you’re going to have a huge privatization trend.
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