In today’s discussion, we explore the evolving dynamics of the global economy, particularly how the United States’ stance towards its allies has shifted. Yves here introduces the insights of Michael Hudson, who sharply critiques the transition from a strategy focused on long-term growth to one characterized by opportunistic exploitation. Strikingly, many leaders of nations facing the brunt of this predation appear compliant, raising questions about their motivations and the psychological factors at play.
It’s important to note that while the Collective West seems to be driving toward potential economic disaster, the outlook for much of the rest of the world—excluding Russia—is equally troubling. China is grappling with a significant private debt crisis, comparable to that of the United States, which could pose even larger risks. As reader PlutoniumKun points out, the situation may be dire enough to mirror Japan’s economic plight prior to its own major market collapses. In response, China has attempted to address overcapacity in its key sectors like electric vehicles and solar panels, yet continues to depend on its export and investment-driven model, neglecting a transition towards a consumer-based economy. The specter of deflation looms large as China experiences price declines, evidenced by the sustained decrease in prices in countries like Thailand. Moreover, former UN economist Joma Kwame Sundaram highlights that developing nations face looming financial crises due to their extensive external debt burdens.
As the celebrated economic analyst Bette Davis once famously noted, “Fasten your seatbelts. It’s going to be a bumpy night.”
Originally published on Glenn Diesen’s YouTube channel.
GLENN DIESEN: Welcome back to the show. Today, we have the pleasure of speaking with Professor Michael Hudson, who will shed light on the U.S. national security strategy and the disintegration of the post-World War II economic framework. Thank you for joining us.
MICHAEL HUDSON: Thank you for having me. The pace of developments has been astonishing, and we have a lot to discuss.
GLENN DIESEN: Indeed, it’s a challenge to keep pace with everything unfolding. In academia, we traditionally focus less on current events, but the current landscape demands our attention to the rapid shifts occurring week by week. Particularly, many discussions tend to center narrowly on individual figures, often attributing the unraveling of the political West to personalities, like Donald Trump.
However, there are broader forces at work. The very foundations of the prevailing economic order are being eroded. I’d like to start by getting your interpretation of the new U.S. national security strategy through an economic lens.
MICHAEL HUDSON: The document itself falls short of fully articulating the strategy. It doesn’t openly state that the aim is for other nations to sacrifice their economic well-being to prioritize American interests. Nations such as Germany, Japan, and South Korea are expected to adopt the “America First” agenda over their own national interests. This represents a significant departure from the post-1945 economic structure that American diplomats established.
In the post-World War II context, the United States emerged as the preeminent industrial and monetary power. The world relied on American support, with U.S. interests aligned with dismantling the colonial empires of Britain and France.
This era of free trade and investment was largely ideological, promoting an assumption that it would stabilize international debts and ensure mutual prosperity. However, this notion proved illusory. The unforeseen consequences of America’s dependence on foreign industry and finances have resulted in a trade deficit that has persisted since the Korean War commenced in 1950.
As other nations amassed dollars, many exchanged them for gold, leading to a continual loss of gold reserves for the United States. As the world relied on American military expenditures, it inadvertently fueled a cycle that allowed the U.S. to continue spending beyond its means.
This enabled the U.S. to deindustrialize, leading to a national security strategy that now recognizes the outmoded principles of free trade, investment, and equal sovereignty among nations. Instead, coercive tactics appear to be the new norm, particularly in controlling vital resources like oil.
America’s strategic goal has morphed into preparation for conflicts with Russia and China rather than fostering a peaceful global order. The current National Security Report subtly acknowledges that the U.S. seeks to monopolize emerging technologies and shield its financial and industrial interests from regulations imposed by other nations.
MICHAEL HUDSON: What’s worrisome is the flawed assumption that coercive economic policies will entice foreign nations to relocate their industries to the United States, without addressing the reasons behind America’s deindustrialization in the first place. The underlying dynamics making investments in U.S. manufacturing less attractive than financial speculation seem to be largely overlooked.
Europe’s fear of an impending economic bubble, particularly around artificial intelligence, is growing among financial circles. Business leaders anticipate significant market corrections, creating pressure on U.S. diplomatic efforts to cement a unilateral economic order—a scenario they estimate may only have a three-year window before facing increased resistance.
Among the key supporters of this agenda in Europe, leaders like Macron, Starmer, and Merz find themselves unpopular domestically, as their policies seem to imperil their nations’ economies without providing tangible benefits, leaving them vulnerable in the upcoming electoral cycle.
Thus, we see a troubling trend where European nations align themselves with U.S. policies, often at their own detriment, especially regarding relationships with emerging economies in Africa and Asia.
Finally, the report hints at the potential fragmentation of global spheres of influence, indicating that while the U.S. may assert control over regions like Latin America, countries such as China and Russia will continue to seek their own spheres, complicating international relations.
It’s becoming clear that Europe faces a crossroads: whether to follow the imposition of American policies, risking long-term economic stability, or pivot towards growing markets and partnerships in Eurasia. Given the urgency and complexity of these issues, choices made in the next few years will shape the future for both Europe and the global balance of power.
Thank you for joining us today, as we navigate these complex geopolitical and economic landscapes. The future remains uncertain, and only time will tell how these dynamics unfold.
GLENN DIESEN: Thank you, Professor Hudson, for your insights into these critical issues.
MICHAEL HUDSON: Thank you for having me, Glenn.
