Michael Hudson explains the kabuki budget debate

Hudson is taking a VERY long term view:

All across Europe the Socialists have moved to the right of the conservative parties as far as financial policy is concerned.

The terminology and political concepts that existed a century ago when the Social Democratic and the Labour parties were being formed were concerned with wages, labor unionization and other employer/employee workplace relations much more than with bank policy. “Capital” meant mainly heavy industry. That’s not the case today. You have a war of finance not only against consumers and employees, but against industry – and most of all, against government, which is the only power able to restrain finance and tax it. Financialization has turned into asset stripping. It focuses on the public domain because this is still where most of the assets are. Also, national treasuries are able to create public debt – and make future taxpayers pay tribute to the financial oligarchy, which is un-taxed.

They actually teach short-term financial engineering in business schools. Bob Locke and J. C. Spender are coming out this fall with a good book, Confronting Managerialism, about how this management philosophy is disabling economies. Financialization also has disabled socialist and left wing politics. In a turnaround from their origins, you don’t hear much about financial issues from the Democrats in America or from the Socialist parties in Europe. They focus on cultural issues, minorities, sexual equality, but not banking and finance, or even privatization except when it threatens labor unions.

The result is an absence of a political alternative. Meanwhile, economic democracy is being turned into a financial oligarchy. This is going to be the main problem for the next century: how to cope with the financial oligarchy that the bubble’s bailout terms have empowered. When the Bush and Obama Treasuries gave $13 trillion to Wall Street’s managers, they vested a new century’s power elite, much as the 19th-century railroad barons were empowered by giving them the western lands and all the money for the railroads. Similar public giveaways and insider deals vested land barons and power elites in most of the world.

The re-assertion of today’s rentier oligarchies is the opposite of what was expected from the early 19th century into the 1930s. In the middle of the Great Depression, in 1936, Keynes wrote his General Theory. His last chapter called for “euthanasia of the rentier.” What we have now instead is euthanasia of employees, euthanasia of industry and of entire economies to siphon off rent extraction, interest and financial fees to the top of the economy.

Nothing like this has occurred in Western civilization since the conquest of Europe a thousand years ago. It occurred in the Roman Empire when the creditors took over. We all know what happened then. We had a Dark Age. You asked about recession. Well, we’re not only moving into a depression but the question is now whether it is going to keep on going? What kind of a society are we going to have if we persist in today’s tax shift off wealth onto employees, onto consumers and industry, onto the cities and states, while privatizing and selling off basic infrastructure. Governments are now conducting a kind of pre-bankruptcy sale. But nobody’s either end of the political spectrum is talking about the emerging oligarchy.