It provides a sweeping overview of monetary history from World War I to the present -- which may not sound like a very interesting subject, until you realize that he is explaining the outlines of the political and economic system which has framed a hundred-year period marked by the overthrow of any nations which attempt to restrict the takeover of their peoples' natural resources and their sale to private parties, and (through the lever of foreign-currency debt) the imposition of austerity upon their populations (including the removal of public services, the reduction of pensions, and the sale of utilities, ports, airports, and even rivers and waterways to private "investors," who stand to make a fortune from these assets).
As such, Professor Hudson's article is worth reading and re-reading very carefully and deliberately in order to try to grasp the framework that he is describing, and how it leads directly to consequences that are all too familiar in the world around us.
He explains that after the cessation of open hostilities in 1945 at the end of World War II, the united states controlled seventy-five percent of the world's gold stock. This situation led to the united states dollar becoming the reserve currency, "freely convertible into gold at the 1933 parity of $35 an ounce." And, because other governments wanted to have either gold (largely controlled at that time by the united states) or dollars (which were "as good as gold" and could always be turned into gold at a fixed rate) to back their own currencies, those countries that wanted to participate in the system found that there were a few strings attached when it came to obtaining gold or dollars: they had to accept the trade and investment rules dictated by the united states.
Professor Hudson explains: "These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems."
That sentence deserves to be read very carefully for all the points that it is making. It explains how the gifts of nature (or the gifts of the gods) to the people of a country -- such as the waters, the woodlands, and the mineral wealth beneath the surface of the earth -- were privatized (largely by individuals and corporations operating across boundaries and originating in other countries), so that the benefit of those natural riches accrued to a small group of people (from other countries) instead of to the people to whom nature (or the gods) had given those gifts.
However, the reader is probably aware that the united states dollar is no longer readily convertible into gold at the fixed price of $35 an ounce -- that framework ended a long time ago (in 1971), as Professor Hudson's article explains. You will get a lot less than one ounce of gold if you try to convert $35 into gold today. The gold window was closed after the united states spent so much of its gold on military actions around the world beginning in the early 1950s and accelerating in the 1960s, as Professor Hudson explains.
However, instead of being a defeat for the united states, the severance of the united states dollar's link to gold "was just the reverse of a defeat," Professor Hudson says. Those other countries could no longer easily turn their dollars into gold (and, as Professor Hudson notes, anyone trying to do so met with strong disapproval from the US), so they turned them into united states treasury bills and bonds instead -- and that is the situation that largely continues to this day.
What the reader must understand (and what Michael Hudson points out in his article) is that holding united states treasury debt is the same as making a loan to the united states, without any say in how the proceeds of the loan are used. Thus, the international landscape actually became even more dominated by the united states, which could still dictate that nations had to open their public domain and natural resources and industrial companies and banking firms to foreign takeovers by private individuals and corporations, and at the same time could rely on low-cost loans to finance its own military buildup and reduction of tax rates.
Towards the end of the article, in a section with the heading "US Neoliberalism Promotes Privatization Carve-Ups of Debtor Countries," Professor Hudson explains that the strong economies of industrialized countries like America and Germany were originally founded on "public investment in economic infrastructure," in which prices for essential services such as water and education were subsidized and kept to a minimum (or even provided freely).
"The aim," Professor Hudson explains, "was to lower the price of living and doing business by providing basic services on a subsidized basis or freely." But after the implementation of neoliberalism, public sectors are "privatized and planning turned over to rent-seeking corporations" -- and the united states is now leading the way in exporting this neoliberal privatizing vision around the globe.
"The price of resistance," he notes, "involves risking military or covert overthrow." The united states has a demonstrated history of overthrowing democratically-elected governments which oppose privatization of public domain and natural resources, as well as of protecting authoritarian governments which are open to giving away their country's natural wealth and resources (given by nature, or by the gods, to the people of those lands) to privatization. Authoritarian regimes have been invaded and overthrown as well, to be sure -- but the unbroken track record since the end of World War II demonstrates unequivocally that the criteria for the implementation of covert or overt overthrown is whether a nation's government resists privatization of public resources and the public domain or whether that government is open to such privatization. Such overt and covert actions have nothing whatsoever to do with "supporting democracy."
The economic aspect of this system is not very well understood. It is extremely rare to find anyone who can explained it with the clarity that Michael Hudson explains it -- and who can, in addition, bring a rich understanding of the history of economic thought and the debate over these issues stretching back over centuries (and indeed over millennia) that he also provides in his published writings, interviews, and lectures.
And, while the question of reserve currencies and treasury debt may seem to be far removed from the profound ancient wisdom contained in the world's myths, scriptures, and sacred stories, the question of the privatization of the natural resources and public domain that we see taking place in the world around us at an ever-increasing pace is very much a manifestation of the rejection of that ancient wisdom given to all people around the world. I have discussed this subject in numerous previous posts, including:
- "Two Visions" and
And so, what may seem at the outset to be a dry and unappealing subject -- the monetary history of the world since the end of World War I, and the question of reserve currencies and the holding of united states treasury securities in reserves of nations wanting to be part of the international monetary system and trade -- opens a window on the privatization by a few of what actually belongs to the gods, and thus to the people (in whom, the ancient wisdom explains, the gods are present, and at whose birth, the ancient myths tell us, specific divinities -- usually goddesses -- are always present).
The ugly and life-depriving effects of this privatization (note that "deprive" and "private" come from the same root -- a fact Professor Hudson points out elsewhere) is perhaps most dramatically seen when governments who are collaborating with the forces of neoliberalism sell off entire rivers. Here is an article from 2011 about the sale of rivers in India to corporations, who promptly fence them off, barricade their flow and divert it for use in mining, and hire guards to prevent the people from using the water for cooking, cleaning or fishing as they and their parents and ancestors have done for centuries.
And a similar thing has also been happening in Central and South America, where rivers may not be blatantly sold off to corporations by the collaborating governments, but where they are "de facto" given over to mining companies, who then barricade them off, prevent the people from using or even accessing the water, and divert their flow to generate power used for mining operations. See this story from early 2016 about the murder of Berta Cacares, who was a vocal leader in the opposition of such privatization of the rivers of her people. As that article shows, she urgently called on humanity to wake up to what is going on, saying: "!Despertemos, humanidad!"
Articles such as the most-recent article by Michael Hudson, "Monetary Imperialism," provide the kind of big-picture overview of what is taking place that should help us to wake up, and see how the pieces fit together.
The path that the world is on -- towards privatization, deprivation, and the short-sighted exploitation of the public domain and natural resources given by the gods (or by nature, if you prefer) to all and not just to a few well-connected individuals or corporations -- is by no means inevitable or unstoppable. But we need to be able to see what is going on, explain what is going on to others, and then stand up to what is going on, if we are to change direction before it is too late.