Renegade Economists: October 1, 2014: DOUBLETHINK TANKS, TAR SANDS, WATER & IMPERIALISM.
Michael Hudson, October 9
Karl Fitzgerald: This week on the Renegade Economists we’re joined by Professor Michael Hudson, the author of The Bubble & Beyond, Super Imperialism, and a host of other books. You can read his work at www.Michael-Hudson.com. Certainly our favourite guest here on the Renegade Economists and Michael, today we’re going to have a look at the role of think tanks in sculpting the American mind and the public policy that flows from that. What’s your take on the role of think tanks in American economic history?
Michael Hudson: Well, today they’ve become basically public relations organisations and they’re subsidised by groups with political agendas. The first major think thank was in the 1930s and it was a very good one at that time: the Brookings Institution, headed by Harold Moulton. They wrote America’s Capacity to Produce & to Consume which, without being Keynesian, made the same points that Keynes was making about the need for consumer spending and the need for economic revival. And that was really the main think tank one heard about during the 1930s and even the ‘40s.
Later, think tanks began to be formed on the right-wing. A military think tank, the RAND Corporation, was founded in California. Herman Kahn came from there, and then the Department of Defense funded his ideas at the Hudson Institute at Croton-on-Hudson, New York. He was the model for Dr Strangelove. I joined him as the number two man and economist in 1972, just as my Super-Imperialism was published. It proved to be a big hit with the Defense Department in Washington, which used it as a “How to do it” book. My first job was to explain just how America was using monetary imperialism to get a free ride from other countries. Herman said that this was part of the “good news” that he wanted to spread.
Herman and I actually disagreed on almost every policy. We’d go around the country together arguing. He’d talk about the glass being half-full and he said I talked about it being half-empty, but I said, “No, you guys are peeing in it.” So then he talked about the economy being an expanding pie – he was into calculating GDP growth at doubling times to show that in time every economy could become a leisure economy. My job was to ask, “Who’s actually making the pie? And who’s going to eat it?” He didn’t focus much on distribution and polarization of wealth.
Michael: It’s like the Cato Institute, an ultra-right-wing institute whose party line is that government is the enemy, you have to stop government planning. Of course, every economy is planned by someone or other. If you oppose government planning, that role shifts to Wall Street. The Koch family is rich enough that, essentially, they want to be the planners. Their plan is essentially fossil fuels, oil, and everything that the greens and the left-wing are against. The right-wing of the Republican Party in America has left enough leeway for the Democratic Party under Obama to move hard-right, neo-con and pro-Wall Street. And Obama, as you know, is supporting the tar sands in Canada, which are the dirtiest source of oil in the world.
The first large contract I worked on at the Hudson Institute in 1973 and ’74 was on the gasification and liquefaction of the tar sands, for ERDA, the Energy Research Defense Agency. They asked the Hudson Institute to do an economic analysis. I found that in the analysis the government gave me, they had the price of water at zero. Of course, oil gasification makes gas out of water, and this is much more the case for the tar sands. This drive went on into the Carter administration. Herman and I went to the White House and it was explained to me, that this was the whole idea of tar sands. The aim is to use so much water that it creates a drought in America. The drought was seen as doubling or quadrupling grain prices. In essence, the idea was for America to pay for higher priced oil with higher priced grain. This would support the balance of payments enough to finance U.S. military power throughout the world. In the process, of course, it would starve as much as a quarter of the population of Africa and Latin America.
Today’s gasohol is having this effect. It is diverting farmland away from food production to gasohol. In the process, it is driving down the world oil price, and thus hurting Russia’s balance of payments, while increasing food export prices for the United States. American foreign policy has almost always been based on agricultural exports, not on industrial exports as people might think. It’s by agriculture and control of the food supply that American diplomacy has been able to control most of the Third World. The World Bank’s geopolitical lending strategy has been to turn countries into food deficit areas by convincing them to grow cash crops – plantation export crops – not to feed themselves with their own food crops.