Richard Wolff: Iran War Destroys Global Economy & U.S. Empire (Transcript)

Trump promised as he ran that he would do it. And one of the reasons he adopted his tariff program was that it might generate big money into the government so that at least the deficits would be reduced.

Okay, all of that has been blown apart. Number one, in order to counter the declining empire problem, you got all this noise about retaking the Panama Canal, taking Greenland, converting Canada into the 51st state, and so forth. And with all of that grandiosity and with the quite determined resistance of all of those entities — they didn’t want this, they’re not for sale, and all the rest — he went to the Congress about a month and a half ago, first quietly, then publicly demanding an increase in the defense — although it’s now called the War Department — budget, from the current $900 billion to $1.5 trillion.

Excuse me for the arithmetic, but it’s needed for the argument to be made. That’s an increase in one year’s budget of $600 billion on a base of $900 billion. In other words, a two-thirds increase in one year of the Defense Department budget, when we spend more on that than the next eight countries combined spend on that, and that includes Russia and China.

So this is a wild announcement of increased spending, but we’re not done. Then he goes to war against Iran and has now asked for an additional $200 billion to fight the war. Okay, so now we’re increasing $800 billion.

The Tariff Collapse and Borrowing Crisis

The only increase in revenue to deal with that were the tariffs. And the Supreme Court has ruled that those were illegal and unconstitutional. And the companies that paid them — importing companies — have now gone to court and are demanding a refund of that money. And I don’t see how that can be refused. If you’re taxed and the tax is illegal, it has to be returned to them.

So there’s no increase in revenue and an $800 billion increase in military outlays. This is impossible. What this means is that the government will go into the credit markets and try to borrow an additional $800 billion on top of what it was already facing as a deficit. And it will do that at a time when its credit rating is lower than it has been for most of the last century.

Here’s what I expect. It will not be easy to borrow, and for sure it will be necessary — unless something new happens — to pay higher interest rates if you’re going to be able to borrow.

Interest Rates, Stagflation, and Political Desperation

So how interesting, with this logic, that yesterday Axios and other important news agencies of the business world announced that the people who keep track of these things went in the last two days from a zero probability that interest rates would be raised by the Federal Reserve to about 26 to 27% odds that we will have increases this year — not the decreases that the stock market had priced in over the previous six months.

If you remember, Mr. Trump has been trying to get rid of his own appointee, Mr. Powell, at the Federal Reserve, in order to get lower interest rates sooner. At this point, no one is thinking you could possibly lower interest rates now. Everyone in this country is worried that what’s going on in the Middle East will mean oil and gas prices will stay elevated and that that will work its way through the economy and give us another inflationary bout, and therefore interest rates cannot be lowered.

That puts the United States in an impossible situation. We have a renewal in the debate on Wall Street about the likelihood of stagflation — a recession and inflation at the same time, which we call stagflation — which we’ve had before and which we can have again.

Trump’s Political Crisis and Electoral Interference

And an election in November in which at this point Mr. Trump and his people have only two options: interfere in the election or lose. Those are their options. And given who these people are and how they behave, you’re going to see a lot of interference in the election as much as they can get away with, starting with the so-called SAVE Act.

The newspapers yesterday were full of two ironies that speak to this. Number one, that in the Florida state election for the state legislature of Florida, which was held yesterday, Mr. Trump — who was in Florida during the day — chose to use a mail-in ballot to cast his vote. He has stimulated a bill in Congress that would end mail-in ballots, using the argument that they are illegitimate somehow.

Even more important, the election for the state assembly in the district that includes Mar-a-Lago — that’s where Mr. Trump voted — for the first time in many years, voted for a Democrat and not for the candidate of the Republicans who had been endorsed by Mr. Trump. So he was defeated right in his own neighborhood. These are all terrible signs for his lack of popularity and the desperate situation they are in.

The Unresolved Crises Behind the War

Meanwhile, last point: the two issues that were supposed to be pushed off the headlines by this war in Iran — namely the Epstein scandal, which is far from over, and the economic problems of a vast majority of the American people — those remain unresolved, unsolved, worsening literally by the day.

And how long he can distract from that with the war, I don’t know. But I think he is seeing this as his only hope. He got a little bit of a boost by snatching Mr. Maduro out of his bed at night in Venezuela and hoped somehow Iran, as you put it, could be a parallel piece of political theater. The bottom line is it’s not working at this point at all.

But again, everything depends on the solidarity of the Iranian people behind their government. And I can’t speak to that. It’s not anything I know in any direct way.

Assumptions, Uncertainties, and the Stakes of Failure

GLENN DIESEN: Well, I think that’s an excellent point to make, because a lot of the predictions being made are premised on that — we know how this war is going to end. But even if we see the trajectory it’s going now, it’s still based on a lot of assumptions which we can’t be certain about.

So, as you mentioned, for example, it’s possible that the Iranians are exaggerating the missile stockpile they have built up through these tunnels. It’s possible that they don’t have the industrial capacity to keep replenishing the stocks as is assumed. It’s possible that the resilience of the political system after killing all these leaders is not as strong as one would think, especially in terms of institutions. And as you said, it’s also possible that this societal cohesion is not as durable. I mean, at the moment they’re pouring into the streets in support of their government, but this could change.

So I agree that if the US is able to defeat the Iranians, this will be a massive victory for Trump, because every American president for the past 30 years, I think, has considered attacking Iran but never done so because it was too risky. So of course it could revive the US Empire. It could strengthen Trump’s position.

However, if it doesn’t play out — I mean, this is why it’s such a dangerous gamble which appears to be going the wrong way — then it’s going to be devastating for Trump. His support will plummet. And also it seems that the position of the US Empire can also dramatically be affected.

The Petrodollar and the Global Economic Fallout

Because I was thinking the US was already overstretched. Last week it ran into $39 trillion of debt, which is an ungodly amount of money. And we already knew that the US wasn’t doing that well in the economic war. The tech war against China is struggling with competitiveness. The tariffs of Trump, as you and I have spoken about in the past, have not worked as hoped.

And it just seems like the petrodollar itself could come under a lot of stress now, if the Iranians succeed in essentially compelling the Gulf states to, for example, stop trading in dollars if they want to use the Strait of Hormuz. So there’s a lot gambling at stake here.

But how do you see it affecting the wider global economy? Because you can’t really double energy prices and put such massive limitations on fertilizers and not have the rest of the world feel the pain.

The Global Economic Fallout of Middle Eastern Instability

PROFESSOR RICHARD WOLFF: All the rest of the world is feeling it. And the rest of the world is not only feeling it, but is taking steps that are not reversible. People don’t understand that when you are faced with a sudden spike in the price of oil and gas, for example, and in derivative prices like fertilizer, plastics and other things, you’re going to have adjustments that do not get readjusted back to the position before when the prices come down again.

In other words, there are people that are going to be switching to solar energy or hydro energy or other kinds of energy that are never going to go back to buying oil, especially when they’re squeezed like they are now. I mean, I don’t know of anyone who’s done a study how much damage has been done in the Gulf states that they will now use their accumulated dollar holding of US Treasuries, liquidate them, in order to repair and replace the facilities that the Iranians have knocked out. I don’t know how much that is, but my guess is that the Gulf states are going to be much less of a buyer of American debt than they have been in the past as a result.

How does that figure in? And here’s some even bigger ones. If I have this right, the most extreme problems are going to come in Asia, which relied on Middle Eastern oil. Europe and Asia relied on Middle Eastern oil. The Europeans are feeling the squeeze already. The Asians are feeling it already. I believe it’s the Philippines that has already now put limits on the amount of gasoline you can get into your vehicle each time you stop at a gas station. In other words, they’re beginning to control the supply. Other countries are forbidding export of certain kinds of either oil or derivatives from oil.

So if you have a closing up of the fossil fuel business, you might have the best ecological outcome for reasons having nothing to do with ecology, because everybody is either unable to get the oil or does not want to stay in the vulnerable position waiting to see how wars thousands of miles away work themselves out. And then when you remember that the United States, as you rightly say, has been antagonistic toward Iran and may now become so against some of the Gulf states, depending on how they go in this situation, it’s very, very dangerous.

Russia, China, and the Iran Equation

Let me introduce a couple more. Iran has an immense long border with Russia. On one level, I don’t want to over exaggerate this, but it would be naive not to think it doesn’t matter what their capacity is to produce missiles or drones, because Russia can supply them with all the missiles and drones they could possibly need or want indefinitely. And one of the reasons Russia can do it is because China has a big long border with Russia. And so moving these things from the manufacturing powerhouse that is China through Russia to Iran, the mechanisms for that are already in place. The trade that runs like that has already occurred.

So the United States has to wonder not just about the capacity of Iran, but of the willingness of Russia and China to support Iran. It’s a little bit like Russia had to calculate what is the power that we face against Ukraine, once it became clear that the United States and Western Europe was going to help Ukraine with missiles and drones and everything else.

In order to answer that question, you have to wonder what’s going through the mentality of Russian and Chinese leaders as they confront this. And my fear is that what Russian Foreign Minister Lavrov said yesterday — he was quoted as saying lines to the effect that “this is the beginning of World War Three” — okay, put aside for a moment the shock value of that. And there are others who have been saying that, too. But here is one of the people closest to Mr. Putin for many, many years saying that in the minds of the planners and thinkers there, we’re not dealing with a localized event, we are dealing with a global event.

And if it’s global, and if it’s even vaguely World War 3, then Russia and China cannot then logically step back and say that Iran will have to rely on its own capacity to produce weapons. That’s not going to happen. The stakes are much too high to make that assumption. And if you don’t make that assumption, then where are you? The Iranians using their own missiles and drones, or the limitless supply that will be available to them, if it isn’t already — they can keep the Strait of Hormuz closed forever. They can keep lobbing the drones and missiles onto the Gulf states, not just the American bases there, but the desalination plants, the electric plants, the energy facilities, and on and on. Who’s going to stop them?

The Iron Dome hasn’t saved Israel from all kinds of damage done by the missiles from Iran, and the United States can’t either. That’s why you get the crazy proposals from the likes of Lindsey Graham and other marginal characters here in the United States. They’re advising Mr. Trump to use nuclear weapons either to destroy Iran literally, or else — the best one I heard last night was to widen the Strait of Hormuz by dropping nuclear weapons into that area. I understand this is all crazy stuff, but it’s crazy stuff that’s becoming part of the discourse.

Trump’s Political Survival and the Domestic Crisis

Because if John Mearsheimer is correct — and I know you have him as a guest and you know him well — then he has said from the beginning there is no way out. Mr. Trump has no way out. And the implication of what Mearsheimer has said all along is: don’t do this, because you won’t have a way out. And Mr. Trump did it anyway. And so now we are living with what it means if he has no way out.

But I’m telling you again, and I would stress it, he will disappear politically anyway when the internal fiscal disaster hits here. If he can’t prevent the election, if he can’t control the election, and if he is defeated — which he will be if he doesn’t prevent it at this point, no question — then the question becomes whether he will go or not. And that’s where we are. Then the issue becomes the American military establishment. Where will they go? Because you will have reached a point in which the country is split 60-40, and the only conceivable control mechanism becomes the military.

And then, who knows, because he is busily creating his own military. To give you an example, the refusal of the Congress to fund ICE — the private army that they created to deport immigrants — they have now brought them into all the airports here in the United States, because the budgeting meant that the people who process you at the airport are on strike. Effectively, they’re not working because they haven’t been paid, because they can’t resolve it. The Democrats won’t let it go through. So Trump has decided to use ICE at all the airports.

That’s an expansion. The private army is now committed to deporting all the bad criminal immigrants, and now they’re also in charge of security at all airports. They’re becoming an alternative military police apparatus, and they will be called in. And you can be very sure that the rest of the military are watching this with great concern, because they are not reliable for Mr. Trump, and he has to deal with that, which he’s doing.

The Collapse of Confidence in America

But the very fact that I speak to you in this way about this society already tells you something — that the global understanding of the United States as a place where you can safely keep your money is finished. That’s done. This is a country of turmoil, of illegal activity all over the place, a military whose loyalty is now in play. This is what wealthy people around the world want to hide their money from. They don’t want to go to a place that’s like that.

And I think you’re going to see, as the instability deepens and becomes more visible in daily life, the pressure on Mr. Trump — I don’t see how he survives this. But that’s how grim it is.

And by the way, I’m talking to you from New York City. You can feel it in the population here. There’s a level of — it’s not quite psychological depression, but there is anxiety. There is enormous disaffection from the institutions, almost all of them, a turning in of the population. And when you talk to people and you say, “Is that happening to you?” they nod, because someone has put it into words. I’ve never — and I’m born here and lived and worked here all my life — I’ve never had that feeling that I have now, just in the street among people, over a cup of coffee at a coffee shop and so on. You’re picking up a deep sense that something is terribly wrong and that we have to change dramatically.

And that’s why I think it’s extremely important that we here in New York City — the largest city in the country, the most cosmopolitan, largest percentage of people who are Jewish — voted for a Muslim socialist for mayor. I mean, that’s an index of change. We want somebody completely unlike our traditional politicians. And he won for that reason. And he could have been a communist instead of a socialist, he still would have won. That’s the amazing thing. By people who don’t like socialism, don’t like communism, don’t know very well what it is anyway because of the country’s attitude — but it didn’t make any difference. He was a nice young man with a beard and a socialist and a Muslim. Fine, vote for him.

And the man said that if Benjamin Netanyahu visited New York, he as mayor would have him arrested. He said that as part of his campaign, and the Jewish vote here went for him. I think people should understand — that’s extraordinary. It’s really extraordinary.

Europe’s War Discourse and the Search for an Off-Ramp

GLENN DIESEN: Well, I agree with your assessment — that as the US reaches a breaking point in terms of its economic standing and political cohesion, its hegemony falling apart, there’s desperation and pessimism in there. But of course, you see similar things in Europe. If you listen to the political class across Europe, they only speak now in the language of war. Nobody speaks of peace anymore. No one speaks about the value of diplomacy. It’s been replaced with a very moralistic language where, it’s because our values are so virtuous, that our enemies — because their enemies must be so evil — that we can’t even talk to them.

So you see this weird combination of talking values, and this translates — whenever they talk about values, it translates into war. They talk about empathy for Ukrainians, it only translates into sending more young Ukrainians to die. When they talk about, “we condemn Russian crimes,” it sounds like it’s a moral argument, but all it means is there’s no way we can have peace, we have to fight them. So it’s a very ugly, ugly discourse we have here.

And so I don’t dismiss what Lavrov is saying, that we might already be heading into World War 3. But I was wondering — it’s a last question — it’s possible that we could go the other direction, because now that things are going so bad in the Middle East, there seems to be some rethinking among some European politicians. Especially the Belgian prime minister, we’re seeing some signals from the Italians, that perhaps we have to find an end to this war with the Russians.

Even Merz — which is one of the biggest war hawks you have in Europe — who said that the Israelis were doing “our dirty work,” is now starting to question, “What’s the off-ramp plan here, Mr. Trump? How are we going to go down this road?” And he was positioning himself as the number one stooge in Europe who would obey Trump. So do you see any off-ramp here, any way out from both of these wars?

The Risk of a Prolonged Conflict and Its Global Consequences

PROFESSOR RICHARD WOLFF: Again, the only way I see it is if you have a groundswell of opposition. And I must tell you, I’m beginning to see it here. I don’t know enough about Europe to be able to say I see it there. I don’t know, for example, how to interpret the municipal elections in France over the weekend when Paris and Lyon and Marseille voted for socialists to be in power. And I understand what the socialists in Europe mostly are, but here in the United States, let me give you some signs.

The Democratic Party is a party that has a conventional, centrist leadership and an active base that is much more progressive than that leadership. That’s an enormous tension inside that party and usually immobilizes it. If they continue the way they have, then they may even lose the election this November because they can’t overcome the tensions inside. But they might overcome it either way. They might hold on so that Hakeem Jeffries and Schumer and the Clintons and that, horrific — for my judgment, horrific — compromise center of the Democratic Party, they may hold on, in which case there’s a good chance they will lose and an even better chance that they will win and change very little. Bring us another Biden who will preside. Things will get worse and the next Trump will emerge four years or eight years later.

But there is a possibility. I didn’t think it was there until the Mamdani election. There is a possibility that the progressive wing of the Democratic Party will become much stronger, much faster. They have the young people, they have the energy, they have huge numbers. Now just think of it this way. In popular opinion polls, the most popular politician is Bernie Sanders. He is that wing of the Democratic Party. There are serious efforts, I know that they’re there, to put forward Alexandria Ocasio-Cortez as a presidential candidate. This is a young, vibrant, Hispanic American candidate and she would be very successful. I think maybe more than others think, but I think she has that mixture of sharpness and likability that we need in this country for our politicians.

The Youth Revolt and the Job Crisis

And there may be a long delayed explosion of the young. And here’s why. Job prospects for new entrants into the labor market — we keep statistics in this country about that. How many people are graduating from high school or college, entering looking for a job. How many jobs are there? That situation now is horrible. And I can tell you from my own students’ stories, but I can tell you also from the official statistics — you have now five, maybe ten years of young people unable to get decent jobs in huge numbers, just huge numbers. People with college degrees making coffee at a Starbucks coffee shop and grateful to have the job, but bitter at the same time that their degree in, I don’t know, biology or whatever it is they studied is useless to them.

There are no jobs coming for them. If I can believe the tech people that I talk to, we are seeing the implantation, the installation of artificial intelligence in a whole raft of jobs for which college and high school graduates had always prepared to enter. Those jobs are disappearing and that’s going to get worse because we’re just at the early stages of this now. There’s a debate about whether this will really happen or not. I understand that. But if it does, this is going to make a bad job situation very, very bad.

And traditionally those have been the people leading the progressive challenges to power. That’s how it was with Occupy Wall Street, which was the last upsurge — 2010, 2011, around that time — that was fueled by young people in crappy jobs busy trying to change the world because the world had not given them the job and the life that they had been told they would get. Well, we are doing exactly the same thing now, only the numbers are larger.

And I wouldn’t be surprised if a strange event that I didn’t pay attention to, you didn’t pay attention to — you know, like that group of straggly people — I’m speaking to you, a walk from Zuccotti Park, where Occupy Wall Street began. I could walk there in about 12 minutes from where I’m sitting now. The idea that a group of young people who put up a tent in a city park would start a national movement would have struck everybody as ridiculous and humorous and fantastical. I wouldn’t be surprised at all if it happened tomorrow or something comparable.

Trump’s Declining Authority and the Instability He Has Created

So yes, the United States is following Mr. Trump at this point, but the majority don’t do it willingly. The majority don’t like him at all. The majority are voting against him in almost every election that we’re having — major, minor, and in between. So all the signs are there of a tremendous disconnect. And I think Mr. Trump is going to have a harder and harder time.

The whole world of business, for example, having gone through a year of agonizing adjustments trying to figure out how you are going to evade the tariffs, how are you going to cope long term, short term with the tariffs — and then the tariffs are all undone. This is a level of instability that the whole world recoils from. It’s anathema to operating a business, hard enough to do it if there’s some stability. But the United States was the rock of stability. That’s over. It will not — I don’t see that returning at all. It’s all fantasy at this point.

Even the attack on Iran is an attempt to hold on. I’ve said this to you before. It’s an attempt to hold on to an empire undertaken by people who themselves know that the wind is blowing in the other direction. That’s why Trump will say, “Other presidents tried and they couldn’t do it, and I’m going to.” It’s an admission — it’s been a failure. “I’m going to offset it. I’m going to make Canada behave correctly.” Not working. “I’m going to make the Danes accept the loss of Greenland.” Doesn’t look like it. And on and on and on.

Maduro was for him a wonderful respite from difficulty and failure. And I think, in a way that historians will have to check, that may have been the single most important objective — to do another Maduro, sort of, in Iran. If you can’t extract the Ayatollah, well, then use the Israeli approach. Get rid of him. Get rid of two or three of them. Doesn’t matter. If you watch Mr. Trump’s news conference yesterday, he virtually said that, “We killed one. I am told we killed another. We can go in and kill the next one” — like a cowboy, like a crude cowboy.

And that is losing its allure, especially as people begin to understand that they are paying more for their car, they’re paying more for their home, interest rates may go up, the job situation is so grim — and all he gives you is war. And remember, he ran as the anti-war candidate. And it’s becoming so easy to mock him and he has no answer. He just had nothing to say.

Closing Remarks: The Uncontrollable Variables of War and Economy

GLENN DIESEN: I guess the big lesson from the Iran war is it’s impossible to control all of these unknown variables. And that should also apply to the world economy. There’s no way to control this, so —

PROFESSOR RICHARD WOLFF: No way to control it. And they can’t — I don’t know how. Obviously I have no knowledge of Mr. Putin or Mr. Xi Jinping, but Iran has two incredible allies, and if they think this might be the beginning of a global conflict, then they are going to line up behind Iran. They’re not going to sell Iran down the river. It would make no sense at all. And the joke that must pass among them is how ironic that what you — the West and America — did to us in Ukraine, we can now do to you in Iran. How could they resist?

GLENN DIESEN: I think that’s predictable as well. Anyways, thank you so much for taking the time. I know you have a class to teach, so I appreciate you taking the time. Thank you.

PROFESSOR RICHARD WOLFF: All right. Thank you very much, Glenn.

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