Transcript of Prof. Michael Hudson: Economic Collapse in Europe

How do you put them together?

Obviously, as you’ve discussed all along and just said, the seemingly obvious European, especially German self-interest is to be complementary with Russia, to do exactly what it was doing for the last few decades – to get energy from Russia and give Russia what it needs, industrial goods, industrial investment to make its own cars and automobiles and consumer goods.

So the real question is, how do you explain why Europe seems not to be acting in its self-interest and taking this bellicose Cold War split that it’s doing today? Well, you pointed out before that it’s all about the narrative, that somehow there is a false narrative that overwhelms the natural reality. I think it’s natural for people to understand what is reality and it’s more difficult to make them twisted around and to accept a false narrative.

I’ve been trying to figure out why would Europe, and especially Germany, and especially the new leader Merz from Blackrock have this idea that the future of Europe lies in fighting with Russia. And I think I’ve got the answer. That is they have a false economic narrative that underlines everything, a false worldview. It’s the worldview that underlies the way that the Eurozone was set up. It’s a false economic view.

In America we call that military Keynesianism. The idea that if you spend money on the military budget, that’s going to create investment and employment and that is a way of injecting government money into the economy by running deficits. Well, the problem for Europe is the Eurozone’s rule that prevents it from running a deficit of more than just 5% of GDP.

Europe’s Economic Constraints and Military Spending

Europe, especially right now, has so many social spending programs that it needs, including subsidizing families so that they can afford to buy the energy that they’re not buying from Russia anymore, but have to buy from the United States at four times the price of LNG liquefied natural gas. How do you get around this?

Think of what Donald Trump was trying to get Europe to do, saying you’ve got to believe the framework, the myth that Russia is going to attack Europe and trying to recreate the old Soviet empire. We know that’s not the case because no country can afford to invade another country, a big country anymore. It would take 10 or 20 million Russian troops. The big thing is Europe doesn’t have anything now that Russia particularly wants.

What I think Merz’s idea is, if we say that we are defending ourselves against an enemy, then all of a sudden we have a national security excuse for going beyond the constraint of the Eurozone on how much money we can spend. And if we say that we’re spending militarily, I think he’s talked about almost a trillion euros on spending rearmament on European industry. Then somehow that is going to spur German, French, maybe even English economic recovery.

Well, the obvious question is do you really need to go to war or have a war-like narrative in order just to enable the government to pump money into the economy to promote a Keynesian policy of economic recovery. Obviously Europe needs to recover right now. Economically it’s in a mess. Its industry’s been closing down because of the end of Nord Stream and the end of importing from Russia.

The Fallacy of Military Spending as Economic Stimulus

There’s a kind of idea that only economists would have – a kind of tunnel vision that thinks that somehow if you pump money into the economy, it’s all going to be amorphous and fungible and turned into GDP. And that can be a recovery. The only way that I can explain why Europe is following such an unrealistic policy to believe that it has to conjure up fears of war with Russia over Ukraine and indeed sabotages any attempt by the United States to end its conflict with Russia so it can pursue other conflicts elsewhere, is this tunnel vision of economists that think that somehow you have to go to war in order to let the government spend money into the economy to revive the economy, as if that’s going to revive the economy.

Well, you can just imagine the silliness of thinking almost a trillion euros for arms. It’s going to take many years to do this, many years of investment. All right, that investment is going to employ labor and expand the economy. But the problem is who’s going to buy the arms. Producing arms is not like producing washing machines and cars which consumers can use. It’s not like producing capital goods and machinery that investors can use.

There’s really no use for arms except to have them destroyed by other people going to war with each other. It’s the west that’s going to war with the rest of the world. I don’t think the rest of the world has many needs for arms except to defend itself against the new Cold war from the West. And so obviously you’re not going to have Asia and the United States buying European arms to fight each other.

So Europe is producing all of this enormous investment. Instead of investing in increasing living standards and increasing production of consumer goods or capital goods, it’s producing useless goods. This is how economists think. They don’t think of use values. They don’t think of a critical path analysis of what do we need in order to get prosperity. It’s sort of the neoliberal junk economics of sort of a bastardized Keynesianism. The only way that you can explain why Europe is acting so much against its self-interest is its tunnel vision of thinking like an economist.

Deindustrialization and Missed Opportunities

GLENN DIESEN: It is interesting you mention the military Keynesianism. The former Greek finance minister Yanis Varoufakis also warns that this is a dead end, especially for the Germans. This idea that you just build enough weapons and this will create jobs and with the jobs there’s money and then suddenly you have an economy.

But Europe has some real problems though in terms of deindustrialization. Indeed, this is a very critical time to have these economic problems because the industries of the world are largely shifting now. That is with the digitalization. We’re entering what many refer to as the fourth Industrial revolution in which the digital technologies get more ability to manipulate the physical world.

And it’s at this point in time where we should really be investing in technologies of the future, trying to catch up a bit with the Americans and the Chinese. But instead of industrializing, we’re now going to prepare for war instead. And as for the Germans, they can’t build cars anymore competitively. So now the idea is that they should make tanks instead. But this is not how economics works, as you said. This is literally building things which should be blown up.

But what do you see with the motivation of concentrating power? Because it does occur to me that making very hawkish radicals such as Kaja Kallas to be the EU foreign policy chief – a person who says she doesn’t believe in diplomacy, she wants to destroy Russia, break it up in pieces – indeed there is more and more criticism towards her now that her very vile rhetoric goes well beyond what the EU has a consensus around regarding the language that should be used.

I say this because in 1870-1871 you had this Franco-Prussian War. And it’s often argued that if the Germans didn’t provoke it, at least they took advantage of it because by having this external threat they were able to then bring together the German states. Do you see this also being a possible motivation? I guess we are speculating to some extent.

Economic Collapse in Europe: The Fracturing of European Unity

# The Backfiring of Militarism in Europe

PROF. MICHAEL HUDSON: Motivation is certainly backfiring because what you’re seeing now is that the strains of this German, French, British, new Cold War militarism is breaking up the European Community. One of the reasons is, when you mention Ms. Kallas and her friend von der Leyen, you see how the EU leadership can be so pro-war, whereas the voters of Europe, especially in Germany but throughout Europe, don’t want war. How is it that the EU bureaucracy is able to put in warmongers who have almost a traumatic hatred of Russia, an emotional wanting to go to war with them that is not shared by the voters and the population at large?

The result is, I think, that you’re already having Hungary, the Czechs, even questions by Meloni and many Frenchmen asking: do we really want to be a part of this? How can we remain in the whole political way in which the European Community has been structured, whereas somehow unelected war promoters like Kallas and von der Leyen are in charge of European foreign policy? They put all of their fellow neocons and neoliberals along with them in the European Community. The EU leadership is opposed to the individual countries.

How long can Europe really stay together without countries beginning to withdraw? Already Hungary has said, “We’re going to veto these levies on us to try to fight Russia. We don’t want to fight Russia. We want gas from Russia. We want the way it used to be before 2022.” Other countries are saying the same thing.

# The Structural Problems of the European Union

What you’ve described is actually splitting up Europe. It looks like the only way that Europe can escape from this false narrative and this false economics is by somehow breaking it up and starting all over again with a new structure. Looking at how this all came to be in the first place, it was largely US influence. The United States pressed a design of Europe not only with the eurozone and its monetary rules following University of Chicago sort of right-wing economics, but the whole political way.

Going back to Operation Gladio in Italy and other countries, the United States has been sponsoring through non-governmental organizations the political leadership of Europe today. That is how people like Baerbock and the Greens somehow got promoted. People that you think, how can these people ever have risen and gotten so many credentials? Well, a lot of that’s by US maneuvering to do to Europe what it did with putting Tony Blair in England. The idea is to make all of Europe find Tony Blairs for Germany, France, Italy, and other countries who will be very loyal to US policy and the Cold War.

That loyalty to the US is what’s splitting up Europe today. You’ve seen European politicians say, “We’re breaking away from the United States. The United States wants peace with Putin, at least Trump wants peace, but we certainly don’t. And we’re not going to spend 5% of our GDP on military arms, on buying American arms as Donald Trump had hoped. We’re going to spend it on buying German arms.”

# Economic Deterioration and Loss of Liberty

There’s an attempt to use this anti-Americanism to reinforce what they think is a way of re-solidifying the European countries, but it’s not re-solidifying it. Especially as the economic situation gets worse and worse as Germany de-industrializes and loses its heavy industry, its fertilizer industry, all the industries that were dependent on imports of raw materials from Russia.

As Europe agrees with the United States to cut itself off from China and trade with China, it’s not exactly in its own self-interest. It’s based on this kind of false narrative – a false economic narrative as well as a false political narrative. That’s the problem. Given the role of the mass media in Germany and other countries, you’re not really getting much of the other side of the issue.

You’ve just seen in Germany trying to ban the AfD, the Alternative for Deutschland, just like other countries. Romania is trying to ban the anti-war candidates. You’re having a suspension of liberty and you’re also having Germany ban advocates of peace in Gaza, defenders of Gaza, or just Germans who say we don’t want genocide, we want peace. All of this is being banned and visitors who are coming to give speeches or discussion of the war in Gaza are turned away. You’re having this antithesis of everything that the COVID story of the European Union of prosperity and democracy was supposed to promote.

# Europe Trapped in Its Own Narratives

GLENN DIESEN: I’m always thinking that part of the problem for the Europeans is also that they got trapped in narratives. I spoke recently with George Beebe, the former CIA director for Russian Analysis, and he has an interesting article where he was going somewhat in the same direction as the Europeans are now really locked themselves in a corner with this idea that it’s an unprovoked, full-scale invasion to wipe Ukraine off the map, you know, as a new Hitler attempting to restore the Soviet Union.

All of these narratives which have been spun are interesting because this has kind of been Trump’s key strength. He seems to be able to just ignore everything. He ignores key narratives. He just begins to push interests where other politicians will be trapped into these common narratives.

What’s fascinating with the Europeans is they were pulled to a large extent along with Biden. Keep in mind for all these years, the Europeans were very well aware that all this NATO expansionism, especially Ukraine, was a red line, something that would likely trigger a war. But they got on board with the Biden train, which was anti-Russian. I think the Europeans prepared themselves as well by making Kaja Kallas, not the brightest tool in the shed, but she’s a wartime leader. They said she’s very hawkish on Russia, this is what we need. Now it’s very difficult to steer the ship around.

As you suggested as well, there’s lack of independent media these days in Europe. So there’s very little ability to challenge the narrative-driven media with actual facts. It’s very hard to turn around but at some point certainly it has to be forced around, doesn’t it?

# European Fragmentation and Ambitions

While many Europeans now have this great ambition to learn to live without Americans – again Kaja Kallas made a statement that the free world needs a new leader, so we’re done with America – she talks a big game but she’s not a prime minister or anything. We have independent nation states in Europe and not the whole continent is ready to break off with the Americans, especially the British. They seem to be more hawkish on Russia but they also would like to be the main partner of America.

So there will be huge fragmentations here. I also wonder how comfortable Poland is – one of the most anti-Russian countries we have on the continent. If Germany is going to arm itself to the teeth again, does Poland want to divorce itself from the United States which is kind of its safety blanket when it’s stuck between the Germans and the Russians?

I just don’t see unity in Europe based on going against both the Russians and Americans at the same time. Indeed, you might end up in a horror situation for the Europeans where the Americans and Russians come together to put pressure on the Europeans for not falling in line on the Ukraine issue.

But I wanted to ask you about the feasibility of this whole thing because obviously Europe or the Europeans are in panic. We see France, Germany and Britain arming themselves. Financial Times wrote recently that the main challenge now was to convert European welfare states to warfare states and suggesting that they might need a heavy dose of war propaganda if you’re going to have the public consent to this. So what are the political and economic considerations here? Do you see this as being feasible?

The Welfare State Versus the Warfare State

PROF. MICHAEL HUDSON: A warfare state is not a state, as the name implies, that’s going to provide welfare for the population at large. So what are they going to vote for? Are they going to vote for their self-interest, which is better living standards? Or are they going to say, “We’re going to pay higher prices for gas and electricity and for heating our homes. We’re going to have much lower living standards, but it’s all worth it really, just to fight Russia.”

Well, you’re going to have a conflict between the narrative of “we need war in order to save the world” and the reality of “somebody’s going to make a big sacrifice.” And also the reality of other countries’ responses, especially France and England are the dangerous triggers here.

President Putin said, all right, they’re going to be more active in providing Ukraine with missiles, long-distance missiles that can hit Russian territory. I think a month ago Putin came out and said, “We’re not going to pretend that all this fighting in Ukraine is about Ukraine. It’s really about NATO and behind NATO, the United States wanting to break up Europe and divide Europe.”

# Russia’s Potential Response to Escalation

Since we know that the fight’s NATO and in Europe, led by Macron in France and now Starmer in Britain, Putin said, “If a missile made by France or England hits Russia, we’re going to respond not against the Ukrainian territory that launched it, but against the country that made the missile. We’re going to respond against Britain. Will it be London, will it be some British manufacturing territory, will it be Paris or one of the Parisian military production plants?”

So there’s a possibility of a Russian response that realizes this is just a charade to pretend that all of this fighting is in Ukraine. That’s the point that Putin and Lavrov have been making in their discussions with the Americans. They’re saying, “Look, forget Ukraine. We really would be better off not even discussing it right now. Let’s talk about the whole roots of the Cold War. Let’s talk about the fact that when the Soviet Union broke up in 1991, NATO should have been dismantled also.” That’s when Putin said maybe and the Russians said maybe we should join NATO and all be together.

They want to go back to try to undo this whole salami carving up of Russia bit by bit and deal with the underlying economic structure. That’s what the European governments are against. And if they’re against restructuring, going back and deconstructing the whole Cold War apparatus, economic apparatus and political apparatus that’s been put in place since 1991, this cannot be done smoothly.

# The Need for a Critical Mass of Awareness

There has to be some sort of trigger of consciousness. There has to be a critical mass of the population realizing what the problem is. You’re seeing this to some extent in Germany, but from my point of view, the only party that has a reality-based economics is this Sarah Wagenknecht group. And she hardly got to the 5% cutoff point to get into the government.

Europe is in a pre-crisis situation. But in the end, you cannot keep a false narrative going when reality becomes stronger and stronger and the gap between the reality and the narrative becomes so strained that finally people realize that doesn’t work.

What you need is an alternative to be put forth. There are political alternatives, yes, let’s not fight with Russia. But there hasn’t been an economic alternative to how, if we don’t fight with Russia, are we going to reestablish prosperity in Germany and in the other European countries if it’s not by producing more military goods? How are we going to restructure the economy in a better way than the way in which the Eurozone was set up originally?

Without an economic discussion of that kind of alternative, you’re seeing Germany and Europe just go into a blind alley that is getting tighter and tighter and at some point just has to explode.

The real question is, does Europe really have to go to war to be able to spend money creation into the economy to employ labor and somehow re-industrialize? And how can it even re-industrialize and make arms without getting gas and energy and oil and other raw materials from Russia and without trading with China?

How can it re-industrialize in the world if it’s cutting itself off from the rest of the world that’s growing so much more rapidly and even from the United States? How can it go it alone when it’s already de-industrialized so much, when it’s already cut off what would seem to be all of its natural potential sources of strength that it’s now lost? There’s no realistic way of explaining it except that they have a set of false assumptions and false ideas of how an economy or even a society works.

GLENN DIESEN: It seems to be also some distortion about the image of Europe itself versus the rest of the world. Because we see now the EU being quite hawkish on China. And then suddenly the Europeans would like to get some cooperation going. They invited Xi Jinping to come over to Brussels and he’s not going to come. Part of the reason is the way the Europeans have been behaving as well. But the assumption appears to have been we play tough with the Chinese and then offer the carrot and invite them over, and then they would come running. But it turns out that it’s not happening anymore.

I think it’s very difficult for the Europeans to adjust to this new world because again, it’s been almost 500 years of a very European-centric world where the Europeans, we have been the subject, the rest of the world were the objects. We got to organize the whole world around us. And now suddenly it’s been turned on its head a bit. As they say, we no longer have a seat at the table. We find ourselves on the menu instead.

It’s a bit strange to see again, that’s why the Ukraine war is so interesting because now you have the Americans and the Russians effectively negotiating peace in Europe. So moving the pieces around and the Europeans find out that they don’t have a seat at the table. They are the new pieces.

It appears this would be an ideal time to revisit some of the mistakes we did after the Cold War. Because after the Cold War a lot of European countries realized that this would also America, by the way, that redividing the continent and returning to the bloc politics, that this would revive the Cold War. But while it would alienate and create conflicts with the Russians, at least it would cement America’s presence in Europe.

But now that the United States is planning to reorient itself, it’s very openly saying you’re not a priority anymore. We’re not left with the Americans anymore. We’re just left with the conflict with Russia. And it kind of begs the question what is the point of this?

I did pick up on something you said which was, you used the word collapse. And I don’t see that has been an exaggeration because if we’re going to have this economic plan which doesn’t work, that is cut ourselves off from every center of power and then arm ourselves. To also get the population to accept the idea that the good times are over, there’s no more welfare and prosperity because now we have to tighten our belts to fight Russia.

In order to sell this story, you need too much propaganda. There’s not going to be an ability to pursue basic national interest. You’re going to have more political dissent, which has to be undermined. The narrative has to be elevated above the facts. And the economics doesn’t work, the politics won’t fit anymore. And as you said, eventually reality will catch up and punch some holes in the narrative. And then do you think it’s a possibility that if not Europe, at least the EU could move towards a collapse?

Europe’s Slow Decline and Loss of Relevance

PROF. MICHAEL HUDSON: Well, we’re in a pre-collapse situation. Before you have a collapse, there’s going to be a slow crash. It’s going to be, the current trend is going to mean that living standards and industrial profits and employment is getting slowly worse and worse and worse. And there can’t be a crash until you have a revolutionary situation. And a revolutionary situation is you have an alternative. Without an alternative, there’s not a crash. There’s just a slow crash, a slow tightening, slowly going down as the economy deteriorates.

You mentioned at the beginning of what you just said, Europe wants to get tough with China. You can’t get tough with China. You can’t threaten China or Russia because there’s nothing that China or Russia needs in Europe. That’s what really is so shocking to the European mentality, that the world can get along without Europe at all.

Putin and Lavrov said we’d hoped to have a symbiotic relationship with European industry, technology and complementary economies. But we realize that isn’t working. So we’ve reshifted our focus eastward to Eurasia and to the BRICS. And we realize now that there’s nothing that Europe has to offer. And we certainly don’t want to take it over because it would be an albatross for whoever takes Europe as a protectorate under its wings. We don’t want that now.

It’s very hard, I think, for Europeans to realize that they’re not needed anymore, that they’ve lost their place in the world. I think most politicians in every country try to do what Trump has said, make America great again. In Europe, they’ll say, well, make Europe great again, or Europe is great, or let’s recover our greatness. But they’ve taken steps that seem so irreversible that they can’t do anything.

And what they’ve created is a counter reality. I think that last week, Foreign Minister Lavrov said here is how Russia and our allies are viewing Europe. And it’s a brief quote. What he said was, “Over the past 500 years, when the West was more or less formed in the form in which it has survived to this day, all the tragedies of the world originated in Europe or happened thanks to European politics, colonialism wars, crusaders, the Crimean War, Napoleon, the First World War, Adolf Hitler, all of that came from Europe.”

Historical Context of Europe’s Decline

Well, President Putin in his way, have said, well, all this goes really back to the 11th century when the Great Schism in the Roman Church broke from the Eastern Orthodox Church in Constantinople. And the Romans said, we have to take over Christianity. We have to create a united Europe under the control of Rome.

And so the first thing they did after about 1051 or so when they had the Great Schism, was they began to say, how are we going to defeat and destroy Turkey, Constantinople, by extension, all the areas that the Orthodox Church controlled? Well, the answer was they hired Norman warlords in Europe and said the first warlord they hired was in the 1070s when they went to one of them and said, well, we’ll give you southern Italy and Sicily, which right now is a Byzantine area. If you get rid of the Byzantines and make that Catholic, we’ll bless you as the king.

They then went to William the Conqueror of England and said, well, if you conquer England, right now it’s not really paying us very much money. We will bless you as the King of England if you pledge fealty to Rome. And the next, the whole Crusades was really a crusade to destroy the Greek Orthodox Church in Spain, in southern Italy, in the Balkan area.

In every area the Roman church had warlords taking over and in order to finance their military spending, the church abolished its opposition to usury. It created international banking to finance war lending. And you can see how this whole attempt to integrate Europe from the very beginning was an alternative to what was the economic center of the day, the prosperous center, which was Constantinople and its prosperity that was spreading further eastward.

Well, in that sense, the Russians are looking at Europe and saying, well, we thought that there could be peace, but there’s not only this underlying religious difference, which Putin seems to find very important, but there’s also a cultural difference that we are very much like China. We’re trying to achieve alliance of other countries by mutual gain, win-win situation. What can we offer you in exchange for integrating your economy and politics and hence your political and military alignment with us?

The Western Approach vs. Eastern Cooperation

The Western way, as you see with Donald Trump, is exactly the opposite. Trump is providing a model that I’m afraid Europe is taking. Trump is sort of saying, we’re going to impose tariffs and sanctions on every other country of the world, awful sanctions to every country. We’re saying we can destroy your economy. And the other countries, Mexico and France and Canada for starters, are saying, well don’t do that.

And Trump then will say okay, if we don’t destroy you, what are you going to do that benefits us? He’s done the same to law firms in the United States, the same to universities. We’re going to pull out all of your spending if you don’t follow Zionist policy for us. And they’ll say well what do we have to do to get the funding back so that we can do research and development? And Trump is laying down the neocon policies they have to take. And Columbia University has led the surrender.

I think this is how, this is the mentality that Europe is trying to emulate. But it doesn’t have anything to threaten other countries with. It can’t threaten them with sanctions because other countries can say okay, don’t trade with us, we don’t need you. We’re self-sufficient by ourselves. The whole rest of the world is trying to be self-sufficient and almost every region is trying to be self-sufficient so it’s not dependent on other countries so that it can follow its own self-interest.

But Europe has destroyed its own self-sufficiency by Nord Stream and by the sanctions against Russia. By seizing Russia’s $300 billion that it had in Belgium and the Euroclear, it’s isolated itself from the rest of the world. How on earth can it have anything to gain militarily or politically?

Even if it were militarily successful, what can it gain from the rest of the world by isolating itself from the whole rest of the world that is divided into new regional geographic groupings? It’s as if it’s left western Eurasia. Europe is a kind of abandoned area. I won’t say it’s a rust belt like the United States abandoned industrial cities, but it’s more than that.

What it thought of as its national identity, its historical understanding, its idea that it is a political, moral, intellectual leadership of the world has become a fantasy. How do you ever undergo the psychological healing of that kind of self-inflicted wound that has been sweeping Europe like a disease over the last few years?

# Europe’s Self-Harm and Russia’s Eastward Pivot

GLENN DIESEN: Yes, this self-harm has almost become an expression of solidarity or virtue that we’re willing to sacrifice all national interest to stand up against our evil opponent. I feel that we need to replace some of our social scientists and political scientists with psychologists because it’s becoming a very strange thing to observe.

I agree with this focus on diversification because this point has been somewhat lost over the past decade. When Russia began to organize its economy towards the east, really intensifying since 2014, many saw it as an attempt to elevate their market value for Europe so they would have more bargaining power to integrate with Europe on a more equal footing. Others wondered if Russia was trying to join an anti-European bloc. But all possible hypotheses were very Europe-centric.

The main idea for the Russians was they want to make Europe matter less. We can trade with them, but it shouldn’t be that important anymore. We shouldn’t have to be pro-European or anti-European. We just shouldn’t have to focus on Europe as much as we’ve done in the past. This is quite distinctive, and you see this now in the political sphere.

The economy is reorganizing to the east and it falls in all spheres. You see it in technology, industries with all these new transportation corridors by land and sea, payment systems, new banks, trade in currencies, establishing new commodity exchanges, and insurance systems. It’s quite extensive economically as well.

You mentioned culture because in the Cold War, at least towards the end, there was still hostility between our governments, but among the Soviet public and Russians, there was sentiment that the Western way of life and lifestyle was quite attractive. This is gone now. They don’t want to remodel or shape their countries like the West anymore.

# The Seizure of Russian Assets

You mentioned something else which I found interesting on the economic side: the EU has begun to steal Russian national reserves. So far, they have taken the proceeds from these reserves, suggesting this is okay and not theft if they just take this. But now there’s talk about seizing the full $300 billion.

Some are suggesting that in a future peace deal, Russia should accept giving up this money, perhaps transferring it into a reconstruction fund. But even if the Russians would accept such a reconstruction fund, it would be under pressure to get something back in return. Either way, this is already theft as we have seen. It’s not just freezing funds, which is also devastating for trust, but actual theft.

How have you seen the world reacting to this? Gold is up. Is this a consequence of it? If you would give a speech for the European Union, what would be your main warning against what has been done here? This is truly dramatic and hasn’t been done before.

Europeans get swept up in their own narratives and morality that Russia attacked Ukraine, so it’s just fair they have to repay for reconstruction. But this is a very weird argument because this has never happened before. America and Europeans have also invaded other countries. The idea that the rest of the world should seize our money and hand it over to the countries we invaded would diminish trust in the entire international financial system. How do you see this impacting the world?

# Partners vs. Opponents in International Relations

PROF. MICHAEL HUDSON: Well, Glenn, you begin by mentioning Europe’s opponents, and that’s the problem. Europe views the whole rest of the world as negotiating with an opponent. Think of how different the rhetoric of European diplomacy is from that of Putin in Russia. Putin always refers to other countries as his partners, as if somehow the only way we can have relations with each other that are voluntary is if each of us gain. So we’re partners, not opponents.

Europe has followed the Donald Trump view that America has to be the gainer in any transaction. Europe has to be the gainer because the rest of the world is viewed as an opponent by Europe. With that psychology, with that attitude, which is just what Lavrov was talking about, they are doomed to failure.

Regarding the $300 billion that Euroclear seized, I can imagine Putin has a very good answer. He’ll say, “Of course we’re going to spend the $300 billion on reconstruction. We’re quite happy to do that. There’s been enormous destruction of civilian buildings and territory in Luhansk and Donetsk and the other Russian provinces—the parts of Ukraine that have now joined Russia. We realize it’s going to take $300 billion to reconstruct, but we’re going to do this.”

“Unfortunately, we don’t see any reason to spend any of this $300 billion on European construction firms or European industrial firms in helping rebuild these areas because you’ve fallen into economic obsolescence as a result of your economic policies. It didn’t have to be technological obsolescence, although you’re way behind Asia in that. But it’s really economic obsolescence. Quite frankly, you charge too much because of the way you’ve privatized and neoliberalized your economy.”

“So yes, we’ll spend the $300 billion, but we’re going to have to have other countries participate because we don’t have a large enough industrial population to do that. We’re going to hire Asians and other people from other areas to do this construction. But have no fear, this $300 billion will be spent on reconstructing the civilian areas that the Europeans and Americans have destroyed by backing the neo-Nazi regime in Ukraine.” What do you think of that rhetoric?

# Europe’s Multiple Crises

GLENN DIESEN: This sounds familiar. This is my thought as well. I’m just thinking this is what the Russians want to spend on Donetsk, Luhansk, Zaporizhzhia, and Kherson.

If you look at all the problems of the Europeans now, they’ve cut themselves off from other centers of power—first the Russians, then de-risking from the Chinese, and burning down a lot of bridges. At this point, the Americans have decided they’re more or less deprioritizing Europe. Now things are bad enough as Europeans are paying a lot of money for energy, which costs industrialization, and then the goal is to just build weapons and somehow this is going to be the solution.

Making matters much worse is that even if the war in Ukraine finishes tomorrow, the reconstruction of the country is going to be a huge mess for years to come. The Americans seem to be washing their hands of this and handing it over to the Europeans. So the Europeans will have a big mess to finance over the coming years. It’s very hard to see how any of this can not result in a massive crisis or even collapse.

# BRICS and De-dollarization

My final question is on the alternatives here. As the old system dies, countries want to look for alternatives. Europe doesn’t seem to have any alternatives yet, but the rest of the world does. They seem to be looking towards institutions such as BRICS to reorganize technological and industrial cooperation, to have physical connectivity with these corridors, and of course financial connectivity.

For all his talk about multipolarity, Trump doesn’t like the idea of BRICS de-dollarizing. Has this train already left the station, or do you think Trump can stop it? He’s threatened that BRICS is pretty much done already because he’ll put tariffs on them if they don’t use the dollar.

This fails to appreciate the main problem. The reason why they’re diversifying through the BRICS institution is because they do not trust the US Dollar anymore. All economic levers of power can be weaponized, but by threatening to use access to further weaponize the dependence on the US in order to maintain dependence on the US—surely he must be aware of this contradiction. Threatening other countries with sanctions will only convince them they need to diversify and decouple.

Still, America is not a weak country. It has a lot of economic power. Do you see Trump being able to stop this trend, or is it too late?

# America’s Weakening Position

PROF. MICHAEL HUDSON: Well, America has become a weak economy even though it’s not a weak country. It has the atom bomb. It has political influence to get other countries to impose sanctions against countries that don’t follow American policy. But the fact is that Trump and the United States are in almost as weak a position as Europe is. There’s nothing that it has to offer other countries except “we will not hurt you if you do what we tell you to do.” What we’ll do for you is not bomb you. Well, that’s not really offering very much.

You mentioned Ukraine. Regarding the reconstruction of Ukraine—what is left of Ukraine, and it’s not going to be very much—nobody’s going to fix it. Nobody has the money and nobody cares, just like they don’t seem to care about Gaza. Ukraine has run up enormous debts to the International Monetary Fund, to Europe, to other people and institutions, and it can’t pay. Europe is not going to pay. The United States is not going to pay. Russia certainly is not going to pay. Russia is going to be concerned with rebuilding that part of Russia that used to be Ukraine.

There’s nothing that either Russia or China needs from the United States or Europe. Every week in the Financial Times, you have some German or European saying it’s unfair for China to export more to us than we’re exporting to it. China’s response is the same every week: “We’d love to import more from you. For instance, that Dutch firm making the engraving equipment—a couple of 10 or 20 million dollars per machine—we’d love to buy it. You’re refusing to trade with us because you’re following the American sanctions.”

The Europeans have a narrative saying, “If we import more from another country, that’s dependency.” Well, the whole idea of free trade for two centuries has been trading in order to make a gain. The gains from trade theory is what international economics is all about. European politicians say there are no gains from trade. Any trade is only a dependency that lets other countries stop the trade if they want to hurt us.

Of course, Russia never stopped the trade with Europe. It’s Europe that stopped the trade with Russia. Other countries are fearful of trading with Europe or the United States to establish a dependency that would enable Trump in America or Merz in Europe to destabilize their economies by stopping exports they need and interrupting supply chains.

No other country is willing to let its supply chains be based on Europe or the United States. Their supply chains are based on each other. The supply chains that are being split up are in Europe and the United States now, even without Trump’s tariffs.

You’re seeing an economic crisis in the United States caused by Trump’s idea that somehow you can isolate the United States and re-industrialize almost overnight, as if you can create factories in the remaining three years of his administration instead of over a ten-year planning period.

The United States and Europe together have painted themselves into a corner that they can’t get out of. That’s why it’s impossible to predict how Europe and the United States are going to achieve their self-interest when they don’t understand what their self-interest is. They don’t understand how the economy really works.

How do you anticipate and project the future of a continent—Europe or the United States—that doesn’t understand how the economy works or its self-interest and is floundering? That’s what you’re seeing right now. There are so many possibilities of floundering. The scattershot approach of Trump is what you’re going to be seeing in Europe. Try this, try that. But it’s just flailing without any idea of how to create a productive economy to do in Europe what China has done to rebuild its economy or what Russia is trying to do.

That’s what’s so striking in all of this. It doesn’t make sense from a materialistic approach to history.

The Challenge of European Economic Independence

GLENN DIESEN: I guess this is the problem of having had the unipolar moment. That is the whole world was excessively dependent on the collective west while the west was less dependent on any one state or region, which meant that any concern about economic dependency being weaponized was only a problem for others. So now waking up to this reality and uncertain how to react again, I wish we would revive some of the ideas from Alexander Hamilton or Friedrich List or Sergey Vita, someone who defining the industrialization and economic power more as an intrinsic part of political independence.

But still one doesn’t have to cut oneself off from the world. The sufficient thing is to diversify, to just have a variety of partners. And this is what the rest of the world is doing. But we are not. And I always make this point because it’s quite shocking what’s happening in Europe. The main idea is that the United States is weakening and it’s going other places. So what rational sensible policy would be it would be to diversify ties that is to yes, keep a hand out to the Americans but also reach out to the Russians, Chinese and other centers of power and diversify but instead and also find a way of seeking some collective bargaining power based on shared national interest within the EU bloc.

But instead it’s the dear Vistas. Yeah, we’re surrounded by this political midgets who can’t accept that we have moved on and that the world is changing. So they’re trying to reach out and show their value to the United States by subordinating themselves even further just doing anything America say and then hope that this would convince America that Europe is still an important partner and America won’t leave us. But again America has less resources and shifting those resources and focus other places. But it’s just the willingness to accept realities is just completely gone.

And again this is not an exaggeration. I see the political leadership in Germany accusing, saying well the reason why I have economic trouble is because the Russians cut off the energy supply to us. So, no, they did not. It was the Germans who cut this. You know, how is it possible that they get away with this? And also in Nord Stream tried to pin this on the Russians. Then we found out, yeah, it wasn’t the Russians. And now nobody wants to talk about it anymore because there’s no more good narratives left.

It’s just such a huge mess. I think the first step towards fixing Europe and the political West, I guess, would be to first address, well, restore some reason and rationality because I think we lost this a while ago when we got entangled in our own narratives. Anyways, Michael Hudson, I’ve already kept you way too long, so, yeah, thank you so much again for taking the time and it’s always a great pleasure to speak with you.

PROF. MICHAEL HUDSON: Well, I hope that you’re successful, Glenn, in trying to raise the concept of rationality and reality to the rest of Europe.

GLENN DIESEN: As political realists, the assumption is always the rational state. So the foundation of the political theory is now missing. It’s like quite troubling time. Anyways, thanks again.

PROF. MICHAEL HUDSON: Yeah, well, thank you for having me.

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