High-ended retailer Saks Fifth Avenue added private security, fencing and barbed wire ahead of a Black Lives Matter protest in New York, June 7. 2020. (Anthony Quintano, CC BY 2.0, Wikimedia Commons) Michael Hudson and Pepe Escobar last month took a hard look at rent and rent-seeking at the Henry George School of Social Science.
Michael Hudson: Well, I’m honored to be here on the same show with Pepe and discuss our mutual concern. And I think you have to frame the whole issue that China is thriving, and the West has reached the end of the whole 75-year expansion it had since 1945.
So, there was an illusion that America is de-industrializing because of competition from China. And the reality is there is no way that America can re-industrialize and regain its export markets with the way that it’s organized today, financialized and privatized and if China didn’t exist. You’d still have the Rust Belt rusting out. You’d still have American industry not being able to compete abroad simply because the cost structure is so high in the United States.
The wealth is no longer made here by industrializing. It’s made financially, mainly by making capital gains. Rising prices for real estate or for stocks and for bonds. In the last nine months, since the coronavirus came here, the top 1 percent of the U.S. economy grew by $1 trillion. It’s been a windfall for the 1 percent. The stock market is way up, the bond market is up, the real estate market is up while the rest of the economy is going down. Despite the tariffs that Trump put on, Chinese imports, trade with China is going up because we’re just not producing materials.
America doesn’t make its own shoes. It doesn’t make some nuts and bolts or fasteners, it doesn’t make industrial things anymore because if money is to be made off an industrial company it’s to buy and sell the company, not to make loans to increase the company’s production. New York City, where I live, used to be an industrial city and, the industrial buildings, the mercantile buildings have all been gentrified into high-priced real estate and the result is that Americans have to pay so much money on education, rent, medical care that if they got all of their physical needs, their food, their clothing, all the goods and services for nothing, they still couldn’t compete with foreign labor because of all of the costs that they have to pay that are essentially called rent-seeking.
Housing in the United States now absorbs about 40 percent of the average worker’s paycheck. There’s 15 percent taken off the top of paychecks for pensions, Social Security and for Medicare. Further medical insurance adds more to the paycheck, income taxes and sales taxes add about another 10 percent. Then you have student loans and bank debt. So basically, the American worker can only spend about one third of his or her income on buying the goods and services they produce. All the rest goes into the FIRE sector — the finance, insurance and real estate sector — and other monopolies.
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