The video is here, interviewer's questions after the opening one are marked with a time-stamp.
Ukraine war - what was end game for US foreign policy?
MH: Not so much an end game as a fantasy that Ukraine would be able to drain Russia's resources and deplete its military capacity. No expectation that Ukraine could actually beat Russia. US had no idea how large Russia's manufacturing capability was, the State Dept and military analysts believed the KoolAid they'd been drinking, that Russia was just a gas station with atom bombs and that all Russia could do was drop an atom bomb or let Ukraine march into Moscow; and all the people would get so upset they'd overthrow Putin and bring back an American-backed Boris Yeltsin and America could restore neoliberalism.
That was a fantasy, not an end game. There was no real analysis. As Ray McGovern has explained, there were some analysts who did understand what was happening but they were fired because "you must want Russia to win if you don't think we can beat it." So all they got was flag-wavers.
And the generals whose main hope for advancement wasn't to get another star, it was to go onto the board of directors of Raytheon, etc. and make real money. So the whole dynamic had little to do with the real military situation.
2:48 Why did the US sanctions not bring the Russian economy to its knees?
MH: That really wasn't the purpose of the sanctions. The war in Ukraine wasn't a war against Russia, it was a war against NATO. The nightmare for the US was that Germany and other NATO countries would see their road to prosperity as lying with increasing trade and investment with Russia.
The Germans had an ideal that they were going to export their automobiles and consumer goods to Russia at high value-added industrial prices, and that Russia would get the money to buy these exports by selling oil and gas at a very low price to Germany, and it was a circular flow.
That would make Europe increasingly prosperous but its prosperity would be shared with Russia and Eurasia and leave the US behind. So the sanctions were an American attempt to make an iron curtain to prevent you from making money with Russia, if you're going to trade it has to be with us. So instead of cheap oil and gas from Russia, you'll depend on American LNG at 3X the price, you'll have to spend $5 billion to make ports large enough to accept the container ships with the LNG, we'll have the power to turn off your gas at any point in case you wanted to vote "socialist". The sanctions were to draw a rope around Europe to make it dependent on the American economy.
And the result was to bring German industrialization to an end because relying on American LNG instead of cheap Russian gas, German industry was no longer competitive and the eurozone was brought to its knees because if you look at the balance of payments in Europe, they were largely supported by German industrial exports.
One of the reasons Germany was so interested in joining the eurozone was without having your currency tied to the French, Italian, Dutch and other economies, the German mark would have gone up, just as the Swiss franc has gone up, and that would have priced German exports out of the market. By tying it to the rest of Europe, you had Southern Europe running a balance of payments deficits and keeping the eurozone exchange rate low enough that Germany wasn't priced out of the market as it ran a big trade and investment surplus.
So suddenly denying Germany from a source of energy, which is really the source of labor productivity, prevented Germany from running a surplus and meant the European balance of payments was drained in the process. And now you're going to have a weakening of the euro.
Your question was what was the effect on Russia. Sanctions against any country almost always backfire because it's very much like creating protective tariffs for the country. When the US told the Baltics to stop exporting its cheese and grain crops to Russia, it didn't starve Russia, it prompted them to start their own cheese industry.
The common agricultural policy for Europe was always one of the key benefits and it always hoped to be a key grain exporter. Once there were sanctions on Russia, Russia developed its own agriculture and grain. So the effect of sanctions was to make Russia independent of the eurozone and increasingly self-reliant which has certainly strengthened its balance of payments.
So Russia has lost its export income from its oil and gas to Europe but no longer has to pay the import charges of its food and other European products because it's now producing these at home.
It's as though Biden told Russia "we're going to help you get rich in Russia the same way we got rich in the US, by doing protective tariffs like we did in the 19th century. The neoliberal people in Russia won't tell you that, but you do need protective tariffs. Since you won't enact these yourselves, we'll have sanctions and that will help you develop your own industry."
The result is what you've seen - Russia is much more independent and strong and there's no power the US or Europe have to impose further sanctions on them.
9:27 When you look at Europe, they're following everything the US says in Ukraine. Why is Europe so much under the thumb of US foreign policy?
MH: The US has politically interfered in European affairs ever since 1945. I visited Berlin a decade ago. There's a big hill where they took all the bricks and other refuse from the bombing to make the hill; on the top of the hill were US communications spy satellites. Remember about a decade ago it turns out the US was listening to Angela Merkel's phone calls; they were tapping the phones of every leading European politician.
They also had scouts - NED, which is an endowment for neoliberal oligarchy, was looking for people like von der Leyen and Baerbock, people who promised to be opportunistic and essentially throw their careers into line with the US. So the US set up many NGOs throughout Europe that were basically talent scouts looking for entrepreneurial, ambitious, opportunistic business people and politicians so they were pretty much dominating European politics, also through the control of the European media. So EU leaders do not represent European business interests or the European economy or the European people. They represent the US foundations and government that have been promoting their careers all these decades. I've been told by US Treasury officials that the US can always get what it wants from Europe because its politicians are probably the most corrupt in the world. Sorry India and Pakistan, Europe outdoes you according to the US.
They sell out cheaper. And the US says "all we need are envelopes with $100 bills and we have the policy." So European policy is really designed in the US and put into the hands of the European proconsuls.
The euro was designed as a satellite currency for the US dollar by Robert Mundell at the University of Chicago. And it was designed primarily as an anti-labor and anti-industrial policy. So England and Continental Europe have both followed the neoliberal finance capitalists' model that doesn't really help Europe but locks it into a satellite status with the US.
13:34 The war in Ukraine has hit Europe so hard. If you were an advisor to the EU, what would you say to them to get out of the problems they're now dealing with?
MH: Germans should move to Russia and China; as Donald Rumsfeld said, Old Europe is a dead zone. The eurozone is dead, it can't be revived without a radical restructuring. And it's not going to restructure, it's on a suicidal trajectory; all you can do is get out of the sinking ship.
I would tell them, "look at why China is growing and you're not. Look at what your industrialists have said, wanting to get rich and employ labor by exporting to Russia. You're not doing that." There's no way for you to break from the US given the corruption of your politicians and the fact that you don't have an economic doctrine that is an alternative to neoliberalism. Without understanding classical economics, value and price theory and economic rent, and the difference between earned and unearned income, there's no way you can make an economic policy that actually works.
15:20 It seems they are so much in love with Yeltsin despite hating Putin. What's the difference between these two figures?
MH: That was the lost dream. Under Yeltsin, Russia backed every ruble issued domestically with a US dollar holding. IOW for every ruble Russia created for spending within its economy, it had to borrow a US dollar to hold in its reserves. At the beginning I was told by investors, Wall Street people, they were charging Russia 100% interest per year to get dollars.
The reality is that Russia didn't need dollars at all to create its domestic money, it could just print the money. Which is what the Russian Central Bank did; when it got the dollar, it printed the money anyway. The only difference is it needlessly borrowed US dollars and permitted the US to come in and convince the kleptocrats to register factories, oil reserves, electric utilities - everything in their own name but then to sell out. They'd already wiped out the Russian savings through shock therapy so the only people the kleptocrats could sell to were American investors. And they sold at such low prices that between 1994 and 1996, Russia was the most profitable stock market in the world. I was working with (?) Stephens, a brokerage house, and a former student of mine was their economist. She was told she was going to be fired because she didn't invest in this Russia takeover. She said she didn't invest in it because she saw it was all going to collapse in 1997, that it was a complete fantasy; she was told she should have invested from 1994 then jumped out before it collapsed.
That was the mentality. The Americans wanted to come in; transfer Russia's raw materials, industrial capacity, farm land, natural resource into their own name and remove it from Russia. It was a strategy that had worked for Global South countries for the past 50 years and they thought they could do it in Russia.
The problem is that Russia had no background in Marxism, one of the few countries without it, and without Marxism they didn't even have classical economics, Adam Smith or John Stuart Mill or any economists that talked about economic rent, what a free lunch it was. They really didn't understand what capitalism was other than the propaganda view that it was about employers exploiting wage earners. But they didn't understand that finance capitalism was all about rent-seeking from natural resources and land, etc.
What Russia could have done as opposed to Yeltsin is what I had been advocating when I lectured 3 times before the Duma. I said, "you have all your housing, you can give it to everybody who occupies it now freely, you will have the lowest cost economy in the world. You'll be an economy without land rent."
In the West - US and UK - 80% of banks' debt overhead is mortgage rent. Russia could have gotten free of all this but the US convinced them that the way to get rich was to emulate the neoliberalism that American students are taught in school. What Russia didn't realize is that it got rich by tricking other countries into adopting neoliberalism. They just didn't understand how capitalism worked.
20:12 The reason behind these endless wars in Afghanistan, Iraq, Libya, Syria, Ukraine, now in Israel - is what Ray McGovern calls MICIMATT (Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank) the reason for all these wars?
MH: Just exactly what President Biden said to Congress the other day: "Yes, we can afford the war in Ukraine and in Israel because the weapons they use employ American labor." If you want to be employed, if you want your living standards to go up, you have to make the arms to kill other people. You'll get rich and be able to afford rising rents, your credit cards, your auto loans. And we can tell other countries "fight to the last Ukrainian, fight to the last Israeli as the war spreads, fight to the last Taiwanese" if we can convince Taiwan to go to war with China. You don't need Ray McGovern to say it, who I admire; just look at what Biden said: we're at war for the military because that's all we can produce now. We can't compete industrially or in technology, the one thing we can compete in is to sell arms to have you people fight each other instead of joining together and making the kind of alternative to the world that we have planned for you.
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