Yanis Varoufakis on European capitalism

Since stepping down as Greece’s finance minister in the leftist Syriza government, Yanis Varoufakis has been touring the world with his words, giving speeches to packed-out audiences. He spends much of the year with his wife Danae Stratou on Aegina, an island near Athens. From there, the couple can no doubt see that his work is a long way from being realised. Greece is still ensnared by crisis. But his main political focus now is ‘agitating’ for a “democratic European Union”.

Born in Athens in 1961, Yanis Varoufakis was six years old when the Greek state was seized by a military coup d’etat led by the fascist Georgios Papadopoulos. “Those bleak days remain with me,” he would later reflect on his blog. “They endowed me with a sense of what it means to be both unfree and, at once, convinced that the possibilities for progress and improvement are endless.”

By the time the dictatorship collapsed, the young Yanis was reaching the end of his secondary education. His parents, George and Eleni Varoufakis, began to consider where he should go to university. Eventually, they decided it was still too dangerous in Greece so they opted to send him to the University of Essex in the United Kingdom. There Yanis Varoufakis would study economics – which he saw as the “lingua franca of political discourse” – and join the Communist Society as he became politically active.

Erratic Marxism

Earlier in his life, Dr. Varoufakis was a much more orthodox Marxist, but his thinking has evolved over the years. “The exuberance of youth often goes together with dogmas,” Dr. Varoufakis told Aaron Bastani at Novara Media. “I believed a lot more in central planning than I do now. I believed a lot more in the wisdom of a political party that is hierarchically created. I was less aware and sensitive to the capacity of humans to abuse power – even power that is created in the pursuit of good causes.”

Today, Dr. Varoufakis characterises his own brand of Marxism as “erratic” and libertarian. It draws on the humanistic work in Marx’s early career. As Dr. Varoufakis explains to The World Weekly: “Marx’s quarrel with capitalism was not that it was unjust but that it was inimical to human freedom and particularly inefficient at pressing our magnificent capacity for technological innovation into humanity’s service”.

He goes on to say: “He got capitalism right but failed to predict how his disciples, the left, would exploit the power of his ideas to build political power structures that proved detrimental to human freedom and particularly inept at harnessing technological innovation”. Much like the British economist Paul Mason, the former Greek finance minister seems to view technology as a force that will overthrow capitalism with or with the help of the left. The question that occupies his thinking is not whether capitalism will be overtaken by technology but what kind of society will emerge as a result. Will it be the good society that has so far eluded us or some dystopia?

In Dr. Varoufakis’s own words: “In the 21st century, a blend of Marx’s freedom-based critique of capitalism and libertarian warnings against too much trust in bureaucracies seems to me a great weapon against the current political and economic dead-end. Decentralising technologies can help to make this ‘marriage’ work.”

However, Dr. Varoufakis has warned that this could be a “dystopia” where huge numbers of people are rendered superfluous to the economy while the benefits of the great productivity gains are shared by a minority that enhance their monopoly of the new means of production. But he is optimistic that this is not inevitable. As Dr. Varoufakis told Novara Media: “If the left manages to organise itself in order to play a crucial role in fashioning the technological future and the social relations of production, then we have a chance.”

The American economist Doug Henwood has argued that this view of the high-tech sector is inaccurate. If it were the case that technology was radically changing the conditions of work then the traditional relation between GDP growth and employment would be breaking down. In Mr. Henwood’s analysis, the rate of GDP growth remains in lockstep with the level of employment.

Varoufakis’ point, however, is that the quality of jobs has already been decoupled from GDP growth (e.g. in the United States and Britain) and, moreover, that the ‘inflexion’ point will come the moment artificial intelligence succeeds in replacing masses of service sector workers with automata.

The Greek dilemma

Since the third bailout agreement was finalised in July, Greece’s Syriza government has won re-election, albeit on a much lower level of voter turnout, having compromised its original anti-austerity programme to meet the demands of its creditors and secure its finances in the short-term. But there are still many questions to be answered.

While the European right does not see any alternative to austerity, the left wonders whether or not Syriza’s policy shift represented a ‘betrayal’ of the party’s original aims – the key question being: Did the Greek government have a real choice?

“My resignation, on the night of the referendum, reflects a conviction that, indeed, there was a real choice – and my view that Prime Minister Tsipras made precisely the wrong one,” Yanis Varoufakis tells The World Weekly. “Having said that, I am loath to use terms, like ‘betrayal’, which demonise the ‘other’ viewpoint. It is time the left abandoned sectarian practices and language.”

The world may never know what would have happened if the Syriza government had refused to concede. Certainly, the ‘what if’ discussions will continue for years to come. The former Greek finance minister remains steadfast that it was possible to reach “an honourable, an economically viable, agreement”. In Dr. Varoufakis’s view, the refusal scenario would be preferable to “a surrender that leads to the continuation of the debt-deflationary spiral that deepens our insolvency and inflames further the ongoing humanitarian crisis”.

Although the bailout agreement finalised loans of €86 billion ($91 billion) to the Greek government (to be disbursed by July 2018 conditional on major reforms), the economic crisis is far from over. Indeed Dr. Varoufakis believes that the new loans deepen Greece’s woes, constituting a continuation of the ‘extend-and-pretend’ policies that began in 2010 with calamitous effect on Greece’s national income. Now out of office, Yanis Varoufakis told the BBC the deal “would go down in history as the greatest disaster of macroeconomic management ever”. When asked how long it will take, Dr. Varoufakis said: “It has failed already”.

It’s clear Dr. Varoufakis does not see the European plan as a viable option. “The only way Greece can remain in the eurozone in the medium term is if we succeed in ending the continual decline of national income and the exodus of our best-educated young,” Dr. Varoufakis tells The World Weekly. “And the only way this will happen is via a combination of a smart debt restructure, the end of self-defeating austerity, and deep reforms in public administration and the private sector.”

European Questions

Many critics of the European Union wonder if this crisis reveals fatal flaws in the project. German sociologist Professor Wolfgang Streeck argues that the dream of a social democratic Europe, advanced by German Chancellor Helmut Kohl and French President Francois Mitterrand, is not possible. On the contrary, European integration, Professor Streeck argues, could only take the form of a neoliberal union because it’s much easier to pursue the same measures across the region. In this view, the project of a European federalism is fundamentally flawed.

In this account, the former Greek Finance Minister saw more than an element of truth, but it’s not the whole story in his view. “Yes, it is true that the eurozone’s design was based on a serious misunderstanding of how macro-economies function – a misunderstanding that was functional to the political agenda of those who wanted to shift power away from electorates and toward vested interests,” Dr. Varoufakis tells The World Weekly.

At the same time, he is keen to distinguish the eurozone as it exists from the vision of a democratic and federal Europe. He says that “the eurozone’s design was not a species of federalism – it was, in fact, utterly antithetical to the principles of a democratic federation. It is the absence of a federal sovereignty that renders the eurozone crisis-prone and politically toxic.”

Despite taking this view of the European project, Yanis Varoufakis is not an advocate for withdrawal. “There is no doubt that they need to be reformed radically, but to create the political conditions for such reform first we need to re-deploy existing institutions in a manner that stabilises the four sub-crises afflicting Europe: public debt, banking, low investment and poverty,” he says.

As the global financial crisis began in 2008, the eurozone was thrown into a sovereign debt crisis which engulfed not just Greece, but also Portugal, Ireland, Spain and Cyprus. The political impact of the crisis was swift. In many of these cases, the national governments moved to the right while once marginal forces became increasingly prominent. Much like in Greece, Portugal’s crisis to the emergence of a new progressive coalition led by the Socialist Party.

“The two countries, Greece and Portugal, are caught up in the same eurozone-wide crisis and both have been subjected to dead-end policies that have been portrayed as success stories (with the Portuguese one bathed in more adulatory light),” Dr. Varoufakis tells The World Weekly. “But there is a difference: last January, in Greece, our government was elected with a clear mandate to oppose these dead-end policies.”

“In Portugal this is not the case,” Dr. Varoufakis explains, “as the Socialist Party seems determined, even before forming government, to avoid challenging the basic logic of a failed policy agenda”. So the former Greek finance minister is not optimistic that the new coalition, which includes Greens and Communists, presents a sufficient challenge to austerity. It is important to note that the Socialist Party was the architect of the austerity measures as the crisis hit.

When asked if the Portuguese case represents any sign of social democracy resurging, Dr. Varoufakis does not mince his words. “Social democracy remains in tatters of its own making,” he says. “It has yet to articulate a valid criticism of its contribution to the eurozone’s terrible architecture as well as to the illogical manner in which Europe responded to the inevitable failures of that architecture.”

“The crisis unleashed by the events of 2008 has not passed. For seven years now, it has been migrating across the planet, gathering strength and transforming itself constantly,” Dr. Varoufakis says. He sees the recent economic slowdown in China as another stage in this process, while the global economy is in a dollar recession as GDP shrinks in dollar terms.

Europe is a weak link, in Dr. Varoufakis’s view, but the global economy is under the strain of imbalances. Nevertheless, Dr. Varoufakis has not run out of suggestions: “Nothing short of a new Bretton Woods can make a long lasting difference”.

Dr. Varoufakis will have plenty more agitating to do first.

This article was originally published at The World Weekly on November 19, 2015.

You can read the full transcript of the interview here.

About JT White

a writer and journalist living in the UK where he works as Africa editor and researcher for the World Weekly. White is a philosophy graduate, specialising in political thought, and maintained a blog for several years. His main focus is national and international politics having written on subjects as seemingly far apart as US elections, Russian nationalism and the state of modern Britain.
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