Yanis Varoufakis talking:
Fourteen-year-olds and 40-year-olds and 90-year-olds must all—we must all understand that empowering citizens to speak authoritatively about the economy is a prerequisite for democracy and a precondition for the good society. There are no economic experts. There are experts when it comes to recording a program like this one or to building a bridge. If you want to build a bridge, you can’t do it democratically, because if you do, the bridge will collapse and will be, you know, like a major crime. But the economy is the way in which we organize social power, who does what to whom, who has the power over their lives and who doesn’t. And that is a question of how we run our society. This is a question about democracy. So, if we were to accept that there is—there’s a group of experts and we have to defer to them when it comes to economic matters, then, effectively, we accept oligarchy.
It’s a little bit—little bit like in the Middle Ages. The language of power in the Middle Ages was the Bible. It was religion. So, if you do not understand—you remember Voltaire. He always—as an atheist, he had the Bible in his desk, and he said that “I need to understand it better than the theists, because, otherwise, I cannot discuss politics.” Today, the equivalent of the Bible is economics. So, my act of writing this book is a political act for empowering democracy, to the extent that we need to effectively liberate each and every citizen from the fear of understanding the economy, because that fear keeps them away from the levers of power and destroys our democracy.
The beauty of capitalism is that it is undermining itself. We of the left have not done a very good job undermining capitalism. We tried and failed. We created the gulag, and we imprisoned one another. You know, we’ve been quite horrific in what we’ve done. We have a major stigma on our record as the left wing. But capitalism is fantastic at overthrowing capitalism.
Think about all of the gadgets that it creates, the technologies. Just very briefly imagine for a moment that this technological innovation, artificial intelligence, robots, moves in a manner in which it is moving, but even faster. Very soon, you’re going to have robots producing everything. Now, the robots do not want to consume that which they produce. And the rest of humanity is not going to have the money to buy it. So, capitalism is going to have a massive crisis, simply because it will have a humongous capacity to produce stuff, and no capacity to consume it, which is already what we are observing.
The reason why Trump is the president of the United States is because of this great incongruity. In the United States today, we have a magnificent capacity to produce, but the majority of Americans—I was reading a fantastic statistic, which explains Trump a lot better than Facebook, Russia and so on. More than 50 percent of American families cannot afford to buy the cheapest car on the market, for the first time in the last 70 years. So we have the capacity to produce all sorts of things, but not enough of a capacity to consume them. That is what is undermining capitalism. And until we regain democratic control of the way in which we organize production and distribution, both of income and of goods, we are going constantly to be in a crisis that allows people like Trump, effectively, to usurp the democratic process and deepen the crisis both at home and abroad.
by not mentioning capitalism, because the moment you mention anything beginning in—ending in “ism,” to my daughter, she just shuts the shutters down and says, “Dad, you’re boring.” So, the—you know, we were brought to this world—weren’t we, Amy?—to embarrass our children and to make them really not want to listen to us. But so, yeah, I’m an economist, I’m a politician. My daughter doesn’t want to talk about any of these things with me. But the one thing, from a young age, age of 8, 9, that seemed to energize her was inequality. She would come to me and say, “Why? This is stupid, Dad. I mean, why do we have a society”—she wouldn’t even use the word “society.” But the question, “Why so much inequality?” it really doesn’t make sense to an 8-year-old. And that was my gateway, because to explain inequality, you have to explain history, you have to explain the way in which colonialism evolved, the way in which—why are the 0.1 percent of society owning all the robots.
gradually, through the process of commodification, through the process of marketization, the steady, triumphant march—war—of prices against values, which produced inexorable wealth and, at the same time, stupendous deprivation that we never had before. And so, these—through an explanation of this epic, if you want want, contradiction, you can inspire young people, if you explain it in a way that Sophocles would explain it or Shakespeare would explain, because great theater is, I think, the best guide that we have to how young people can understand, you know, the historical struggle and contradictions that are the stuff of our lives.
debt is to capitalism that which hell is to Christianity. It’s unpleasant, but essential. It doesn’t work otherwise. So, would Edison or Henry Ford be able to create what they—you know, the networked companies of the second industrial revolution that they did, without huge quantities of debt? It would be impossible to finance this. So, debt is the fuel.
Look, Amy, in slaves-owning societies or in the Middle Ages, we had production. People worked, toiled the land. Then we had distribution. The lord would send his henchmen in, his sheriff, to take his cut. So you had distribution—production, distribution. The lord’s cut would then be sold in markets. He would get money out of it, and then you would have finance. So we had production, distribution, finance.
With capitalism, we had the reversal of that. First you’d get the debt, to set up the—you know, to employ people. So you have finance, then distribution, and the last thing that happens is production. So, debt is central to capitalism. Now, that means one thing: The banker, the financier, has an exorbitant privilege. He’s like the sorcerer who has the capacity to push his hand through the time line, snatch value from the future, that has not been produced yet, and bring it in to the present to help orchestrate the production that will create the value that will be repaid in the future. But, effectively, you’re creating a class of people, the financiers, who then have complete control over society. And they can keep doing this a lot more, until the present can no longer repay the future, and there is a huge crash. And then what happens? Because they have this privileged position, they can make you and me, President Obama, whoever, Larry Summers, bail them out. So, they win if their bets succeed, and they win if their bets lose. What kind of political economy is this, when you have one class of people who win, whatever they do, and everybody else loses, whatever they do?
Its the black magic of banking.
the cure of this is, effectively, to do that which FDR did in the 1930s. President Roosevelt—to put the financial genie back in the bottle. Make banking boring again. Put huge constraints upon them. Nationalize the banks and turn them into institutions for public purpose. And if even—you don’t necessarily need to nationalize, as long as you really keep them under strict control. Remember Bretton Woods, which designed the golden era of capitalism. Bretton Woods was a conference in 1944, and there 120 different countries agreed on the system which saw, in the 1950s and 1960s, the longest period of steady growth, with shrinking inequality and low unemployment and low inflation. FDR had one condition slapped onto membership of that Bretton Woods Conference. Do you know what it was? No banker was allowed in the Washington—the Mount Washington Hotel. So you had a monetary and financial system that was designed in the absence of bankers. That’s what we should do again.
the two Oedipal markets are the market for labor and the market for finance, for money. You see, markets work very well, when it comes to mugs. So, if you and I are manufacturers of this mug, and we have an excess supply of them—that is, you know, they are not selling fast enough—well, we can’t do anything about them, we can’t redesign them. I’m sure that the Democracy Now! mugs would sell magnificently, but you know what I mean. All you need to do is reduce the price, and at some point you clear your stock.
But that is not the case with labor, and it’s not the case with money. Labor markets and money markets do not work well like markets. Why is this? Imagine you are an employer, and you are tossing and turning in bed at night, and you’re thinking, “Shall I invest in a new product? Shall I employ workers? Shall I borrow money to do all this, in order to enhance my production?” Well, you will, if you think that at the end of the production line there will be enough demand for the things that your company is going to produce. But what will this depend upon? It will depend upon whether other people like you have made the investments, because if they have, if everybody has invested, then there will be enough money in the economy for your product to be sold. So, you’re trying to predict what others in your position will do, in the middle of the night, turning and tossing around.
Now, imagine that in the middle of the night you can’t sleep, you’re worried, you don’t know what to do, and you put the radio on, and you listen to the news that the Fed is going to reduce interest rates further, instead of increasing them. Now they’re supposed to be on the way up. Imagine that the price of money—that’s the interest rate—has been announced it will come down. Or even imagine at the same time that trades unions announce that because of the slackness of the labor market, they will accept a lower wage, because they’re desperate for more jobs. Now, what will you think as an employer? Will you think, “Oh, great! My labor costs are coming down. My money costs are coming down. I will invest more”? You may think that. But there is an alternative thought you may have, which is, “Oh, my god! For the Fed to be reducing interest rates, things are bad. For the trades unions to be prepared to work for less, my god, things are—I’m not investing.” So, you have a situation where wages are coming down during a crisis, interest rate is coming down, and instead of labor quantities increasing and more money being invested, you have the opposite.
So, I call them Oedipal markets, because remember the myth of Oedipus. Oedipus’s father heard from the oracle that his son, his baby son, who was just born, would grow up to kill him, to murder him. So he takes the child, the baby, snatches it from his wife’s arms and gives it to a shepherd, with instructions to take it to the woods and kill it. The shepherd can’t bring himself to do this, so he gives it to somebody else. This boy grows up in the end, not knowing that Laius is his father. So, at some point, he meets his father, and in the first incident of road rage in the history of humanity, he kills his father, as to who had the right of way. If he didn’t—if he knew that this guy was his father, he would not have killed him. So, this is where the prophecy is self-fulfilling.
And that is what I just described before with interest rates and wages. Those two markets don’t work like markets. The idea that you will cut wages, through austerity, and competitiveness and output is going to go up, is just complete nonsense. It just doesn’t happen, because of the Oedipal effect. And Greece is a fantastic example of that. We reduced wages by—where it used to be, through the great depression, by more than 40 percent. And guess what happened to employment. It crashed.
Apolitical money
In this country, you have a lot of people, good people, who are fed up with politicians, who are fed up with the Fed, and who believe that—they believe in true money, in honest money, that money should be somehow independent of the political process. Remember the gold standard? They still hanker after the gold standard. They would like the quantity of dollars printed to be linked to the quantity of gold that the Fed owns, so that there would be no political influence of the quantity of money, because they fear that—they fear the government will print too much money, and there will be inflation, and the value of money will be effectively eaten away—the gold bugs, as you call them in this country. Bitcoin—Bitcoin is a digital form of the gold standard. And so, the backlash against political control—
The Bitcoin folks are moving into Puerto Rico right now, has been devastated by Maria. Of course it’s been devastated. But the solution is not Bitcoin.
but it’s—you know, it’s just a bubble. It will burst. And the reason is, however much we loathe the political process because it is controlled by oligarchs and by the same old financiers who are behind the politicians who are bailing them out whenever the finance is needed—however much we dislike that, there is no alternative to political money. Why? Because the quantity of money must be in sync with the quantity of output of goods and services. If those two go out of sync, you have deflationary bouts. You have to—that will lead to depression. So, to put it very bluntly and simply, the quantity of money must be decided democratically. At the moment, it’s not being decided democratically. It’s decided politically, but oligarchically. The solution is not to take it and tie it to some algorithm.
But the United States of America is the prime oligarchy. The difference between the United States of America and Russia is that the United States is a more successful oligarchy. But it is an oligarchy nevertheless.
think of 2008. President Obama is sworn in on a wave of expectation by the victims of the financiers. And what does he do? First thing he does is he appoints Larry Summers and Tim Geithner, the very same people who had actually unshackled the financiers in the late 1990s, allowing them to do everything that brought so much discontent to the very same people who then entrusted President Obama. President Obama, very soon after that, lost his credibility with those people, and the result is Donald Trump. That’s an oligarchy.
the ruling class has a fantastic capacity, like the working class, to be divided. Donald Trump was never in the pocket of Wall Street. He used Wall Street. He used Deutsche Bank. He used all the people he dislikes, in order to keep, effectively, bankrupting his companies and profiting from it. So he’s really very good at that. But he was never very successful as a businessman, certainly not as successful as Goldman Sachs or JPMorgan. And he was always on the margins of the capitalist order of things in the United States. He understood that in order for him to gain more power, more—both discursively and politically and economically, he had to ride the wave of discontent against Obama. And he did this magnificently. And the Democrats let him. The Democrats brought their own distress and failure upon themselves.
– the growth of the support for Hitler and how he took power in Germany, going back to World War I and the devastation of Germany?
the combination of a humiliated populace. The humiliation is very important, Amy. When you humiliate a whole people in the middle of a great depression, great economic crisis, you have a political crisis. So the political center implodes, which is what happened with the Weimar Republic, and then all sorts of political monsters ride up—rise up from that. We saw this in the 1920s, the 1930s, in the midwar period in Germany. But we saw it in—we see it in Greece today, after—do you know we have a Nazi party in Greek Parliament—in the country that, along with Yugoslavia, fought tooth and nail against Nazism in the 1940s. We had a magnificent resistance movement against Nazism. In that country now, the third-largest party is a—not a neo-Nazi party, fully old-fashioned Nazi party.
They came into Parliament in 2012, at the time of a humiliated public in the clasp of a great depression, just like in Germany in the 1930s.
But allow me to make a point, because there is a great misunderstanding about Germany of the midwar period. Usually people say, “Oh, it was hyperinflation. It was the fact that prices were rising exponentially that brought Hitler to power.” Not true. It is true that hyperinflation depleted the middle class, effectively destroyed the middle class’s savings and shook the system and made the Weimar Republic extremely fragile and ready for the taking. But if you look at the electoral performance of the Nazi Party in Germany, there is a direct correlation, not with inflation, but with deflation. You had Chancellor Brüning, who in 1930 decided to slam the brakes on the economy and to use large doses of austerity in order to make inflation go away—a bit like Paul Volcker when he pushed interest rates up in the early ’80s, remember, to 20-something percent—and a lot more fiscal austerity, not just monetary austerity. It was at that point when prices started falling in Germany. Prices started falling, and unemployment ballooned. And that is when you have a major jump in the support for Nazis. Deflation breeds fascism. And that is something that we’ve got to remember. And I’m making this point because, unfortunately, the European Union’s economic policies today are producing deflationary forces that are being exported to the United States and to China. And that does not augur well for progressive international politics.
the Golden Dawn is a Nazi party. That’s the Nazi party I was referring to.
– you have Hungary, you have Poland. Talk about what’s happening in Austria.
it’s the 1930s all over again. You know, Marx once said that history repeats itself, second time as farce. Unfortunately, it’s not a farce. It is a tragedy, even the second time around. In 2010, the European economy entered a massive recession, that also became a depression in certain parts, in the periphery. And we behaved in Europe in exactly the same way that President Hoover behaved in 1929: liquidate, liquidate, liquidate. Remember that. This is what we did in Europe. And we had the gold standard, effectively. We still have the gold standard in Europe, because we have a European Central Bank, which is not allowed to do that which the Fed did in 2008. So, what the Fed did in 1929, which is nothing, effectively—sit by, waiting for liquidation to make the problem go away—we did in Europe in 2010.
Is it any great wonder that we had the ultra-right xenophobes rising up from everywhere, the political center collapsing? Now you have an ultra-right-wing government in Austria, which was always a fiefdom of social democracy and a very progressive country. You have Germany. The two centrist parties, the center right and the center left, the Christian Democrats and the Social Democrats, together used to command 85 percent of the vote. Now they’re just is a smidgen above 50. And that’s why Merkel is so weakened today. And you have the Alternative for Deutschland, which is rising up. They went from zero to 13 percent, and now they’re going to go to—
That’s called the Alternative party. that’s a very xenophobic, ultra-right—it’s the Donald Trumps of Germany, to put it bluntly.
In France, the two major political parties disappeared. They don’t exist. You have, of course, the rise of Macron, which was almost serendipitous. It was almost serendipitous in the sense that he only became president because his right-wing opponent self-destructed as a result of a scandal involving his wife. And I’m very glad that Macron was elected, but nevertheless it’s not a great source of joy that Macron won, because it—you know? And Le Pen won 35 percent of the vote.
Marine Le Pen is the leader of the Front National, the National Front, which is a Holocaust-denying, ultra-right-wing, xenophobic, anti-Muslim, Islamophobic party. I have friends in France who were fearing for their existence, because in France, unlike in the United States, you don’t have the checks and balances of the Constitution. The French president can send the secret police into your home, and you disappear. Of course, thankfully, Macron is there now, but his hold over French politics is more tenuous than it looks.
Then you have—you have Holland. In Holland, you have a very civilized country. You have an increasing insular, Islamophobic, anti-Semitic, anti-Southern Europe narrative. I can tell you, from Greeks that I know in Holland, they feel increasingly alien within their own communities.
In Greece, you have racism rising up against almost everyone, because this is what happens when you have a social economy in free fall. This is why DiEM25 is important to us. And we’re not just a movement anymore. We’re doing something rather radical. We’re going to stand in the European Parliament elections May 2019 in at least 10 countries. We are creating a political version of our movement. We call it the European Spring. And now we have—in June, we’re going to present our pan-European manifesto, and it will be a transnational list for the first time in the history of Europe. And we are running in France, Italy, Portugal, Greece, throughout.
DiEM25
It’s the Democracy in Europe Movement. We also play on the phrase carpe diem, which means “seize the day.” So, effectively, it means “day,” but in the sense of a democratic movement that is trying to do something that has never been done in Europe and which we consider absolutely essential. We have a systemic, continental crisis in Europe. Never has the question been asked: How do we deal with this systematically? If you look at every Eurogroup meeting, every European Union Council meeting, the European Commission, the European Parliament, they deal like firefighters who attack the flames but not the source of the fire. They look at the Irish banks or the Greek public debt or the Italian labor market. But they never sit down and think of this as a systemic problem, which has to do, to a very large extent—and since we are on Democracy Now!—with a failure of European democracy. Because what we’ve done in Europe is something quite absurd. We have democratic states, but we have shifted all the important decisions to a democracy-free zone in Brussels, where all the decisions have been made outside the checks and balances of a democratic process. And to put it bluntly, Europe is failing because of that, because democracy is not a luxury. It is an essential process for maintaining a sustainable social economy.
I personally campaigned in Britain against Brexit, which puzzled a lot of my friends in Britain, because they would say to me, “You were treated like scum by Brussels. You were crushed. Your government was overthrown by the European Union. And you’re coming here to Britain to ask us to stay in this European Union? We don’t want to do that. Why are you asking us to do that?”
And my argument was, my answer was, look, I spent all my life demonstrating against every Greek government there was, outside the Greek Parliament, because a patriot has to love his country and demonstrate against his government when his government is wrong. Similarly, I confronted the European Union establishment because it was wrong. But I don’t want to bring Europe down. Britain is at the mercy of a major social crisis. We have massive poverty rising in Britain. We have very low-quality jobs, Uberization of the labor market. You know, 50 percent of families in Britain, as we speak today—this is incredible—need to use credit cards to put food on the table. We have an environmental crisis, like everywhere else.
All these crises are like climate change. We cannot sort them out at the level of our nation-state, at least not in Europe, where we have fragmented nation-states. What we need to do is we need to pull together. We need a pan-European New Deal, to put it in American terms. And this is why DiEM25 is organizing in Britain and everywhere along the lines of our policy, which we call the European Green New Deal.
Trump
Trump is an abomination for every progressive person, the way that he thinks of women, the way he thinks of Mexicans, the way he thinks about, I don’t know, even his own self. I mean, he’s a misanthrope. I’m sure he hates himself, as well. There’s no other explanation. So, it is quite an abomination to have that man in the White House.
But at the same time, I believe that it is a cardinal sin to demonize those who voted for him. What the Democratic Party does in this country is a crime against logic, to call them deplorables, to say that they’re idiots who were duped by Facebook and Cambridge Analytica. The reason why most voters who made the difference, in marginal seats, voted for Trump was because they could not fathom yet another variation of the same establishment government in Washington, D.C., that constantly bails out the bankers at the expense of the majority of the people in this country. It’s a failure of President Obama. That’s what Trump represents to me in this—in this country.
Internationally, he’s a major threat to the chances of stability, of peace, and of finding a modus vivendi between the three main economic blocs, that need to collaborate to avert a new great depression from hitting us. And the three main economic blocs are China, the European Union and Trump. Look, there is no doubt that America should play a leading role, effectively, with the European Union, to force the Europeans to get their act together. The Europeans are not getting their act together. Trump’s criticism of German trade surpluses is correct. But what he’s doing, which is to—all these shenanigans, with the Iran deal, against Merkel, playing games with China—this is not creating a new Bretton Woods, a new International New Deal, which we need. It is simply to go it alone and to undermine any prospect of a global equilibrium.
Don’t take anything for granted. And don’t forget that every system of oppression, every system of government, if you want, wants to envelop you in its superstitions and ideology, until you can’t see it anymore and you think that you live in the best of all possible worlds. You don’t.
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Yanis Varoufakis
economist, former finance minister in Greece and co-founder of the Democracy in Europe Movement 2025, known as DiEM25.
— source democracynow.org