{"id":280,"date":"2017-12-12T15:39:53","date_gmt":"2017-12-12T15:39:53","guid":{"rendered":"https:\/\/mint.10yearsafterthecrash.com\/?p=280"},"modified":"2019-07-04T09:55:12","modified_gmt":"2019-07-04T09:55:12","slug":"unorthodox-greek","status":"publish","type":"post","link":"https:\/\/www.themintmagazine.com\/unorthodox-greek\/","title":{"rendered":"Unorthodox Greek"},"content":{"rendered":"

Yanis Varoufakis is a heavyweight academic\u00a0economist with a rare combination of style and substance. He talks to The Mint.<\/strong><\/p>\n

Economics professor, Yanis Varoufakis, describes himself as a \u201cfailed finance minister of a failed state called Greece.\u201d This, the once senior politician who rocked up to a meeting at 10 Downing Street wearing what was described by one journalist as a \u201cdrug dealers\u2019 coat,\u201d is flamboyant even in his self deprecation.<\/p>\n

Varoufakis appeared on the world\u2019s screens when Greece\u2019s financial calamity hit the news in 2010. His eventual defeat in a tussle with Greek\u2019s creditors and resignation after only six months in politics established his significant political and media clout.<\/p>\n

Having stood toe-to-toe with Europe\u2019s bastions of neoliberal economics, does Varoufakis subscribe to the pocket analysis that says after 30 years of the neoliberal school\u2019s dominance in the West, its credibility has been shot? He does; \u201cto some extent.<\/p>\n

\u201cOf course I\u2019d put it slightly differently. For me, neoliberalism was never an economic programme. It was always an ideology, like Marxism,\u201d he says. He says the Politburo in the Soviet Union used Marxism to justify their actions, \u201cBut, Karl Marx would have had nothing to do with them had he been alive.\u201d<\/p>\n

Similarly, he believes that while Margaret Thatcher believed in neoliberalism, she rarely practised it. What she did, he says, had nothing to do with the theories of Friedrich\u00a0Hayek:\u00a0\u201cHayek would have been aghast at the growth of the British state under the Conservative party.
\n\u200b<\/p>\n

\u201cEven the powers that be do not believe in their own legitimacy.\u201d<\/p><\/blockquote>\n

\u201cNeoliberalism was, for me, an ideology that provided a cover for financialisation,\u201d says Varoufakis. \u201cNot only in banking, but also the financialisation of real estate. The sale of council houses, which then became part and parcel of the whole financial dynamic.<\/p>\n

\u201cOnce that collapsed in 2008, the ideology began to start withering. That’s my explanation of what went on. Who are the new liberals today? I don’t know.\u201d He characterises the current Chancellor as simply doing,\u00a0 \u201cwhatever he can to keep a sinking ship from sinking,\u201d rather than following any guiding tenet. And that principle of untethered self-preservation, according to Varoufakis, differentiates the current government from the Thatcher administration.<\/p>\n

\u201cThatcher actually believed. She was prepared to go out there and visit working class people and preach to them that, smaller state, privitisation and more competition was going to make them happier and richer. Now you don’t have that. Now, what you have is a regime that has cynically shifted the burdens created by the bursting bubbles of financialisation onto the poor, while at the same time, reducing health and taxes; just very brutish stuff.<\/p>\n

\u201cI don’t think they even think that they believe in what they’re doing. I think they are simply doing it because they can and because it’s in their interests. I believe Reagan and Thatcher and Keith Joseph and these people, believed that their policies were serving the common good. Now, you have very cynical political moves. I saw them in the Euro group at their worst. People are coming to me and saying \u2018you were right. But, we’re going to crash [your government] anyway.\u2019 Thatcher would never have said to somebody like me \u2013 that I was right but she was going to do it anyway. Never. She considered herself to be right.\u201d
\n\u200b<\/p>\n

“Every single economic prediction that they had ever made was lying in ruins.\u201d<\/p><\/blockquote>\n

\u200b
\nVaroufakis sees this pattern in which \u201ceven the powers that be do not believe in their own legitimacy,\u201d as a measure of the extent to which the government is undermined: \u201cThat just goes to show the depth of the crisis,\u201d he says. And while he sees the current degree of political atrophy as promising change, he is no more than hopeful that the change will be for the better and he says any prediction he might make \u201cwould not be upbeat.\u201d He emphasises that he remains \u201cforever hopeful\u201d and insists that there is \u201cno evidence on which to base optimism.
\n\u200b
\n\u201cYou should never lose hope. Optimism is a very poor cousin of hope,\u201d he says.
\n\u200b
\nSo was his time away from his academic career to be Greece\u2019s finance minister a piece of action research into the Greek economy? \u201cThere was nothing I could possibly learn about the economy from this,\u201d he says, adding: \u201cI learned that [politicians] can be worse than I expected them to be at the political game.\u201d
\n\u200b
\nHis part in addressing Greece\u2019s debt crisis, \u201chad nothing to do with the economy whatsoever. It was a power relationship,\u201d he says. “My short but intense tenure could not teach me anything about economics. It taught me about naked, brutish, gunboat diplomacy-like power.\u201d
\n\u200b
\nHe describes his experience as \u201call about a tug-of-war between me and my team on the one hand, and the creditors on the other. I was putting forward proposals to them that would be beneficial, financially, to them. And they were not interested.\u201d
\n\u200b
\nHe says they were acting against the economy. \u201cThey had in the first Greek bailout in 2010, effectively shifted the burdens created by the financial sector, and in particular the French and the German banks, onto the shoulders of the taxpayers. So, they took losses that could not be retrieved from private agents, and they pushed them onto the shoulders of taxpayers.\u201d
\n\u200b<\/p>\n

“I\u2019m most probably going to fail. But, so what?\u201d<\/p><\/blockquote>\n

\u200b
\nAt that point, according to Varoufakis, it became a political battle and while it had \u201chuge economic impact\u201d it ceased to be about economics. \u201cIt was a political game with economic repercussions,\u201d he says. While Varoufakis accepts much of the impact on any economy comes from political decisions he maintains that the events of 2010 were extreme examples of that process.
\n\u200b
\nHe compares Gordon Brown\u2019s actions to rescue the UK banks in 2008 with Greece\u2019s position. He says the Bank of England\u2019s independence of Brussels meant it could print \u201ca hell of a lot of pounds\u201d so the bailout did not require the severity of austerity measures Greece had to endure \u201cto pretend it was paying its debts.\u201d In contrast he describes his experiences during his tenure as a Greek minister between January and July 2015: \u201cIt wasn\u2019t my economic arguments against their economic arguments. There were no economic arguments. The standard narrative that came down upon me: \u2018These are the rules; this is what we’ve decided. If you don’t go along with it, you’ll be crushed.\u2019 \u201d
\n\u200b<\/p>\n

“If they went ahead and threw us out, they would have violated almost every treaty of the European Union to do it.”<\/p><\/blockquote>\n

\u200b
\nVaroufakis says he was not surprised by the nature of the EU\u2019s political behaviour but he was unimpressed with its quality: \u201cI knew exactly what was going to happen. I was hoping that they would be a bit more nuanced, and they would try to cover up their brutish political gaming by means of economic arguments. They didn’t even bother to do that. That was a surprise.\u201d
\n\u200b
\nAnd he insists that despite acting out of self-interest in \u201ccrashing\u201d the Greek government, they failed to achieve those aims. His contempt is clear: \u201cLook at them, they’re still locked in a Greek programme, which is not going anywhere. Every year they hail the recovery. In 2016, they even celebrated the first increase in GDP in the history of Greece since 2008. In 2017, they revised their estimates and they showed another 1.2% reduction in GDP in 2016. They will do the same thing in 2017.\u201d
\n\u200b
\nHe says the politicians\u2019 abandonment of any attempt to justify their actions was largely the product of weariness: \u201cBy 2015 I think they had given up. Seriously, I think they had given up. Every single economic prediction that they had ever made was lying in ruins.\u201d
\nHe describes as \u201cjust a joke\u201d the decisions made by the European Central Bank and the International Monetary Fund. \u201cI don’t believe that macroeconomics and microeconomics has ever produced more failed estimates than the estimates about Greece’s path following the bailout in 2010.\u201d<\/p>\n

And Varoufakis argues that the long-running sequence of bridging loans is not the only way the Greek programme has backfired. He believes that the recent tailspin in the fortunes of German chancellor Angela Merkel culminating in her failure to secure a coalition government has its roots in the Greek tragedy.<\/p>\n

Greece\u2019s prime minister, Alexis Sipras agreed to the bailout terms following intense pressure \u2013\u00a0described by Varoufakis as \u201c17 hours of water boarding\u201d \u2013\u00a0from EU officials with Germany seen as the chief tormentor. Varoufakis says, \u201cMerkel\u2019s image in Europe suffered significantly. Even within Germany, even though they were happy to have won against the Greek government, still she didn’t come out looking good, from that episode,\u201d he adds.
\nVaroufakis agrees with the widely held view that her decision to open Germany\u2019s borders to Syrian refugees brought on her demise. But he believes that the move was an attempt to recover her reputation that was tarnished by her government\u2019s treatment of Greece.
\n\u200b
\n\u201cShe had multiple arguments or reasons for letting them in,\u201d Varoufakis says. \u201cOne was, the shortage of labour supply in Germany. But it\u2019s my considered opinion that there was also a question of restoring her own image as a humanist, after what she did to the Greeks.\u201d
\n\u200b
\nThe Mint put it to Varoufakis that there may be value in another popular view which is that Greece is a basket case, and had its government done better in addressing the weakness of the institutions, the tax raising powers, and so on, it might have won a better deal. \u201cThat’s rubbish. Complete rubbish,\u201d says Varoufakis. Greece\u2019 parlous position in 2010 was, he says, the product of bankers who couldn\u2019t spot a bad debtor.
\n\u200b
\n\u201cI’m not going to defend the malignancies of the Greek state, but Greece has always been in a state of disrepair, always. We went into debt before we became a nation,\u201d says Varoufakis. \u201cThe first debt was incurred by the Greek rebels in 1822 (five years before the first Greek state was created). In 1822, the rebels\u2019 representatives came here to London, and they got a huge loan from David Ricardo.\u00a0 And of course, only 40% of that loan ever reached them. The rest was fees and interest, paid in advance. It was a scandal.
\n\u200b<\/p>\n

\u201cBut, Greece has never had a period of eight years of recession, despite all the corruption, tax evasion, you know, third world, under-developed institutions and all that. The reason why we have an eight-year old recession is because of Europe. And because of the bailout.\u201d<\/p><\/blockquote>\n

\u200b
\nHe argues that had Greece not been in the Euro it would have had significantly less borrowing at the time of the 2008 crash. Why?\u00a0 \u201cBecause I would not give so much money to Greece with the Drachma. It was only the membership of the Euro, that made the German and French bankers, idiotically, think that lending to Athens or to Stuttgart was the same.\u201d
\n\u200b
\nSo is there any hope for Greece in the Euro? \u201cHow can there be hope?\u201d he responds. Varoufakis lists the squeeze on people and businesses including business tax upped to 30% with a 100% prepayment of the following year’s tax, this year, every year, \u201cwith no access to a creditor system so they can’t even borrow money.\u201d In neighbouring EU member, Bulgaria, business tax, he says, is 10%, with no prepayment. And businesses are moving to Bulgaria where they can trade in Greece with no border and he estimates that on adding social security contributions, Greek business pay 75% of their profits to the state. And there is, he says, an exodus of capital and labour with young, well-educated people moving to England, Australia, China, India, Bangladesh and Latin America.
\n\u200b
\n\u201cThis is like trying to destroy the country,\u201d Varoufakis laments.
\n\u200b
\nBritain\u2019s exit from the EU was long-held to be the way forward by one-time backbencher now leader of the opposition, Jeremy Corbyn who has Varoufakis\u2019 support. Varoufakis believes Corbyn has \u201crefreshed his ideas.\u201d
\n\u200b
\nHe praises the Labour leader for his courage particularly in his presentation of some of the complexity in the remain argument in the face of populist rhetoric from the rest of the remain campaigners as well as the pro Brexit camp who sought to \u201cinfantilise the audience,\u201d according to Varoufakis. \u201cIt’s one thing to say we shouldn’t have gotten in; it’s another thing to say we should get out. This is to confuse tactics and dynamics. I think that Jeremy has learned that lesson. He took many hits as a result of this. It shows that he has moved on.\u201d
\n\u200b<\/p>\n

“I’m not going to defend the malignancies of the Greek state, but Greece has always been in a state of disrepair, always.”<\/p><\/blockquote>\n

\u200b
\nOn the grounds that \u201cone should be critical of one’s friends,\u201d Varoufakis says he would like Corbin to be \u201cmore energetic\u201d and \u201cless of a Labourite.\u201d He describes Labour as \u201ca sectarian, small-minded party, like most parties are,\u201d and urges Corbin to \u201crise above that to become a national leader.\u201d And he counsels Corbin to forge ties with the likes of the Green Party and the SNP in a \u201cprogressive alliance.\u201d
\n\u200b
\nVaroufakis raps Labour for a \u201crun of the mill\u201d manifesto offering \u201cnothing particularly radical\u201d in its economics. \u00a0But he says there was \u201csome good stuff\u201d coming from Labour on investment \u201cto create good quality jobs in the green transition and green energy sector that Britain needs.\u201d He commends the proposal of a public investment bank on which he said he had canvassed with shadow Chancellor, John MacDonald. The privately owned bank would issue bonds to \u201csoak up\u201d global excess liquidity \u201cwith the Bank of England buying them in the secondary markets to make sure that the yields are kept low,\u201d Varoufakis says (see box, The easy answer). \u201cThese are things that Corbyn and John McDonald have been considering and to some extent, embracing. So, for me, that was important,\u201d he adds.
\n\u200b
\nHis alliance with instinctively Euro sceptical Corbyn is intriguing in that Varoufakis\u2019s pro European view is a the level where he sees \u201ca rise of misanthropy, xenophobia and toxic nationalism,\u201d which, if not halted threatens \u201ca return to the 1930s.\u201d
\n\u200b<\/p>\n

“I was so loathed by the creditors, and so vilified by their friendly press, because they understood what I was up to.”<\/p><\/blockquote>\n

\u200b
\nIn 2015 he founded the Democracy in Europe Movement 2025 (DiEM25) \u2013 a pan Europe group of about 100,000 people. \u201cWe’re not a confederacy. We are not an alliance of nation-based groups. We are one unitary, homogenous movement that takes different positions in different countries. We take these collectively, as Europeans,\u201d he says.<\/p>\n

\u201cYou can stand as a member of the Greek national committee of DiEM, if you’re German. We’re thinking very seriously of criss-crossing the boundaries in the European Parliament election, so having a Greek running in Germany, or a German running in Greece, or an Italian in France, to show that another Europe is already here. At least within our ranks.\u201d<\/p>\n

In an echo of the \u201csophisticated and wise\u201d contradictions he values, Varoufakis declares his pride to be Greek. \u201cI’m thoroughly Greek and very proudly patriotic, but I don’t need to be parochial in order to be patriotic. I don’t need to be nationalist to be patriotic. I don’t need to believe that my country is better than anybody else’s. I don’t need to believe that we need to barricade ourselves behind our borders.\u201d<\/p>\n

Varoufakis calls himself an \u201cEconomics professor, quietly writing obscure academic texts for years, until thrust onto the public scene by Europe’s inane handling of an inevitable crisis.\u201d But this is not true.<\/p>\n

He is probably incapable of doing anything quietly. And he jumped. It\u2019s inconceivable that anyone might thrust him into anything. He wants to instigate change and he\u2019s looking for a way. The Mint asked him: \u201cAre you not hoping to do something quite incredible that’s going to probably take much longer than the rest of your life?<\/p>\n

\u201cSure,\u201d he said, \u201cand I\u2019m most probably going to fail. But, so what?\u201d\u00a0 He is genuinely cool.
\nVaroufakis has the credentials to be an international voice for political or economic change. Following an appearance on BBC\u2019s Question Time his ability to explain sparked an observation that he spoke in English \u2013\u00a0his second language \u2013 with greater coherence than other panellists did in their first. He has been acknowledged as \u201cknowing more than anyone\u201d about game theory. He is appreciative of challenging art \u2013 his wife is an installation artist. And he hangs with the likes of Brian Eno.<\/p>\n

But here\u2019s a sad thought: while Varoufakis might be equal to the task of delivering a cogent case, rich with dialectic, for a new regime, his voice might be lost under strident, populist arguments that ring true to the common people.
\n\u200b
\n\u200b
\nThe easy answer<\/strong>
\n\u200b
\nA growing debt overhang, quantitative easing with a Eurozone injection of \u20ac600 bn in 2015 and liquidity of some $900bn smells a bit like impending crisis. Who might come to the rescue this time? Varoufakis points to the US in the 1930s under Franklin D Roosevelt (FDR).
\nHe explains: \u201cThere’s a fundamental difference between, 2009, when the G20 came together, and now. In 2009 all they had to do was to agree to print lots of money. That’s what they did in 2009. But now, we have excess liquidity. Now, they have to come together to do a new deal together. What was the FDR New Deal about? It was about soaking up excess liquidity and putting it into investment.\u201d<\/p>\n

The measures can, Varoufakis says, be fiscal as was the FDR deal, but he favours the establishment of a public investment bank, operating on banking principles, but soaking up the liquidity by issuing bonds directly to avoid the need to raise taxes and with the support of the central banks.
\n\u201cIf there is a joint press conference of the public investment banker, the government representative, and central bank representative and the government says: “Look, this is what we’re going to do.” 5% of GDP is being invested into A, B, C and D. It’s going to be done through bonds that the public investment bank is going to issue and the central bank is going to support it in the secondary markets. End of story.\u201d<\/p>\n

He says there is gathering urgency for a public investment ban for three reasons: \u201cclimate change, Vladimir Putin, who’s controlling us through gas pipelines and thirdly, the access to liquidity, which is crushing pension funds.<\/p>\n

\u201cThis simple idea would deal with all these things at once, without any taxation.\u201d<\/p><\/blockquote>\n

Varoufakis doesn\u2019t know why Britain is not following his advice. But suspects it\u2019s through a \u201cfalse sense of security\u201d garnered from Bank of England’s success and the spectacular failure of continental Europe to deal with crisis. But he offers an interesting insight into the European Union\u2019s reticence.<\/p>\n

\u201cWhen I was minister I was, de facto, a governor of the European Investment Bank (EIB). I put forward this proposal to the board of governors of the bank and I was astonished that the EIB\u2019s German president, Werner Hoyer actually spoke very much in favour of my proposal.
\nBut he never got a green light for it from the European Council. Why didn’t it make it? because it didn’t get the green light from Angela Merkel. So, the question is, why is Merkel not giving the green light? because Germany\u2019s finance minister, Wolfgang Sch\u00e4uble, blocked it.<\/p>\n

\u201cThe reason why he blocked it, was explained to me by Sch\u00e4uble himself. He said his number one concern was how to enforce upon the French, German control over their national budget. So, for Sch\u00e4uble anything that gave more breathing space to Paris, was inimical to his project of exerting control over the national budget of France.<\/p>\n

\u201cSo, an investment policy that would have been good for Europe, to the extent that they would have given more degrees of freedom to Paris was inimical to this Franco-German war to the death. It concentrates the mind, doesn’t it?\u201d
\n\u200b
\n\u200b
\n\u200b
\n\u200b
\n\u200b<\/p>\n","protected":false},"excerpt":{"rendered":"

Yanis Varoufakis is a heavyweight academic\u00a0economist with a rare combination of style and substance. He talks to The Mint. Economics professor, Yanis Varoufakis, describes himself as a \u201cfailed finance minister … <\/p>\n","protected":false},"author":1,"featured_media":281,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[46,58,2,45],"tags":[141,138,290,139,140,134,137],"class_list":["post-280","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-continental-europe","category-government","category-interviews","category-uk-ireland","tag-dec-2017","tag-eu","tag-globalisation","tag-greece","tag-neoliberalism","tag-politics","tag-yanis-varoufakis"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/posts\/280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/comments?post=280"}],"version-history":[{"count":0,"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/posts\/280\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/media\/281"}],"wp:attachment":[{"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/media?parent=280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/categories?post=280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.themintmagazine.com\/wp-json\/wp\/v2\/tags?post=280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}