Much of the world was introduced to Yanis Varoufakis in early 2015, when, as Greece’s bold new finance minister (he rode a Yamaha to work and tabloids touted his sex appeal), he led negotiations with the European Union, the European Central Bank, and the International Monetary Fund to restructure the country’s crushing load of government debt.
To many, he was a leftist hero standing up to the heartless eurocrats in Brussels. But then the eurocrats won.
After failing to reach an agreement — Varoufakis viewed the terms of the austerity measures as overly punitive and counterproductive — he resigned in a July 2015 blog post in which he vowed to “wear the creditors’ loathing with pride” and quit the governing Syriza Party.
Varoufakis, 57, has since become a vocal critic of politics in the European Union and a torch bearer for progressive ideas across the continent.
This March he launched a new party in Greece — where the conservative media continue attacking him as a narcissist and relentless self-promoter — MeRA 25, which aims to restructure Greece’s debt yet again and reverse some austerity measures. The country, he says, is turning into a desert of human capital, as the young emigrate to flee an E.U.-imposed “debt bondage.”
The U.S. edition of Varoufakis’s book, Speaking to My Daughter About the Economy: or, How Capitalism Works — and How it Fails, was just released. It sets out to demystify some of the major economic issues of our time for readers of all kinds, including 14-year-olds.
I spoke to Varoufakis over the phone last week. The interview has been edited and condensed for clarity and length.
So, in what ways does capitalism work and in what ways has it failed?
Capitalism has liberated us. It has generated incredible new technologies and wealth — I love the idea of a robot doing all the chores. But at the very same time, out of the same kind of proverbial production line, it has generated the most spectacular horror and depravity. It’s remarkably contradictory.
Speaking of robots: Your daughter is 14. What sort of jobs do you think will be available for her generation?
My greatest worry about my daughter is that increasingly her generation is being divided into two lumps, two groups of people. Those who will be doing more demeaning jobs, being the appendices of some kind of digital system, so they become part of that machinery in a way that resembles Charlie Chaplin’s Modern Times. And the second group who are beginning their lives as interns struggling to acquire a profile that at some point in life they’ll be able to sell to the highest bidder, of some large corporation, maybe for the highest salary but always living their working lives in a state of precarity and a state of angst.
I think that’s how many young people view things today.
So what’s one way to improve young people’s lot?
A universal basic dividend. We need to face up to the fact that [corporate] profits are increasingly produced socially; a result of cooperative, collaborative large-scale projects, many of them financed by the state and state institutions and many of them generated surreptitiously by each one of us. Every time you search something on your Google engine, you’re contributing to the capital of Google. A part of their shares [would] be contributed to a public growth fund so that we can produce a universal basic dividend, distributed to members of society that have contributed — maybe inadvertently — to the production of that social capital.
At least at the initial stage, you can say to [these companies]: Every time you have an IPO or you raise new capital, you take, say, 10 percent of the shares and you deposit them in a public equity fund.
Until we’re prepared to do that, we’re not going to find what it takes in order to stabilize this destabilizing process.
But is that at all feasible?
There’d be resistance from the ExxonMobils, the General Motors, the older corporations, but the newer big tech companies, I think some would support the idea. I know Bill Gates would.
Why not universal basic income — just ensuring everyone gets a check from the government?
My proposal is a counterpoint to universal basic income. It’s very difficult in today’s environment to convince a blue-collar worker who’s working day and night and is very insecure about his job that you’re going to tax him to give money to someone to sit home and watch television. [Also it would] jeopardize the existing welfare state.
The idea of universal basic dividend is we’re saying “Forget taxes”; this has nothing to do with taxation.
How would this work across borders? Apple is U.S.-based. Would Europeans get a dividend too?
It would give us a fantastic opportunity to do what we have to do anyway: greater collaboration across borders. So instead of having trade wars, which Trump seems to think in his infinite wisdom we need now, we collaborate. Let’s say the European Union authorities and the American authorities agree that the distribution of Google shares among two equity funds — the American and the European —should be pro-rata in proportion to the revenues of Google in Europe and the United States. This might sound utopian. But I’d refer you to the Bretton Woods conference of 1944 which designed the postwar financial system, where the degree of collaboration and cooperation achieved was much higher. There was political will and some more far-sighted politicians.
Unemployment remains stubbornly high in parts of Europe, in particular in Greece. Why has the U.S. managed to generally keep it lower over the last couple of decades?
The main reason is that [in the States] you have a Federal Reserve that is within its remit to adjust the money supply to achieve full employment. We don’t have that in Europe; [the European Central Bank] has only a mandate for price stability. You [also] have a federal budget which plays a massively important recycling role. You have an economy like California and you have an economy like Missouri; it’s like having Germany and Greece in the same economy. But you have Social Security payments in Missouri that are funded by taxes raised in San Francisco.
What about the argument that tighter labor-market regulations are partly to blame for higher unemployment in some European countries?
I would never deny anyone the right to humiliate themselves with such hypotheses.
Think of Greece as the laboratory of neoliberalism. Greece is now more flexible in terms of its labor markets than Bangladesh. We have effected in the last eight years measures and policies that would be a neoliberal or libertarian’s wet dream. We have a 60 percent reduction in social security payments, 48 percent reduction in state pensions. We have abolished … collective bargaining, so unions are cosmetic, they play no role in setting wages. Libertarians would expect a massive boost in employment [and the] eradication of youth unemployment. Instead: What has happened? We have a great depression, we’ve lost 28 percent of nominal GDP, similar to what happened in the United States in 1929 and one in two families has no members that work.
When you look at Trump, what do you see?
Trump has to be seen as a symptom of the failure of Barack Obama.
He’s trying to use the exorbitant power of the American financial system in order to put the brakes on a process that weakens the global position of the United States. He’s using stealth and deliberate strategies of generating instability, engendering fear amongst friends and foes in Europe and in China and in the rest of the world. For example: pulling out of the Iran deal had nothing to do with weapons or Iran, it was a way of trouncing Angela Merkel and showing to the Germans that he can order German companies out of Iran and back into the United States against the edicts and wishes of Germany.
Confrontation could possibly yield short-term benefits for some American corporations and for American power, but in the medium- to long-term it’s going to destabilize the world in which Americans are going to have to live.
What failure of Obama’s are you talking about?
Remember that Obama would never have won if not for the 2008 collapse of the financial sector. He rode into the White House on a wave of consternation and discontent. And after having won the presidency he immediately appointed the very same people who were responsible for the exuberance and extravagance of Wall Street: Timothy Geithner and Larry Summers.
He became the plaything of forces beyond his control, of Wall Street, and of those whom he had just bailed out. The anger turned against him … and in the end he had people who voted for Obama in 2008 voting for Trump in 2016. The banks had to be bailed out, but the bankers didn’t.
The most ironic and ridiculous sight, speaking as an outsider, is the Democratic Party is blaming the victory of Trump on Russia and Facebook. From where I stand, this is one of the most laughable claims I’ve never heard.
So what should you have done differently in Greece?
I [shouldn’t] have trusted my own prime minister and my own colleagues and cabinet because our defeat was a result of their capitulation. This is the greatest regret. I don’t hold grudges against creditors, against my opponents in the European Union, and the International Monetary Fund — they were doing their job.
I put all my energy into extending [the negotiations] by three months so as to give creditors and our side more space during which to find an honorable compromise. The creditors were simply not interested in compromise … what they were interested in was to overthrow or crush our government, but that was not all. I was hoping that that three-month period would have been used by our side as well, to steel ourselves for any confrontation. I should not have struck the deal, I should have forced things to a head, in the first four weeks. Had we done that we would have been far more united, the creditors would not have made use of the three-month period to divide and rule over us.
What if that had meant pulling out of the euro — a Grexit —which many pundits believed would have been catastrophic for the Greek economy, leading to runaway inflation, a sharp rise in the cost of imported goods and even steeper unemployment?
We’d be better off today if we had. Getting out of the euro was not my preference, but what we now have — the extension of our debt bondage within the euro and a great depression that’s foreseeable for the next decade — is certainly the worst possible outcome.
You recently started a new party in Greece, MeRa 25. The platform includes restructuring the national debt and to tie repayments to growth, cut taxes on small businesses, and end austerity by allowing the government to run a smaller budget surplus. What do you hope these, and your other proposals, will accomplish?
End Greece’s great depression. Imagine in the United States, if you hadn’t had a New Deal in 1933. Imagine that the crash of 1929 produced a Great Depression beyond a decade. Imagine the state of this nation. This is the state of Greece today. I wish I didn’t have to start a new party — it’s the last thing in my life that I want is to be part of the political game. [We’re a] tangible and credible alternative to a process of desertification of the country as the young are leaving it.
Which country’s economic management do you admire the most right now?
That’s not the answer I was expecting.
I would never admire a dictatorial communist party. But you asked me about economic policies. The economic policy pursued by Beijing has been exemplary.
In 2008, we owe [the fact] that the great recession that hit the United States did not become a great depression to two factors: one is the Fed printing all this money — not that they used it as they should — and the second is China.
They intentionally inflated their existing credit bubble, creating a lot more private debt, lifted their investment levels to unprecedented levels, on purpose, to replace the lost exports due to the global recession by local investment spending and therefore to buy enormous time — a decade — for the European Union and America, to get their act together. Of course, we didn’t.
And then when that bubble started bursting, around 2013, they were very smart in the way that they deflated without bursting it. And then when the recession was beginning to be smelt in the air they boosted again in 2015, that’s what stopped the American economy from going into a double-dip recession.
So they’ve been very skilled at managing their macroeconomy in a way that has been very beneficial to the rest of the world.
But isn’t at least some of this possible because they could ram their policies through in a way you couldn’t in a democracy?
As a committed democrat I would never agree to this, that’s my line and I’m sticking to it!
I think it is perfectly possible in well-functioning democracies to have smart policies that stabilize a macroeconomy. You had it in the United States in the 1940s and the 1950s, even in the early-to-mid 1960s.
You don’t have that now because of the toxic after-effects of the period of financialization and of the discontent following its collapse. But I will never concede the point that you need to have a dictatorship to make things work.