Yanis Varoufakis at DiEM Session One, Volksbuhne. Arno-image. All rights reserved. I would like to start this review by looking at Varoufakis’ writing style: his style is interesting. The circumstances of Varoufakis’ life during the writing of this text were anything but conducive to the reflective processes that aid good writing. But, unlike many a scholar siloed within academic arcana, the stylistic treadmarks of 2015 are only noticeable in this book because Varoufakis writes so well.
Like all great story tellers, Varoufakis’ literary flare is not just a function of stylistic prowess. He gets right inside the fears, desires and external constraints of the key players in the complex history of the Eurozone so that we come to understand the human reasons why Europe now is where she is. This ‘getting inside’ is a function of a sharp analytical mind combined with a clear eyed commitment to the moral principles undergirding liberal democratic politics and humane economic science. It is his combination of high humanist values with carefully calibrated practical rationality that guides his story telling and makes his style so clear and powerful. This is on fine display in the hardest part of any book to write, its opening.
The preface is a pearl: a vivid account of childhood in Greece under the fascist turmoil of the late 1960s. It is polished, penetrating and powerful writing which moves the moral consciousness of the reader. We see that his concerns arise from tragic contact with the deep things of human experience that are universal and should be our concerns too. There is an urgency underpinning this text requiring that the story he tells must be told now. Three features give the book its solidity and importance: historical breadth and clarity, analytical incisiveness, and – to borrow a phrase from Ghandi – the moral power of its reasoning.
Telling it like it was
This book is far more than a re-statement of Varoufakis’ 2011 book, The Global Minotaur.
It fleshes out the narrative of the origins of Europe’s present financial and political crisis, unpacked with a particular eye on Europe’s present crisis. But the basic story line in The Global Minotaur – which also provides the structure here – is a play in three acts.
Act One is set in the years 1944 to 1971. When the present global economy was set up at Bretton Woods, the US was gripped by a New Deal fear of international financial chaos but was not prepared to let its dominance of the post-war globe slip in order to generate a truly self-balancing global economy. This led to the US rejecting Keynes’ plan to construct a genuinely international currency and a genuinely international set of surplus and deficit rebalancing institutions. What the US did instead was a sort of Keynesian-light internationalism that relied on US currency, US controlled international institutions, and the massive US surplus economy to keep all the post-war boats (outside of the Communist sphere) floating.
Finance was tightly under political control during this era. By investing their own surplus into Germany and Japan in particular, the US was able to re-build Europe and Asia and recreate them – politically and economically – in something like its own image. On the whole, things worked exceptionally well for what we now call the post-war boom (1949– 1971). But when the astronomical expense of the Cold War kicked in and the US stopped running a surplus, the Bretton Woods system simply fell over, leaving the globe in a mess.
Act Two is the years 1971 to 2008. Here the US boldly re-configured the global economy so that – by releasing the financialized profit desires of Wall Street from tight regulation – it was able to maintain global dominance as a deficit economy. The Nixon Shock of 1971 produced the stagflation sickness of the 1970s which was then ‘cured’ in the 1980s by the staggering success of financialized and transnationalized corporatism. But the architecture of the post-Nixon area was inherently unstable, inherently disconnected from sustainable human and economic realities, and it all came crashing down in 2008.
Act Three starts in 2008. Here, after acts one and two have both ended in tears, the global economy is terminally wounded and must either die or face radical reconstructive surgery. Now, despite the various appearances of recovery, it is simply the case that the mechanisms and institutions that used to keep the global economic order in some sort of functional balance have all failed. We have only just started Act Three, but it could end quickly, and violently.
It will require unusual collective intelligence and fortitude to divert our path from disaster now. For today, the ideologies and vested power interests driving the prevailing financialized escape from economic and moral reality are now deeply entrenched in what sociologists call our life-world. Neoliberalism and financialization have so effectively defined political “realism” that our public discourse simply refuses to recognize that we are hurtling towards a savage unravelling of the prevailing global order if we just keep going as we are.
So, how does And the Weak Suffer as they Must? take up this narrative and tell us things we did not know and need to know now?
The edge of our seats
Reading And the Weak Suffer as they Must? is like reading a gripping thriller. It is a page turner because the plot itself is a relentless sequence of astonishing twists and turns driven by the cunning ingenuity and hubristic folly of its key protagonists.
Even if you know a lot about the Eurozone, Varoufakis’ carefully researched account, with its vivid glimpses into the motivations and outlooks of key players, and its expansive breadth in appreciating the global dynamics pressuring localized decisions, is unerringly startling. Yet it is no novel. Varoufakis’ book has something made-up stories can only mimic; the texture of real history.
But here is the key thing that Varoufakis has so carefully noticed. In the texture of real history, convenient illusions are typically a great deal more influential in the circles of power and normality than is truth. It is for this reason that, in real history, truth usually seems stranger than fiction. And yet, Varoufakis also notices that the texture of history is such that truth always has the last say, no matter how hard the powers of illusion and convenience seek to keep the dream alive by helping us to stay asleep.
Varoufakis’ insight into the relationship between what normal mainstream people and the great and powerful want (even need) to believe, and what is actually going on, is a key feature of the significance of this book. He weaves his intricate and tense narrative fabric out of illusion and reality – the texture of real history – by constantly shifting our gaze between three interconnected focal lengths.
With the first, Varoufakis enables us to see how the world looks through the myopia of the common man’s desire to doggedly hope that our leaders know what they are doing while we just get on with our lives. This myopia is savagely reinforced by the news media and integrated with the myopia of European high power.
And that high power cannot see past the end of its own nose, defined as it is by the bureaucratic echo-chamber of self-perpetuating institutional power (read Max Weber and Michel Crozier) and the autism of self-serving financial power.
This short-sighted focal length insight is then overlaid with a 20 20 focal length perspective provided by Varoufakis’ forensic knowledge of how Eurozone power actually functions. Here we get a nauseating sense of how badly awry things are when very basic macro-economic realities are simple banished from the ‘negotiating’ table laid out by the powers that be.
This perspective is in turn overlaid with a telescopic focus, the far-sighted and sweeping historical panorama which shows us why the Eurozone is what it is. This enables us to see – in the one account – the disjunction between ‘normal’ financial and public affairs orthodoxies, the ‘realism’ mandated by prevailing power interests, and what is actually happening to Europeans.
One passage that encapsulates Varoufakis’ sensitivity to the relationships between power, illusion and reality is his description of Mario Draghi’s creatively adjusted application of Quantitative Easing to the Eurozone, bar Greece, in 2015. (See pages 186–192.) Draghi’s manoeuvres are here situated as part of a larger power struggle between the European Central Bank (ECB) and the Bundesbank.
Firstly Varoufakis explains what Quantitative Easing (QE) is. When things are going seriously financially wrong and no one will borrow money, even when interest rates hit zero, then the troubled nation’s central bank can buy debts from commercial banks in order to prevent interest rates from going negative and producing the total implosion of the banking sector. Japan did this in the 1990s and the US did it in the aftermath of 2008. When performing QE, the central bank deposits money into accounts for the floundering commercial banks in exchange for their debts. The central bank ‘finds’ the money for this act by simply making it up. These accounts “are just digital numbers that the central bank conjures up and adds to the commercial bank’s account, held at the central bank.” (p187) The purpose of QE is to provide troubled commercial banks with the courage to lend money to real investors so that the real economy can be stimulated by investor spending and by the wage earner spending that results from investor fuelled employment. This is what will return the economy to health and get the banks out of trouble (in theory).
However, the ECB is governed by the Maastricht Treaty and does not have the same overt powers as central banks like the Fed in the US. The ECB must be a central bank within a stunning set of limitations. So Mr Draghi as President of the ECB has to be very clever in the manner in which he performs central bank manoeuvres that might genuinely benefit the entire Eurozone. This challenge is devilishly hard in the first place, but on top of that the politics between the ECB and the Bundersbank is astonishingly thick with reprisals and power plays. So it can be no surprise that Eurozone QE has gone horribly wrong. With breathtaking precision, Varoufakis explains:
“QE works but, even under the best possible circumstances, it works neither well nor in the manner it is intended to. The reason is that, for QE’s virtuous wheel to start spinning, a multiple coincidence of impossible beliefs must occur.” (p187)
What ends up happening – as in the US – is that QE-supported nervous private banks do not lend money to real investors, but to nervous big companies who buy back their own shares in the stock market in order to increase their share price. So money conjured out of nothing is used to inflate non-productive financialized share price bubbles. This, unsurprisingly, has no real positive impact on the economy or on the banks. So the Eurozone QE attempt did not work to improve real investment and it ended up (accidentally) savagely devaluing German pension funds. (To find out how, see page 190.) All this happened at the same time the Syriza – as a Euro-power side show – was being crushed by the troika for the heresy of disbelieving that economy-killing austerity was good for it.
This is just one small snap shot of Varoufakis’ masterful account of Eurozone power games. Fascinatingly illuminating pictures like this run through the entire book. But it is Varoufakis’ ability to situate historical particularities within a larger context of meaning, and to be sensitive to the way in which illusion, belief and reality interact in real economies, real politics and (un)real high finance games, as well as seeing what impact these games have on real people, that makes this book so good.
A call to action
But this book is not just illuminating. It is a call to moral awakening and to intelligent, determined and humane political action. The title comes from one of the founding classics of western political writing: Thucydides’ History of the Peloponnesian War. In this history Thucydides recounts an unprovoked display of imperial dominance by the powerful Athenian navy over the people of the Island of Melos in 416 BC. The Melians had carefully kept themselves neutral in relation to the war between Athens and Sparta, but that was not good enough for the Athenians. So the Athenians decided to align Melos with Athens by force. The terms offered were allegiance, with a devastating tribute, or be destroyed. The Melians protested that such a demand was unjust and in violation of a proper fear of the gods. If Athens did this evil and brutally self-interested thing it would surely come back on them in the end. The Athenian delegation responded to Melos thus:
“Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must.” (Book 5, line 89.)
Strangely Thucydides is oft ‘credited’ with putting forward a “political realist” account of power in his History, but it is not what his History shows us. Thucydides – himself an Athenian – clearly thinks that the Athenian empire was too cruel and too instrumental in their use of weaker vassal states under their sphere of influence, and that such cruelty undermined their power (he died before the final defeat of Athens at the end of the Peloponnesian war). I would argue that he thinks it an objective feature of history that matters of justice and respect for the rights of the weak cannot be simply over-ridden because it is within the reach of the powerful to so do.
This notion that justice is not a matter of what the powerful can extract by force, that there are moral realities built into human history that cannot be overridden by violence is deeply ingrained in classical Greek thinking. Simone Weil’s astonishing essay “The Iliad or poem of force” brings this out keenly. Plato too, entirely rejects the “realist” arguments of Thrasymachus in book one of The Republic. Shakespeare’s historical plays also work around the theme that power tries to avoid moral accountability, so that whilst the strong often do as they will and the weak often suffer what they must, nevertheless unjust power is inherently self-destructive.
Keen observers of the human condition such as Thucydides, Plato and Shakespeare give us potent reason to think that what we call “political realism” has no durability in holding human society together – let alone in nurturing human flourishing – because it is, in the end, unrealistic.
There is an unavoidable moral grain to all human actions which is pragmatically ignored to the great peril of the powerful. So it is not simply immoral for the powerful to do what they will at the expense of the weak, it is also irrational, for history and simple clear reasoning shows us that things only work well for the powerful if they are grounded in the justice that facilitates the flourishing of the weak.
This also is Yanis Varoufakis’ guiding moral conviction in his analysis of the politics and economics of contemporary Europe. Varoufakis struggles with his Europe and it is a passionate struggle, characterised by a courageous existentially ventured optimism. So called ‘realists’ often dismiss Varoufakis as idealistic and unrealistic, but Varoufakis can see disaster looming with very, very clear eyes. His astonishing hope is premised on the belief that if he can help enough ordinary citizens of the world to see that looming disaster too, then collective action from the grass roots up can be taken to divert us from catastrophic destruction. In that sense he is on a mission to ‘call us out’ to join the public assembly and take the future of our polis out of the hands of our misguided leaders and into our own.
Varoufakis wants us to make power and finance accountable to real people and real communities lest we find ourselves in a terrifying postmodern 1930s. He sounds a very important call. We should respond to this call and make the liberal democratic idea that we say we believe in work. If we do not make power accountable to the people ruled, if we do not make power serve the good of the majority of ordinary people, then it is our failure when our leaders carry us over the cliff face of destruction.
The situation is urgent. We do not have much time before the hubris and unreality of contemporary financialization and geopolitical self-interest destroys the world as we know it. And the Weak Suffer what they Must? has laid it all out before us in relation to the future of Europe, and of the globe. But the key element in Varoufakis’s title is the question mark. Will we believe that brute power with its self-destructive and system destroying characteristics is simple how things are, or do we believe it is against our humanity and against our intelligence to let the powerful do as they will?