After putting it off for a while, I finally got round to reading The Global Minotaur by Yanis Varoufakis (Γιάνης Βαρουφάκης), the Greek finance minister.
If you’re not put off by a healthy dose of Latino-Greek loan words and grammatical constructions that sound rather academic and/or foreign, it’s a wonderful book. Here’s a typical sentence: “Our current aporia is a variant of the puzzlement engendered by the simultaneous progression of commodification, financialization, and the crises these processes inevitably occasion.”
The book isn’t really about Greece, or even Europe. It’s about the global financial system that was created by the United States after World War II, how it developed over time, and how it got fatally wounded in the financial crash.
His discussion of the 1929 crash and its aftermath is good, but things get interesting when he starts discussing Bretton Woods. For instance, the following was new to me:
During the debate on what that new syustem should look like, John Maynard Keynes made the most audacious proposal that has ever reached the bargaining table of a major international conference: to create an International Currency Union (ICU), a single currency (which he even named — the bancor) for the whole capitalist world, with its own international central bank and matching institutions. Keynes’ proposal was not as impudent as it seemed. In fact, it has withstood the test of time quite well. In a recent BBC interview, Dominique Strauss-Kahn, the IMF’s then managing director, called for a return to Keynes’ original idea as the only solution to the troubles of the post-2008 world economy.
Of course, this never happened. Instead, the US came up with what Varoufakis calls the Global Plan, “according to which the dollar would effectively become the world currency and the United States would export goods and capital to Europe and Japan in return for direct investment and political patronage”.
The book then discusses why the US chose to make Germany and Japan the regional pillars of this system, rather than some of the WWII victors (and as an aside, how this damaged the UK’s economy hugely).
What Varoufakis calls the Global Minotaur is the system that arose when the Global Plan collapsed after 1970, and the world economy instead started to depend on US deficits: “America began importing as if there were no tomorrow, and its government splurged out, unimpeded by the fear of increasing deficits. So long as foreign investors sent billions of dollars every day to Wall Street, quite voluntarily and for reasons completely related to their bottom line, the United States’ twin deficits were financed and the world kept revolving haphazardly on its axis.”
The book then describes how the financial crash fatally wounded the Minotaur, and how nothing has stepped in to replace it.
A lot of the book is concerned with surplus recycling mechanisms, and the point here is that there needs to be some mechanisms that allow surplus capital to be put to good use elsewhere in the world, so if the US can’t or won’t do this any more, the world economy won’t fully recover until some other way has been found to achieve this.
This is of course also the problem in the Eurozone: Germany and other Northern European countries are generating surpluses but tend to hoard the cash. Ideally they should either invest the cash elsewhere (in Greece, Portugal and so on), just like the US did as part of the Global Plan, or they should start to run massive deficits and in this way create a market for Greek and Portuguese products, like the US did during the reign of the Global Minotaur.
Finally, the book discusses how the bankrupt banks managed to dictate solutions to governments, in the process creating what Varoufakis calls a bankruptocracy or a ptocho-trapezocracy. (Although the book doesn’t discuss it, it’s interesting to compare this with what Iceland did instead.)
I must say the book was quite depressing to read. Varoufakis sees things a bit too clearly for comfort (this is what he calls an aporia), and to realise you’re living in a ptocho-trapezocracy is not a cheery thought.
However, if you can face it, I thoroughly recommend this book.