Yanis Varoufakis is a self-styled ‘erratic Marxist’ and a former finance minister of Greece under the Syriza-led government. He penned his illuminating book The Global Minotaur (TGM) some years ago, in the aftermath of the evolving Global Financial Crisis.
He has become a prolific writer for the intelligent layman, and his website is well worth a look, particularly for those interested in progressive reform in the European Union and the Eurozone.
TGM is Varoufakis’ thesis on the roots of the crisis, which according to him lie back in the 1940s, towards the end of World War II. At that time, the US had emerged as the global capitalist hegemon, economically, politically and militarily.
The 1944 Bretton Woods Conference in New Hampshire was attended by such figures as the economist John Maynard Keynes, who led the British delegation, and Harry Dexter White, his US counterpart. The aim was to construct a post-war global economic and financial order which would avoid another Great Depression, as had occurred in the 1930s, and the achievement of peace and prosperity via international cooperation. Continue reading →
“Self-restraint, as the philosophers know, is a rare and bewildering virtue. It is also a virtue that tends to come unstuck the more powerful we become. In this it resembles the relationship between trust and success: the stronger the bonds of trust between us, the greater our collective and individual success. But success breeds greed, and greed is a solvent of trust. Similarly with self-restraint: having it can help one succeed. But then success poses a threat to one’s self-restraint.”
Yanis Varoufakis (2015), The Global Minotaur – America, Europe and the Future of the Global Economy (p.249)
This thought-provoking quote is taken from the postscript of Varoufakis‘s enlightening book on the roots and evolution of the Global Financial Crisis, originally published in 2011.
The author describes how post-war US hegemony produced a ‘Global Plan’ which helped to underpin a successful capitalism for twenty years; its ‘finest hour’, according to Varoufakis, and what has often been called the Golden Age. This gave way to his ‘Global Minotaur’ in the 1970s, which ultimately led us to the crisis of 2008 and its collapse.
The key that links these systemic ideas, and the possibility of a successful global capitalist future is what he calls the ‘global surplus recycling mechanism’ (GSRM). The evolution of the GSRM is the unifying theme which unites the book, which I will discuss in a future post.
Some of The Global Minotaur‘s ideas overlap with those of Michael Pettis, particularly in the latter’s book The Great Rebalancing. In fact the two are largely complementary, as Pettis describes the domestic policies in countries such as China and Germany, which helped to create the financial imbalances that caused the crisis.
A short video featuring the ever-engaging Yanis Varoufakis, self-styled ‘erratic Marxist’ and former finance minister of Greece. Here he explains the process of debt deflation which, during the eurozone crisis, has hit Greece hard. In particular he outlines the difference between devaluing the national currency and reducing wages, and the effect these have on the debt burden and the prospects for economic recovery.
An interview with Professor Michael Hudson on the Real News Network, where he focuses on US house prices, the ongoing problem of private sector debt (particularly student debt) and the lacklustre performance of the economy.
Keen’s central thesis is that mainstream economics failed because it ignores the role of private debt creation by the financial system, known in the jargon as ‘endogenous money’. This grew unsustainably in many countries in the decades prior to the crisis and drove a boom in the real economy and, even moreso, in asset prices (stock markets and housing). Credit expansion in economies such as the US and UK started growing consistently more rapidly than GDP in the 1980s, following the deregulation of the financial sector. Although it was subject to cycles, the trend in private debt as a share of GDP was upward. When its growth slowed or even went into reverse, the result was a severe recession and the aftermath is still with us both economically and politically. Continue reading →
An eleven-minute interview with post-Keynesian economist Steve Keen, which begins one minute into the video. He discusses the huge accumulation of private debt in the US and how it is to blame for the Great Recession and the aftermath of sluggish growth. This story has been repeated in many countries across the world. In my view this is only part of the story, but it is an essential part. He usefully counters the hysteria over public debt and the ignorance over levels of private debt with some lessons from history.
Recently, the economics editor of the Guardian newspaper in the UK, Larry Elliott, presented us with a comparison of the Great Depression of the 1930s and now. In effect, Elliott argued that the world economy was now in a similar depression as then. The 1930s depression started with a stock market crash in 1929, followed […]