Yanis Varoufakis's Blog, page 17

Interviewed by PoliticsJOE on my TECHNOFEUDALISM

Yanis Varoufakis is an economist, politician and author of Technofeudalism: What Killed Capitalism. He swung by JOE Towers to chat to us about his new book, the regression of neoliberal capitalism to a feudal system ran by a few tech billionaires, and the future of global capital. Subscribe to our new podcast now, or you’re a silly goose: https://linktr.ee/pubcast

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Channel 4’s Krishnan Guru-Murthy interviews me on my TECHNOFEUDALISM

In his latest book, the Greek politician – who in 2015, at the height of the Greek debt crisis, was catapulted from academic obscurity to Minister of Finance – argues that insane sums of money that were supposed to re-float our economies in the wake of the financial crisis and the 2020 pandemic have ended up supercharging big tech’s hold over every aspect of the economy. And capitalism’s twin pillars – markets and profit – have been replaced with big tech’s platforms and rents; while we, the “cloud serfs”, increase these companies’ power with every online click and scroll. Today on Ways to Change the World, Yanis Varoufakis tells Krishnan Guru-Murthy how the world is grappling with an entirely new economic system and therefore political power, and why Britain and the EU are “irrelevant” compared with the “fiefdoms” of US and Chinese tech firms.

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Στο ΚΟΝΤΡΑ-NEWS με τον Πάνο Χαρίτο – video

Ο Γραμματέας του ΜέΡΑ25 Γιάνης Βαρουφάκης στο κεντρικό δελτίο ειδήσεων του Kontra Channel με τον Πάνο Χαρίτο μίλησε για την οικουμενική σημασία της υπόθεσης Ασάνζ για την ελευθερία έκφρασης και την ελευθερία του Τύπου, τη δράση του ΜέΡΑ25 στο δρόμο προς το Συνέδριό του το Δεκέμβριο, για το www.aristera.eu και την ανάγκη διαλόγου της Αριστεράς.

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UNHERD interviews me on TECHNOFEUDALISM

In his new book,  Technofeudalism: What Killed Capitalism , Yanis Varoufakis, the Leftist economist and former finance minister of Greece, suggests that the capitalist age has already come to an end. He argues that a new global economic and political system has stealthily replaced the old order, with the emerging dominance of tech monopolies like Amazon and Google. He spoke to UnHerd’s Freddie Sayers this week about the return of feudalism, the problem with globalism, and the ongoing European migrant crisis.

For the UNHERD site, click here.

You can watch the full interview above.

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Long interview with Carole Cadwalladr, for the Observer/Guardian, on my Technofeudalism

What could be moredelightful than a trip to Greece to meet Yanis Varoufakis, the charismatic leftwing firebrand who tried to stick it to the man, AKA the IMF, EU and entire global financial order? The mental imagery I have before the visit is roughly two parts Zorba the Gr

eek to one part an episode of BBC series Holiday

from the Jill Dando era: blue skies, blue sea, maybe some plate breaking in a jolly taverna. What I’m not expecting is a wall of flames rippling across a hillside next to the highway from the airport and a plume of black smoke billowing across the carriageway.

Because even a modernist villa on a hillside on the island of Aegina – a fast ferry ride from the port of Piraeus and the summer bolthole of chic Athenians – is not the sanctuary from the modern world that it might once have been. The house is where Varoufakis and his wife, landscape artist Danae Stratou, live, year round since the pandemic, but in August 2023 at the end of a summer of heatwaves and extreme weather conditions across the world, it feels more than a little apocalyptic. The sun is a dim orange orb struggling to shine through a haze of smoke while a shower of fine ash falls invisibly from the sky. A month later, two years’ worth of rain will fall in a single day in northern Greece, causing a biblical deluge and never-before-seen levels of flooding.That the end of the world feels just a little bit nearer here than it does in some places may not be coincidental to Varoufakis’s having written a new book called Technofeudalism: What Killed Capitalism. Nor that the book comes to the conclusion that capitalism has been replaced with something even worse. Not the glorious socialist revolution that his hero Marx foresaw. Nor some new mutation of capitalism such as the one detailed by Shoshana Zuboff in her surprise 2019 bestseller,  The Age of Surveillance Capitalism . We’re now in servitude, Varoufakis argues, to the fiefdoms of our new global masters, Lord Zuckerberg of Facelandia and Sir Musk of the rotten borough of X.When I arrive by taxi at the bottom of the dirt track up to his house, Varoufakis is there to meet me, folded inside a zippy red Mini. “I’m usually on my motorbike,” he says, and describes his “pristine commute” at speed via land and sea that gets him to the Greek parliament in just over an hour. It should also be mentioned that the motorbike and leather jacket didn’t hurt his image as a lefty bad boy, taking on the grey men of global capitalism. To put Varoufakis into context, he was the Greek equivalent of John McDonnell (a close friend) if Jeremy Corbyn (another close friend) had actually been voted into power and if John McDonnell had, in this scenario, been played by George Clooney.[image error]

With Aléxis Tsípras, the former prime minister of Greece in February 2015. Photograph: Anadolu Agency/Getty Images

 

Because in 2015, at the height of the Greek debt crisis, Varoufakis was catapulted from academic obscurity to minister of finance. He said – loudly and repeatedly – that the punitive terms the banks wanted to impose on Greece would lead to catastrophic austerity. A majority of Greeks voted to back him, and for a short time his strategy of simply refusing to agree to the IMF and EU’s terms led to a tense standoff. Right until the moment prime minister Aléxis Tsípras, the man who appointed him, accepted them. Either the only possible action to prevent the country going bankrupt, or a treacherous betrayal, depending on who you choose to believe.

Jeff Bezos doesn’t produce capital, he argues. He charges rent. Which isn’t capitalism, it’s feudalism

The Financial Times labelled Varoufakis “the most irritating man in the room” during the negotiations, so it’s not exactly a surprise to learn that Technofeudalism is a polemic, a controversialist’s take. And although in 2023 there’s nothing particularly novel or special about hating on tech – hating on Elon Musk is the only rational response to the situation in which we’ve found ourselves – nevertheless, Technofeudalism feels like an important new book.It’s a big-picture hypothesis rooted in a historical account of how capitalism came into being that describes what is happening in terms of an epochal, once-in-a-millennium shift. In some ways, it’s a relief to have a politician – any politician – talking about this stuff. Because in Varoufakis’s telling, this isn’t just new technology. This is the world grappling with an entirely new economic system and therefore political power.“Imagine the following scene straight out of the science fiction storybook,” he writes. “You are beamed into a town full of people going about their business, trading in gadgets, clothes, shoes, books, songs, games and movies. At first everything looks normal. Until you begin to notice something odd. It turns out all the shops, indeed every building, belongs to a chap called Jeff. What’s more, everyone walks down different streets, and sees different stores because everything is intermediated by his algorithm… an algorithm that dances to Jeff’s tune.”It might look like a market, but Varoufakis says it’s anything but. Jeff (Bezos, the owner of Amazon) doesn’t produce capital, he argues. He charges rent. Which isn’t capitalism, it’s feudalism. And us? We’re the serfs. “Cloud serfs”, so lacking in class consciousness that we don’t even realise that the tweeting and posting that we’re doing is actually building value in these companies.We’re in his airy open-plan living room where his wife intermittently appears offering water, coffee and snacks and shooing away a large, enthusiastically affectionate labrador. “He’s totally in love with Yanis,” she says. Stratou and Varoufakis are a striking couple, as glamorous as their house, a cool, luminous space featuring poured concrete and big glass windows overlooking a perfect rectangle of blue pool.“I have no issues with luxury,” he says at one point, which is just as well because the entire scene would give the Daily Mail a conniption, especially since Aegina seems to be Greece’s equivalent of Martha’s Vineyard, home to a highly networked artistic and political elite. Tsípras, the former prime minister and Varoufakis’s nemesis, used to live next door. “He was on the next hill. There’s a symbolically important ravine between us,” he says.[image error]

Varoufakis and his wife, Danae Stratou, at a concert in Athens, 2015. Photograph: Angelos Tzortzinis/AFP/Getty Images

 

And although Stratou is an accomplished artist, she’s also cursed with some niche internet fame. At the height of Varoufakis’s notoriety, a newspaper report claimed that she was the inspiration behind Pulp’s hit song Common People. “She came from Greece she had a thirst for knowledge,” runs the first line; “She studied sculpture at St Martin’s College,” is the second. As Stratou did, at the same time as Jarvis Cocker was there, though she gives me a “No comment!” when I inevitably bring it up. “It’s the first thing you see when you Google my name,” she says, with irritation, and “who knows where artists find their inspiration?” though Varoufakis seems to be enjoying my line of questioning just a little too much.Technofeudalism takes the form of a letter addressed to Varoufakis’s recently deceased father, Georgios. A Greek-Egyptian communist, he emigrated to Greece in the 1940s, in the middle of the country’s civil war, and was sentenced to five years’ “political re-education” for refusing to denounce his communism. He rose to become chairman of Greece’s biggest steel company. What Varoufakis valued most about him, he says in the book, was his father’s ability to see the “dual nature” of things.Technofeudalism is also partly a sequel to his previous book,  Talking to My Daughter About the Economy , addressed to his then 11-year-old daughter Xenia, in which he tried to answer the question of why there’s so much inequality. Though even as he was writing it, he says, he felt end-of-an-era qualms about the future prospects of capitalism.“Even before it was published in 2017, I was feeling uneasy,” he says in the first chapter of Technofeudalism. “Between finishing the manuscript and holding the published book in my hands, it felt as if it were the 1840s and I was about to publish a book on feudalism; or, even worse, like waiting for a book on Soviet central planning to see the light of day in late 1989.” Was the entire concept of capitalism already out of date, he wondered?On the living room bookshelf, I spot a copy of  Zucked  by businessman Roger McNamee, one of the first investors in Facebook, who was responsible for introducing Mark Zuckerberg to Sheryl Sandberg. “That’s a great book,” says Varoufakis. I tell him that McNamee broadly agrees with his new ideas. I’d messaged a bunch of people to ask them what they would ask Varoufakis, including McNamee, and precised the book to him – that two pivotal events have transformed the global economy: 1) the privatisation of the internet by America and China’s big tech companies; and 2) western governments’ and central banks’ responses to the 2008 great financial crisis, when they unleashed a tidal wave of cash.I read him McNamee’s reply: “I buy the basic thesis. The US kept interest rates at near zero from 2009 to 2022. This encouraged business models that promised world-changing outcomes, even if they were completely unrealistic and/or hostile to the public interest (eg the gig economy, self-driving cars, crypto, metaverse, AI). This came at a time of no regulation of tech and an accepted culture in business that said executives should maximise shareholder value at expense of everything else (eg democracy, public health, public safety)… had rates been at 5% the past 14 years, I doubt very much that the gig economy, self-driving cars, crypto, metaverse or AI would have gotten even 10% as much funding.”It’s pretty remarkable, I point out, that a Marxist and a venture capitalist have reached the same economic conclusions. But then there are more and more people – outside politics – trying to understand these new power structures. Shoshana Zuboff tells me that she “explicitly rejects labels like technofeudalism because technology is not the independent variable nor are we feudal serfs”. But she also says that the argument has some similarities to one of her latest papers: “In big tech we face a totalising power that in key respects disqualifies itself from being understood as capitalism, but rather as a wholly new form of governance by the few over the many.”

I ask him what his advice would be to Keir Starmer, he says: ‘He should try being honest. He should say: “You know what? Brexit was a disaster”’

When I message Mariana Mazzucato, another charismatic and influential economist, but one who, unlike Varoufakis, has been embraced by governments and financial institutions, her response suggests that some of Varoufakis’s ideas are not that new. She herself published on an adjacent concept, “algorithmic rents” (the idea that tech companies capture attention and resell it rather than creating long-term value) in 2018.But perhaps traditional distinctions between left and right don’t make sense any more. The right, Varoufakis says, “thinks of capitalism as like a natural system, a bit like the atmosphere”. Whereas the left “think of themselves as people created by the universe in order to bring socialism over capitalism. I am telling you: you know what, you missed it. You missed it. Somebody killed capitalism. We have something worse.”The early internet, he says, has given way to a privatised digital landscape in which gatekeepers “charge rent… The people we think of as capitalists are just a vassal class now. If you’re producing stuff now, you’re done. You’re finished. You cannot become the ruler of the world any more.”I wonder aloud if Varoufakis’s big-picture approach stems from the fact that authoritarianism – and the radical politics it produced in his own family – is still near-history in Greece. When he was six, the secret police raided his house and arrested his father. Do you remember it, I ask. “My God, yes, you don’t forget a thing like that. For two weeks, we didn’t know where he was.” And when Varoufakis started becoming interested in politics – this was when a military junta still ruled Greece – and he was picked up by the police as a teenager, his parents were adamant: he was going to Britain.As well as being a passionate European and an internationalist, he’s also an anglophile who writes in English and studied at Essex University, where he joined the Communist party of Great Britain. He is credited with persuading Jeremy Corbyn to back remain in the referendum and campaigned around the country for it. And when I ask him what his advice would be to Keir Starmer, he says: “He should try to do something he’s incapable of: being honest. He should say: ‘You know what? Brexit was a disaster. I want to bring back the UK into the EU. I’m not saying that I’m going to do it any time soon. But I’m going to work toward it. In the meantime, I will make Brexit work by doing A B C and D.’” (Coincidentally, Starmer said last week that he will seek to remake the deal with the EU for closer trade ties.)“He’s now adopting austerity. There’s no plan for the NHS to reverse the privatisation from within. You know, this is the one thing I miss about Thatcher. She was a conviction politician, right?”I say that the closest political analogues to Varoufakis in the UK might be Boris Johnson and Nigel Farage. “What?” he says.“You’re all anti-politicians,” I say.

His views on the conflict in Ukraine are practically indistinguishable from Nigel Farage’s

“The fact you have a point is a source of sorrow,” he says. “Because I’m anti-establishment. But it’s true, you have these people taking over the anti-establishment mantle in a way that is functional to the interests of the establishment. I see no difference between Orbán, the Polish government, Trump, Farage, Johnson, Mussolini.”It formed part of his pitch to the EU at the height of the Greek debt crisis. “I told Wolfgang Schäuble [the former German finance minister]: ‘We’re both democrats. We believe in the Enlightenment.’ I said: ‘Give us austerity and we’ll turn to fascism.’ And I very much fear that is turning out to be the case.” The big winners in this year’s Greek elections were “The Spartans, they are the mutation of Golden Dawn [a banned Greek neo-Nazi party]. The Greek Solution. You only have to hear the names, right? And Niki, or Victory.”It’s a particularly sore point. Because these parties’ gains came at the expense of Varoufakis. After his stint as finance minister, he’d set up his own party, which won nine seats in the 2019 election. This year, it lost them all. “We don’t really know what happened. We were polling at 21% among young people.” The spring has gone out of his step, he admits. He’s been holed up in Aegina since, pondering his next move. Still, even with the ash raining from the skies, it’s not a bad place to be.This is a bracing conversation, which includes half an hour on Russia and Ukraine during which I politely disagree with everything he says. His views on the conflict are practically indistinguishable from Nigel Farage’s, rehearsing the same far right-meets-far left “horseshoe” rhetoric about doing a deal with Putin, and Crimea not really being Ukraine. But on the subject of technofeudalism, I could listen to him all day.Xenia, his daughter, wanders in. “Are you guys still going? I’ve had three naps since you got here.” A student in Australia, she’s been taking her classes online from Aegina and has been up half the night. The breakdown of his relationship with his first wife, Australian academic Margarite Poulos, and her decision to return to Australia with Xenia was, Varoufakis has written, one of the darkest periods of his life. Meeting Stratou is what saved him from “near oblivion”.In Technofeudalism, Varoufakis retells the story of the minotaur. It’s a myth that he returns to often. In his prescription, the minotaur is the global financial system. In the myth, the beast is eventually slain by an Athenian prince. This prince of Athens didn’t manage to bring down capitalism. But as he and Stratou walk me down to the taxi under an unnatural orange sunset, it strikes me that the beast may yet turn out to have mortally wounded itself, all on its own.Technofeudalism: What Killed Capitalism by Yanis Varoufakis is published by Bodley Head (£22). To support the Guardian and Observer order your copy at guardianbookshop.com. Delivery charges may apply

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The MONTHLY reviews my TECHNOFEUDALISM

The economist and author’s latest book considers how 21st-century capitalism resembles feudalism, and offers an alternativeYanis Varoufakis – former Greek minister of finance, economics lecturer and prolific writer of books – has often admitted that the left is good at critiquing capitalism but not so good at suggesting alternatives.“When Margaret Thatcher coined ‘Tina’ – her 1980s dictum that ‘There is no alternative’ – I was incensed because, deep down, I felt she had a point: the left had neither a credible nor a desirable alternative to capitalism,” he wrote in his last book, Another Now: Dispatches from an Alternative Present (2020). Her acolytes didn’t last so long. “Just as when the Soviet Union collapsed in 1991,” he continued, “we on the left – social democrats, Keynesians and Marxists alike – had the sense we would live the rest of our days as history’s losers, so in 2008, with Lehman’s collapse, those living the ideology of neoliberalism saw history erupt with similar soul-destroying force.”That ideology still dominates the Western – certainly the Anglophone – world, but capitalism has morphed once again, by necessity as much as by inevitable evolution. “Metamorphosis is to capitalism what camouflage is to a chameleon: essence and defence mechanism combined,” Varoufakis writes in his new book, Technofeudalism: What Killed Capitalism, out this week. “Assuming, wrongly, that capitalism’s only serious threat was the rise of organised Iabour, I missed completely the epic transformation of our times: how the privatisation of the internet commons, aided by the 2008 crisis that led central banks to open the floodgates of state money, would beget a new, super-powerful type of capital.”That flood of government-printed money created by the G7 to keep central banks afloat, the only apparent way to keep the international economy alive, spawned a new incarnation of capitalism. It was not the end result, but the segue to a system that would not only change the economics but the very organisation – political and social – of society.“That central banks’ balance sheets, not profits, power the economic system explains what happened on August 12, 2020,” he wrote, by way of example in a 2021 Project Syndicate article, which presaged the content of his new book. That was when the world of money found out that the national income of the UK had plummeted by 20 per cent. “Upon hearing the grim news, financiers thought: ‘Great! The Bank of England, panicking, will print even more pounds and channel them to us. Time to buy shares!’ All over the West, central banks print money that financiers lend to corporations, which then use it to buy back their shares (whose prices have decoupled from profits).”This was true, but something else was happening as well. Digital platforms had been quietly replacing markets as the locus of private wealth extraction. It was a radical turn when the rising crop of tech idealists – Larry Page, Sergey Brin, Bill Gates, Mark Zuckerberg, Jack Dorsey, Elon Musk, et al – became disappointed by surveillance and other tech developments in state control and began to run with their own form of commercial success. Their ideal of a new commons quickly turned into a global mass market. And they materialised quite suddenly at the top of lists of capitalists with eye-watering wealth. They are the harbingers of Varoufakis’s prediction of capitalism’s demise.In Technofeudalism, he hangs onto the blueprint he had previously outlined for an alternative to 21st-century capitalism. He called it “corpo-syndicalism”: a kind of development of the German concept of Mitbestimmung (co-determination between management and workers), plus elements such as an ethical world financial system that transfers wealth to the global south, and more. He then runs through a clear precis in the final appendices. He steps us through the history of capitalism, going all the way back to Greek mythology, using a lively (if posthumous) conversation with his father, who had endured prison as a dissident against Greek totalitarianism. His account of feudalism, before the rise of industrialisation, gives him the metaphor he will circle back to.What makes the book a gripping read, however, is the main game: his meticulously pieced-together analysis of the latest incarnation of capitalism, which he calls “cloud capitalism”. Value extraction has shifted away from markets and onto digital platforms such as Facebook and Amazon, he points out, which no longer operate like oligopolistic firms concentrating and monopolising investment in production. Rather, they operate more like the private estates or fiefdoms presided over by the old feudal lords who collected their wealth by aggregating the percentages they took from the production of the serfs who were bonded to them.“For the first time in history, almost everyone produces for free the capital stock of large corporations,” Varoufakis writes. “That is what it means to upload stuff on Facebook or move around while linked to Google Maps.” He calls technofeudalism the greatest threat yet to social democracy.Cloud capital – the massive amount of value that is shuttling around the internet in tiny, fragmented percentages – would spawn a new ruling class. And that ruling class, he explains, would prove revolutionary, “leveraging its cloud capital to make almost the whole of humanity work for them, either for free or for a pittance – including many capitalists. And, crucially, what a backward step all that would prove in the grander scheme of emancipating humanity and the planet from exploitation.”Meanwhile, companies that Varoufakis calls the Big Three – BlackRock, Vanguard and State Street – would come to own a staggering number of the massive American companies that produce the goods and services still required for humans to live. That includes major airlines, car manufacturers, arms manufacturers, much of Wall Steet and more. Those three titans are, between them, the single largest shareholders in almost 90 per cent of the US Stock Exchange, including ExxonMobil, Coca-Cola and tech companies such as Apple and Microsoft, managing shares for passive investors who prefer to delegate handling the precariousness of the business. BlackRock’s investments come to nearly US$10 trillion, Vanguard’s US$8 trillion and State Street’s US$4 trillion. Varoufakis points out that, with the total between them US$22 trillion, the dollar value “has too many zeros to mean much”.Feudalism has been rising as a metaphor for the economic shift in Western society for less than a decade. It is rapidly becoming more than a figure of speech. The most sobering theory so far was outlined by Harvard professor Shoshana Zuboff in her 2019 book The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power. If global warming is an existential threat to the planet, she argued, the exponential growth of unregulated surveillance, via the sophistication of the global internet, is a threat to our political, social and psychological wellbeing – in other words, to the existence of human society as we know it.“What is unbearable,” Zuboff stresses in her book, “is that economic and social inequalities have reverted to the pre-industrial ‘feudal’ pattern but that we, the people, have not. We are not illiterate peasants, serfs, or slaves. Whether ‘middle class’ or ‘marginalised’ … we know ourselves to be worthy of dignity and the opportunity to live an effective life. This is existential toothpaste that, once liberated, cannot be squeezed back into the tube.”The future is becoming increasingly difficult to imagine without entering the realm of science fiction.MIRIAM COSICMiriam Cosic is a Sydney-based journalist and author.

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Christine Lagarde’s Gifts to Populists – Project Syndicate

Since taking over as president of the European Central Bank in late 2019, Christine Lagarde has committed three major errors that play right into the hands of right-wing populists. Now, one can only hope that these parties’ own incompetence will sink them before next year’s European Parliament elections.ATHENS – Christine Lagarde’s three blunders as president of the European Central Bank did not cause the revival of right-wing populism across Europe; but they have reinforced it mightily.The first gaffe cost Italy billions, and the ECB many of the reputational gains that Mario Draghi, Lagarde’s predecessor, previously worked so hard to secure. Recall March 2020: The world was gripped by pandemic-induced anxiety and markets were panicking, especially about the solvency of Italy, a country with gigantic debts and no central bank of its own to print money the way the US Federal Reserve, the Bank of Japan, and even the Bank of England could do.When asked at a scheduled press conference if the ECB would stand by Italy’s debt to contain interest-rate spreads (the difference in borrowing costs between member-state governments) within the eurozone, Lagarde did not reassure markets and the public by repeating Draghi’s famous promise to do “whatever it takes.” Instead, she did the opposite, declaring: “We are not here to close spreads.” Within seconds, Italy’s debt-servicing costs skyrocketed. While Italy’s government was apoplectic at this, populist opposition leader Giorgia Meloni, who has since become prime minister, was undoubtedly delighted.The second blunder was less visible but has had deeper, longer-lasting effects. Ever since the crash of 2008, the ECB has been pushing a wall of money toward Europe’s permanently fragile banks in the hope that they would lend it on to businesses and thereby revive Europe’s flagging economy. After 2014, when official interest rates were negative, the ECB was essentially paying bankers to accept hundreds of billions of euros in their ECB accounts. But instead of lending that money to businesses, the bankers simply kept it in their ECB accounts and continued collecting the bribes the ECB was paying them in the form of negative interest rates.Now that inflation has returned with a vengeance, the same bankers have kept billions parked in their ECB accounts to collect on the higher interest rates, while continuing to pay their depositors minuscule interest. Yet instead of using the ECB’s powers to put the fear of the divine into these bankers, Lagarde has let them run rings around the institution at the expense of small businesses and depositors.Once again, this has played right into the hands of populist politicians like Meloni, who is benefiting politically by calling for a windfall tax on bankers. As if that was not bad enough, Lagarde and the ECB have responded to this proposal by taking the bankers’ side. I, for one, cannot imagine a more efficient way to boost the appeal of right-wing populists in Italy and beyondLagarde’s third blunder was her slow reaction to rising inflation, reflecting a long sequence of spectacularly disastrous ECB forecasts. In fairness, Draghi, too, had presided over terrible forecasts while consistently failing to hit the ECB’s 2% inflation target. But the dragon that he could not slay was deflation – negative or very low inflation – which forced him to cut interest rates first to zero and then to minus 0.5%.These ultra-loose policies made him an object of hatred among German savers, particularly the proverbial “Swabian housewives.” Still, most workers in Germany and beyond took little notice, because their real (inflation-adjusted) wages were unhurt by deflation, and because they had precious few savings.That all changed under Lagarde, when inflation turned positive – and in a big way. Unlike deflation, inflation hits the entire population, especially workers and middle-class households struggling to make ends meet. Any central banker who fails to anticipate it is thus guaranteed opprobrium from all walks of life. We saw this in the 1970s, and we are seeing it again now – except that this time is even worse.In the 1970s, trade unions were strong enough to claw back workers’ inflation-driven losses through higher wage bargains. Moreover, since women’s labor-market participation was still low, households managed to maintain their living standards by dint of women entering the workforce.Today, by contrast, trade unions are a shadow of their old selves, and most women are already in paid employment. Unemployment may be low, but as prices have continued to rise over the last two years, the average working-class household’s spending power has taken a beating unlike anything seen in the 1970s.In this sense, Draghi was lucky, at least compared to Lagarde. His policy toolbox worked reasonably well under deflationary conditions because the ECB at least could pretend that the aim of its unlimited money-printing was not to save Italy (which the ECB’s charter formally prohibits), but to ensure that the low (often negative) interest rates were reaching every part of the eurozone.Lagarde’s luck ran out early on in her tenure when pandemic-induced supply-chain disruptions triggered inflation, which Russian President Vladimir Putin later turned into an even bigger problem by invading Ukraine and causing a nightmarish energy-cost crisis. Before long, Lagarde was saddled with a cruel dilemma. She could keep interest rates below 5%, let inflation run away from her, and unwittingly do the bidding of the right-wing Euroskeptic German opposition party, Alternative für Deutschland (AfD). Or, she could raise interest rates to levels that would quell inflation but bankrupt Italy and many European banks and corporations in the process. In the event, she chose to delay until falling between these two stools.Could Lagarde have done something different? As I argued at the time, yes: She could have increased interest rates earlier to burst the housing bubble while buying (or merely promising to buy) bonds issued by governments, the European Commission, the European Investment Bank, and even private companies, with the proceeds going exclusively to finance a green public investment drive. Instead, she wasted her energy and political capital on calibrating the ECB’s collateral policy to favor phony ESG (environmental, social, and governance) commitments, which did nothing to increase the supply of clean energy just when it was most needed.Moreover, instead of advocating EU Treaty changes that would spare the ECB from always having to keep our governments solvent, she gave misguided speeches foreshadowing the impending replacement of the dollar as the world’s reserve currency.Where are we now? Lagarde’s rare blend of ineptitude and conceit has helped revive the political fortunes of the AfD in Germany, Meloni in Italy, the right-wing Vox party in Spain, and so forth. All we can do now is hope that these parties’ own incompetence will lead them to squander their gains before next year’s European Parliament elections.

For Project Syndicate’s site, where this article was originally published, click here.

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The NATION (UAE) reviews TECHNOFEUDALISM

When Yanis Varoufakis wrote a book about capitalism, addressing it to his daughter, then 12, he forced himself to keep the language simple. “If you can’t keep it simple, it means you do not understand what you are saying,” he says.His latest book Technofeudalism: What Killed Capitalism is again addressed to a family member, this time as a letter to his late father, George Varoufakis. “When he was dying two years ago, I didn’t get the chance to explain my theory to him because he was 96 and very close to the end, but I thought I will honour my dad, and pretend that I am talking to him about technofeudalism,” says the former Greek finance minister.Technofeudalism is the term Varoufakis, a leading economist, uses to describe the system he believes has replaced global capitalism. “Over the last few years I have been shocked to realise that, without us noticing, it is not socialism that replaced capitalism, it is something else. Something more predatory than capitalism has replaced capitalism,” he says.Similar to a virus mutating into a new virus, he argues “capital has mutated into cloud capital”, as typified by companies such as Amazon, Facebook, Alibaba and Tencent. This emergence of “cloud capital” has demolished the two pillars of capitalism – profit and markets – and replaced them with a new system where companies such as Amazon charge manufacturers a percentage of what they produce, which he terms “cloud rent”.Painting from Breviarium Grimani depicts late 15th-century peasants working outside a town. Getty ImagesThe 2008 financial crisis “massively” accelerated the advent of technofeudalism. Varoufakis says the crisis became “stabilised” by printing money, but never really went away, terming it “socialism for the bankers, and austerity for everybody else”. The central bank’s continued intervention in the markets since 2008 has been popular among the very rich: “It was like having an ATM in their living room, keeps churning money out, without them being charged, that is what it was. At the very same time, in order to prevent inflation, they practised austerity on the majority of the people.”Modern serfdomVaroufakis stresses certain key distinctions between historic feudalism and modern technofeudalim. For one, unlike feudal lords, entrepreneurs such as Mark Zuckerberg worked hard to build their wealth, rather than being born “with a silver spoon in their mouth”. At the same time, he argues, unlike Uber and Deliveroo drivers or Amazon warehouse workers, 16th-century peasants were at least out in the clean air.“They had their own culture, they had their own access to the land, they could grow their own food in addition to what the lord took. So it is not necessarily an improvement, what you have now,” he says.

Varoufakis says ‘capital has mutated into cloud capital’, as typified by firms like Amazon. PA

What about users who now get paid for their content on YouTube, or the recent monetisation introduced by X, formerly Twitter?“Feudalism is not all bad. There were market towns, there was a lot of trading, I mean think of the fantastic artworks that came out of feudalism. There were artisans who got paid, Michelangelo got very well paid by the feudal lords in order to do his masterpieces. That doesn’t mean it wasn’t feudalism.”Would large cloud-firms be directly hit if the central banks stop injecting money into the markets? “Well, I think history has already answered that because once the pandemic started waning, we had inflation,” he says, pointing out that for the first time since 2008, some of the printed money went to the masses during the lockdown “to keep them alive”.But inflation and the Ukraine war made matters worse, and central banks stopped printing money and increased interest rates.

Yanis Varoufakis’s latest book, Technofeudalism: What Killed Capitalism. Photo: Bodley Head

“Then Bezos lost a third of his wealth, Zuckerberg lost 60 per cent of his wealth overnight. But meanwhile they had already built up their cloud capital, they had the machinery, it was in place. We had paid for it, and they continued to extract rents from that.” The central banks also got really very “panicky”, he says, “from printing money to not printing money, suddenly all those banks started failing in the United States, Italy nearly went bankrupt. So behind the scenes they started printing again, to prevent insolvencies.”‘My politicisation came early’It was Varoufakis’s father who introduced him to capitalism at a very young age. A metallurgist who wrote a lot about ancient technologies, he was a “monumental influence” on him, along with other family members. The elder Varoufakis was born and raised in Cairo, Egypt, before moving to Greece in the 1940s. While a student at the University of Athens he was arrested by the secret police and spent several years imprisoned for refusing to sign a declaration denouncing communism.“My father was imprisoned in the late 1940s. Then he got out, struggled, managed to make a life for himself. Then when I was six, in 1967 we had a coup d’etat, right-wing dictatorship. My father was arrested again, just because he had a record with the police, so they picked him up. Because he was on the list.”

Yanis Varoufakis, pictured after his resignation as Greek finance minister in 2015, says his father introduced him to capitalism at an early age. AP

Then his maternal uncle, a businessman and “quite right wing”, turned against the regime and was tortured and imprisoned. As a young boy, Varoufakis found himself in and out of prison visiting members of his family. “That was a good way of starting early, when it comes to trying to understand what on Earth is going on here. My politicisation came early, but I have to say that these were very happy years.”He recalls it being “fascinating” going to prison. “My father was very angry with me for not being sad. But I thought it was an adventure. My father was a very strange man, in the nicest possible way. He was the opposite of a fanatic. He always managed to see the weaknesses, demerits, and the failings of his own side.”Although his father was on the left, Varoufakis recalls he was very critical of it. “In the 1970s, when he was still voting for the Communist Party, he said: ‘You know what Yanis, if we had won the civil war, I would be in the same prison with different guards. So beware of that. Our side are not angels.’ This capacity to be nuanced, and see both sides of the story, on whatever matter, is always very important. And he taught me that.”

For The Nation’s site, click here.

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Bill Black and Yanis Varoufakis discussing corruption in finance – video

Invited and chaired by Patrick Lovell (director of The Con), in this video Bill Black and I discuss financial corruption in the USA and the EU. Bill Black needs no introduction. As a lawyer he filed over 1700 indictments for financial corruption in the US, from the S&L scandal to this day. He was also the nemesis of five US Senators who did their utmost to cover up financial fraud. He is also an academic, best-selling author and former bank regulator. Currently an associate professor of economics and law at the University of Missouri, Kansas City, Bill assisted Icelandic and French leaders responding to their fiscal crises and has testified to US Congress about the financial crisis, specifically on regulatory failures and the role of control fraud in the bubble and crisis.

 

 

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Why can’t the EU power ahead with green subsidies like Biden’s? It isn’t just political procrastination – THE GUARDIAN

Inglorious procrastination is one of the European Union’s standard responses to major crises. This is not merely due to the difficulty of getting twenty-seven Prime Ministers and Presidents to agree. It is also because of their motivated tendency to ask themselves the wrong questions, thus heading slowly but inexorably to self-harming policy solutions.After the demise of Lehman Brothers in October 2008, a group of policymakers gathered in Washington to ponder the relevant question (“How do we bail out the bankers to stop them from consuming us?”). Meanwhile, in Brussels a much larger group mused for years over a toxic version of the same question (“Given that EU rules prohibit bailouts, how do we maintain the pretence we are respecting them as we bailout the bankers anyway?”). The result was a costly delay and policy choices which ensured that, whereas in 2008 Europeans earned, in aggregate, 10% more than Americans, by 2022 Americans were earning 26% more than Europeans.Today, the European Union is about to repeat this self-harming act in response to another unforeseen blow that struck Brussels a year ago. On 16th August 2022 President Biden signed into law the misleadingly labelled Inflation Reduction Act that released $783 billion of subsidies, over a decade, in support of US industry’s green energy transition. In one fell swoop Washington had torn up the so-called Washington consensus; the rules-based free trade and industrial policies that America and Europe had been foisting upon the Global South for thirty years. Suddenly, large unilateral subsidies were introduced by a US government that felt no obligation to keep the rest of the world in the loop, the EU included.The EU’s bureaucrats and politicians were livid. Overnight, the whole of Europe’s mighty manufacturing sector faced tall fences impeding access to the vast American market. The problem went far beyond German car makers whose electric cars became ineligible for the up to $7500 subsidy that domestically assembled cars benefit from. By subsidising all domestic battery production, Washington ensured that every manufacturer across the United States will face lower energy costs than their European competitors.It was not long before the shivers down EU policymakers’ spines were further electrified by the news that, after President Biden’s IRA law came into force, the world’s largest chemical producer, BASF, decided to curtail its operations in the EU while Tesla put on hold the completion of a major battery manufacturing plant in Germany. Europe’s rapid de-industrialisation suddenly loomed large on a bleak and inauspicious horizon.It is hard not to pity the EU’s top brass. They thought that, once Donald Trump was out of the White House, Washington would treat them as partners. They expected the Biden administration to endorse Brussels’ preference for carbon taxes and pricing schemes which, unlike subsidies, encourage not just more clean energy but also overall energy savings. They believed that Biden’s circle would appreciate the readiness with which, following Putin’s invasion of Ukraine, Europe cut itself off dirt cheap Russian natural gas and, instead, is spending billions on the expensive fracked oil and liquified natural gas Europe now imports from Texas and New Mexico.What is not easy to sympathise with is that, as in 2008, the EU’s decision makers are indulging their penchant for inglorious procrastination, thus inflicting further damage to Europe’s already diminished prospects. A whole year after the IRA was activated, the EU response remains in limbo. Some have argued that this is an exaggeration since the EU, unlike the US, already had a Green Deal in place involving funding pledges not too dissimilar to those of Biden’s IRA. Alas, the devil is in the detail: The EU’s Green Deal offers up to €1 trillion of pledges which, unlike Biden’s IRA monies, is not actual money but, rather, a fictional number akin to the notorious Juncker Plan whose pledged €300 billion of new investment funds never really materialised.Similarly with the argument that Europe also offers equivalent subsidies to every electric car sold in the EU. A closer look reveals two key differences: First, in the US subsidies come from the federal government, which means that domestic producers do not face discrimination depending on their location; unlike in the EU where subsidies are grossly uneven and reliant on the fiscal health of each member-state. Secondly, in the EU all electric cars receive the subsidy, including US-produced TESLAs. By contrast, in the US no EU-produced zero-emission vehicles qualify for the subsidy.Why is the EU not following the dictum “if you can’t beat them, join them”? Why not offer the same subsidies Biden made available to US-based manufacturers to companies manufacturing in the EU? The reason is that, unlike carbon trading schemes that pay for themselves, subsidies require a common budget, lest Portuguese or Slovenian manufacturers receive much lower subsidies courtesy of their governments’ relative impecunity. Without a common money pot for EU-wide manufacturing subsidies, Washington’s choice to discriminate against EU manufacturers will lead richer European governments massively to discriminate against the manufacturers of poorer member-states. And without a common Treasury it is impossible to replicate in the EU what the IRA is accomplishing in the US with the active involvement of the US Treasury Department.As I write these lines, three pieces of legislation are in the pipeline promising a decent EU response to the IRA: The Net Zero Industry Act (which will cut red tape and drop state-aid rules), the Critical Raw Materials Act (which focuses on rare earths and other materials crucial to green tech), and reforms of the European electricity pricing model (which has given a great boost to the monopoly rents of private power oligopolies at the expense of both industry and the struggling classes). While the jury is still out on these, two things are clear already: First, the EU cannot afford the billions it would take to compensate industry for its intolerably delayed response. Secondly, the EU’s leaders will never create the common Treasury the EU needs even if the alternative is calamitous (i.e., exactly as in the euro crisis).Meanwhile, Germany, is acting virtually alone to stem the mass emigration of manufacturing to the US. Once upon a time, it might have pulled it off by funding the necessary subsidies from the surpluses generated by its coveted business model based on cheap Russian energy, Chinese demand for its finely engineered machine goods, its chemical factories, its mighty car industry. Alas, that business model is now in terminal disrepair: its gas deal with Moscow gone, its Chinese markets imperilled by Washington’s sanctions, its advantage at building fine internal combustion engines, drivetrains, oil heaters etc. undermined by an electrification process that shifted most profits from the makers of things and the owners of terrestrial capital to the masters of green tech and cloud capital that Germany never seriously invested in.Sadly, Germany’s political class are, again, asking precisely the wrong question. Instead of wondering “How do we replace our broken mercantilist model (of traditional net exports and wage suppression) to one made for the era of cloud-based technologies?”, they are wilfully trapped in the wrong question “How do we lower the energy costs of our manufacturers to maintain our inoperative mercantilism?” Unwilling to fathom that the value-added from electric cars and green energy networks will go to the manufacturers of the kind cloud-based capital that Germany, and the EU more generally, have failed to invest in, they insist in immiserating both the people of Germany and the rest of the EU through another bout of investment-destroying paneuropean austerity.As long as climate disaster does not lead to our species’ extinction, Europe and Germany, I have no doubt, will bounce back. Don’t know how or when. What I do know is that we are very close to condemning one or more generations of Europeans to persistent underdevelopment.

For The Guardian’s site, where this op-ed was originally published, please click here.

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