Yanis Varoufakis's Blog, page 23

Discussing Technofeudalism, Ukraine & Britain with David McWilliams in Kilkenny – audio

David McWilliams and I sat down in front of a splendid, heartwarming, boisterous Kilkenomics audience to talk about Technofeudalism but also Ukraine, Britain and Europe. The ersatz audio recording is not of the highest quality (sorry!) but it is not terrible either (especially if you have a good headset). Apologies for this but one of the merits of Kilkenomics is that events are not professionally recorded – the philosophy, which I applaud, is ‘be there or be square’…

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Should electricity markets be reformed or disbanded? My debate with Michael Liebreich on Cleaning Up

The other day, Michael Liebreich and I had a lively discussion on his CleaningUp podcast provoked by my call “to blow up the electricity markets”. It was fun but, of course, fell short of a comprehensive analysis of the complex issues pertaining to the political economy of electricity generation and distribution. Following our debate, Michael posted his verdict on it and, in particular, his “four key takeaways”. To further the debate, I have added a comment after each of Michael’s “takeaways”, plus a brief postscript. Hope you enjoy the debate’s afterlife…TAKEWAWAY No.1Michael Liebreich: Varoufakis’s core argument for nationalisation was that electricity is a natural monopoly because there is only one wire into each house, and therefore that the electricity market is a “fake market” constructed by (corrupt) politicians which does nothing but enrich (rapacious) oligarchs. He appeared not to have thought deeply about the value chain of the electrical system, using the “single wire” argument to demand nationalisation of the whole system, from generators to retailers. He dismissed out of hand the idea that the “single wire” could be competently regulated.Yanis Varoufakis: There were three planks to my core argument that any electricity market is bound to be a pseudo-market plagued by a propensity toward a natural and grossly inefficient monopoly – Michael only acknowledged the first one.The ‘single wire’ feature; i.e., electricity comes into your home or business out of a ‘single wire’ in the wall.Electricity is a totally, undeniably homogeneous, undifferentiated good; in other words, there can be zero competition between providers over its qualityWhile electricity is an essential input into every single aspect of a modern home’s or business’ activities (from cooking to surfing the net), electricity has no close, or even distant, competitors (Unlike a cable or optic fibre internet connection which one can bypass by turning their smartphone into a hotspot, for most people today electricity can never be accessed except through that one wire from the wall)If my argument relied only on (1), it would have been open to the charge that telephony & internet services spring out of a single wire too. But it is doesn’t only rely on (1)! In combination with (2) and (3), the natural monopoly proclivities of any electricity market are indisputable. The reason I dismiss the idea of efficient regulation, is that (without even referring to the clear and present danger of regulatory capture) it is demonstrably impossible – not just hard.To begin with, recall that an electricity market is not like the market for food, metals, maritime services etc., which existed well before any government had a view about them. The single wire point [see (1) above] means that the government must create, or simulate, an electricity pseudo-market. Electricity markets are, in other words, government creations. Furthermore, features (2) and (3) above guarantee huge powers of rent extraction by the few firms that will produce the nation’s electricity. A natural oligopoly of producers manufacturing a homogeneous product inexorably breeds cartel-like behaviour.As for the retail providers, who compete to buy electricity from this cartel to sell it on to consumers, they too are (by design) a constructed oligopsony whose competition with one another is limited to two dimensions: Billing and hedging. Of those two dimensions, the public may benefit only from smart billing (e.g., rates that react to market conditions second by second – see Takeaway 2 below). In contrast, hedging that uses electricity derivatives provided in the same way and by the same banks that sold Lehman’s its CDOs, leads – and can only lead – to an unmitigated catastrophe: As long as their bets pay off, the companies make a nice little earner but when, eventually, their derivatives have their Lehman’s spasm, they run to the Treasury cap in hand for huge bailouts.In conclusion, contrary to Michael’s ‘takeway’, only a shallow, highly ideological touching faith in the superiority of markets (aided by taking shots at a straw-man version of the above argument) can lull anyone into the illusion that electricity pseudo-markets can be regulated in the public interest. They cannot – a conclusion borne out by the present sorry state of the privatised electricity markets in the UK and beyond.TAKEWAWAY No.2Michael Liebreich: Varoufakis also dismissed the idea that there was anything innovative about any private players in the electrical system. He dismissed the software developed by Greg Jackson of Octopus Energy, my guest on Episode 39 of Cleaning Up to deliver time-of-day pricing as something a graduate student working for a national utility could have coded. This mirrors the failure of Professor Mariana Mazzucato, my guest on Episode 67 of Cleaning Up, to acknowledge the innovation and risk-taking involved when private players build teams, secure and integrate technologies, navigate regulations and meet market needs.Yanis Varoufakis: I do not dismiss the useful innovations in the field of software billing technologies that people like Greg Jackson and hundreds of others have contributed. My point about smart graduate students being able to code such billing software is neither a put down line (unless one wishes to dismiss the ingenuity of graduate students) nor an argument for keeping everything within employees of a government-run enterprise.My vision for a publicly owned electricity network is not a throwback to the statist 1970s but a vision in tune with a modern electricity commons in which graduate students, good people like Greg Jackson, indeed anyone who wants to have a go, can innovate and peddle their software. How? Take the Apple Store or Google’s Play Store. These software outlets offer the opportunity to countless developers to peddle applications that allow us, the general public, better to utilise our phones, computers, home appliances etc. Since I do not want to see any oligarch own these digital outlets, and take issue with the 30% fees-rent Apple charges, I would love to see them owned by the public. A digital commons, where all sorts of innovative developers can sell their software free from the tyranny either of the state or of some Big Tech mogul.Come to think of it, is this not how Web1.0 came about? Was it not set up by governments (from the Pentagon to our non-profit universities) so that thousands of developers would furnish us with open protocols thus creating an Internet Commons – which then Big Tech took over and wrecked (Web2.0)?In short, my vision is one of a new electricity commons that is, at once, a corporate-free zone and a boisterous ecosystem for private developers. This is a far cry from the antiquated statist that Michael tried to portray me as.TAKEWAY No. 3Michael Liebreich: Although I felt no listener could come away believing that Varoufakis had a credible plan for managing the electrical system if he were able to nationalise it, I was wrong. Early comments on social media made it clear that many found his arguments persuasive and believe that the current price spike is driven purely by corruption and the profiteering of middlemen. Which is a salutary reminder to all of us technocrats that energy is deeply political and irrational. No matter how obvious the optimal engineering or policy design might be, some, maybe even a majority, will refuse to accept it.Yanis Varoufakis: It is not for me to tell listeners or readers what to believe. What I do know is that the great bulk of the price spikes in electricity prices is driven by vile speculation in the derivatives markets. I also know that, while the UK sources (on average) its electricity from home grown energy sources, the prices Britons pay have spiked just as much in the UK as they did in countries like mine which rely on imported energy sources. This proves beyond reasonable doubt that the commodification of electricity (not merely its privatisation) exposes a nation’s electricity output to financialised racketeering.In short, energy is always deeply political. Especially in societies exploited by corporations whose rent-seeking strategy relies heavily on (a) hiding its rent extraction under a veil of market fundamentalism and (b) presenting anyone who rejects its market fundamentalist propaganda as… irrational.TAKEWAY No. 4Michael Liebreich: Our conversation was in some ways just the latest round of the Revolution or Reform debate from the early 1970s between radical left professor Herbert Marcuse, promoting revolution, and critical rationalist Sir Karl Popper arguing for reform. Do you get a better outcome by breaking everything and starting again, or by fixing flaws in the current system? That same debate characterises the broader fight between those espousing degrowth (revolution) versus sustainable growth (reform).Yanis Varoufakis: While honoured by the comparison to Herbert Marcuse, I fear that our debate is far less heroic. The world has changed since the early 1970s. The old arguments between socialists and free-marketeers are buried under the rubble of the Left’s 1991 defeat and the free-marketeers’ 2008 thrashing. Since 2009, permanent socialism for corporations and permanent austerity for the vast majority has created a toxic environment in which the only winners are nasty rent-extracting corporations and hopeless masses. People like Michael and myself have no right to pretend that we are taking further the exciting debates of intellectuals who lived at a time when free-market capitalism was still a possibility and socialism was challenging it.

 

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Iran’s Revolutionary Moment as the Internationalist Left’s Great Challenge – by Shoja Azari

Shoja Azari , is an Iranian visual artist and filmmaker based in New York, working with Sherin Neshat, his life-long partner and comrade, on art projects of note and substance. Their last project is   Land of Dreams , a magnificent new film set in the United States but ever so redolent of meaning viz. the New Iranian Revolution that Shoja writes about below. After demonstrating how central developments in Iran have been in world affairs since the 1950s, and especially since 1979, Shoja asks the largest and most pertinent of questions: Will the international left once again betray the Iranian people? To which question I would add: Will the international left once again betray itself by betraying the Iranian people? The 1979 Iranian revolution coincided with the emergence of the neoliberal order and the domination of financial capitalism in the world. Today’s new revolutionary movement coincides with financialised capitalism’s deepest, most profound, crisis since the 1920s.When the 1979 revolution entered its final stages, and the demise of Shah’s regime seemed inevitable, the US and the West, at the height of the cold war, aligned with the most reactionary factions within the movement, namely, the Islamic fundamentalists led by Khomeini. At the same time, intellectuals and the left until then, the vanguard of the revolution, under the Soviet and Maoist rubric of the fight against Imperialism, found Khomeini’s anti Imperialist posturing in line with their goals and a necessary step in the revolution’s success.The Shiite Islamic republic was born with its misguided ambition of resurrecting Islamic civilization by adopting, on the one hand, an anti-imperialist rhetoric while, with the other hand, crushing the left and its opposition to theocracy. Ten years later, the Soviet Union had fallen and the neoliberal order was celebrating “The End of History” under the cloud of a rapid expansion, and domination, of financial capital. Among the poor and devastated masses of the Muslim world, the Islamic rhetoric of Iran’s regime seemed like a rare source of emancipatory hope. This, in turn, reinforced and legitimized the Islamists’ predatory expansion in the region inevitably leading to a confrontation with its historical Suni rival and the rise of Isis. Before long, the Islamic Republic faced war on all fronts.It is essential to understand that the Islamic Republic is a system born out of crisis and maintained by instigating crisis. Because of its anachronistic nature, it oscillates between contradictions within and without that it can neither manage or resolve. The truth is that, despite its irrationality, its backwardness, its reliance on a growing rentier class, Iran’s development since the 1979 revolution has been in line with the new, neoliberal type of capital accumulation. The bitter rivalry between the regime’s so-called reformist and conservative factions has been a push and pull on the nature and path of integration into the world system.A privatization process has been in full swing since the 1990s, with the reformist faction envisioning foreign investment and integration into the world market (essentially the European Union and the UK) as the only vehicle for containing the crisis. At the same time, the conservative coalition under the military’s dominance (IRGC and Basij), by establishing and controlling a labyrinth of mired enterprises, aim at expansion into regional markets and align itself with China and Russia in accordance to the shifting global geopolitical landscape. The end result has been deregulation, removal of subsidies and an inevitable popular backlash demanding social justice.The accumulation of wealth and capital under the control of a mafia of the so-called private enterprises, directly in cahoots with the military and government, has resulted in dire poverty, exploitation, child and enslaved labour, and devastation of the environment in Iran. It is, thus, important for Western left-wingers to understand how capital accumulation, neoliberal-style, even in its hybrid Iranian form, is at the heart of the class war and the tensions raging within Iran today. Leftists, worldwide, must not be misled by the anti-imperialist, anti-US posturing into thinking of the vicious Iranian regime as a potential ally.Looking at the evolution of the regime’s internal tensions, in 2021 the IRGC consolidated its power and, as a result, the conservative faction put the final nail into the coffin of the reformists, who until then had played a critical role in inspiring false hope and providing limited legitimacy to the regime. The West’s systemic crisis in 2008, to this day, its deepening during the pandemic, and now the war in Ukraine have emboldened the theocratic rule to bolster its alliance with China and Russia with the hope of circumventing its internal crisis. What the rulers of the Islamic Republic fail to see is the all-encompassing nature of the neoliberal’s systemic crisis, that has as its integral part China, is a significant factor in perpetuating the war in Ukraine. Consequently, due to this unholy alliance and consolidation of power, Iran now stands on the verge of a new revolution.The current Iranian uprising has entered its second month, with women and the youth front and center leading the movement. What distinguishes this uprising from numerous others in the past four decades is not only its leadership, but its radical nature. Whereas prior protests were local, concerning multiple cultural, ethnic, and economic grievances by different groups, this one is significant for its unifying character and aim of dismantling the regime. Every indication points to the burgeoning momentum toward a full-scale social revolution and reorganization of society on a different scale and order that can offer a new development model and inspire the Global South and beyond. Iran stands at a particular historical juncture imbued with the opportunity to exploit the engulfing neoliberal crisis and the redrawing of the world’s geopolitical map. Can the international left seize this opportunity to shed its old and tired shell and imagine a novel narrative that can inspire the youth of Iran, who are the movement’s driving force? Can “Another Now” be at hand for Iran?Let’s take a close look at the anatomy of this historic opportunity. Ironically, the reactionary and anachronistic nature of the Islamic Republic has given it semi-autonomy from the financial capital which has penetrated, and subjugated, almost every nation and enterprise around the world to the wizardry of Wall Street bosses. As I already explained, this does not mean that Iran is immune to neoliberal-style capital accumulation, in line with the global paradigm,  exacerbating class conflict and environmental destruction. In the past four decades, the Islamic Republic has crushed all opposition and undermined all civil and labour organizations through its embedded fascistic organizations employing paramilitary lumpen gangs and revolutionary guards. Let us not forget that the success of Islamists in hijacking the 1979 revolution was mainly due to their ability to a fascist-style mass mobilization with religious zeal to overpower descent with brutality instigating fear. Even as the regime lost the masses, it has institutionalized its terror gangs in a labyrinth of inconspicuous force utilising multiple command centers.The lack of viable opposition, political parties, and civil or organized labour may make the path of the revolution costly and arduous. Still, it opens up the opportunity for a new narrative and the possibility of novel civil society organization. Given our experiences with from Occupy Wall Street, the Arab Spring and current movements in Latin America and elsewhere, the left should not only acknowledge the nature and reality of these contemporary movements but see it in accordance with the shifting paradigm and the necessity of envisioning the future society at large. If successful, these rather unarticulated youth-led movements can finally culminate in a full-scale social revolution, turning Iran into a genuine laboratory for dreaming about the future.The revolutionary movement in Iran lacks vertical integration and classic leadership. Yet, one month in its making, it demonstrated a high degree of organization and the presence of multiple leadership centers. The revolutionaries in Iran have learned through experience that the only way they can fight the fascistic operation of the regime is through a war of attrition. Youth groups in multiple locations in the cities and throughout the country often assemble at night, take control of the streets, and, in many instances, engage the police in battle. Almost every university in the country has become the scene of daily demonstrations spreading fast to high schools. The regime, frustrated and unable to quell this asymmetrical battle, has become increasingly more brutal, beating, kidnapping, and opening fire on children. Despite the regime’s crackdown on newspapers and bloggers and shutting down the internet, the news, images, and videos spread wide and fast, uniting people in their rage against the regime and shattering its religious base. In solidarity with the youth, workers in many industries are on strike, though with a lack of unions and strike funds, this can be challenging unless circumvented through international solidarity.The killing of the 17 years old Mahsa Amini ignited the current unrest. Besides awakening the youth, it provided an important symbol that helped congeal a sense of unity throughout Iran. Amini was a young woman but also a Sunni Kurd. Besides the oppression of women, the regime has brutally suppressed Kurds, Sunnis, and all national minorities in Iran. The government’s propaganda machine, sowing the fear of the country’s disintegration, had managed to manufacture silent consent among the majority population. The sympathy for the young woman’s brutal killing on her visit to the capital, Tehran, mitigated the ethnic divide at once. The Kurdish slogan “Woman, Life, Freedom” was immediately adopted as the revolution’s national anthem.Even more surprising was how the killing of Mahsa Amini and the slogan “Woman. Life. Freedom.” hit a sensitive cord internationally. #Mahsa Amini and the accompanying slogan broke all Twitter records, passing 200 million retweets in less than two weeks. Celebrities, politicians, sports champions, state ministers, and people from all walks of life poured their support internationally. The news of killing and brutality coming from the Islamic Republic has been abundant to a numbing degree for many years – without progressives taking much notice in the West? What was it that resonated with this particular killing?With the rise of right-wing neofascist movements in America and Europe, the organized assault on women and minority rights, the increase in surveillance, and the curbing of freedoms, it is no surprise that the plight of youth in Iran resonates deeply with a cornered populace around the world. “Woman. Life. Freedom.” can be viewed as an all-inclusive moto uniting all the demands of the working class without regressing to old cliches that can neither capture the realities of today’s struggle nor stimulate the imagination to move away from the most divisive trap of identity politics. What remains of the nonconformist left today is either stuck in the past or receding in closed academic circles as warriors defending identity and social justice devoid of class struggle.Today, the youth in Iran and the global south have much more in common with their counterparts in Europe, America, China, and Russia than any generation before them, for the apparent reason of internet and social media connectivity. They share the fear of the environmental catastrophe awaiting them, not as citizens of their respective countries but as a human race. They share their disdain for the gerontocracy that rules the planet and has appropriated the resources and the wealth. They value creativity and experience over consumption. In small ways, they have created a shared value economy. Perhaps, ill-fated and naive, their adaptation of bitcoin and cryptocurrency points to their international solidarity, their disappointment with the neoliberal order, and their knowledge and opposition to the power of the financial oligarchy.It is important to point out that the workers in Iran have assembled and are on strike under the banner of “Woman. Life. Freedom,” confirming the youth’s leadership. These youth are the future working class and have already realized and are forming international solidarity. They rightly know that the oligarchs of all nations are cashing out in unison and are fully united in turning the world into a global police state to keep in check the increasing precariat masses locked in their borders and subjugated.The current revolutionary movement in Iran is a wake-up call to the left. It calls for international solidarity and opportunity for “Another Now” as Iran gears up for the possibility of yet another social revolution. The oligarchs, harmonious with their state representatives in the West, have been waiting for forty years and are lining up to take advantage of Iran’s vast market while the left watches from the sidelines.Will the left once again betray the revolutionary aspiration of the Iranian people?

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Our Task? To Inspire the Rebellion against the Legalised Robbery of People & Earth, even if it is too late – Reply to Chomsky, Fuentes & McPherson

Have we, humans, passed the point of no return down the path to ecological ruin? Does ruin-without-end loom black across the land, the air, the oceans? I hope not but, regardless, I don’t think it matters. What matters is what we do. And how we do it. From now on. Until our last breath.Sure enough, three centuries of industrialisation dictated by the logic of capital pushed us into a hideous predicament: Whatever we do from now on may, I acknowledge, prove insufficient for preventing the collapse of organised human society. Even so, radical humanists ought to think it necessary to do our best to resist civilisational collapse. As an old-school Marxist once taught me, what is necessary is never unwise, never futile, never worthless – even if it is as hard to accomplish as hitting a bullet with another bullet fired from a handgun while riding a runaway horse.I am no climate scientist, so I shall say nothing about our proximity to the point of no return. Instead, I shall focus on the political economy of what it means to do our best in view of our capacities and in the face of ecological and civilisational collapse. My focus shall be on what we can do, as activists, to help translate humanity’s remaining capacities into the necessary praxes, into the collective actions that will permit us jointly to say: “We did our damned best!”Two are our greatest obstacles: Baseless optimism is one. And self-indulgent pessimism is the other. In fact, I would go so far as to proscribe prognosis altogether. Prediction is not our friend. We know everything we need to know in order to act: humanity is on a path to ruin without any guarantee that we can turn back. That’s enough knowledge. Unlike astronomers seeking to predict the trajectory of a faraway comet, our current task is not, and should never be, to predict the trajectory of climate change. Astronomers have the luxury of knowing that the phenomenon they study (the comet) doesn’t give a damn about their predictions of its trajectory. We don’t have this luxury. Our predictions, to the extent that enough people take them seriously, are crucial determinants of what people do. Thus, the phenomenon we are struggling to fathom and control (e.g., humanity-driven climate change) cares deeply about our predictions and, in an infinite regress, is bound violently to react to them – rendering our predictions useless and, potentially, causing us to lose any control over the phenomenon we might have had.What should our task be, once forecasting is out? My answer is: To end the legalised robbery of people and Earth fuelling climate catastrophe and the broader ecocide. Even if it is too late, at least let’s go out with a revolutionary bang. Let the last feeling we have be that we did what we could, albeit belatedly. To accomplish this, we must inspire the multitudes to join our rebellion.  But to inspire them, we need to articulate a Program that addresses people’s hearts and minds. What should that Program consist of? This is the pressing question.Our Program should avoid excessive optimism and the insinuation that climate change is a technical problem calling for a technical fix. Smart technological solutions funded by clever public finance will not save the Earth just because they are feasible (even if they are!). Equally, it would be a terrible defeat for progressives to dismiss the capacity of science, technology and public finance to be part of a Program that succeeds in saving humanity and the planet. Giving up on humanity and its collective ingenuity may be tempting in times like the present, when war is once more turbocharging the fossil fuel industry. Alas, such defeatism is impermissible for progressives. This, our darkest hour, is precisely the time when we, progressives, radicals and revolutionaries, must give back rational hope to those who have been deprived of it.Which brings me to the debate between, on the one hand, Noam Chomsky and, on the other, Miguel Fuentes and Guy McPherson. As ever, when it comes to passionate debates between radicals whose objectives coincide but who disagree regarding strategy and constraints, it is important to take a step back so as to appreciate the room for synthesis. In the following paragraphs, I shall attempt such a dialectical synthesis for one purpose: to establish the common ground that is a prerequisite for a common Program that inspires the multitudes to coalesce internationally so as to end the legalised robbery of people and Earth.Let me begin with Noam’s position, which I understand intimately having myself been a proponent of a Green New Deal since 2001. A large public investment in humanity’s green transition (Noam suggested 2%-3% of global GDP, I raise this to at least 5%) can make a decisive dent in our collective carbon footprint. Public financial instruments can be constructed to mobilise these funds globally. Exponential technological advancements in solar, wind, green hydrogen, organic agriculture etc. are feasible. Technically (both in terms of engineering and public finance), an effective green transition is possible without a revolution, under the present global exploitative system. However, the operative word here is: Technically.Politically, I cannot see how the current oligarchy-without-frontiers will allow the green transition to happen. Green Keynesianism will not work for the reasons Michal Kalecki gave decades ago to explain why the original Keynesianism would never be allowed to run its course: Because, even if the bourgeoisie panics and adopts Keynesian (today Green Keynesian) policies to save its skin, the very moment these policies begin to bear fruit, and well before they do their job, the ruling classes will abandon them in favour of their usual extractive, austerity-driven policies. It is in the capitalist class’s nature to block the very road that leads to its own salvation.So, why do people like Noam Chomsky and myself still put forward Green New Deals or Green Keynesian-like policy proposals? Are we so naïve as to imagine that our sensible arguments will win over the capitalist oligarchy? I assure you dear reader that we have no such illusions. No, the reason we do it is because their mere advocacy is full of revolutionary potential. Let me explain this by comparing three different strategies of how to approach the many who are impervious to the language of us radical leftists – with a view to mobilising them. Compare and contrast three things we could say to them:Strategy 1: “Nothing will save humanity except revolutionary socioecological changes that include (A) the socialisation of property rights over the means of production and (B) painful decisions on how to de-grow our economy in favour of Nature and of our cultural and spiritual lives. Join us!”Strategy 2: “Humanity is doomed. We are past the point of no return. The collapse of our ‘civilisation’ is inevitable. Let’s embrace collapse and see how best to organise whatever life survives within the ruins.”Strategy 3: “Here is a bunch of policies that can be implemented today, even under the existing system, to shift massive funds to the green transition, to provide basic public goods to everyone, especially in the Global South, to eradicate unpayable debts, to pay you a basic income wherever you live on the planet etc.”Strategy 1 involves telling people out there the naked truth about the need for a revolution which they, nevertheless, are unprepared psychologically to fathom, let alone to stage. Indeed, Strategy 1 will cause anyone who is not already a card-carrying revolutionary to yawn and move on, with their heads tilted to the floor, unable to muster any enthusiasm for joining us to rebel against the systematic looting of people and planet. Similarly with Strategy 2, which will probably only benefit psychoanalysts whose clientele will burgeon, not to mention end-of-the-world prophets of doom whose congregations will grow. Only Strategy 3 stands a chance of mobilising those whom we, the radical left, have failed to mobilise. Here is why.If the policies of our Green New Deal make sense in the mind of reasonable people who are discontented with the grim social and ecological realities surrounding them (yet who are no revolutionaries), it should be possible to convince them that these policies, technically, can be implemented immediately. Without a revolution. Within the current system (like, for example, Roosevelt’s neutering of the banking sector did not require a prior overthrowing of capitalism). Once this realisation is planted in people’s heads, it is plausible that a radical question will hit them: “If these things could be done today to benefit humanity, without some socio-ecological revolution, why on earth are the authorities not doing them?” It is at that point that the ears and minds of the many will be readied for the explanation which only radicals can offer them: That, yes, though technically feasible, these policies are ignored by an establishment solely interested in profit that is maximised by methods that destroy lives, ecosystems, capitalism’s own sustainability even. That will be the point when we, radicals, will get our chance to influence the many, to radicalise them.****As I was reading Miguel Fuentes’s and Guy McPherson’s rejoinders to Noam Chomsky, I was struck and concerned by their embrace of defeat. Sure enough, I understand their radical rejection of baseless optimism and of those who treat ecological disaster as a technical problem. On the other hand, it seems to me that if civilisational collapse is the answer, we are asking the wrong question. That if the Left must fall back onto a neo-Malthusianism, which places its hope on death as the only possible cure to the plague that is humanity, we have lost our way. We, the Left, were defeated at a planetary scale in 1991, and since then we have been failing to recover, despite the occasional revolutionary moments that revived our spirits temporarily. But, vengeance and defeatism are lazy forms of grief. Giving up on humanity because humanity gave up on us, on the Left, is an affront to the values the left was born to serve.Wishful thinking, of a Keynesian or social democratic kind, is not the answer either. Without a socio-ecological revolution humanity is doomed. Green Keynesianism will never be implemented to any degree equal to the task. As for the green technologies developed under capitalism, which could make a difference (e.g., green hydrogen), they will never be developed fully by a system which has a natural propensity to continue cannibalising what remains of our commons. The delicious irony is that for a fully-fledged Green New Deal to be implemented a revolution must precede it. And there’s the rub: For a revolution to precede any Green New Deal, we need rational rage to overcome the hearts and minds of people who are not yet revolutionaries. To engender this rational rage, the many need to be exposed to our Green New Deal policy proposals, to be convinced by them before watching the establishment shoot these proposals down. Then and only then might the rational rage that is necessary to motivate them crawl up their spine, bolstering it enough to cause them to join us in rising up, en masse, against the incessant looting of people and Earth.

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Comradely disagreements between progressives over Ukraine & the New Cold War – Reply to Anthony Barnett

Anthony Burnett, a friend, comrade and collaborator, just published an article in openDemocracy, a splendid and much loved source of progressive ideas and material, to which he alerted me in a mail reading: “Dear Yanis, we disagree but in solidarity!” Since Anthony’s article mentions me, along with Jeremy Corbyn, in its subtitle, here I am, responding in the spirit of solidarity, affection and goodwill.Anthony’s article was in response to a petition I gladly co-signed that, in the face of a New Cold War and a collapsing climate, called for an immediate end to the war in Ukraine, for the aversion of another war over Taiwan, for the de-escalation of the New Cold War engulfing, primarily, the United States and China and, lastly, for a genuine global Green New Deal. That petition, it is perhaps helpful to note, was in the spirit of The Athens Declaration which I, Jeremy Corbyn and Ece Temelkuran issued on 13th May 2022 on behalf of DiEM25 and the Progressive International. Dear Anthony,Whenever you and I debate anything, the hardest part is to disentangle the things we agree on from our genuine differences. So, let me begin by pointing out four of your points with which I agree before homing in on our one major disagreement:“Any threat to use nuclear weapons is an outrage”.Obviously. Whether it is a panicky Putin who issues such threats, or North Korea, or the United States perpetually refusing to rule out a first strike, we must condemn every nuclear threat and any attempt to normalise nuclear weapon use.“Invading other countries is wrong… it is wrong for Israel in Palestine’s West Bank and Gaza, and it must now be reversed in Ukraine.”Absolutely. This is how I put the same point on 5th March in an article entitled What we must do in the face of Putin’s criminal invasion of Ukraine : “When a country or region is invaded, I am overcome by one duty: To take the side of the people facing troops with direct orders to violate their homes, to bombard their neighbourhoods, to destroy the circumstances of their lives. Without hesitation. Unconditionally.”“If [Ukrainian] neutrality were guaranteed by military commitments from outside to safeguard the country’s independence in a way that satisfied the government in Kyiv, and did not deprive it of weapons for self-defence, then this would be reasonable.”Agreed. Here is the same idea as I put it in my aforementioned 5th March article: “[I]t must be an agreement guaranteed jointly by Washington and Moscow, guaranteeing an independent and neutral Ukraine as part of a broader agreement that de-escalates tensions with the Baltics, Poland, around the Black Sea, across Europe.”“Neutrality should not prevent Ukraine from joining the European Union if it so chooses (something even Putin’s Russia seems to have accepted). This, too, needs to be said.”This is also my position. From the first moment Putin invaded Ukraine, I have been arguing that to stand with Ukraine should mean, amongst other things, a commitment to empowering Ukrainians to integrate, if this is what they want, with Western Europe in the same way that Austria did during the Cold War: militarily neutral but with a boisterous democracy, strong economy, full political independence, and freedom “to truck, barter and exchange” with anyone they want.You warn leftists, like myself, of the danger that, while discussing Ukraine and the manner in which Russia, the USA and NATO are exploiting the war, we should avoid denying “Ukrainian agency and the commitment of a huge majority of Ukrainians to their country’s integrity and independence.”How can I disagree? As a Greek, I have had a gutful of Anglo-European orientalist, weaponised condescension that sought to explain to us Greeks our predicament – with a view to getting us to accept our ‘lot’. However, this is not an argument – as I am sure you agree – that we Greeks have never been manipulated by the Great Powers or, indeed, that non-Greeks like your good self should not have an opinion on Greek politics; including your right to tell me that I am wrong on Greek matters or even that I have been led astray. Maintaining the right balance between (A) respecting the agency of those in the eye of some distant storm and (B) defending our right, as internationalists, to treat another nation’s war or crisis as our own, is both hard and crucial – as I tried to explain in another article back in March entitled Westsplainers? Or genuine comrades? ****Dear Anthony,You chide our petition for not re-stating all the points above, focusing instead on the need for a new non-aligned Peace movement. I say ‘re-stating’ because these points were included in the preceding Athens Declaration, co-authored by Jeremy Corbyn, Ece Temelkuran and myself, whose opening lines were:“We stand with the people of Ukraine, as we stand with every people suffering invasion, displacement and occupation. We demand an immediate ceasefire, the withdrawal of Russian forces, and a comprehensive Peace Treaty guaranteed by the European Union, the United States and Russia in the context of the United Nations.”Should our latest petition have repeated these points? You think it should. We felt that, since brevity helps drive any petition, it was best to focus on stressing that more war, even if it is just, is not the answer to an endless European war (Ukraine) or to the US-China tensions over Taiwan or the South China Seas shipping routes. Which brings me to the one major disagreement between us.You are suggesting that the left must consider the United States a fading imperialist superpower which, despite its criminal past (from Vietnam and Pinochet to Iraq and its support of the Saudis etc.), is now democracy’s only remaining defender against China, Putin, the Tehran theocracy etc. This is the crux of our difference. I beg to differ both on your diagnosis (that the United States is a fading, weakened superpower) and your prescription (that the left must see the US as an ally against orchestrated misanthropy).In my estimation, the latest, inflationary, phase of the never-ending post-2008 economic crisis has reinforced US hegemony (and the power of Wall Street) over Western working classes and the developing world alike, while the war in Ukraine has wrecked all remaining hope of a sovereign EU that adopts an independent European foreign policy. As for the idea of the US being our ally against autocracy, my view is precisely the opposite: US policy is actively helping breed monsters to this day (from Putin in the 1990s to Bolsonaro more recently and, now, Meloni’s post-fascist government) while – as I am typing this – my comrade Julian Assange is rotting in Belmarsh, at the behest of the Biden administration, for having opened our eyes to US war crimes committed in our name and behind our backs.I could, of course, be wrong and I am sure you would have interesting rejoinders to offer. Thus, I would very much welcome a debate which would enable me to hear your reaction to my understanding of the New Cold War; for example, that China is too rich a socio-economic experiment to be either castigated as an imperialist autocracy or to be celebrated as a socialist success story; that Taiwan and Ukraine are profoundly different cases (since both Taipei and Beijing have traditionally claimed to represent the ‘true’ China); that Biden’s humiliation by the Saudis is nothing new (Remember how Saddam Hussein, also a US stooge for a long while, bit the hand that fed him?) etc. etc.****I shall close this letter with a comment close to my heart. It concerns our duty, as friends and comrades, to educate younger progressives on how to disagree with one another. Over the years, painfully aware of the left’s tendency to allow disagreements to degenerate into civil wars, I have endeavoured to desist from deploying inflammatory language when referring to comrades’ views I disagree with. Comrades like us must take a lead in demonstrating that it is possible vociferously to disagree without speaking of ‘betrayal’ or painting comrades we disagree with as (historically, analytically, strategically etc.) naïve. From this prism, the title and subtitle of your article was, I submit, not helpful.To end on a high note, and on a belief that unites us, I shall quote approvingly and in full your closing lines: “Our larger aim should be to welcome the emergence of democracy in Russia – maybe the last thing that the Western security establishment actually desires. The alternative is rule by a mobsters international, which would ensure that the world will fry. It is as important as that.”In solidarity, as everYanis Varoufakis

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My take on Georgia Melloni and her incoming government – LTIO clip

Italy is about to have a new far-right government under the self-declared Mussolini groupie Ms Georgia Meloni. In this LTIO episode (entitled Fascism: The Radical Centre’s Last Resort), with comrades Roger Waters, Ece Temelcuran and Frank Barrat), I share my thoughts on Meloni and Co.

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How the West poisoned its money – Project Syndicate op-ed

ATHENS – Capitalism conquered the world by commodifying almost everything that had a value but not a price, thus driving a sharp wedge between values and prices. It did the same to money. The exchange value of money always reflected people’s readiness to hand over valuable things for given sums of cash. But, under capitalism, and once Christianity accepted the idea of charging for loans, money also acquired a market price: the interest rate, or the price of leasing a pile of cash for a given period.After the 2008 financial crash, and especially during the pandemic, a strange thing happened: money held its exchange value (which inflation diminishes), but its price tanked, turning negative on many occasions. Politicians and central bankers had inadvertently poisoned “humanity’s alienated ability” (Karl Marx’s poetic definition of money). The poison they administered was the post-2008 policy, in Europe and the United States, of harsh austerity for most to finance socialism for the few.Austerity reduced public expenditure precisely when private expenditure was falling like a brick, accelerating the decline of the sum of private and public expenditure – which is, by definition, national income. Under capitalism, only Big Business has the capacity to borrow significant amounts of the money that lenders, mostly rich people with large savings, are willing to lend. This is why the price of money tanked after 2008: demand for it dried up, as Big Business responded to austerity’s calamitous effect on demand by canceling investments, even as the supply of money (to Big Business) burgeoned.Like stockpiles of potatoes that no one wants to buy at the prevailing price, the price of money – the interest rate – drops when demand for it lingers below the quantity available to be lent. But here is the crucial difference: Whereas a rapidly falling potato price cures quickly any over-supply problem, the opposite happens when the price of money falls fast. Instead of rejoicing that they can now borrow more cheaply, investors think: “The central bank must think things are grim to let interest rates drop so much. I won’t invest even if they give me free money!” Even after central bankers cut money’s official price sharply, investment failed to recover – and the price of money kept falling, until it reached negative territory.It was a strange situation. Negative prices make sense for bads, not goods. When a factory wants to remove toxic waste, it charges a negative price for it: its managers pay someone to get rid of it. But when central banks begin to treat money like car manufacturers treat spent sulfuric acid, or nuclear power station their radioactive wastewater, one knows that something is rotten in the kingdom of financialized capitalism.Some commentators now hope that Western money is being purified in the flames of inflation and interest-rate hikes. But inflation is not driving the poison out of the West’s money system. After more than a decade of addiction to poisoned money, no obvious detoxification method presents itself. Inflation today is not the same beast the West faced in the 1970s and early 1980s. This time around, it threatens labor, capital, and governments in ways that it could not 50 years ago. Back then, labor was organized enough to demand wage increases that averted a cost-of-living crisis, and neither states nor private corporations relied on free money to keep going. Today, there is no optimal interest rate that will restore the balance between money demand and money supply that does not trigger a massive wave of private and public bankruptcy. That is the long-term price of poisoned money.The US government faces the impossible dilemma of curbing domestic inflation and forcing Corporate America and many friendly governments into a solvency crisis that will threaten America’s own stability. Things are far worse in the eurozone, where policymakers refused to do the obvious once Europe’s banks had failed after 2008: establish a proper federation’s foundation – a fiscal union. Instead, they let the European Central Bank do “whatever it takes” to save the euro. Only by poisoning its own money could the ECB keep the euro show on the road. Today, the ECB owns huge quantities of Italian, Spanish, French, even Greek debt that it can no longer justify holding as a means of achieving its inflation target, but which it cannot renounce without calling the euro’s existence in question.While pondering the unresolvable conundrum Europe and America face, this is perhaps a good moment to contemplate the deeper reason why money can be poisoned (which is not the same as being debased by inflation). A good start is to borrow Albert Einstein’s idea that we can make sense of light only of if we accept that it features two distinct behaviors: that of particles and that of waves.Money, too, has two natures. Its first nature, that of a commodity that we trade with other commodities, can never explain why money would ever acquire a negative price. But its second nature does: Money, like language, is also a reflection of our relation to one another and to our technologies. It echoes how we transform matter and shape the world around us. It quantifies our “alienated ability” to do things together, as a collective. Once we recognize money’s second nature, everything makes a lot more sense.Socialism for bankers and austerity for most of the rest thwarted capitalism’s dynamism, plunging it into a state of gilded stagnation. Poisoned money flowed in torrents, but not into serious investments, good jobs, or anything capable of re-animating capitalism’s lost animal spirits. And now that the specter of inflation hovers above us, no monetary policy can purify money, restore equilibrium, or channel investments where humanity needs them.

 

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Is This the End of ‘Socialism for the Rich’? – The Atlantic

Last Thursday, the International Monetary Fund spooked the markets and surprised the commentariat by chiding the U.K. Conservative government for fiscal irresponsibility. The shock was palpable. For the IMF to criticize the government of a major Western economy was a little like the janitor scolding the landlord for putting the building’s assessed value at risk. That sense of a reversal of the usual order of things was all the sharper because, lest we forget, it was Britain’s Tories, under Margaret Thatcher’s steely leadership, who wrote the book on fiscal probity as the bedrock of neoliberalism. The IMF spent more than four decades inflicting that orthodoxy upon hapless governments the world over.As if in a bid to amplify the stir it knew it would make, the IMF’s communiqué went so far as to censure the British government for introducing large tax cuts (now partially canceled after the IMF intervention), because they would mainly “benefit high-income earners” and “likely increase inequality.” Tories loyal to Britain’s beleaguered new prime minister, Liz Truss; America’s feistier Republicans; international economic pundits; and even some of my comrades on the left were briefly united by a common puzzlement: Since when did the IMF oppose greater inequality? One would be hard-pressed to identify a single IMF “structural adjustment program”—ask Argentina, South Korea, Ireland, or Greece (where I was once a finance minister who had to negotiate with the IMF) about the strings attached to its loans—that had not increased inequality. Had the fund’s hard-nosed bureaucrats enjoyed a road-to-Damascus moment?Three theories have surfaced about the IMF’s motives for opposing the U.K.’s tax cuts for the wealthy. One is that the IMF board feared that the fund would struggle to raise sufficient money were London subsequently to request a bailout. Another theory, voiced by former U.S. Treasury Secretary Larry Summers, is that the IMF now understood it ought to show evenhandedness in its dealings with countries rich and poor. “When there’s a crisis situation or policies that are manifestly irresponsible, it’s kind of natural for the IMF to take some kind of note,” Summers told the Financial Times, adding, “I don’t think the IMF should distinguish between its rich country shareholders and its emerging market shareholders.”A third theory followed the Pauline-conversion rationale, suggesting that the IMF’s statement damning the Truss government’s giveaways to the ultra-rich could mark a sea change in the Washington-based institution. According to this view, the IMF was realizing that to save the international liberal order from the various authoritarian populists ascendant in the world—such as Donald Trump, Giorgia Meloni, Marine Le Pen, Viktor Orbán, Narendra Modi, and Jair Bolsonaro—it must shift its mission in a more social-democratic direction.Though interesting hypotheses, none of these explanations engages with the reality to which the IMF was responding with last week’s surprising statement. The notion that London will go cap in hand for a bailout too big for the IMF to deliver is absurd. Britain is a wealthy country that borrows exclusively in a currency printed by the Bank of England. If worse came to worst, the Bank of England could raise interest rates to as much as 6 percent to stabilize sterling and the money markets. An interest rate at that level would certainly demolish the U.K.’s economic model of the past 40 years, but it would be the choice over an IMF bailout every time.And I have firsthand experience that contradicts the theory that the IMF has only now, for the first time, decided to confront a G7 country whose policies it deems to be threatening global financial stability. In my negotiations as Greece’s finance minister with the IMF in 2015, the fund’s top officials were openly scathing about the German government’s rejection of a full restructure plan for Greece’s public debt; they accused Berlin of undermining Europe’s, and by extension the world’s, financial stability.A year later, in a telephone conversation among senior IMF staff published by WikiLeaks, its European chief told a colleague that the IMF should confront the German chancellor and say, “Mrs. Merkel, you face a question. You have to think about what is more costly: to go ahead without the IMF … or to pick the debt relief that we think Greece needs in order to keep us on board.” So much for the second theory, that the IMF now ought to start acting toward Western governments the way it does to developing countries.This brings us to the third, and most interesting, of the three explanations: that to save the global liberal order from right-wing populism, the IMF is turning social-democratic, “woke” even—as some British Tories accuse it of doing. The truth, I fear, is less heroic. What happened last week is simply that the IMF panicked. Along with other smart people in the U.S. government and at the Federal Reserve, its officials feared that the U.K. was about to do to the United States and the rest of the G7 what Greece had done to the euro zone in 2010: trigger an uncontrollable financial domino effect.In the days preceding the Truss government’s mini–budget statement, the $24 trillion U.S. Treasuries market, whose health decides whether global capitalism breathes or chokes, had already entered what one financial analyst called a “vortex of volatility” not seen since the crash of 2008 or the first days of the pandemic. The yield on the U.S. government’s benchmark 10-year bond has risen sharply from 3.2 percent to more than 4 percent. Worse, a large number of investors had recently stayed away from an auction of new U.S. debt. Nothing scares those in authority more than the specter of a buyers’ strike in the U.S. bond markets.To steady the investors’ nerves, officials came out in strength with reassuring messages. Neel Kashkari, the Minneapolis Federal Reserve president, summed up the spirit thus: “We are all united in our job to get inflation back down to 2 percent, and we are committed to doing what we need to do in order to make that happen.” This was the moment when the U.K. government chose to announce Britain’s most expansionary fiscal policy since 1972.American officials were not the only ones to fret. Days before the London government’s so-called fiscal event, the European Systemic Risk Board—a body established by the European Union after the 2008–09 crisis—had issued its first-ever general warning, in effect confirming that Europe’s financial markets had fallen into the volatility vortex that originated in the United States. Europe’s electricity providers were being bankrupted by commitments to future orders at exorbitant prices, Germany’s mighty manufacturing industry was shutting down because of natural-gas shortages, and public and private debt was climbing fast.An extra financial shock from the U.K. had the potential to cause huge spillover effects across Europe and beyond. If the U.S. subprime market could push French and German banks over a cliff in 2008–09, this latest shock wave from the Anglosphere could do similar damage, especially if it rocked the U.S. Treasuries market.In the face of this mounting transatlantic storm, the IMF’s decision to step in was unsurprising. The only remaining puzzle is why the IMF pointed to the inequality-causing effects of the Truss government’s tax cuts for the ultra-rich. Although force of circumstance has changed something significant, I doubt this spells the demise of the IMF’s neoliberal instincts. Much more likely is this: The IMF realized that the post-2008 inequality-generating policies it helped enforce have plunged North Atlantic capitalism into a state of gilded stagnation that is now unstable, and it feared that the volatility vortex would worsen on news of measures that would create even greater inequality. If the IMF has begun to dislike inequality, it is only because the IMF sees inequality as a proxy for systemic instability.After the 2008 financial collapse, the U.S. and the EU adopted a policy of socialism for bankers and austerity for the working and middle classes. This ended up sabotaging the dynamism of North Atlantic capitalism. Austerity shrank public expenditure precisely when private expenditure was collapsing; this sped up the decline of both private and public spending—in other words, aggregate demand in the economy. At the same time, quantitative easing by the central banks channeled rivers of money to Big Finance, which passed it on to Big Business, which, faced with that low aggregate demand, used it to buy back their own shares and other unproductive assets.The personal wealth of a few skyrocketed, the wages of the majority stagnated, investment crumbled, interest rates tanked, and states and corporations became addicted to free money. Then, as the pandemic lockdowns stifled supply and furlough schemes boosted demand, inflation returned. This forced central banks to choose between acquiescing to rising prices and blowing up the corporate and state zombies they had nurtured for more than a decade. They chose the former.All of a sudden, though, the IMF saw the liberal establishment’s lost capacity to stabilize capitalism reflected in rising economic inequality. So the last thing the markets needed, the fund’s technocrats realized, was more socialism for the wealthy. But it would take a feat of wishful thinking to interpret the IMF’s panic-driven reaction as a sincere conversion to economic redistribution and social democracy. A warning against an act of elite self-harm was the extent of it.Yanis Varoufakis, a member of the Greek Parliament and a former finance minister of Greece, is the author of  Adults in the Room: My Battle With the European and American Deep Establishment  and, most recently, the novel Another Now.

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Trickle-down Truss is carrying on the dirty work of Thatcher, Blair and Osborne – THE GUARDIAN

If Kwasi Kwarteng’s mini-budget survives the storm it triggered, a banker on a million-pound annual salary stands to receive £50,000 of income tax relief – on top of the extra bonuses the bank can throw in, now that the Liz Truss government has removed the cap on them. Meanwhile, a Deliveroo rider gets a pep talk on the emancipatory value of aspiring to be wealthy, presumably as an incentive to pedal harder. This is the gist of the government’s growth strategy or, according to former Brexit minister David Frost, its antidote to stagnation and defeatism.While it’s tempting to draw the obvious analogy between zombie ideas such as the trickle-down growth effect, and the classic Hollywood horror film Night of the Living Dead, a more appropriate response to the seriousness of the situation is to follow the banker’s extra cash. The government claims the banker will invest it, thus promoting growth. If it were not a blatant lie, it might have passed as a touching example of unfounded faith. But unlike Adam Smith’s bakers, butchers and brewers, who would invest any spare cash into better and more bread, ale and meat, the banker will buy into some fund that will, in turn, purchase shares, derivatives and bonds.These recipients of the banker’s extra money have a long track record of not investing in actual productive capacity. Why would they, when the masses out there can’t afford to buy new, high-value products? Instead, big businesses use any funds that come their way either to buy back their own shares (to boost their share price and, consequently, their bonuses) or to speculate in the derivatives market or in real estate. The dirty secret behind the zombie idea of trickle-down economics is that only one thing can prevent the vicious financial cycle from spinning out of control: the government’s (and, sometimes, the central bank’s) power to feed it.Margaret Thatcher, whom Liz Truss pretends to idolise, understood this dirty little secret. She learned the hard way that tax cuts for the wealthy merely shifted income to the ruling class without delivering growth dividends. For her neoliberal policies to deliver a semblance of growth, she had to throw into the vicious financial cycle pre-existing public wealth: council houses and public utilities (gas, electricity, water) in particular. In short, Thatcher’s policies boosted growth not because trickle-down worked, but because swathes of society’s common wealth was liquidated at cutdown prices and thrown into the City’s cauldron.Thatcher’s business model for the UK has remained more or less the same ever since. While the last Labour government did use its revenues from taxing the City to fund the NHS and social services, the UK’s productive capital base continued to shrink. Tony Blair and Gordon Brown not only maintained the financialisation cycle that Thatcher had begun, but boosted it in two ways: by removing all remaining regulatory constraints on the City, and by throwing into its circular flow the proceeds from deregulated public services.Then, in 2008, under the weight of its hubris, the financialisation vicious cycle had its famous collapse. At once, the Bank of England combined forces with the government to re-float it. To that splendid example of socialism exclusively for the financiers, George Osborne added austerity, which, by suppressing aggregate demand further, eradicated any remaining drive toward actual investment in Britain’s productive base.Four decades after the neoliberal experiment began, the evidence is in: trickle-down economics is dangerous make-believe. Growth is in fact impervious to the top income tax rates. Paul Krugman recently showed that neither Ronald Reagan’s tax cuts nor Bill Clinton’s tax hikes affected the US’s income path significantly. Similarly in the UK, the data dispels the Tory conviction that Thatcher put Britain on to a brave new path to higher growth. We find that in 1979, the output per hour worked in the UK was trailing France and Germany by 17% and 18% respectively. Did the UK catch up after four decades of trickle-down tax policies and assorted deregulation measures, which never happened in France? No, in 2019, France’s productivity remained 18% higher than the UK’s, and Germany’s 17%.From this historical perspective, the recent backlash against Liz Truss seems almost unfair. Sure enough, the new prime minister and her chancellor blundered monumentally. Nevertheless, it is disingenuous of the Truss trashers to try to pin on her the sins of a business model inspired by Thatcher, modified by Blair, shored up by Osborne, undermined by Brexit and neglected by Boris Johnson. The hapless new PM’s rookie mistake was to try to beat Rishi Sunak (while also jettisoning Johnson’s levelling up agenda) by doing … a Thatcher. Alas, because she lacked Thatcher’s access to plentiful public assets to be injected into the financial sector, and with the Bank of England too spooked by inflation to print more money to revitalise financialisation, Truss ended up trying to achieve the impossible: to do a Reagan, but without the mighty dollar in support.The problem with zombie ideas that refuse to die is that, once they re-emerge, they encourage other deadly undead ideas to rise up too. There are already signs that Kwarteng, instead of killing off the trickle-down zombie, will instead revive the austerity zombie. Impervious to the fact that tax cuts never generate growth, and austerity never arrests the growth rate of public debt, the UK is destined to be haunted by these two zombies for two more years.The silver lining is that Trussonomics has almost guaranteed the Tories’ defeat in the next election. And then? Does Keir Starmer’s Labour have a plan to break up the doom-loop of state-maintained wealth appropriation centred upon the City? The UK’s future, and any hope of undoing four decades of unnecessary damage, will depend on it.Yanis Varoufakis is the leader of MeRA25 in Greece’s parliament, a former finance minister of Greece, and author of Another NowFor The Guardian’s webpage click here

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Zombie capitalism is unravelling – THE NEW STATESMAN

This is no sterling crisis. It is a crisis of British capitalism caused by 40 years of underinvestment and deindustrialisation, exacerbated by chronic reliance on speculative bubbles and triggered by Liz Truss’s extravagant kindness to Britain’s wealthy.While all eyes are on the fall of the pound, the real drama revolves around the Bank of England’s interest rate. Typically, a developed country’s exchange rate rises when its government announces its intention to borrow big. Foreseeing a rise in interest rates, speculators rush into the currency to take advantage. However, precisely the opposite happened after Kwasi Kwarteng’s (not-so) mini budget last week because of a dirty secret known to almost everyone: British capitalism is even more addicted to low interest rates than the United States or continental Europe.In view of the UK’s high inflation (9.9 per cent), its record current account deficit (8.3 per cent of GDP) and its low foreign exchange reserves, the Bank of England cannot steady the gilt market, or the pound, by buying gilts – as it announced on Wednesday – or pounds. These desperate moves can only buy a little time. Before long, it will need to raise its base rate to at least 6 per cent to equilibrate money markets. But such a rate would kill the corporate zombies on which the British ruling class depends for its existence, not to mention the house price levels on which the Tories have built their electoral dominance. That’s why the pound’s slide is merely a symptom of a deeper crisis of post-1979 British capitalism, not its epicentre.The Thatcher insurgency was ultimately a political project to deindustrialise Britain while encouraging the City of London to create mountainous paper wealth by financialising council houses and public utilities. Fully aware that she could not emulate Ronald Reagan’s borrowing – lacking the exorbitant privilege of the dollar – Margaret Thatcher’s growth strategy involved controlling public debt while letting private debt rip – the opposite of what Truss is doing today.Under Thatcher, chancellor after chancellor unshackled the City while keeping a tight rein on the Treasury – primarily through inhuman cuts to social benefits, the NHS, education and all the other services that gave people modicum of control over their lives. Mounting private debt did not frighten ministers because, unlike today, they had three reasons to welcome sky-high interest rates: the relatively low levels of private debt they inherited; the government’s mortgage relief scheme (now gone) and, crucially, the availability of so many council houses and public utility (gas, electricity, water) shares to dump into the City’s financial cauldron at below-value prices.The Blair and Brown years saw financialisation accelerate further and in sync with the breakneck speed at which Wall Street spawned itsinfamous derivatives. While Labour ploughed a substantial portion of the UK’s tax receipts from Big Finance into the NHS and social services, the process of underinvestment in productive capital continued. Then, the 2008 crash burst the bubbles in which Britain’s ruling class had invested so much since 1979.Almost immediately, the Bank of England, along with the US Federal Reserve and every other major central bank, rushed in to refloat the City and Wall Street. At the same time, in an absurd attempt to compensate for their largesse, they imposed austerity on the majority of their people – more so in some countries than others but, nonetheless, universally. The result was the elimination of what little actual investment was taking place. Why would big business invest its central bank monies when the little people out there were broke? Why not just buy back shares so as to boost share-linked bonuses and buy splendid houses, art and yachts?David Cameron and George Osborne’s Britain was, of course, not the only economy where socialism was lavished on the financiers while the majority of people were subjected to austerity. What distinguished Britain from continental Europe was that financialisation started earlier in the UK and penetrated much deeper into the fabric of an economy that had been purposely deindustrialised. Thus, the Bank of England’s post-2008 money creation zombified the UK economy far more than the German or French economies.Then came the pandemic. Central banks reacted to the spectre of capitalism’s implosion with more money printing on behalf of the same financiers who gave it to the same CEOs to buy back more of their shares. However, to avoid starvation during the lockdowns, some of the freshly-minted money had to be handed over to the furloughed workers. As the lockdowns artificially choked the supply of goods and services, the little people got some of the central bank money to spend, demand rose and, hey presto, inflation was back.The crisis that is now taking its toll on sterling has been, in this sense, a long time coming. It harks back to 43 years of class war against working Britons, four decades of under-investment and, crucially, 13 years of monetary largesse that turned the City, former utilities and mortgage owners into low-interest rate addicts.What broke the dam were the handouts lavished on the rich by a Prime Minister and Chancellor who pretend to model themselves on Thatcher but who, in reality, are trying to do the impossible. You cannot pursue Reaganomics without a modern-day Paul Volcker able and willing to print the world’s reserve currency and to raise interest rates, if necessary, to 20 per cent.UK interest rates will, undoubtedly, rise and the pound will recover. But many of the ruling-class zombies will die. A new inequality will rise within the British bourgeoisie – between rentiers who managed to reduce their debt liabilities in time and others who did not.Meanwhile, the UK’s working class, the young and pensioners will suffer a disastrous, secular decline in their prospects. Two more years of this government will guarantee that the next one will not be able to mend the wreckage left by Thatcherism’s latest metamorphosis.

For The New Statesman‘s website click here.

 

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