El Minotauro global

by Yanis Varoufakis

En este extraordinario y provocador libro, Varoufakis destruye el mito de que la financiarización, la regulación ineficaz de los bancos y la globalización fueron las causas de la crisis económica global. Más bien, son síntomas de un malestar que puede rastrearse hasta los años setenta; la época en que nació el «Minotauro global». Igual que los atenienses mantenían un flujo constante de tributos a la bestia, así el «resto del mundo» envía sumas increíbles de capital a EE.UU. y a Wall Street. De este modo, el Minotauro global se convirtió en el motor que impulsó la economía mundial desde principios de los años ochenta hasta 2008.

La crisis actual en Europa, los acalorados debates sobre austeridad frente a estímulos fiscales en EE.UU., y el choque entre las autoridades chinas y el gobierno de Obama sobre los tipos de cambio son los síntomas inevitables del debilitamiento del Minotauro, la prueba de un sistema global tan insostenible como descompensado. Más allá de esto, el autor expone las opciones que tenemos a nuestra disposición para volver a poner un mínimo de sensatez en un orden global altamente irracional.

Quedan todavía muchos cabos por atar en este periodo, pero el libro de Varoufakis representa una magnífica introducción, escrita con un estilo muy lúcido, desde un país sacudido por la hecatombe económica.

Genres: Economics, Politics, Nonfiction, History, Finance, Business, Political Science

352 pages, Paperback

First published August 1, 2011

About the author

Ioannis "Yanis" Varoufakis is a Greek-Australian economist and politician. A former academic, he has been Secretary-General of MeRA25, a left-wing political party, since he founded it in 2018. A former member of Syriza, he served as Minister of Finance from January to July 2015 under Prime Minister Alexis Tsipras.

Reviews

[The Conspiracy is Capitalism · Rating 5 out of 5]

Magnum opus on how the world economy works since WWII…

Preamble:
--If Varoufakis is my favorite writer, why postpone reading his first general public book?
…Well, the other Western political economist I’ve learned so much from happens to be Michael Hudson, who published in 1972(!) the infamous (in government/military/intelligence circles) Super Imperialism: The Origin and Fundamentals of U.S. World Dominance. This was the first detailed study of what Varoufakis later (in 2003) termed the “Global Minotaur”. So, how is it that Varoufakis’ research makes zero mention of Hudson’s work?!
--Of course, Varoufakis’ approach still turned out brilliant (read the 2nd edition), as he is a much better writer for the general public. To salvage the situation, my review will include a comparison with Hudson’s book.

Highlights:

1) Real-world Capitalism::
--There is now a litany of “what happened?” books on the 2008 Financial Crisis with numerous explanations (systemic risk, regulatory capture, greed, cultural origins, toxic theory). Varoufakis incorporates some of these, but takes a deeper dive into the structural crisis of capitalism (ex. David Harvey: https://youtu.be/qOP2V_np2c0).
--I prefer:
a) Varoufakis’ framing of capitalism’s accelerating abstraction/contradictions (for lovely intro, see Varoufakis’ Talking to My Daughter About the Economy: or, How Capitalism Works—and How It Fails), over...
b) Hudson’s framing of a “progressive” Industrial Capitalism vs. reactionary “neo-feudal” Finance Capitalism (Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy), which Hudson doesn’t seem to synthesize enough with his own critiques of imperialism.
--Here's Varoufakis' breakdown:
i) Abstract Production:
--Mainstream economics naturalizes capitalism, thus failing to capture its significance in history. Markets where goods (real commodities) are exchanged have long existed.
--Capitalism took root when the focus for elites turned to selling goods (ex. wool) on the global market, necessitating the commodification of land and labour (nature and humans are "fictitious commodities": The Great Transformation: The Political and Economic Origins of Our Time): the Enclosures kicked serfs off feudal lands (creating the land market) and the dispossessed were forced to sell their labour (creating the labour market). See: The Origin of Capitalism: A Longer View
--“Societies with markets” now became “market societies”. A “Great Reversal” took place: during feudal times, production came first (where the serfs performed the harvest) and then came distribution (when the lords took their share)/finance (lending what's left over). Thus, production and distribution were clear and visible to the labourer. With land and labour commodified, finance/distribution came first (credit for capitalist investments/wages to the labourer), then production. Thus, commodification abstracts the productive inputs of land/labour/money (Marx’s “commodity fetishism”), enabling the manufacturing of consent for capitalist distribution (providing stability for capitalist ideology, i.e. liberalism).
ii) Volatile Finance:
--Greater production required greater investments, thus greater Financialization (money being the third "fictitious commodity") and its abstraction of value/risks (credit = bringing future productivity to use in the present, buoyed on the waves of optimism/pessimism).
...This led to further stability of ideology amidst instability of outcome: economic stability breeds instability (Hyman P. Minsky) as Finance accelerates confidence creating reckless speculative bubbles.

Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.

-John Maynard Keynes

iii) Networked corporations:
--By the beginning of the 20th century, industrial capitalists (ex. Edison) were building monopoly power; this involved not just the final product (ex. light bulb) but also control of the infrastructure (ex. electricity generation stations/wire distribution), resulting in corporate mini-states (The Corporation: The Pathological Pursuit of Profit and Power).
--Such ventures meant Finance also grew colossal, and prices were less sensitive to supply/demand (thus no longer shock absorbers where a fall in demand means fall in prices, ensuring the supply is sold).
iv) 2 Gremlins (labour and money markets) :
--For industrial capitalists, both labour (wages) and money (credit, thus debt payments) are unavoidable costs, means-to-an-end (profits). Thus, unlike real commodities (which we expect everyday users to eventually purchase given falling prices), capitalists are concerned with the end goal of profitability (i.e. optimistic future with plenty of demand).
...So, we encounter the “prophecy paradox”: during a downturn where wages fall and the State tries to stimulate investment by cutting interest rates, pessimism of future profitability can cause capitalists to not take advantage of the falling costs of wages/credit, fulfilling the pessimistic future and worsening the downward spiral (rather than balancing to “equilibrium”)!
v) Ghost in the machine (labour value vs. mechanization):
--Finally, the Sisyphean contradiction of the competitive capitalist drive to automate away labour costs while labour is a source of value, thus cheapening the product and squeezing profit margins (and demand).

Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth - the soil and the labourer.

-Marx, Capital: A Critique of Political Economy, Volume 1

2) US’s Global Plan (1950-1971):
--This contradictory system of stability (in ideological abstraction) amidst instability (in routine economic crises of increasing scale), of mass productive social mobilization during booms and complete shambles during busts, reached a global scale with the Great Depression that was only resolved by the creative destruction of the greatest war in human history, WWII.
--US New Dealers, haunted by the Great Depression, were greatly concerned of another global crisis post-WWII, as global trade converged on a single currency (US dollar) and Financial center (Wall Street). See Hudson on how US’s isolationist creditor role during WWI burdened global trade and pushed the world into WWII.
--Keynes (British) was concerned with trade imbalances (where deficit countries become a weak link due to debts, triggering a chain reaction in falling demand), proposing an international central bank (“International Clearing Union”) and international trade currency (“bancor”) to automate the regulation of imbalances by recycling surpluses (“global surplus recycling mechanism”, GSRM).
--US New Dealers could not reach this level of enlightenment, given their surplus power while the rest of the world powers were in ruins from WWII. So, US rejected Keynes’ automated, internationalist GSRM and opted for a US-controlled GSRM (US’s “Global Plan”, i.e. Bretton Woods). Both Varoufakis and Hudson point out the US’s enlightened recognition of a GSRM over the pre-WWII isolationist approach, as now the US funded the re-building of recent-enemies Japan and Germany to establish 2 strong regional currencies as shock absorbers.
...However, Varoufakis and Hudson are more blunt in addressing the underbelly of this “Golden Age of Capitalism” than moderates like Chang (Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism); the US was pivoting into the Cold War, reviving reactionaries in Japan/West Germany (and throughout the rest of the world to preserve imperialism's global divisions, a departure from FDR’s supposed disdain for European colonialism)
-The Jakarta Method: Washington's Anticommunist Crusade and the Mass Murder Program that Shaped Our World
--Varoufakis highlights the flexibility of Bretton Woods: China was supposed to be the market for Japan, but Mao’s revolution prevented this; so, the regional US-led war against Korea fed the Japanese Miracle of reindustrialization (subsequently, the war on Vietnam fed South Korean industrialization: Drums of War, Drums of Development: The Formation of a Pacific Ruling Class and Industrial Transformation in East and Southeast Asia, 1945-1980). However, wars can take on a life of their own…

3) US’s Global Minotaur (1971-2008):
--Hudson stresses the central role of US war spending in Korea and Vietnam in unraveling Bretton Woods (Varoufakis agrees, adding in falling US corporate profits). War spending abroad meant dollars flooded into foreign central banks, who in turn would exchange them for US’s gold reserves given Bretton Wood’s dollar-gold convertibility. US spent so much in these wars that it effectively went from a surplus to a deficit country.
--To retain its global hegemony, US dismantled its “Global Plan” of Bretton Woods (GSRM via US surplus) to replace it with what Varoufakis calls the “Global Minotaur” (GSRM via US deficit); hegemonic power lies in retaining control of the GSRM. Such a drastic reversal required several shocks:
i) Nixon Shock: ended Bretton Woods’ dollar-gold convertibility; US Secretary of the Treasury John Connally to G10: the dollar is our currency, but it’s your problem! The rest of the world was incapable of establishing an alternative trade currency, while the US controlled the dollar’s “printing presses”. US now freely turbo-charged its twin deficits (esp. under Reagan; trade deficit/domestic budget deficit i.e. military spending and tax cuts for the rich) financed simply by printing dollars while the rest of the world returned trade goods and paid for US military encirclement. This is the tribute paid to the Minotaur (Greek mythology, as expected from Varoufakis). See Hudson on the economic details of the “greatest free-ride in history”.
ii) Volcker Shock: new Chairman of the Federal Reserve Paul Volcker: “controlled disintegration in the world economy is a legitimate [US] objective for the 1980s”. Varoufakis counters the conventional framing of stagflation as the OPEC oil crisis vs. US. US was able to take advantage of the crisis to reign in competition from Germany/Japan/Third World industrialization (all much more reliant on oil imports) while Volcker spiked interest rates to attract foreign capital for the Minotaur (esp. petrodollar recycling).
--Once the Minotaur was born, the “beast’s handmaidens” were:
i) Wall Street: Bretton Woods’ shackles on Finance were removed, and the Wall Street casino got busy with the massive inflows to the Minotaur with “financial innovations” to mobilize society into a speculative euphoria. CDOs (collateralized debt obligations) packaged together debts to hide risks, while CDSs (credit default swaps) made bets on others defaulting. Such financial instruments become not just a store of value but also a means of exchange (i.e. traded and speculated with), thus taking the role of private money (Hayek would be so proud!).
ii) Corporate profits: Walmart business model of squeezing labour/small producers rather than technological innovations.
iii) Trickledown politicians: Reaganomics and Thatcher’s “shareowners’ democracy” privatizations.
iv) Supply-side economics: Varoufakis’s academic career was focused on such mathematical abstractions and makes an illustrative connection to the real-world Wall Street CDO calculations that assumed one debt going bad is unrelated to other debts, thus no risk of systemic crisis!
v) Household debts to keep the American Dream alive (since the rising-wages compromise was broken)

4) Death of the Minotaur while its handmaidens reign (2008-present):
--The Minotaur’s tribute feeding Wall Street’s casino eventually burst (for a more economized analysis, see Keen’s Can We Avoid Another Financial Crisis?).

Notice the irony: in a world ideologically dominated by monetary conservatism [against Government spending], and ringing with long sermons about the perils of printing money, the effective money supply had been turned over to privateers [private banks] bent on flooding the markets with money of their own making [ex. CDOs]. How did this differ, really, from handing the Fed’s printing presses over to the mafia? There is not much difference, is the honest answer.

--The book’s 2nd edition confirms the hypothesis that the Minotaur died because a US hollowed out by Wall Street (unemployment/ black hole of private debts, i.e. debt deflation) is now insufficient as a GSRM (despite the continuation of its twin deficits). The key handmaiden (Wall Street) continues to reign since Obama failed to seize the moment of public outrage to reign in Wall Street like FDR, instead insuring Wall Street and reviving their casino at the expense of the public. Without the Minotaur GSRM, what is left is Wall Street “bankruptocracy”.
--Varoufakis reviews the rest of world powers: “dimming sun [Japan], wounded tigers [Southeast Asia], flighty Europe, and anxious dragon [China]”. For Europe’s abyss, see And the Weak Suffer What They Must? Europe's Crisis and America's Economic Future. On China, Varoufakis reviews its contradictions as the production base of global capitalism (thus competition) while also offering an alternative (to imperialist IMF/World Bank). After the 2008 crisis, China inflated its own bubbles to save global demand/production from completely collapsing, and one question is how these bubbles can be deflated without a new GSRM. Hudson seems more optimistic on China building an alternative.
--On a new GSRM, Varoufakis praises a Global South or Keynesian internationalist initiative, but concludes on a disappointing note:

With Europe out of contention, and the emerging nations buffeted by both the Crisis and a lack of tradition in mould-breaking on a global scale, once more it is the United States that must provide, perhaps for the last time, the missing agency. Put simply, I just cannot see how genuine progress towards building a wholesome GSRM can be made otherwise.

The Missing:
--While Hudson and Varoufakis both recognize imperialism, their research methodology/framing are still Western-centric. This should be balanced with the global South geopolitics of Vijay Prashad (The Darker Nations: A People's History of the Third World, in particular the Global South as a historical actor esp. decolonization’s internationalism/NIEO proposal) and the (dense) political economy of Utsa and Prabhat Patnaik (Capital and Imperialism: Theory, History, and the Present)
--The irrationality of capitalist crises (i.e. if demand briefly halts then epic crisis) becomes exponential when we consider this demand underlying “economic health” is GDP’s compound growth, which is driving us to existential environmental crisis! Less is More: How Degrowth Will Save the World
-Facing the Anthropocene: Fossil Capitalism and the Crisis of the Earth System
--For a longer view than just the 20th century:
-World-Systems Analysis: An Introduction
-Debt: The First 5,000 Years
--Transcending global capitalism? See Varoufakis' Another Now: Dispatches from an Alternative Present

[Trevor · Rating 4 out of 5]

Nothing I like more than a good Greek myth. And the Minotaur has got lots going for it. An angry god, a far too beautiful bull, leading inevitably to bestiality, a monster child that likes to eat people, a master builder and his maze, a clever young hero and a suicidal father. What is there not to like? And as with so many Greek myths, this is a story of characters either having unnaturally too much or too little affection for members of their family. All of which is well and good, but I’ve a feeling that if you are going to use a myth like this to help you explain what is complex economic theory, well, then the myth has either got to be simpler than the economic theory you are trying to explain, or it needs to be so clearly relevant that it illuminates that theory in ways doing without it could not do. That is how all good metaphors work – taking what is known to help us understand the unknown.

The problem here is that the Minotaur story does neither of these things. Admittedly, the author overcomes the problem of the Minotaur story not being all that well known by giving his thumbnail of the story on about a page of the book. But it’s not even that the story isn’t well know that bothers me – it’s that it isn’t clear what the story adds to our understanding of the problem at hand. Most of the elements of the myth just don’t relate to what he has to say about international economic activity. I do understand that international trade deficits and the role of the American dollar aren’t nearly as interesting as Greek myths, but I felt he was working too hard to get the one to explain the other. The collapse of the financial markets and the inability of the US to continue to operate as a recycling mechanism for global surpluses is a story with no gods, no sex with bulls, no maze, no hero…

Basically, all that the Minotaur story is used for is the idea that the Athenians were forced to pay tributes and these ended when the Minotaur died, the comparison being made to the tributes the world has been forced to pay the US since the end of Bretton Woods. But even that bit of the myth doesn’t hold with the story the author is telling here, since he is arguing that the tributes have continued long after the Minotaur was killed in 2008.

I can’t think of a better myth to help explain this story, if there was one, I think it would probably need to be tidal, but even King Canute doesn’t quite work – so, let’s just go with the story itself and forget about the Minotaur for a minute. The problem with this strategy is that it does leave me in the position of not particularly feeling like an expert in this history – what follows is what I’ve gleaned from the book and from others I’ve read over the years. I take responsibility in advance for the mistakes I am going to make along the way. Since I’m not an economist myself, I’m happy to assume the economics is going to be boring but I’m not sure it will be helped even with women having sex with bulls along the way.

After World War Two, the US was in a remarkably powerful position. It was the world’s major superpower, it stood at the centre of economic power and it was one of the few remaining creditor nations. It was the world’s major surplus nation. That is, it produced an awful lot and everyone else wanted to buy that stuff. It was able to use its economic might to rebuild Europe (mostly Germany) and Japan – and it did this to act as a bulwark against the Soviet Union.

Keynes had proposed at the Bretton Woods conference that there should be regulations that would essentially force countries to recycle their surpluses and thereby keep the world economy growing and healthy. Such a recycling mechanism is necessary, since some countries will inevitably become debtor nations. In fact, even some regions within countries are likely to always be in debt to more economically advanced regions of the same country. Without a means of recycling the surplus that one region has over another region, the whole system grinds to a halt – something in no one’s interest.

Keynes suggested an international currency that could be used for trade – but the US preferred the US dollar to serve this function. The US assumed it would always be in the position of the world’s major surplus nation and that it would be similarly able to redistribute that surplus as it saw fit. And this became central to how the Bretton Woods conference resolved itself.

To perform this role of surplus redistributor, the US currency was given a fixed value – expressed in gold. And the US agreed to exchanged dollars for gold at this fixed rate. The problem was that the US had decided to crush some third world nations, as you do, the two it did this openly with were North Korea and North Vietnam in what became remarkably expensive wars. By the early 1970s, the US was faced with stagflation – that is, two things that ought to be opposites and not occur at the same time, stagnation and inflation. The US ended the exchangeability of gold for dollars.

You might think that this would be a bad idea and that other nations would then seek another currency to use for world trade. But in fact, what actually happened was that it opened up further the twin deficits that US has created for itself. These were its trade deficit with the rest of the world and the US government’s budget deficit. However, because all countries held so much of their wealth in US dollars, what might otherwise have seemed a weakness placed the US in a remarkably powerful position. The last thing countries wanted to see was the US dollar decrease in value. Also, if there were shocks, money sought a safe haven, and ironically enough, that invariably was US government bonds. This is where the effective tributes to the Minotaur come into the story. The US became a huge vacuum cleaner of the world’s wealth – sucking in goods made in other countries and their surpluses too – the machine that had been created after the second world war to redistribute US surpluses had been rammed into reverse and rather than the US redistributing the world’s surpluses, it dragged them into Wall Street.

This provided the US with lots of money, which was then turned by banks into ‘new financial instruments’ – Credit Default Swaps is the example given here – and these are essentially clever insurance policies designed to remove risk from investment. The notion being that if you bundle together lots of loans that you make, the chances all of them going bad at the same time is minimal, and so the ones that remain good will cover the ones that go bad. While there is no such thing as a risk-free investment, these were presented as being as close as the world is likely to get to being just that. This meant banks could engage in increasingly precarious lending practices, and since the loans would then be bundled up and sold on to someone else, effectively immediately, the loans themselves had effectively become risk free to the bankers. And then one day – and this is the best bit of the whole book, where he provides a timeline of the 2008 global financial crisis – the impossible became the inevitable and for a while it looked like the whole financial system of the world was about to implode.

This is when he says the Minotaur died. The problem is that just because the old world is dead, doesn’t really mean that the new world is ready to be born. His argument is that now there is no proper mechanism to redistribute surpluses and so we are just going to get bubbles that will burst and cause more harm, while debtor nations will be forced into ever more austerity and therefore crushing poverty – which will do nothing to help either the debtor nation nor the surplus nations grow their way out of these recurring nightmares.

Like all such books, he offers some advice that no one will ever take and that is meant to provide some last vestige of hope to the world. I’ve no idea why writers think this is a good idea. I know myths are generally best when they give us a happy ending, but in a world where the US is bankrupt, a pandemic is raging, the ecological basis for the continuation of human, and much of animal life on the planet is threatened, and Donald Trump is still possibly going to win another four years in the White House, we are going to need more than a myth with a happy ending.

[Luke · Rating 4 out of 5]

I have to hold my hands up and admit to being a virtual novice when it comes to the intricacies of economics. Like many, I find both the study and application of economic theory testy at best, but reading The Global Minotaur behooved me to question what it was that made me so about the never-ending obsession with the world of monetary policy and globalised finance.

This book helped me understand just how much of what we are told about the global economy, austerity and international trade is either extremely skewed or outright fallacious.

Like many acclaimed leftist economists, the-many-times-vindicated Varoufakis is often treated by mainstream pundits and commentators (yeah, *those* guys) as little more than a dogmatic marxist technocrat.

Of course, Varoufakis (who has time and again imbibed a frankness and dynamism into a rapidly stagnating contemporary Westernised political arena) is anything but. Always communicated in an accessible yet mercurial style of prose, his methodology is informed more by statistics and hard facts than basic neo-Marxian ideology. This shines threw in the depth of his research, his interrogation of ideas, anecdotes concepts and dissection of predominant "economic actors". In many sections of the book, it actually read more like a historical text, such was the quality and comprehensiveness of the research contained within.

Put simply, Varoufakis is a breath of fresh air amidst all of the neoliberal apologia we see on our tv screens, and one of the most brilliant thinkers of out times. For those looking to make sense of the state of global economics since the end of ww2 and the role of the U.S. in enslaving us all to the whim of capital (or as Varoufakis appropriately refers to it, "The Minotaur") put Picketty et al to one side for now and read this instead. You won't regret it.

This excellent extrapolation of mid to late capitalism is too good not to read immediately.

[Randal Samstag · Rating 5 out of 5]

Continuation of the review of the book Modern Political Economics with additional material about Varoufakis's solo book, The Global Minotaur

The second part of Modern Political Economics includes an historical analysis of the post-World War II world. The authors divide this time frame into two periods: 1) The Global Plan: the period following the Bretton Woods conference in 1944 which set up the gold-backed dollar as the world’s dominant currency and 2) The Global Minotaur: the period after the breakup of the Bretton Woods system leading to the financial crash of 2008. This is the story of a march to devastating collapse. The third period would be our current time, the period of aporia following 2008. This story is also retold in a solo 2011 book by Varoufakis, The Global Minotaur (TGM).

The Global Plan

The Global Plan begins during the waning of WWII at the international conference convened by Franklin Roosevelt at the Mount Washington Hotel in Bretton Woods, New Hampshire in July 1944. The conference provided a face-off between the two primary partners in the Allied war effort: The United States, represented by Harry Dexter White, and the United Kingdom, represented by none other than John Maynard Keynes. The conference was focused on two ostensible goals: 1) design of a post-war monetary system and 2) reconstruction of Europe and Japan. Underlying issues, however, were how to prevent future lapses into Great Depression and who would be in control of what was recognized needed to be an international approach to managing the world economy.

At this conference Keynes made one of the most striking proposals to ever reach the bargaining table of an international conference: an International Currency Union (ICU) that would provide a single currency (which Keynes christened the “bancor”) for the whole capitalist world. This would replace the Gold Standard that had been killed off by the Great Depression. The ICU would provide the stability provided by gold without the severe restriction that killed the Gold Standard: “the fact that by restricting the quantity of money in each country to a pre-specified level linked to gold deposits, it prevented governments from dealing with catastrophic declines in effective demand (e.g. the Crash of 1929) by means of increased public expenditures.” Keynes thought that this mechanism would provide a means to deal with two devastating problems: catastrophic crashes and systematic trade imbalances. The ICU would guard against trade imbalances by allowing member countries to borrow at zero interest up to a deficit of 50% of the country’s average trade volume. Beyond that there would be s fixed interest rate. This would give an incentive to minimize excessive debt. For countries exceeding a certain percentage of their trade volume interest would also be charged and its currency would therefore have to appreciate and in the process transfer that surplus to deficit countries.

Keynes’ brilliant idea was an idea before its time. The United States, as the emerging victor in the world war, was in no mood to give up its hegemonic position. White vetoed Keynes’ plan and in its place proposed the system that was adopted: a system of fixed exchange rates with the dollar as its base, albeit tied to gold. To address the problem that there was no mechanism here to deal with depression or fiscal default, the adopted plan established the International Stabilization Fund which became the International Monetary Fund (IMF). White was to go on to the job of executive director of the IMF before being forced out under a cloud of Cold War mania. The problem of trade imbalance went unaddressed. It took another 30 years before the United States would find itself as the world’s largest deficit economy and come up with the system which made a virtue out of apparent economic failure (deficit).

The Global Plan was administered by New Dealers who had been trained following the insights of Keynes from the General Theory but who, as representatives of the world hegemon, needed to turn their attention to maintaining that hegemonic power. During the years following WW II the United States was a surplus economy and it recycled its surplus by supporting reconstruction in Europe and Japan. The German Deutschmark and the Japanese Yen became supporting currencies to the dominance of the US dollar. But the Global Plan came to an end with the end of the 1960s when the Vietnam War and the Great Society turned the United States from a surplus to a deficit economy.

An interesting side-story in MPE is the story that it tells about encouragement of the Middle Eastern oil price rise by Secretary of State Kissinger with the thought that while the United States would be harmed by oil price inflation, Germany and Japan would be harmed more. The inflation that followed in the seventies doomed the Global Plan. When the French sent a warship to the United States to redeem their dollars for gold, Nixon unhooked the United States from gold convertibility and imposed wage and price controls. The Global Plan was dead. But what was to follow? What was to follow was an ingenious scheme for the United States to maintain its hegemony even as a deficit economy: The Global Minotaur.

The Global Minotaur

The Minotaur, of course, was the monstrous result of the coupling of the wife of King Minos of Crete with the beautiful white bull given to King Minos by Poseidon. Aphrodite had driven the wife mad with love for the bull, which Minos had kept in his household, instead of sacrificing it, as Poseidon had intended. This offspring, being an unnatural result, had no sense of proper nourishment and desired human flesh as food. Minos hired Daedalus to design him a Labyrinth in which to house the beast and required the Athenians, who were under his power as a result of a successful military campaign, to send young men and women to Crete for sacrifice.

For Varoufakis the myth of the Minotaur provides a fitting image of the power of the United States to maintain its hegemony over the world economy even as it became a deficit economy. The system, as described in MPE and TGM, is one in which the United States had accumulated massive fiscal and trade deficits in the Post-Reagan years. The trade deficit reached nearly $800 billion dollars per year by 2007. The current post-2008 fiscal deficit is over one trillion dollars per year.

The Matrix Economy makes a showing here as a steadily rising productivity accompanied by stagnation in real wages. Where did the increased productivity go? It went into average real profits, of course, which, by the time of the 2008 crash had reached 7 times the amount at the beginning of the Global Minotaur era in the 1970s.

But how does this work? How is it possible that a country massively consuming less than it produces and accumulating debt can keep afloat? Well, the long-term answer is that it can’t; for this has led to the crash of 2008 and to our current crisis. But how is it that it lasted so long? The answer that Varoufakis gives is “financialisation”. The surpluses accumulating in the Central Banks of China and Germany during the last 20 years have been recycled by purchase of United States Treasury Bonds and other securities with the money passing through the financial centers of London and New York. With the United States maintaining a reasonable control of internal inflation, US investments became not only less expensive, but more secure.

Loans were made by US-based banks during the sixties and seventies to developing countries in Latin America and several former members of the Eastern Bloc at low interest rates. As interest rates rose in the mid-1970s, these developing countries were caught in a debt repayment squeeze. Forced to go to the IMF for help, these countries were told to dismantle their public sectors and to sell off valuable public assets, like water and telecommunications utilities, which were scooped up by Western companies at bargain basement prices.

“To recap, the nexus between geopolitical power and the centrality of the dollar’s role in maintaining the Global Minotaur grew stronger and stronger. A brief perusal of the Fed’s research papers during the 1990s confirms that US authorities saw the greenback as a strategic asset. The drive to use political influence in order to dollarise whole foreign economies, especially in Latin America in the 1990s, is to be understood as part of the same mindset. Dollarisation meant that the dollar became the country’s de-facto local currency. . . . . As dollars were increasingly demanded by foreigners also for their own domestic purposes, the United States’ balance of payments played a decreasing role in shaping the dollar’s value in the international money markets . . . . The deep, and deeply wounding (for local societies), crises that dollarisation led to in the later 1990s were, in this sense, mere collateral losses during the process of maintaining the Minotaur.”

The Rise of Private Money

By 2003 the United States was devouring over 70 per cent of global capital outflows. “Mountains of cash flowed to Wall Street and from there to US corporations in the form of equity and loans.” This caused an enormous increase in the profitability of US financial corporations. This flow of cash was magnified by the creation of what amounts to private money, the new forms of derivative investments known as “collateralized debt obligations” or CDOs and their evil twins, credit default swaps, or CDSs. “The CDOs were options or contracts. In reality, and since no one knew (or really cared to know) what they contained, they acted as a form of private money that financial institutions and corporations used both as a medium of exchange and a store of value.”

Friedrich Hayek had actually proposed with favor a system of private money in an astounding 30-page paper from 1976, Denationalisation of Money. Hayek blamed the Federal Reserve for the Great Depression. He thought that they had printed too much money in the 1920s. The moral that he drew from this story was that government could not be trusted to print money and that private banks should have the right to issue their own money. It seems to the authors that this is exactly what happened in the run-up to the 2008 crash; A fitting testament to a truly strange Nobel Prize winner in the strange “science” of economics.

The authors end their story of the Global Minotaur with the following summary: “Keynes believed that he had a simple solution to capitalism’s tendency to stumble, fall and refuse to pick itself up without a helping hand from the state . . . . judicious fiscal and monetary adjustments . . . He was wrong. Capitalism cannot be civilized, stabilized or rationalized. Why? Because Marx was right. Increasing state power and benevolent interference will not do away with crises. . . . Marx too thought he had a simple answer for capitalism’s troubles. Convinced that its own contradictions would, effectively, force it to commit suicide; he believed that a new rational order . . . was inevitable. He too was wrong. Why? Because it has Keynes (or someone with similar ideas) on its side. . . . Regulation and state intervention do save capitalism from itself, in the limited sense of preserving property rights and buying time for capital to overcome the authorities’ renewed ambition to reign it in. . . . . The hegemon minding the shop decided to help itself to the till. . . . . Then the bubble broke, the private money burnt out . . . . and a ping-pong game began with private losses turning into public debt. . . . The problem with this type of cycle is its irregularity. Like an out of control pendulum, it threatens to exhaust the state’s capacity to bounce back because of a collapse of the state’s financial position.”

The Post-2008 World

The Crash of 2008 has deeply wounded or perhaps killed the Global Minotaur. But what will replace it as the Global Surplus Recycling Mechanism (GSRM)? In TGM Varoufakis proposes two possibilities. The first is a “grand coalition of emerging countries, which would forge a de facto GSRM on the basis of planned investment and trade transfers between them. . . . . Such agreements between Brazil, China, Argentina, India, Turkey, and selected African countries could act as a GSRM that would promote stable growth. The fact that it would leave our Western bankruptocracies out on a limb would be icing on the cake.” The second takes off from Keynes’ proposal for an ICU at the Bretton Woods conference. He quotes the now disgraced Dominque Strauss-Kahn (DSK) in favor of this possibility. Given the enormous military might of the United States, the prospects look pretty grim to this reviewer. But why not end on an upbeat note: “Perhaps centuries later, our own Minotaur’s death will inspire the poets and the myth makers to mark its demise as the beginning of a new, authentic humanism” (the concluding lines of TGM.)

For another review of this book see: http://monthlyreview.org/2011/06/01/t....

[Reid tries to read · Rating 5 out of 5]

1. The Global Plan

After WW2 the United States emerged as the only true creditor nation in the world. In 1944, at the behest of FDR before the war was even over, New Dealers set up the Bretton Woods conference in New Hampshire to plan out the new global capitalist order. The New Dealers were driven by the traumas of the great depression and subsequent world war. Therefore, the major concern of the conference was to prevent a great depression ever taking place again and destabilizing the entire capitalist system. Central to this would be 2 things: 1. A new global monetary system and 2. The reconstruction of Europe and Japan. At the conference two of the key institutions created were the International Monetary Fund (IMF), whose job would be to hand out loans to countries with balance of payments deficits under the condition that those deficits would be settled, and the World Bank, which would invest in war torn areas devastated by the war to increase their productive forces.

The greatest accomplishment of the conference was the creation of ‘The Bretton Woods System’ (also known as ‘The Global Plan’): “a system of fixed exchange rates, with the dollar at its heart. The main idea was that each currency would be locked to the dollar at a given exchange rate. Fluctuations would be allowed only within a narrow band of plus or minus 1 percent, and governments would strive to stay within this band by buying or selling their own dollar reserves… As for the United States, to create the requisite confidence in the international system, it committed itself to pegging the dollar to gold at the fixed exchange rate of $35 per ounce of gold and to guarantee full gold convertibility for anyone, American or non-American, who wanted to swap their dollars for gold.” (p. 60)

The problem with this was that trade imbalances are chronic, and systemically unbalanced trade can continue for centuries. For example, “some regions within a country (e.g. the Stuttgart area in Germany, the Greater London area in Britain, or the Shanghai region in China) will always post a surplus in their trading with other regions.” (p. 61).

When these regions are bound to the same currency, as in The Bretton Woods System, some mechanism must be put in place to release the strain caused by unbalanced trade and capital flows. There must be a mechanism for recycling surpluses from the surplus regions (e.g. London or California) to the deficit regions (like Wales or Delaware). “Such recycling might be in the shape of simple transfers (e.g. paying unemployment benefits in Yorkshire through taxes raised in Sussex). Or – and this is much more desirable for both the surplus and the deficit regions – it might be in the form of productive and profitable investments in the deficit regions (e.g. directing business to build factories in the north of England or Ohio).” (p. 61)

The New Dealers believed that 2 strong currencies (and therefore strong economies) needed to be put into place to act as ‘shock absorbers’ in case the United States had any economic downturns. These two currencies would need to be backed by heavy industry and nearby markets to create the demand needed to unload their manufactured products. Germany and Japan fit these needs. “Both countries had been rendered dependable (thanks to the overwhelming presence of the US military); both featured solid industrial bases; and both offered a highly skilled workforce and a people that would jump at the opportunity of rising, phoenix-like, from the ashes. Moreover, they both offered considerable geostrategic benefits vis-à-vis the Soviet Union.” (p. 67). Although originally public opinion was mixed when it came to rebuilding the two losers of the second world war, opinion changed in 1947 when Truman, through the Truman Doctrine, announced to the world that containment of the USSR would be the United States top priority. The first actions of this doctrine manifested when the United States entered into the Greek Civil War (which the British had started but could not finish) and spent upwards of $400 million to crush the communists in the country. Next the US-puppet government in West Berlin clashed with the Soviet backed East Berlin. These two conflicts signaled the need to integrate Japan and Germany as two important anti-communist pillars of the global plan, and to do this Europe and Japan had to be rebuilt. On June 5th, 1947 America announced their intentions to do just that under the Marshall Plan. “The point of the Marshall Plan was, simply put, to save global capitalism from some future 1929-like Crisis. During the first year of the Marshall Plan, the total sum involved was in the order of $5.3 billion, a little more than 2 percent of US GDP. By 31 December 1951, when the Marshall Plan came to an end, $12.5 billion had been expended. The end result was a sharp rise in European industrial output (about 35 per cent) and, more importantly, political stabilization and the creation of sustainable demand for manufacturing products, both European and American.” (p. 69-70)

Thanks to the heavy hands of the US, Germany had been put on the path to reindustrialization and integration into the Global Plan. After three years the Marshall Plan had dollarized Europe sufficiently, and from 1951 onwards, the cartelization centered on Germany’s resurgent industry was believed to generate enough surplus for Europe to move ahead under its own steam. Next came Japan’s integration and rebuilding process. Japan had essentially been run as a dictatorship under General Douglas Macarthur after the war. Macarthur exonerated economic, political, and military elites and refused to make Japan go through its own denazification process. It was originally thought that China would function as a massive market for Japanese goods, but after Mao’s victory over Chiang Kai-shek’s nationalist government, those plans had to be changed. The Korean War would suffice as a decent impetus to stimulate demand for Japan. “ While the generals, the Pentagon and the State Department were putting together their Cold War strategic plans, Washington’s economic planners approached the wars in Korea and Vietnam from a quite distinct perspective. At one level, they saw these wars as crucial to maintaining a continuous supply of cheap raw materials to Europe and Japan. At another level, however, they recognized a great chance to bring into being, through war financing, the vital economic space that Mao had robbed ‘their’ Japan of. It is indeed impossible to overstate the point made earlier that the South East Asian ‘tiger economies’ (South Korea, Thailand, Malaysia and Singapore, which were soon to become for Japan what France and Spain were to Germany) would never have emerged without these two US-financed wars, which left the US as the only sizeable market for Japanese industrial output.” (p.79)

2. Disintegration of the Global Plan
The Global plan fell apart because of a major design flaw: A lack of an automatic global surplus recycling mechanism (GSRM). The Vietnam war was the catalyst which set off the disintegration of the global plan. The benefit for the plan was that the war essentially turned the Southeastern Asian countries of South Korea, Singapore, Thailand, and Malaysia into markets for Japan. The US would use those countries to recycle its surplus and in turn they would build up military equipment for America, generate enough income to create markets for Japanese products, and ease the burden of America being Japan’s main export market. However, “Setting aside the appalling human suffering, the war cost the US government around $113 billion and the US economy another $220 billion. Real US corporate profits declined by 17 per cent, while, in the period 1965–70, the war-induced increases in average prices forced the real average income of American blue-collar workers to fall by about 2 percent” (p. 83)

The cost of the Vietnam war plus LBJ’s great society programs put the US government into deep debt. “By early 1971, liabilities exceeded $70 billion, while the US government possessed only $12 billion of gold with which to back them up.” (p. 84). Europeans and the Japanese feared that this constant printing of dollars (which still had a fixed exchange rate of $35 per ounce of gold) would cause a run on gold, where countries exchanged their reserves of dollars for gold out of fear that the US may renege on their $35 an ounce agreement. This is exactly what happened in August 1971 when the British and French governments both demanded that they be able to exchange their billions of dollars for US gold. An angry Nixon responded by announcing the end of Bretton Woods: the dollar would no longer be convertible to gold.

The losers of this decision were the twin pillars of the Bretton Woods system, Europe and Japan. “they knew that their economies would hit a major bump as soon as the dollar started devaluing. Not only would their dollar assets lose value, but their exports would also become dearer. The only alternative was for them to devalue their currencies, too, but that would then cause their energy costs to skyrocket (given that oil was denominated in dollars)” (p. 86). With the Global Plan being lowered into the grave a new grand strategy, which Varoufakis calls “the Global Minotaur”, was forming.

3. The formation of the Global Minotaur

The first real effects of the disintegration of the Global Plan were the price of gold rising astronomically and the value of the US dollar decreasing. Oil producers found that their oil, which was bought in dollars, was now worth a fraction of what it had been. To boost the value back up OPEC members all agreed to a sizable cutback in oil production: “At the time of Nixon’s announcement, the price of oil was less than $3 per barrel. In 1973, with the Yom Kippur War between Israel and its Arab neighbours apace, the price jumped to between $8 and $9, thereafter hovering in the $12 to $15 range until 1979. In 1979 a new upward surge began that saw oil trade above $30 well into the 1980s” (p. 86). With the price of oil soaring the price of everything else (because the entirety of the modern world runs on oil) soared as well. For example: bauxite prices increased 165 percent, lead 170 percent, tin 220 percent, and silver over 1000 percent. “In short, the termination of the Global Plan signaled a mighty rise in the costs of production across the world. Inflation soared, as did unemployment – a rare combination of stagnation with inflation that came to be known as stagflation.”

This begs the question: why did the United States not oppose with any degree of real commitment the large increases in oil prices?
“Recalling that the new aim was to find ways of financing the US twin deficits (military and domestic spending) without cutting US government spending, or increasing taxes, or reducing US world dominance, American policy makers understood that they had a simple task: to entice the rest of the world to finance the USA’s deficits. But this meant a redistribution of global surpluses in favour of the United States and at the expense of the two economic zones it had built around Germany and Japan. There were two prerequisites for the planned reversal of global capital flows, which would see the world’s capital stream into Wall Street for the purpose of financing the expanding US twin deficits: (a) improved competitiveness of US firms in relation to their German and Japanese competitors, and (b) interest rates that attracted large capital flows into the United States. The first prerequisite could be achieved in one of two ways: either by boosting productivity in the United States or by boosting the relative unit costs of the competition. For good measure, the US administration decided to aim for both. Labour costs were squeezed with enthusiasm and, at the same time, oil prices were ‘encouraged’ to rise. The drop in US labour costs not only boosted the competitiveness of American companies, but also acted as a magnet for foreign capital that was searching for profitable ventures. Meanwhile, as oil prices rose, every part of the capitalist world was adversely affected. However, Japan and Western Europe (largely lacking their own oil) were burdened much more than the United States. Meanwhile, the rise in oil prices led to mountainous rents piling up in bank accounts from Saudi Arabia to Indonesia, as well as huge receipts for US oil companies. All these petrodollars soon found their way to Wall Street’s hospitable bosom. The Fed’s interest rate policy was to prove particularly helpful in this respect…interest rates jumped from 6 per cent, where the Global Plan’s final years had left them in 1971, to 6.44 per cent in 1973 and to 7.83 per cent the following year” (p. 87-88) By 1981 Paul Volcker had shot interest rates all the way over 20 percent.

A new phase in U.S. hegemony had begun. “The United States could now run an increasing trade deficit with impunity, while the new Reagan administration could also finance its hugely expanded defence budget and its gigantic tax cuts for the richest Americans” (p. 88)

In 1979 Paul Volcker said: ‘[A] controlled disintegration in the world economy is a legitimate objective for the 1980s’ and that is exactly what America did as it flung the global economy into chaos. “America began importing as if there were no tomorrow, and its government splurged out, unimpeded by the fear of increasing deficits. So long as foreign investors sent billions of dollars every day to Wall Street, quite voluntarily and for reasons completely related to their bottom line, the United States’ twin deficits (its massive domestic budget bolstered by tax cuts to the rich and a massive defense budget + our increasingly large trade deficit) were financed and the world kept revolving haphazardly on its axis.” (p. 90)

Why did the world’s capitalists voluntarily agree to do this? There were 4 factors that influenced their decision:

1. Reserve currency status : When the Global Plan was alive and well most capitalists across the globe, from winemakers to bankers to oil magnets, generally decided to store their cash in dollars even though currency exchange rates were fixed. This is because of capital controls which restricted how many dollars you could convert your other currency to at a time. Once the Bretton Woods system was over people rushed to the supposed safety of the dollar out of fear of the impending floating exchange rates. “Furthermore, the United States is the only country where demand for its currency does not just reflect an increase in the demand for the goods and services it produces. Whenever a Nigerian driver puts petrol in her car, or a Chinese factory purchases Australian coal, the demand for US dollars rises. Why? Because, even if no American companies are involved, primary commodity sales are denominated in dollars. Therefore, every transaction involving oil or coal results in additional demand for the US dollar.” (p. 90-91)
2. Rising energy costs : The United States only imported around 1/3 of its oil compared to Japan and Europe who imported almost all of their oil. Therefore, when the oil shocks raised the prices of oil imports it hurt Japan and Europe (and therefore the costs of all of their production) much more so than the United States, hurting Japanese and European competitiveness with America. On top of this, “As for non-US producers, the dollar’s reserve currency status, coupled with Volcker’s huge interest rates, magnetized their petrol dollars to New York where they metamorphosed into shares or US government bonds.” (p. 91)
3. cheapened productive labor : From 1850 to 1973 real wages in the United states rose. But from 1973 onwards, as the neoliberal revolution was taking place, the real wages stagnated and even today have not recovered their 1973 purchasing power. At the same time productivity was constantly rising due to innovative new technologies. This led to direct investment from abroad into the US to lower labor cost inputs. Low labor costs + high productivity = massive profits
4. Geopolitical power : American geopolitical power bolstered the strength of the Minotaur which, in a reciprocal relationship, helped improve American geopolitical power by helping disintegrate the communist bloc, which arguably “began in the 1970s with the sharp rise in interest rates soon after (Yugoslavia and Poland) had accepted offers of substantial loans from Western financial institutions. It was a similar story in Third World countries, where national liberation movements had grabbed power, often against the West’s best efforts. From the early 1960s up until 1972, Western banks, constrained by the Global Plan’s low interest rates and tough regulatory regime, cast their gaze far and wide, offering large loans to Third World nations, Soviet satellites (e.g. Poland and Bulgaria), and communist countries that were detached (or semi-detached) from Moscow (Yugoslavia and Romania). The loans were used to underwrite much-needed new infrastructure, education, health systems, fledgling industrial sectors, etc… So, when interest rates soared, as part of Volcker’s strategic ‘disintegration in the world economy’, communist regimes in Warsaw, Bucharest and Belgrade began to feel the pinch… they gave their all to repay the debts as quickly as possible, imposing particularly harsh austerity measures on their own workforces. The result was mass discontent, major unrest and the first stirrings of organized opposition, e.g. the Polish trades union Solidarity, which was soon to spearhead a chain of events leading to the first collapse of a communist regime. In the meantime, and for similar reasons, the Third World debt crisis erupted…it was a disaster from which most Third World countries have never quite recovered.” (p. 94-95)

“The two US deficits worked harmoniously together to accomplish their new task. When the US government reduced taxes or spent enormous amounts of money on missiles (as it did under President Reagan), the budget deficit ballooned. To finance it, it attracted foreign capital, which was only too pleased to buy US Treasury Bills (i.e. IOUs issued by the US Treasury). This capital inflow helped balance out America’s increasing trade deficit. Meanwhile, both deficits together drew capital into New York, allowing Wall Street to extend credit further.” (p. 96)

[Carrie]

TOO MANY METAPHORS.

The minotaur.
The dragon
The tiger.
The domino effect.
Helen.
The myth of Europa.
Disparate mountaineers.

[Miguel Rodríguez · Rating 5 out of 5]

(English review below)
Reseña en Español:

En El Minotauro Global , Varoufakis ofrece un análisis agudo del capitalismo global desde antes de la crisis del 1929 hasta después de la crisis del 2008, pasando por el colapso de la convertibilidad de dólares a oro en 1971, mostrando cómo la hegemonía estadounidense se ha basado en estrategias financieras para mantener su poder a expensas de la mayoría.

Tras la Segunda Guerra Mundial, se instauró el sistema de Bretton Woods (1944–1971) , en el que el dólar se vinculó al oro a un precio fijo. Lejos de ser un acuerdo desinteresado, este sistema legitimó al dólar como moneda de reserva global, permitiendo a EE. UU. financiar su expansión y sostener su posición dominante. En esta época entra en juego lo que Varoufakis denomina el “Plan Global”. El Plan Marshall y el denominado “Plan Global” fueron estrategias geopolíticas para reestructurar el mundo a imagen y semejanza de los intereses estadounidenses. El Plan Marshall fue la respuesta de Estados Unidos para reconstruir Europa devastada por la guerra, cuyo objetivo fue la creación de mercados y de una infraestructura económica capaz de absorber los excedentes estadounidenses, en un momento en el que su economía era excedentaria. EEUU lograba enviar sus excedentes en Europa mientras que la condición de reserva mundial del dólar lo transformó en un mecanismo para reinvertir capital y, a su vez, afianzando aún más su influencia política. El concepto acuñado de Varoufakis de Plan Global corresponde al siguiente plan deliberado: mientras Estados Unidos era una economía excedentaria, necesitaba destinos para su capital acumulado y, al mismo tiempo, forjar nuevos polos de producción de bienes de alta tecnología e industria avanzada para sostener su demanda interna. Para ello, además del Plan Marshall, siguiendo este “Plan Global”, financió e influenció notablemente la economía y política de Japón y Alemania, que se convirtieron en sus mayores aliados.

Tras la guerra, Japón fue instrumentalizado para transformarse en la fábrica de alta tecnología de Estados Unidos. Su industria se modernizó rápidamente, permitiéndole producir componentes y tecnología punta que no solo abastecían al mercado interno estadounidense, sino que también le permitieron convertirse en un exportador clave hacia el sudeste asiático. En el caso germano, la industrialización se orientó hacia la manufactura de precisión y la producción en masa, posicionando a Alemania como la potencia industrial de Europa. Los acuerdos comerciales previos a la integración europea estaban, en muchos sentidos, diseñados para generar una demanda agregada que absorbiera los productos alemanes.

Esta “época dorada del capitalismo” (dorada sólo en occidente y en Japón) y el Plan Global llegaron a su fin en 1971. A lo largo de los años EEUU, debido a las tremendas ventajas que otorgaba sobre su economía el sistema de Bretton Woods y el petrodólar, invirtió menos en su industria y los propios capitalistas estadounidenses se dedicaron a la especulación financiera en vez de a la producción. Esto produjo que EEUU pasase de ser excedentario a deficitario, y que EEUU no pudiese asegurar la convertibilidad de dólar a oro por falta de suficientes reservas. El colapso del patrón oro en 1971 –mediante el “Nixon shock”– evidenció el fracaso del sistema Bretton Woods, al obligar a Estados Unidos a abandonar el respaldo oro. Fue entonces cuando EEUU pasó a financiar su hegemonía a través de la emisión incesante de deuda, en un giro de 180º, a pesar de ser una nación crónicamente deficitaria. Lo que permitió esto fue, de nuevo, la condición del dólar como reserva mundial. Este cambio marcó la transición del modelo del “Plan Global” hacia el modelo del Minotauro Global , en el que el reciclaje de excedentes mediante la compra de deuda y activos estadounidense se convirtió en el motor del capitalismo global, beneficiando a la élite financiera y dejando al descubierto las contradicciones internas del sistema. La transición hacia un sistema monetario fiduciario implicó una mayor vulnerabilidad a crisis financieras y desequilibrios globales.

Paralelamente, la creación del Fondo Monetario Internacional y el Banco Mundial se erigió como parte de este proyecto hegemónico. Estas instituciones, en lugar de promover un desarrollo equitativo, impusieron políticas neoliberales que empobrecieron a medio mundo, obligando a países en desarrollo a someterse a un modelo de deuda y dependencia que perpetúa la desigualdad. Además de la creación del FMI y el BM, en 1985, los Acuerdos de Plaza fueron implementados como una respuesta a los desequilibrios comerciales y monetarios acumulados. El objetivo principal era devaluar el dólar y, con ello, corregir los excesos del déficit estadounidense, así como apreciar el marco alemán y el yen, ya que Alemania y Japón pasaron a rivalizar con EEUU en sectores clave y EEUU quería reducir su capacidad exportadora. Para Alemania, aceptar un marco apreciado era, en esencia, una apuesta por la estabilidad y la consolidación de su sector exportador en el contexto europeo, aunque implicase una reducción de su exportación global. Una moneda más fuerte reforzaba la confianza en la economía alemana y facilitaba ajustes estructurales internos. En contraste, para Japón, la apreciación del yen resultó fatal: encareció sus exportaciones y puso en riesgo la competitividad de una economía que dependía en gran medida de su capacidad exportadora hacia EEUU, ya que Japón carecía de industria para el consumo nacional y sus habitantes, al tener unos salarios muy pobres no podían generar demanda para sus productos tecnológicos. Por su dependencia económica y militar, Japón se vio obligado a adoptar medidas que hundieron su economía, y que conllevaron una huida de inversores de Japón hacia EEUU, que era el objetivo final, junto con reducir la competencia tecnológica de las empresas japonesas.

En muchos países del mundo, debido a políticas del FMI, el BM y la política de la guerra, muchos capitalistas internacionales dejaron de invertir en sus respectivos países y pasaron a invertir en dólares, comprando activos en empresas estadounidenses o deuda estadounidense, ya que era una apuesta más segura y estable. En esta espiral de compra de deuda estadounidense debido a la condición del dólar como reserva mundial (haciéndolo atractivo para invertir debido a su estabilidad y continua apreciación), el sector financiero se desarrolló enormemente. Wall Street y los bancos globales, tanto públicos como privados, fueron los artífices de un sistema financiero basado en la especulación desenfrenada y la toma de riesgos irresponsable, que finalmente colapsó en 2008. Con la invención y masificación de productos financieros opacos—como los CDO y CDS—se reempaquetaron hipotecas subprime en una red interconectada de deuda, ignorando las señales de alarma sobre la acumulación de riesgos sistémicos. Mientras las instituciones privadas se entregaban a la cultura del "demasiado grande para caer", las entidades públicas y los organismos reguladores se quedaron de brazos cruzados, permitiendo que este juego de apuestas de alto riesgo se extendiera sin control. Los CDO (Collateralized Debt Obligations, compra de paquetes de deuda mixtos de alto y bajo riesgo) y los CDS (Credit Default Swaps, básicamente a puestas hacia la caída en bolsa de activos) permitieron mantener el flujo y reciclaje de la deuda estadounidense a la vez que generaban una burbuja que no creían que fuera a explotar, hasta el colapso total en 2008 de todo ese capital ficticio.

El colapso financiero de 2008 se presenta en El Minotauro Global como la culminación de décadas de desequilibrios estructurales. Según Varoufakis la crisis no puede resolverse fácilmente porque emana de contradicciones intrínsecas al sistema capitalista global: mientras unos países acumulan excedentes, otros deben financiar déficits crónicos, y el mecanismo para reciclar estos excedentes resulta, en última instancia, incompatible con la estabilidad a largo plazo. La excesiva interdependencia y la falta de un ajuste equitativo hacen que la solución sea, en el fondo, estructural y difícil de implementar sin una reforma radical del orden financiero internacional.

Este libro ha sido muy desafiante de leer a pesar de la forma tan amena en la que está escrito, ya que no tengo formación económica suficiente. Sin embargo, ha sido muy esclarecedor al explicar a grandes rasgos los flujos de capital globales entre gran parte del S.XX y principios del S.XXI. Aunque el libro es bastante breve (poco más de 300 páginas), incluye infinidad de temas muy relevantes para la geopolítica y economía internacional que no he mencionado en esta ya demasiado larga reseña, como es el rol de la URSS o China (aunque no es desarrollado largamente), la deuda griega y la crisis permanente europea post 2008, la creación del predecesor de la Unión Europea (MEEF), la flexibilización cuantitativa y un largo etc. Lo que sí que puedo afirmar con rotundidad es que el contenido del libro vale absolutamente la pena.

English review:

In The Global Minotaur, Varoufakis offers a sharp analysis of global capitalism from before the 1929 crisis until after the 2008 crisis, passing through the collapse of dollar-to-gold convertibility in 1971, showing how American hegemony has been based on financial strategies designed to maintain its power at the expense of the majority.

After World War II, the Bretton Woods system (1944–1971) was established, in which the dollar was linked to gold at a fixed price. Far from being a disinterested agreement, this system legitimized the dollar as the global reserve currency, allowing the US to finance its expansion and sustain its dominant position. During this period, what Varoufakis calls the “Global Plan” comes into play. The Marshall Plan and the so-called “Global Plan” were geopolitical strategies aimed at restructuring the world in the image of American interests. The Marshall Plan was the US response to rebuild a war-devastated Europe, with the objective of creating markets and an economic infrastructure capable of absorbing American surpluses at a time when its economy was surplus-generating. The US managed to send its surpluses to Europe while the dollar’s status as the global reserve transformed it into a mechanism for reinvesting capital and, in turn, further consolidating its political influence. The concept coined by Varoufakis of Global Plan corresponds to the following deliberate strategy: while the United States was a surplus economy, it needed destinations for its accumulated capital and, at the same time, to forge new centers of production for high-tech goods and advanced industry to sustain its domestic demand. To achieve this, in addition to the Marshall Plan and following this “Global Plan,” it significantly financed and influenced the economies and politics of Japan and Germany, which became its greatest allies.
After the war, Japan was instrumentalized to become the high-tech factory of the United States. Its industry modernized rapidly, enabling it to produce components and cutting-edge technology that not only supplied the US domestic market but also allowed it to become a key exporter to Southeast Asia. In Germany’s case, industrialization was directed toward precision manufacturing and mass production, positioning Germany as the industrial powerhouse of Europe. The trade agreements prior to European integration were, in many ways, designed to generate an aggregate demand that would absorb German products.

This “golden age of capitalism” (golden only for the West and Japan) and the Global Plan came to an end in 1971. Over the years, the US—thanks to the tremendous advantages provided by the Bretton Woods system and the petrodollar—invested less in its industry, and American capitalists increasingly turned to financial speculation rather than production. This shift caused the US to move from running a surplus to running a deficit, eventually making it impossible to maintain dollar-to-gold convertibility due to insufficient reserves. The collapse of the gold standard in 1971—through the “Nixon shock”—exposed the failure of the Bretton Woods system by forcing the United States to abandon the gold backing. It was then that the US began financing its hegemony through the relentless issuance of debt—a complete 180º turn—even though it was a chronically deficit nation. What made this possible was, once again, the dollar’s status as the global reserve. This change marked the transition from the “Global Plan” model to the Global Minotaur model, in which the recycling of surpluses through the purchase of US debt and assets became the engine of global capitalism, benefiting the financial elite and exposing the system’s internal contradictions. The shift to a fiat monetary system also made the global economy more vulnerable to financial crises and imbalances.

In parallel, the creation of the International Monetary Fund and the World Bank was established as part of this hegemonic project. Rather than promoting equitable development, these institutions imposed neoliberal policies that impoverished half the world, forcing developing countries to submit to a model of debt and dependency that perpetuates inequality. In addition to the creation of the IMF and the World Bank, in 1985, the Plaza Accords were implemented as a response to accumulated trade and monetary imbalances. The main objective was to devalue the dollar and, in doing so, correct the excesses of the US deficit, as well as to allow the German mark and the yen to appreciate—since Germany and Japan began to rival the US in key sectors and the US sought to reduce its export capacity. For Germany, accepting an appreciated mark was essentially a bet on stability and the consolidation of its export sector within the European context, even if it meant a reduction in overall exports. A stronger currency bolstered confidence in the German economy and facilitated internal structural adjustments. In contrast, for Japan, the appreciation of the yen proved disastrous: it made its exports more expensive and jeopardized the competitiveness of an economy that heavily depended on its export capacity to the US, since Japan lacked an industry for domestic consumption and its citizens, due to very low wages, could not generate sufficient demand for its technological products. Owing to its economic and military dependence, Japan was forced to adopt measures that devastated its economy, leading to a flight of investors from Japan to the US—which was the ultimate goal—while also reducing the technological competition posed by Japanese companies.

In many countries around the world, due to policies enacted by the IMF, the World Bank, and war-driven strategies, numerous international capitalists stopped investing in their own countries and began investing in dollars—buying assets in American companies or US debt—as it was seen as a safer and more stable bet. This spiral of buying US debt, driven by the dollar’s status as the global reserve (making it attractive due to its stability and continuous appreciation), led to enormous growth in the financial sector. Wall Street and global banks, both public and private, were the architects of a financial system based on rampant speculation and irresponsible risk-taking, which ultimately collapsed in 2008. With the invention and widespread adoption of opaque financial products—such as CDOs and CDSs—subprime mortgages were repackaged into an interconnected web of debt, ignoring the warning signs of systemic risk accumulation. While private institutions indulged in a “too big to fail” culture, public entities and regulatory bodies stood by idly, allowing this high-stakes gambling to run rampant. CDOs (Collateralized Debt Obligations, involving the purchase of mixed packages of high- and low-risk debt) and CDSs (Credit Default Swaps, essentially bets on the decline of asset values) maintained the flow and recycling of US debt while generating a bubble that was not expected to burst—until the total collapse of that fictitious capital in 2008.

The financial collapse of 2008 is presented in The Global Minotaur as the culmination of decades of structural imbalances. According to Varoufakis, the crisis cannot be easily resolved because it stems from inherent contradictions within the global capitalist system: while some countries accumulate surpluses, others must finance chronic deficits, and the mechanism for recycling these surpluses ultimately proves incompatible with long-term stability. The excessive interdependence and the lack of equitable adjustment make the solution fundamentally structural and difficult to implement without a radical reform of the international financial order.

This book has been very challenging to read despite its engaging writing style, especially given my limited economic background. However, it has been extremely enlightening in broadly explaining the global capital flows spanning much of the 20th century and the early 21st century. Although the book is quite brief (a little over 300 pages), it covers an abundance of topics highly relevant to international geopolitics and economics that I have not mentioned in this already overly long review—such as the role of the USSR or China (albeit not extensively developed), Greek debt and the perpetual European crisis post-2008, the creation of the precursor to the European Union (MEEF), quantitative easing, and much more. What I can say is that the content of this book is absolutely worth it.

[Abraham Lewik · Rating 4 out of 5]

The historical reach of Mister Varoufakis book combines with remarkable brevity of letter. We, the reader, are not inundated with statistical economic data, which most of us cannot comprehend. The elaboration of the post-WWII Global Plan, it's subsequent development into the eponymous Minotaur, then the final crisis and implications are the stuff of illusory, megalomaniac conspiracy. Mister Varoufakis in seems to resist delusion (who I am to judge?), nor do any delusions of grandeur besmirch this humble paperback.

The language is clear, the basic cycle preceding the 2008 Financial Crisis is something I want to remark upon here.
Let us say that Korea produces 1 000 mobile phones, 200 are sold domestically. The 800 surplus to domestic demand are exported. [If we all held our mobile phones for as long as the traditional Nokia lasts, there would be minimal export market. This is not the case, and is one quality of the over-consumption actively encouraged within Capitalist society.] So these 800 surplus phones are sold to the USA, producing capital value for Korean mobile phone makers. Then USA deficit value will increase. The Korean capital invests into the USA for the returns offered by CDO's, the security offered by the most dominant currency internationally, and because investing in China is too much work. CDO's produce value out of proportion with the value paid into them. Poorer US citizens slowly paid there mortgage into the CDO, however, the value extracted from their mortgage by financialisation exceeded the rate of return then burst on the global economy like a bag hung beneath the streetlights where pelicans perch.
This then leads to Bankruptocracy, or ptocho-trapezocracy as the natives say it.

[Bridget McGovern · Rating 4 out of 5]

I normally like the ways Varoufakis makes economics more digestible, but I found the Minotaur analogy muddled the story he was weaving. In the end, it was still a good book and I learned a great deal.

[John Da ega · Rating 1 out of 5]

Awful book. Inaccurate data, wrong math, wrong definition of basic concepts as QE and company valuation. I share some of the conclusions, but the book is full of propaganda.

[Κώστας · Rating 5 out of 5]

Περιεχόμενα

Προλεγόμενα
ΚΕΦΑΛΑΙΟ 1
ΕΙΣΑΓΩΓΗ
Το Ορόσημο του 2008
Έξι Ερμηνείες για το τι Συνέβη
Η Πρόκληση της Παράλλαξης και ο Παγκόσμιος Μινώταυρος
Ο Παγκόσμιος Μινώταυρος: Μια Πρώτη Ματιά
Παράρτημα Κεφαλαίου 1: Τρεις Τοξικές Θεωρίες που Θεμελίωσαν το Οικονομικό Γίγνεσθαι πριν από το 2008
ΚΕΦΑΛΑΙΟ 2
ΕΡΓΑΣΤΗΡΙΑ ΤΟΥ ΜΕΛΛΟΝΤΟΣ
Τα Δύο Μεγάλα Άλματα Προς τα Εμπρός
Το Μυστικό του Condorcet στην Εποχή του Κεφαλαίου
Το Παράδοξο της Επιτυχίας και οι Λυτρωτικές Κρίσεις
Η Γένεση του Κραχ: Ο Ρόλος του Χρήματος, της Πίστης και των Τραπεζών
1929
Ο Μίδας Χάνει το Χάρισμά του: Η Κατάρρευση του Κανόνα του Χρυσού
Οι Δύο Δαίμονες του Καπιταλισμού και το Παράδοξο της Προφητείας
Στοιχειωμένα Μηχανήματα και η Οικονομική Σημασία της Ελευθερίας
Επίλογος: Η Επώαση του Παγκόσμιου Σχεδίου
ΚΕΦΑΛΑΙΟ 3
ΤΟ ΠΑΓΚΟΣΜΙΟ ΣΧΕΔΙΟ
Η Μοναδική Ευκαιρία
Bretton Woods
Η Χαμένη Ευκαιρία
Η Ανάσταση των Ηττημένων
Το Σχέδιο Marshall για τη Δολαριοποίηση της Ευρώπης και την Επανένταξη της Γερμανίας
Η Ευρωπαϊκή Ένωση και το Ιαπωνικό Θαύμα
Η Γεωπολιτική Ιδεολογία του Παγκόσμιου Σχεδίου
Το Παγκόσμιο Σχέδιο και η Εγχώρια Πολιτική Των ΗΠΑ
Συμπέρασμα: Η Χρυσή Εποχή του Καπιταλισμού
ΚΕΦΑΛΑΙΟ 4
Ο ΠΑΓΚΟΣΜΙΟΣ ΜΙΝΩΤΑΥΡΟΣ
Η Αχίλλειος Πτέρνα του Παγκόσμιου Σχεδίου
Το Παγκόσμιο Σχέδιο Καταρρέει
Η Μεταβατική Περίοδος: Πετρελαϊκές Κρίσεις, Στασιμοπληθωρισμός και η Άνοδος των Επιτοκίων
Το Περιβάλλον στο Οποίο θα Γεννιόταν
Ύστερα από Λίγο ο Μινώταυρος
Ο Παγκόσμιος Μινώταυρος
Οι Τέσσερις Χάρες του Μινώταυρου
Ένας Πολύ Περίεργος Παγκόσμιος Μηχανισμός
Ανακύκλωσης Πλεονασμάτων
Επίλογος: Οι Μέρες Δόξας του Παγκόσμιου Μινώταυρου
ΚΕΦΑΛΑΙΟ 5
ΟΙ ΘΕΡΑΠΑΙΝΙΔΕΣ ΤΟΥ ΚΤΗΝΟΥΣ
Οι Υμνητές του Μινώταυρου
Θεραπαινίδα Πρώτη: Ο Πυρετός των Εξαγορών - Η Wall Street Δημιουργεί Νέες Μεταφυσικές Αξίες
Θεραπαινίδα Δεύτερη: Η Ιδεολογία του Φτηνού στην Εποχή των Υπερβολών - Το Φαινόμενο της Wal Mart
Θεραπαινίδα Τρίτη: Στοιχειωμένα Σπίτια, Τοξικό Χρήμα - Η Wall Street Γεννάει το Δικό της Ιδιωτικό Χρήμα
Θεραπαινίδα Τέταρτη: Τοξικές Θεωρίες, Μέρος Α - Ο Μύθος της Διάχυσης και τα Οικονομικά της Προσφοράς
Θεραπαινίδα Πέμπτη: Τοξικές Θεωρίες, Μέρος Β - Οικονομική Θεωρία και Λοιπές Πλάνες
Επίλογος: Τα Πρώτα Σημάδια
ΚΕΦΑΛΑΙΟ 6
ΚΑΤΑΡΡΕΥΣΗ
Πύργοι από Σπίρτα, Άμμο και Ιδιωτικό Χρήμα: Διαφορές και Ομοιότητες
Το Χρονικό Ενός Προαναγγελθέντος Κραχ: Credit Crunch, Επιδημία Πτωχεύσεων και η Κρατικοποίηση των Πάντων
Μετά το 2008 - Τα Χωρίς Τέλος Επακόλουθα
Επί της Ουσίας
Επίλογος: Η Διολίσθηση προς την Πτωχοτραπεζοκρατία
ΚΕΦΑΛΑΙΟ 7
ΟΙ ΘΕΡΑΠΑΙΝΙΔΕΣ ΑΝΤΕΠΙΤΙΘΕΝΤΑΙ
"With a Little Help From My Friends": Το Σχέδιο Geither-Summers
Η Ευρωπαϊκή Εκδοχή του Σχεδίου Geither-Summers
Δαγκώνοντας το Χέρι που τους Έσωσε: Η πιο Αχρεία Θεραπαινίδα Αποθρασύνεται
Η Επιστροφή του Αρπακτικού Κράτους, των Τοξικών Οικονομικών Θεωριών και της Περίεργης Τραγωδίας του Φονταμενταλισμού της Αγοράς
Επίλογος: Το Κακόν Αμιγές Καλού
ΚΕΦΑΛΑΙΟ 8
Η ΠΑΓΚΟΣΜΙΑ ΚΛΗΡΟΝΟΜΙΑ ΤΟΥ ΜΙΝΩΤΑΥΡΟΥ: Ο ΔΥΩΝ ΗΛΙΟΣ, ΟΙ ΠΛΗΓΩΜΕΝΕΣ ΤΙΓΡΕΙΣ, Η ΑΜΗΧΑΝΗ ΕΥΡΩΠΗ ΚΑΙ Ο ΑΓΧΩΜΕΝΟΣ ΔΡΑΚΟΣ
Ο Δύων Ήλιος: Οι Χαμένες Δεκαετίες της Ιαπωνίας
Πληγωμένες Τίγρεις: Η Καθίζηση της Νοτιοανατολικής Ασίας
Η Ευρώπη της Γερμανίας
Η Επανένωση της Γερμανίας και η Παγκόσμια Σημασία της
Τα Νέα Ρούχα του Αυτοκράτορα Μάρκου
Το Κραχ του 2008 Αποκαλύπτει τη Γύμνια του Νέου Αυτοκράτορα
Πρώτα ως Ιστορία, Αργότερα ως Φάρσα: Η Διάσωση των Ευρωπαϊκών Τραπεζών
Δαναοί Χρέη Φέροντες
Καταδικασμένοι Ορειβάτες
Γιατί η Ευρώπη Αμφιταλαντεύεται Αμήχανα, Όταν η Κρίση Μπορεί να Επιλυθεί Απλά και Γρήγορα;
Ο Δράκος Ανοίγει τα Φτερά του και, στη Συνέχεια, Καταποντίζεται στο Άγχος
Επίλογος: Ανάμεσα στην Πτωχοτραπεζοκρατία της Δύσης και την Εύθραυστη Ισχύ της Ανατολής
ΚΕΦΑΛΑΙΟ 9
ΕΝΑ ΜΕΛΛΟΝ ΧΩΡΙΣ ΤΟΝ ΠΑΓΚΟΣΜΙΟ ΜΙΝΩΤΑΥΡΟ;
Οι Διαμορφωτές της Ιστορίας
Αυτοσυγκράτηση και το Παράδοξο της Επιτυχίας
Μπορεί να Επιβιώσει ο Παγκόσμιος Μινώταυρος;
Στο Λαβύρινθο Άνευ Μινώταυρου
Ο Μηχανισμός που Λείπει
Και Τώρα Τι;
Αναγνώσματα
Βιβλιογραφία
Λεπτομέρειες

Ο Γιάνης Βαρουφάκης μπορεί να θεωρείται από τα ΜΜΕ κι από πολλούς ως μία αμφιλεγόμενη προσωπικότητα, η αγαπημένη του ατάκα "Δημιουργική ασάφεια" να μας έσπασε τα νεύρα και η αναποτελεσματικότητα του ως πολιτικού να σπίλωσαν την εικόνα του και να την υποβάθμισαν ως εκκεντρική αλλά...
Το κάθε έργο αποκτά δική του οντότητα και είναι μοναδικό και ανεξάρτητο από την παρουσία του δημιουργού του.
Είναι λάθος να το συνδέουμε με την προσωπικότητα και το χαρακτήρα του δημιουργού του. Δεν μειώνεται η αξία του χ συγγραφέα επειδή είναι ομοφυλόφιλος, του ψ τραγουδιστή επειδή είναι εξαρτημένος από ουσίες του Ζ ζωγράφου επειδή είναι αλκοολικός κ.ο.κ.
Ο Γιάνης Βαρουφάκης γνωρίζει καλά το αντικείμενο του και βοηθά και όσους είναι εκτός να καταλάβουν πως φτάσαμε εδώ που φτάσαμε με γλώσσα άκρως κατανοητή που καταλαβαίνει κι ένα παιδί δημοτικού. Πρόκειται για μια εξαιρετική οικονομική ανάλυση, με έντονα ιστορικά και κοινωνικά στοιχεία που εστιάζει στο ζήτημα της παγκόσμιας κίνησης κεφαλαίων και της πυρετικής απληστίας που κατέλαβε το χρηματοπιστωτικό ναό της Wall Street ακόμη και μετά την καταστροφή.
Μπορεί κάποιος να συμφωνήσει μαζί του ή να διαφωνήσει. Ο συγγραφέας μιλά πάντα με πηγές και με παραδείγματα, δεν λέει λόγια του αέρα.
Όσοι βρεθούν σε βιβλιοπωλείο και αμφιταλαντεύονται ας του δώσουν δυό λεπτά ξεφυλλίζοντάς το στεκόμενοι στα εμβόλιμα κείμενα-παραδείγματα με τίτλο "Όταν η λογική υποτάσσεται στη προσδοκία" (σελ.109-110) και"Το σύνδρομο του τζαμπατζή" (σελ.396-398). Τέλος ας ρίξουν μία ματιά στο σχεδιάγραμμα της σελίδας 204.
Η αντιληψή του, η οξυδέρκεια και η απόλυτη γνώση του για το αντικείμενο με συνάρπασαν τόσο που θα συνεχίσω με την "αρπαγή της ευρώπης" που αποτυπώνει και την - πικρή νομίζω- εμπειρία του ως πολιτικού με τον άχαρο ρόλο του συνομιλώντας με κουφούς.
Βιβλίο στολίδι για σοβαρές βιβλιοθήκες.

[Luke McCarthy · Rating 5 out of 5]

Or: it's all debt and surplus, stupid!

[Mariella · Rating 5 out of 5]

fascinating shorter and more accesible than the big short. it also details history of capitalism from the industrial revolution to the hegemon today mixed with game theory. highly recommend.

[Diana · Rating 3 out of 5]

“Never before have so many powerful people understood so little about what the world economy needs in order to recover,” says Yanis Varoufakis in the Global Minotaur.

And what the world needs, he says, is an international mechanism for balancing economies, a Global Surplus Redistribution Mechanism (GSRM).

In general, any economic system contains units that are prone to showing surpluses and others that are more likely to report deficits. To maintain balance, the system must feature surplus recycling mechanisms that maintain the flow of surpluses from the future to the present, from the urban centres to the rural areas, from the developed regions to the less developed ones, etc.

The recycling, whether global or local, may be in the form of payments such as benefits and public services, or it may be investment in production facilities in deficit regions.

This chaos the world has experienced since 2008 is not due to financialisation, deregulation, greed and globalisation as is generally supposed, but to the lack of a GSRM.

To explain this he goes back to the crash of 1929, where a boom followed by bust decimated the economy. In 1932 Roosevelt introduced the New Deal which took the US off the Gold Standard and invested in social programmes. Then during the second world war, the state liberated all finances, spending and growing the economy. After the second world war the US emerged as the world’s powerhouse with large trade surpluses with the rest of the world, but they were spending money like water and afraid of another crisis around the corner. The US sought to avoid the imbalance of boom and bust, with a Global Plan which involved recycling its surplus to Europe and Asia. This would stimulate international development to balance growth in the US, and create markets for its exports. Germany and Japan, two countries that were devastated during the war, were chosen to be the local mini-minotaurs in their respective continents. The dollar was pegged to gold and other countries had to maintain exchange rates fixed to a 1% range.

This arrangement lasted from 1950 to 1971 when it finally fell apart due to the costs of the Vietnam war, welfare payments. The flaw in the Global Plan was that they failed to include an international currency union which would automatically keep trade imbalances in check. The Global Plan only worked as long as the US was the surplus nation, when it went into deficit and began to build up mountains of debt, this meant that other governments had to increase the volumes of their own currencies in order to maintain exchange rates, which led to inflation. Unable to sustain the dollar’s gold peg, in 1971 the US ended the Bretton Woods gold agreement.

From there on forward, the US was now a deficit nation, but rather than give up its position as the GSRM, the US maintained its position but reversed the flow of capital. The US absorbed the world’s exports and got the rest of the world to finance its deficits by attracting capital inflows into the US through a) increasing competitiveness and b) raising interest rates. The Global Minotaur was born.

The Minotaur was a mythological creature, half human, half bull, which lived in a labyrinth in the political hegemon of Crete, to which weaker states were required to pay tribute to in the form of the yearly sacrifice of seven young boys and seven young girls.

"The Athenians’ gruesome payments of tribute to the Cretan Minotaur were imposed by King Minos’s military might. In contrast, the tribute of capital that fed the Global Minotaur flooded into the United States voluntarily. Why? How did US policy makers persuade capitalists from all over the world to fund the superpower’s twin deficits? What was in it for them? The answer turns on four factors. To stick with the mythological narrative, let’s call them the Minotaur’s charismas."

The four charismas are:

a) Reserve currency status, which means that any commodity transaction, whether it involves the US or not, increases demand for the US dollar.
b) Rising energy costs, which benefit US as an oil producer and US multinationals.
c) Cheapened, productive labour, productivity has increased in the US but real wages have remained flat.
d) Geopolitical might, used and abused, to secure mineral supplies from the Third World and Afghanistan.
By the 1990s, American growth had caught up with the rest of the world, and the Global Minotaur worked its magic, right up until the crash of 2008.

The success of the US economy convinced the world that the American model was the one to follow. Unable to see the Minotaur in the room, the elites believed that they could all achieve this if they too adopted unregulated labour and financial markets.

The Minotaur was supported by four handmaidens:

-Wall Street with its mergers and takeovers and hedging instruments
-Walmart, a new type of business that squeezed wages and suppliers
-Trickle down economics, benefit the poor by making the rich richer.
-Supply side economics which argues that economic growth is best achieved by investing in capital, and lowering taxes on production, which inspired deregulation, real estate speculation and toxic derivatives.

"It was a heroic time, during which money seemed to be growing on trees. Traditional companies – those that actually produced things – were derided as old hat. What steel producer, car manufacturer or even electronics company could ever compete with Wall Street’s amazing returns."

But the fantasy economics and fantasy money was blowing up a bubble that was bound to pop sooner or later. It eventually did, when people who should never have been given mortgages were unable to pay them, and the subprime crisis set off the crash.

Now the US is no longer able to absorb the world’s exports and the crisis continues to spread, causing havoc in different places. The American economy is below capacity, demand is low, unemployment is growing. Globally, most governments have chosen to keep the banks afloat, but haven’t introduced any mechanism to stimulate growth and restore balance. Varoufakis calls this new state of affairs a bankruptocracy.

"In a typical zombie-movie setting, the undead banks drew massive strength from our state system and then immediately turned against it! Both in America and in Europe, politicians are quaking in terror of the very banks which, only yesterday, they had saved. Thus, the very financial sectors that were at the heart of the problem are now held in awe by our politicians. Not only does this make it impossible to implement sensible policies to deal with the ongoing Crisis, but it also stifles all rational public debate on what really happened."

Blame has been put on the risk taking and lack of regulation in US markets, and in Europe the peripheral states of Greece, Ireland, Spain and Portugal have been blamed for living beyond their means, when in fact, although Greece was in deficit, Ireland and Spain were in surplus in 2008 and Portugal was no worse than Germany.

The Minotaur is dead, but the ugly handmaidens are alive and kicking. Banks are creating private toxic money again, underwritten by taxpayers’ public money. Walmart-type firms are exploiting people and places, and free market fundamentalism is used to justify austerity for the masses.

What happens when the bullying master is taken ill and the handmaidens take over? That depends on the handmaidens. Unfortunately we are saddled with rule in a way that preserves the worst aspects of the Global Minotaur’s rule (the inequities, the boorishness and the instability) without offering the important function it used to fulfil – to keep generating sufficient overall demand for Europe’s and Asia’s surplus output by recycling the world’s surpluses.

The world needs a new Minotaur, says Varoufakis, though this time a benevolent, democratic one. He calls for an international coalition of countries to create a mechanism for planned investment and trade transfers, or for an International Currency Union, which manages recycling of goods, profits, savings and demand.

But then he finishes the book on a defeatist note, saying that he doesn’t believe this will ever happen because Europe is in disarray and the emerging nations have no tradition of mould building on a global scale. The only way forward he sees is for the US, the world’s only possible hegemon, to take up the role of building a new GSRM.

Beyond the need for a GSRM, the reality that this book reveals is that Capital has a life of its own, with objectives and desires and values that have nothing to do with what’s best for humanity. It is not the interference in Capital through greed, or mismanagement that caused the Crisis, but rather the lack of interference in a system which clearly needs regulation to operate effectively.

What we need to do is rid ourselves once and for all of any notion of free market magical solutions, (or of any Essentialist magical solutions) and take control of Capital for our own purposes.

Varoufakis asks if the Minotaur’s demise is our chance to realise how destructive it is to subjugate our will to that of Capital.

[Jakub Dovcik · Rating 4 out of 5]

Varoufakis has the rare ability to employ actually useful metaphors (conveniently his home turf are ancient Greek myths) to convey many really interesting and compelling analytical points to a very general audience. The centerpiece of his argument is essentially a critical evaluation of the global capital flows in the past eighty-ish years, which constituted two distinct forms of what he calls “global surplus recycling mechanism” - a balance between surplus and deficit regions within a capitalist economic system. And the effects of the undoing of the second form, which he calls the Global Minotaur, during the Crisis of 2008.

But these analytical points can easily get lost amid a relatively repetitive narrative and quite an amateur historiography that even relatively amateurish readers can get a bit tired of. His explanations of some economic events (for instance the 1990s Asian financial crisis) get very simplistic in order to support his greater argument. And constant analogies get quite tiring. Also, his explanations are short on actual motivations or actions of individual people - it is always “New Dealers”, “American officials” and so on - and on the other side, Paul Volcker is given an almost absurdly strong position that is really difficult to take on face value.

Despite all of that, Yaourfakis is quite rare among people at the intersection between academia and policy, in that he not only provides a novel analytical perspective but also some policy ideas for reform. A decade after the first edition almost none have been implemented (and his predictions have not really come into effect, although one could argue that the trends he described are visible), yet they provide a good basis for an unconventional critique of various global and especially European institutions and monetary structures. As such he definitely deserves a read.

[Doa'a Ali]

الكتاب فيه رؤى محددة حول انتقاد الرأسمالية العالمية وادعاء حرية السوق والعولمة لكن في الحقيقة ما هي إلا مسميات، والوجه الحقيقي انها إمبراطورية لكن بحلة جديدة فيها من القوة التكنولوجية والاقتصادية ما هو كاف للتحكم بمقدرات الشعوب واعادة تدوير الفائض العالمي على كيف الدول العظمى...
اعتقد انه مقدم لقارئ مهتم بالاقتصاد بشكل كبير

[Max Hristov · Rating 5 out of 5]

Varoufakis at his best. Though he’s a bit of a broken record on his surplus management theory, it has really held up. The book’s written with great flair, usage of historical events and analysis on how the world economy is structured. Rare to see an author both come up with a theory of his own rather than just repeating what has already been argued, and explain it so understandably.

[Bobby Damore · Rating 5 out of 5]

Very illuminating!

[Monica · Rating 5 out of 5]

Do you really need to read yet another book on the 2008 financial crisis? The answer is yes, and it’s this one. Varoufakis does a great job of denaturalizing and historically situating capitalist markets and forces of financialization, as well as emphasizing the role of US military investments in the narrative of the rise of the East Asian Tigers (a factor too often ignored/discounted by economists). The crux of the overall argument lies in the metaphor of the Global Minotaur (i.e. the global surplus recycling mechanism, or GSRM) which was empowered/controlled by the US’ ‘twin deficits’ (trade & domestic budget deficits) starting from 1971, and which ultimately faced its demise in 2008 due to runaway financialization enabled by market deregulation. The conclusion begs the question of who will step up to supply the GSRM in future, as Keynes’ internationalist vision seems unfortunately out of reach.

[Linda Elder · Rating 4 out of 5]

The Global Minotaur is a fast course in the economic workings of capitalism, covering the major players only, and starting at the 1944 Bretton Woods conference.

Central to the author's thesis is the principle that any monetary system requires mechanisms for transferring resources and capital from supply areas to deficit areas. At the end of World War II, the West had an efficient surplus recycling system in place. US was the supply country, recycling its excesses to the rest of the world, but especially to the former enemies, Germany and Japan, whom it favoured for development to the detriment of all others, even including the US itself.

This went swimmingly until 1971 when excesses of the Vietnam war moved US into a deficit position. At that point, America made an audacious strategic decision. Instead of reining in spending to tackle its twin deficits, they decided to do the opposite: to boost those deficits. Thus, the roles of the players were reversed, and for the next several years, the leading surplus economies, i.e. Japan, Germany and later China recycled almost 70% of their profits back to the US – they gave their money to Wall Street!

The Minotaur, a monster from Greek mythology, is Varoufakis’ metaphor for the aberrant structure of the monetary system after 1971. This monster has four charismas and three handmaidens. Charismas are: the American dollar, American firepower, rising energy costs, and cheapening labour costs. Handmaidens are: Wall Street, Wal Mart, and toxic economic theory built on mathematical hoaxes.

For non-economics types like me, this book is a steep learning curve. Luckily, there are on-line interviews with the author and these are a great help. I came to realize just how immense is the structure of exchange in goods and capital, and also how carefully planned. Yes, Jennifer – there is a conspiracy. But as it turns out, that is the good news.

Varoufakis claims that surplus recycling could easily solve the present Euro crisis. He contends that known mechanisms are not being discussed because the biggest players enjoy too much their own hegemonic positions. The author challenges us to look again at the Keynes proposal of 1944, which was passed over at the time in favour of an American model. Keynes had envisioned a global currency with a global surplus recycling mechanism or GSRM, to be administered by an international central bank.

Keynes GSRM was as follows: each member country would have the right to borrow at zero interest up to 50% of the country’s trade volume. Loans above 50% of trade volume could also be made but at the cost of a fixed interest rate. This would give the deficit country flexibility to boost demand without having to devalue its local currency. Secondly, any country with a trade surplus exceeding a certain percentage of its trade volume should be charged interest, which would force its currency to appreciate. These penalties would, in turn, finance the loans to the deficit countries, acting as an automatic GSRM.

The Keynes system, as described, has a nice ring to it and for this reason I would recommend The Global Minotaur for everyone with eyes trained on the future. Many countries are non-players in the book which can only mean there is a sequel to write.

[Aria Rezaei · Rating 5 out of 5]

Good account of global economy after WW2 and what led to the Crash of 2008. Plenty of metaphors based on Sci-Fi movies and Greek Mythology along the way. It was really fun reading this book.

[Goose · Rating 1 out of 5]

It's a narrative-building book, moreso than an in-depth economic study. Interesting in places, but there isn't nearly enough research, to the point you can't really trust some of the book's points without blind-vesting in the author's authority. He has a tendency for glibly spewing explanations which seem to be contentious or at least not obvious, without a citation in sight. That being said, the worst part about this book is the writing style. It's written with so much aplomb and willful stylization its difficult to tell what exactly he means, and even harder to tell when he's elided a seemingly important facet of the explanation. He uses euphemisms for just about everything, as indicated in the title, and often refers to one thing three or four different ways. Never, ever write a scholarly work this way.

There's some important stuff in here, such as the important of intersystematic surplus recycling mechanisms and the extreme power of the dollar's reserve currency status as the underpinning of the deficit strategy, but even these aren't elaborated on enough. I had many questions at the end of the book.

Apparently this is the populace-level version of a more in-depth work of the same material he did earlier in his career, and he refers the reader to it at the end, along with an article they wrote explicitly answering questions people had to this book. So, basically, blind authority vesting is the only way you're getting the intended effect from this book if you're using only this book.

Also, his line of reasoning seems to lead to the conclusion that the dollar is going to hard-crash one day and lead to a global great depression at worst or America's bankruptcy at best, but he doesn't actually say this or even seem to think about it.

[عمر الحمادي · Rating 3 out of 5]

في عام ٢٠٠٩ أرسلت ملكة بريطانيا سؤالاً إلى ٣٥ من كبار الخبراءالاقتصاديين (لماذا لم تنبؤوا بحصول هذه الأزمة؟) فكان جوابهم أنهم أخطأوا في تقدير فقاعة كبيرة عظيمة لعالم رائع جديد، لقد فشل الخيال الجماعي في فهم المخاطر التي يتعرض لها النظام في أزمة ٢٠٠٨ الاقتصادية، عجز ٤٠٠٠ مدير إدارة مخاطر في البنك الملكي الاسكتلندي عن التخلص من مخاطر الأزمة فابتلع الاقتصاد الثقب الأسود، البشر مخلوقات بشعة وعندما يُمنحون أدنى فرصة سيقومون بالسرقة والنهب والتنمر، مضافاً إلى ذلك علماء اقتصاد نالوا جائزة نوبل ساعدوا في إعادة تصنيع الجهل وتسويقه بنجاح ليُبنى عليه شكل جديد من الديون المتراكمة.

المينيتور هو ذلك الوحش الإغريقي الضبابي القابع في جزيرة كريت اليونانية، نصف جسده إنسان ونصفه الآخر ثور، كان يُدفع لملكه الجزية من البشر والمال من أجل الحفاظ على السلام حتى أتى أمير شجاع وقتله، يمثل العجز الأمريكي ذلك الكائن الأسطوري الذي سقط بغتة بعدما كانت تُؤدى له الأموال والسلع.

اقتبس المؤلف نظرية ابن خلدون في سقوط الأنظمة (العصبية)، والتي تقول أن السلطة التي بنيت بالعصبية ومع مرور الوقت تبدأ وتفقد العصبية مع تصارع القوى الداخلية الطامعة، وتضعف قوة الحكام فتسقط دولتهم، كذلك الشركات الناجحة تنمو نمواً كبيراً ومرضياً ثم يستولى عليهم المبتكرون الجياع محدثو النعمة لتفشل لاحقاً.

الكتاب فيه تحليلات اقتصادية متسلسلة لما جرى، يستحق القراءة خصوصاً من قبل غير المتخصصين، مع تناول فنجان قهوة كل ربع ساعة.

[Aslihan · Rating 3 out of 5]

If you've read your Marx and Adam Smith or the following generation of Keynes and Polanyi, the first half of the book has very little novelty to offer. The lengthy reference to the 1929 economic crisis remains rather descriptive, while the opportunity for a deeper comparative analysis with the 2008 crisis is not well taken. The second half of the book does provide a detailed yet descriptive account of the way 2008 crisis progressed, with some cross-country analysis and the spillover effect, yet the book as a whole is disheartening and disappointing because of its theoretical weakness. We already live in a post-crisis setting and to think of future possibilities is more interesting than whining for the past. The author is superbly equipped with the necessary theoretical capacity, but does not use it to develop a deeper, more questioning analysis. The expressive prose enriched with heavy symbolism does not save the day for Varoufakis.

[Thilina Panduwawala · Rating 3 out of 5]

Explains the intl political economy of the Global Surplus Recycling System and the importance of reforming the GSRM post GFC. Some may disagree with the details amd arguments, but the framing remains useful.

[Keen Reader · Rating 4 out of 5]

4.5 Stars!

“This is no longer a financial crisis. It is not even an economic crisis. It has become a political crisis.”

Varoufakis is everything that Wall Street doesn’t want economists to be…informed, accessible, well-connected and left of centre. This was a fascinating insight into the background and impact of some of the US’s more significant and controversial economic policies of the 20th Century and how they have impacted on the rest of us.

He shows us how America implemented the Global Plan at Bretton Woods back in 1944, and how that eventually led to Japan and West Germany getting heavily protected and greatly bankrolled by the US in order to create new markets and provide buffers and outlets for them. He’s good on the creation and eventual disintegration Bretton Woods in 1971 which heralded the start of the phenomenal wealth and greed of those at the top, whilst keep the vast majority down, what he calls the Global Minotaur.

Varoufakis states that in real terms purchasing power from wages in the US hasn’t improved since 1973, whilst at the top salaries have soared beyond all reason. He’s good on the horror of Reaganomics and how its legacy still lingers and looms large today, as well as various financial deregulations which took place under both Democrat and Republican leadership.

He nicely illustrates and translates what the likes of your CDS (Credit Default Swaps), LTCM (Long-Term Capital Management) (hedge fund), GSRM (Global Surplus Recycling Mechanism) are, explaining what role they played in the financial crash and beyond. There are many box panels which come with all sorts of interesting titbits of information and history, that bolster his overall points.

Most people are aware of the devastation wreaked by 1929 and 2008, less will know of Black Friday and the dotcom bubble bursting, the East Asian crisis of 1998 and maybe handful of other financial crashes, but as Varoufakis illustrates there have been many more which occurred with predictable results, but are less talked about and show just how deeply flawed and fragile the capitalist system is.

This is an eloquent, and thoroughly enjoyable piece of work and shows why Varoufakis remains one of the most engaging and compelling economists in the current global climate and I would highly recommend this to anyone with even a slight interest in the subject.

I sometimes wonder what people in the future will say or think about the financial crisis of 2008?...Vile, unforgiveable and perhaps above all sad. It is a state of affairs which confirms our worst fears about what humanity is capable of. An on-going devastation where not only did the guilty get away with it but they managed to get their victims and the public to bail them out and spread the suffering and misery as far and wide as possible, and now they are stronger, greedier and more powerful than before. It beggars belief.

As we look to the States with another election coming up, the rest of the world endures another round of endless lies and deceit from some of the loudest, brashest and most cynical people you could ever meet as they desperately seek out power. It is deeply depressing when we see the two best candidates the so called greatest country in the world could produce last time round. Trump got nearly 63 million votes but lost the popular vote, Clinton gained nearly 66 million votes, but no one likes to mention the real elephant in the room, apathy, more than 90 million Americans felt so hopeless and ignored that they didn’t even be bother to vote, and so it seems that apathy won by a landslide.

Non-voters are consistently patronised and told they can’t complain unless they vote. But there is maybe a little more to it than that. Choosing not to choose is still a choice and also a right. Generation upon generation has shown these people just what politicians and voting has done for them. Whether Detroit, MI, Camden, NJ or New Orleans after Katrina, it’s there in black in white. School shootings, black killings, wide scale corruption, foreign wars, hyper-surveillance and prescription addiction epidemics to mention only a few.

And yet the same Americans go out every election year like battered wives returning to an abusive husband. This time will be different. But it never is and there is always another excuse, but no responsibility taken. The Republicans hammer them with a right and the Democrats batter them with the left and after the latest batch of broken promises, and a new group of lying thieves have enriched themselves, the wages remain stagnant, hours grow longer and conditions worsen as people get deeper into debt, the rich grow wealthier and the lies keep on coming. I am willing to make a prediction, come the next election the victors will be Wall Street. After all that is who really runs America and that is why more than 90 million of them will probably not even vote.

[Joao Vargas · Rating 4 out of 5]

This book was an incredible surprise for someone who didn't know anything about Yanis Varoufakis except the eccentric Greek Finance Minister that shook European Union for a couple of months. But Varoufakis (I know it now) is much more that a Leftist character with an empty speech against capitalism. In this book he shows his great and deeper knowledge on economy which would embarrass most of the capitalism prophets. He sketches a good overview of how USA lead the world economy towards a very clear goal, taking the best from their European (lead by Germany) and Japanese servants and makes it clear that the chaos of 2008 crisis was not only predicted but somehow intended by some US officials. On a second part of the book, Varoufakis focus on how Europe, specially Germany, handled the 2008 crisis and why it was not yet resolved.
This is definitely a book worth reading by a wide audience - a lot of people can benefit from this teachings and put their beliefs on world economy in perspective.

[Jake · Rating 3 out of 5]

From the postscript :

“Not once, but twice, the United States smashed pre-existing realities to fashion new ones. The first time, it had no choice. World War II had thrust America into the role of an unwilling reality-fashioner. It responded brilliantly, with a Global Plan that delivered global capitalism’s finest hour. And when its Global Plan reached its sell-by date, the United States spent no time dithering, or ‘studying’ the existing reality.
Instead, it actively sought to disintegrate the degenerating reality, to cause a major, worldwide crisis that would spawn a newer, hyper-vibrant reality: the Global Minotaur. It was the second time in its history that America had reshaped the world not so much in its image but in a manner that converted a creeping weakness into majestic hegemony.”

[Mike Sanders · Rating 4 out of 5]

After having gone through a debt crisis myself, can really feel Varoufakis' rage at the system here, comes off quite powerfully. Doesn't hurt that he backs it up with a pretty strong description of the global monetary system in a way. As part of his story to explain this, he does go a bit overboard and I feel exaggerates examples and almost veers into conspiratorial grounds, though this is really not needed - the monetary systems of the past 100 years are dramatic enough as it is (though I realise the audience for this book isn't necessarily me, so perhaps the embellishments are useful).

[maryanne · Rating 2 out of 5]

Idk if the Minotaur metaphor is accurate, since when you send 7 boys and 7 girls to be eaten by a Minotaur in a labyrinth, you lose 7 boys and 7 girls, but when you pay for US goods with dollars and recycle that into US assets, the money appreciates and everyone benefits?

I feel like this was a convoluted analogy to explain that money should go to the people who need it most, and that such would generate more productivity by the basic principle of diminishing marginal returns