Talking to My Daughter

by Yanis Varoufakis

if a goal can only be achieved

collectively, success depends not just on each individual pulling together but primarily on each individual believing that every other individual will do so.

Just like Rousseau’s hunters, entrepreneurs struggling to remain profitable in a market society are playthings of their collective expectations. When the group is optimistic, their optimism is self-fulfilling and self-perpetuating. And when it’s pessimistic, their pessimism is also self-fulfilling and self-perpetuating. The fact that they know this to be the case only makes it all the more certain that it is – and just like Rousseau’s hunters, they may end up chasing hares even though they would rather not.

the labour market is based not just on the exchange value of labour but on people’s optimism or pessimism about the economy as a whole, and so across-the-board wage cuts may well result in no new hirings or even lay-offs.

If the economy is the engine of society and debt is its fuel, then labour is the spark, the life-breathing force that animates that engine, while money is the lubricant without which that engine would seize up.

this simple, practical measure would be for a portion of the machines of every company to become the property of everyone – with the percentage of profits corresponding to that portion flowing into a common fund to be shared equally by all. Consider what effect that would have on the course of human history.

Currently, increasing automation reduces the portion of total income that goes to workers, diverting more and more money into the pockets of the rich who own the machines. But as we have seen, this ultimately diminishes demand for their products, as the majority have less and less money to spend. But if a portion of the profits were to go automatically into the bank accounts of the workers as well, then this downward pressure on demand, sales and prices would be alleviated, turning the whole of humanity into the beneficiary of the machines’ labour. As long as highly skilled human labour remains necessary to design the machines that build other machines, full automation of the production process will not happen. In this scenario the effect of distributing profits as I have described would be to ensure that prices remain more or less stable while incomes rise, with the result that products become increasingly more affordable.

we urgently need as a species a way to make full use of our technological potential without periodically destroying the livelihoods of great swathes of humanity and ultimately enslaving ourselves to the few. To do this, we must first and foremost redistribute between us the riches that the machines we have created can produce through part-ownership of those machines.

What stops us from doing this? The fierce opposition of the tiny but very powerful minority who own the existing machines, land, office blocks and of course the banks. What do we do in the face of their resistance?

the purchasing power of a unit of currency has nothing to do with how much it costs to produce but, rather, its relative abundance or scarcity.

Who would issue the currency and regulate its quantity and quality if not a government or central bank? Such questions were unanswerable before the digital age, but since the Internet arrived, the vision of a democratic, safe and honest digital currency with no physical form, existing only in our computers and smartphones, independent of any central control, has been growing in progressive minds with an anti-authoritarian bent. The challenge has always been this: unlike a banana or a hundred-dollar note, which I cannot eat or spend twice, anything digital is just a string of numbers sitting on a hard drive and can therefore be copied and multiplied by anyone. If there’s nothing to stop me or you from creating as much currency as we want, how can we keep tabs of how much each one of us has the right to spend? Without a solution to this problem, a digital currency would immediately be destroyed by mistrust and hyper-price inflation. A brilliant answer to this question was sent in an email to an online chatroom on 1 November 2008, a few weeks after the crash hit. The email was signed by Satoshi Nakamoto, a pseudonym hiding a person or team whose identity hasn’t been uncovered to this day. In this email Nakamoto presented a dazzling computer program – an algorithm – that solved this problem and would become the basis for a new decentralized digital currency – the so-called Bitcoin.

Before Nakamoto’s email all other solutions required a central authority of some kind. Banks and credit card companies like Visa or Mastercard deal with the problem by creating a central digital spreadsheet. Every time you pay for something on Amazon using my credit card, a number of dollars is taken out of the entry in that central spreadsheet – or ledger – next to my name and account number and is put next to Amazon’s name and account number on the same central spreadsheet. Before every purchase I make, the central system checks to see that there are sufficient funds next to my name, ensuring I never spend the same money twice. The beauty of Nakamoto’s algorithm was that it did away with the ledger run by a central authority but still managed to ensure that a single currency unit could never be copied or spent twice.

dollars. What is truly interesting about this story is that it reminds us why money is, and must always be, political. That money is political is not something Bitcoin’s supporters dispute. Their love for Bitcoin and other so-called cryptocurrencies stems from what they see as its anarchic, anti-establishment, counter-authoritarian nature. This is as political as it gets. What Bitcoin supporters would not like, however, is what I am going to say next: that money can be kept separate from the state and from the political process leading to the formation of our governments and their policies is a dangerous illusion.

As the forest fire suggests, a society that prizes exchange value above everything is one that grossly and criminally undervalues the preservation of the environment. If a tree or a microorganism has no exchange value, our market society behaves as if its destruction is meaningless. If exchange value can be derived from its destruction, we can’t act fast enough. Why is this?

In ancient Greece a person who refused to think in terms of the common good was called an idiotis – a privateer, a person who minded his own business.

Your era will be typified by the momentous clash between two opposing proposals: ‘Democratize everything!’ versus ‘Commodify everything!’ The proposal favoured by powerful and influential people and institutions is ‘Commodify everything!’ They want to convince you that the solution to our world’s problems is to accelerate and to deepen the commodification of human labour, land, machines and the environment. ‘Democratize everything!’ is the recommendation that I have been building towards throughout this book. Take your pick. The clash of these two agendas will determine your future well after I am gone. If you wish to have any say in that future, then you and your contemporaries will have to form an opinion on this matter and articulate good arguments with which to win others to your point of view.

I am not going to pretend to be neutral in this clash, so I will say this. Commodification will never work. Markets do a great job when it comes to managing the supply of coffee shops in a city and, more generally, the distribution of goods among buyers with different tastes, just as we saw in Radford’s POW camp. But as I have attempted to show

over the course of this book, they are terrible at managing money, labour and robots. As for the environment, the market solution combines the worst of the mark...

The fact that our democracies are imperfect and corrupt doesn’t change the fact that democracy remains our only chance to avoid behaving, collectively, like foolish viruses. It is our only hope to prove Agent Smith wrong.

Have I ever told you why I became an economist? Because I refused to leave it to the experts. The more I understood the economists’ theories and mathematics the more I realized that the so-called experts in our great universities, on our TV screens, in the banks and finance ministries did not have a clue. The smartest among them created brilliant models that could only be solved mathematically if the reality of labour, money and debt described in this book was first removed from those models, rendering them irrelevant to market societies.

Many people will tell you that your father doesn’t know what he’s talking about; that economics is a science. That just as physics uses mathematical models to describe nature, so economics uses mathematical models to reveal the workings of the economy. This is nonsense. Economists do make use of lovely mathematical models and an army of statistical tools and data. But this does not really make them scientists, at least not in the same way that physicists are scientists. Unlike physics, in which nature is the impartial judge of all predictions, economics can never be subjected to impartial tests. It would be not just hard but impossible to create a laboratory in which economic circumstances can be sufficiently controlled and replicated for any scientific experiment to have validity – to test for example how world history would have evolved if in 1929 the state had printed money to give to the poor instead of opting for austerity, or how Greece would have fared if in 2010 the bankrupt Greek state had refused to take out the largest loan in history on conditions of the most savage austerity ever practised. When economists insist that they too are scientists because they use mathematics, they are no different from astrologists protesting that they are just as scientific as astronomers because they also use computers and complicated charts.