Fiscal waterboarding, bankruptocracy, and other Varoufakis metaphors

Varoufakis says the darndest things.
Varoufakis says the darndest things.
Image: Reuters/Alkis Konstantinidis
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“…there is nothing that our proud countries can do other than to say ‘No!’” (xvii)

This is how Yanis Varoufakis, whose secret plan for a Grexit was revealed this weekend, began his recently released book, The Global Minotaur.

It is also how he beseeched Greeks to vote in the referendum, after which he resigned as finance minister, despite the country having voted in his favor.

His disdain for the institutions arranging the austerity-driven bailout is apparent from the first page, and makes it clear that Varoufakis had no intention of being part of any negotiation to keep Greece in the euro zone.

The Global Minotaur, first published in 2011, but recently reissued, is perhaps best read as a prequel to Varoufakis’ actions over the past month. In the book, the United States is Varoufakis’ “global minotaur,” the mechanism which enabled the world economy to function by absorbing and recycling its surpluses, just as Ovid’s minotaur gobbled up a regular tribute of young Athenians in the Metamorphoses. The crash of 2008 kills Varoufakis’ minotaur, leaving the euro zone as a dying vestige of a pre-2008 global economy. In light of this, neither Varoufakis’ resignation nor his “Plan B” comes as a surprise.

These prescient passages from the book reveal that, if nothing else, Varoufakis is a man of his word.

Against that background of resistance to bad omens, and while writing the book’s early draft, I was beginning to gain a degree of notoriety in the Greek and international media as a doomsayer who believed that not only was Greece’s bankruptcy inevitable but that it was a precursor of the eurozone’s unraveling as well. (xiv)

In Europe, the Crisis has set in train centrifugal forces that are tearing the eurozone apart, setting the surplus economies, with Germany at the helm, against the stragglers, whose structural deficits cannot be cured, no matter how much belt-tightening goes on. (165)

A visiting extraterrestrial reading the serious European press would come to the conclusion that Europe’s crisis happened because some peripheral states borrowed and spent too much. Because little Greece, uppity Ireland and the languid Iberians tried to live beyond their means by having their governments debt-finance living standards over and above those that their production efforts could sustain. (166)

In short, socialism died during the Global Minotaur’s Golden Age, and capitalism was quietly bumped off the moment the beast ceased to rule over the world economy. In its place, we have a new social system: bankruptocracy – rule by bankrupted banks (if I were allowed to indulge in Greek, I would call it ptocho-trapezocracy). (167)

When the latest pile of private money turns to ashes, too–as it certainly will–what next for Europe? (177)

Zombie banks became a feature of the whole wide West. Moreover, unlike Japan’s zombie banks, which remain politically weak, America’s and Europe’s zombie banks rule the roost in the new socioeconomic configuration that I call bankruptocracy. (191)

The objective? To use the creation of the eurozone as a mechanism by which to cast in stone the ‘obligation’ of the deficit countries (plus France) to provide Germany with net effective demand for its exports. (200)

To put it simply, imagine what would have happened in 2008 if, in the ‘dollar-zone’, each state (e.g. California or Nevada) had to bail out the banks registered on its soil and there was no way of financing public deficits from Washington! (204)

Imagine if, on 15 September 2008, Secretary Paulson had said to Lehman Brothers: ‘No, I am not going to bail you out’ (which he did say); ‘No, I shall not organize very low interest rate loans for you’ (which he also probably said); and ‘No, you cannot file for bankruptcy’ (which he would never have said). That last ‘no’ is inconceivable. And yet that is precisely what the Greek government was told. (206)

If I am right, and the euro crisis is a systemic failure that began as a banking crisis, then Europe’s medicine is worse than the disease. It is like sending a weak swimmer out to sea to save a drowning bather: all you can expect is the sad sight of the two weak swimmers hanging onto one another for dear life, both sinking fast to the bottom of the sea. The two swimmers are, of course, the eurozone’s deficit states and Europe’s banking system. (207)

The domino effect, with one deficit-stricken country falling upon the next, until none is left standing, is the common metaphor used to describe the eurozone crisis. I think there is a better one: a group of disparate mountaineers, perched on a steep cliff face, tied to one another by a single rope… Suddenly an earthquake hits (the Crash of 2008) and one of them (let’s call her Helen) is dislodged, her fall arrested only by the shared rope. Under the strain of the stricken member’s weight as she dangles in mid-air, and with loosened rocks falling from above, the next weakest (or ‘marginal’) mountaineer struggles to hang on; eventually, Paddy has to let go, too. (208)

So it seems that the euro crisis is wholly unnecessary from an economic viewpoint, but that it serves the interests of maintaining within Europe the role that Germany developed for itself during the reign of the Global Minotaur. And now that the Minotaur is kaput, Europe is in crisis and Germany is in denial. (211)

Additionally, Americans were spared the need to contend with a central bank utterly shackled by inner divisions and the German central bank’s (the Bundesbank’s) penchant for treating the worst-hit parts of the Union (the eurozone, that is) as alien lands that had to be fiscally waterboarded until they ceased to obey the laws of macroeconomics! (236)

Europe is looking like a case of alchemy-in-reverse: for whereas the alchemist strove to turn lead into gold, Europe’s reverse alchemists began with gold (an integration project that was the pride of its elites) but will soon end up with the institutional equivalent of lead. (243)

Post-Minotaur, this means that our lives are ruled over by the Global Minotaur’s surviving handmaidens: Wall Street, Walmart, Germany’s provincial mercantilism, the European Union’s absurd pretense that a currency union can prosper without a surplus recycling mechanism, the growing inequities within the United States, within Europe, within China, and so on. A world without the Minotaur but ruled by its handmaidens is an illogical, absurd place. (251)

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. (255)