Henry Kissinger, an academic turned politician, is said to have quipped that academic disputes are extremely bitter because the stakes at universities are painfully low. The book reviewed hereby is authored by Yannis Varoufakis, another academic turned politician, and it suggests, in an entirely unintentional manner, that political disputes are fairly polite and verbally restrained even if the stakes are incredibly high, such as the livelihood of millions, e.g. the common people of Greece as of 2010.
Varoufakis’ book chronicles his turbulent and short time qua finance minister of the Hellenic Republic in 2015 (chapters 6 through 17) while adding a number of reasoned observations about the world’s, Europe’s and Greece’s economic sorrows since the annus horribilis 2008 (chapters 1 through 5). Finally, it informs the reader about some of the latest developments in Varoufakis’ own recent career as a Greek MP (Epilogue), including the launch of a new political party, called “Democracy in Europe Movement” (or “DiEM25”). The idea of founding a new political party matured several months after Varoufakis left his post in the Hellenic cabinet headed by Alexis Tsipras, the young leader of the initially broad leftist alliance Syriza, which came to power during the most painful years of Greece’s economic collapse (chapter 5).
Tsipras and a now much ‘thinner’ Syriza have recently celebrated the formal end of the nation’s subjection to its creditors’ representatives—the so-called “troika” aka the European Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB)—and their notorious Memorandum of Understanding (cf. especially chapters 8 and 9). Therein, the socially chilling and economically contractionary conditionalities of the debtor country are cast black on white in the pursuit of three bailout agreements that future European scholars, politicians and activists ought to retrieve, peruse and reflect upon whenever contemplating how nations should deal with their creditors. Latin American and African ones are likely to be familiar with the score at issue. The conditionalities accepted by three different Greek governments included repeated rounds of cuts to old-age pensions and public expenditures on healthcare, culture and education; mass dismissals of public-sector workers; reduced funds to tax-monitoring bodies; loss of State control over public bodies that must thereafter respond directly to the creditors (cf. especially chapter 2).
It transpires from the book’s accumulated evidence that many experts, especially within the IMF, knew perfectly well that such conditionalities would strangle Greece’s economy and make it incapable of generating the revenue whereby to repay its creditors, and that only the most creative economic modelling could buttress the official position of the troika (cf. Appendix 2). Nevertheless, the creditors pressed all the same such conditionalities onto the Greek State and particularly, despite growing signs of snowballing deterioration, onto the government led by Syriza, which many eggheads in Europe’s governing elite feared qua resurgence of the political left, evidently to be snuffed out in its cradle (chapter 9).
The first and the second bailout agreements were required to salvage German and French banks that had invested in Greek bonds and were now unwilling to oblige to market discipline, which John Kenneth Galbraith had once claimed to be praised by all market sycophants as long as it applies to people other than oneself (Tout savoir, ou presque, sur l’économie, Paris: Editions du Seuil, 1978). The third one had a specific political mission to accomplish, whetherthe money involved in the process was going to be recovered by the creditors or not. Had the European authorities and the German leadership failed “to win Alexis [Tsipras] over to their side”, then they should “create such chaos that his government fell, allowing for its replacement with a compliant technocratic administration, just as they had in 2012.” (92).
Meeting by meeting, debate by debate, telephone call by telephone call, e-mail by e-mail, SMS by SMS, the actual exchanges between the protagonists of this intricate political saga come across as surprisingly civil under most circumstances and most carefully worded in public as well as in private conversations, even when great tension and palpable disagreement occur. Gallant propriety endures even when starkly opposed conceptions of the European unification project are voiced and debated, such as German conservative Wolfgang Schäuble’s plan to “ditch […Europe’s] welfare states” as no longer affordable vis-à-vis the competition of “places like India and China”, contra Varoufakis’ aspiration to the “globalization of welfare benefits and living wages” (212). Greece, in this debate, is revealed to be the starting point in Schäuble’s plan for the pauperisation of Europe’s middle class that also the IMF’s director, Christine Lagarde, seems de facto keen to facilitate, starting “with Greek pharmacies” (367).
Some nasty epithets did fly now and then, and the media’s recurrent, blatant and effective smearing campaigns are duly noted too, including a horrid “set up” scene in which an “irate businessman” attacked Varoufakis in July 2015 as the “former minister” who had ruined him (476). However, unlike the talks between Varoufakis and a long list of high-ranking European officials and politicians appearing in his book, these mucky incidents of character assassination are not worth being recalled with equal care and written all down for posterity to muse upon. Incidentally, we learn that “vulture fund” is regarded in high-level political circles as too crass a term, hence “hold-out” is preferred instead (508 n33). Apparently, strong language is not required in determining or merely discussing whether the wealthy creditors’ pecuniary concerns or the vulnerable people’s more immediate ones—shelter, food, health, survival—should be given precedence in a time of conspicuous recession. As the leading European institutions and the IMF are concerned, the former come obviously first.
Perhaps, as several passages of the book point to, the generally cautious politeness of the conversations can be explained by the way in which all these powerful individuals talking to each other seem generally aware, if not afraid, of being spied upon, recorded and/or leaked to the press. As a result, all these powerful individuals regularly hide their real meanings beneath layers of ambiguity and vagueness, which too blunt a language would impede. As an amusing account of a conversation between Varoufakis and the US economist Jeff Sachs discloses, some spies can show “no compunction whatsoever about revealing they were tapping [Varoufakis’] phone” (396).
Honest and constructive rational dialogue is thus one of the victims of the endless tactical games played by the powerful and frequently unscrupulous individuals paraded in the book. Lying is considered by many of them a sign of intelligence, deafness to argument a sensible stratagem, and the most political issues of all—who gets what, when and how—are couched dogmatically as technical matters. Time, energy, resources, decency and integrity, if not humanity itself, are sacrificed to strategies aimed at outsmarting and manipulating one another, until the point comes when a modicum of frank exchange is eventually permitted, almost as the last resort (cf. especially chapter 11).
As a scholar born and raised in Italy, this recurrent and over-intelligent lack of honesty reminds me of the (sub)culture of so-called furbizia(cunning), whereby each individual takes undue advantage of other people by way of selfish duplicity (e.g. skipping queues, double parking, giving backhanders, ignoring regulation). When this kind of seemingly smart individual behaviour is generalised, however, it results into inane collective inefficiency (e.g. delays, traffic jams, lost income, fire hazard). Game theory, in its neat complexity, confirms this simple realisation that so many southern Europeans, Greeks included, have to cope with on an almost daily basis (cf. Appendix 3).
Varoufakis’ chronicle is detailed, carefully reconstructed from personal diaries and, as a matter of fact, from recorded conversations (cf. the opening “Note on Quoted Speech”, ix). Also, it includes a substantial body of explanatory endnotes and appendixes, which remind the reader of its author’s background as a well-established university professor and an experienced economist who, in a Cassandra-like fashion, had foreseen the crisis to come because of “the bubble in American real estate and in the derivatives market” and feared a novel “Great Depression” (30).
Varoufakis’ declared and effectively “heroic” aim is to be nothing short than a “whistle-blower” and reveal the secretive workings of Europe’s top-level bureaucracy, the IMF, and the realm of transnational finance at large (12). The price to be paid for such a brazen act of defiance is quite straightforward. Varoufakis is bound to join the ranks of institutional “shooting stars” that will never again be allowed to be members of the international elite wishing—frequently in vain—to control world’s events, since in order to belong to this elite one must not let the outside know what goes on in the inside (12). Larry Summers, Jean-Claude Trichet and Mario Draghi would never write a book like the one reviewed hereby.
Once again in an unintentional manner, such a lengthy and sometimes fastidious chronicle of Euro-bureaucracy and cabinet meetings does more than what it sets itself to accomplish. Varoufakis’ book contains many informative elements allowing the reader to grasp the larger picture in which the Greek events have unfolded, namely “the myth of the ‘new economy’, popular around the turn of the millennium and centred on the claim that technological progress had made business cycles obsolete” (Jóhann P. Arnason, “Questioning Progress”, Social Imaginaries, 4(1): 180).
Specifically, the reader is reminded of how the deregulated and liberalised largest private banks and financial institutions of the world made a killing with the waves of privatisations, mergers and acquisitions kick-started by Thatcherite Britain and Reaganite US in the late 20thcentury (chapter 2). Unsupervised by State authorities and entrusted faithfully to the presumed providential invisible hand regulating the markets, these increasingly larger and larger private banks and financial institutions ended up believing themselves invincible, the true masters of the universe (chapter 1). Indeed, the best and brightest that they proudly employed thought themselves capable of such technical wizardry as to disperse risk once and for all in novel and most ingenious ways, securing at the same time further profits ad infinitum (chapter 1).
Alas, all this much-cherished and trumpeted financial genius—which John Kenneth Galbraith had famously claimed to be nothing but a rising market (The Economics of Innocent Fraud, Boston: Houghton Mifflin, 2004)—concocted bad products leading to bad investments, namely the now-forgotten “toxic American derivatives” monopolising the media’s attention in 2008 (31). This toxic kind of financial assets, which are still a threatening presence, annulled ten years ago the trust that the very same private banks and financial institutions had in themselves and in each other (cf. Michael Greenberger, “Too Big to Fail U.S. Banks’ Regulatory Alchemy“, Working Papwr No. 74, Institute for New Economic Thinking, 2018). Paralysed by the fear of massive losses, their lending came to a grinding halt and a global credit crunch took place. Money was no longer available to big- as well as to medium- and small banks, and to their customers too: from States themselves down to small businesses and individuals. The financial crisis became an economic crisis, causing enterprises to go bust, people to lose their jobs, demand to collapse, and the downward spiral of depression to materialise. Pace the widespread beliefs in the end of history and financial capitalism’s unstoppable triumph, 2008 was truly the new ominous “1929” and another Great Depression could not but ensue (125).
Libertarians, whom Varoufakis often compares himsel with, would leave the spiral of depression free to destroy as much of the existing economic and social life as required before finding a new equilibrium, perhaps at a lower level of civilisation, in which creative new entrepreneurs could emerge and flourish; but such libertarians are a minority even in the US that, by and large, have been spawning them in great number (cf. chapters 7 and 13). Traditional socialists, whom Varoufakis collaborated with as finance minister, would seize the opportunity to skip the middle man, i.e. the private banks and financial institutions lending money that only the State can lawfully warrant, and replace them with public ones; but few such socialists can be found in the world after the end of the Cold War: not even within Syriza is the “Left Platform” at the helm (cf. chapters 10 and 17). Old and new Keynesians, whom Varoufakis is associated with, would let the State and its central banks step in and pour fresh money into the depressed economy by way of, inter alia, large-scale public works and public investments, but the ECB is prevented from doing so by its own charter and regulations, unlike, for example, “the Bank of England, which from the moment the City went through its 2008 credit convulsion had printed billions to refloat the banks and keep the economy ‘liquid’”. (35)
What happened in the European Union is that the governments of its member States, through the ECB, decided first of all to buy worthless paper belonging to the inept large private banks and financial institutions as though it was still the gods’ ambrosia. On both sides of the Atlantic Ocean, not just in America, there were bankrupt conglomerates that, albeit culpable for their own toxic mess, were deemed “systemic” or “too big to fail” (138). At the same time, these bankrupt but unsinkable banks would buy the new debt issued by those States to keep funding part of the latter’s activities, i.e. saving the very same banks and institutions, while cutting other expenditures in order to pay for the rescue itself and avoid the inflation that huge emissions of new debt could engender (chapter 2).
Told suddenly that they had been living beyond their means, the citizens of Europe were imposed “austerity” measures, and their tax money was used along so-called “quantitative easing” (and “credit lifelines”, “liquidity injections”, etc.) to salvage the incompetent institutions bearing prime responsibility for the crisis (92). The burden of this crisis was shifted intentionally from the private sector to the public one: “taxpayers” from a vast rainbow of countries “were actually paying for the mistakes of French and German bankers” (27).
Soon after 2008, in a climate of growing economic precariousness for millions of Europeans, “banksters” and the “1%” were quickly forgotten as the object of general opprobrium. As the crisis’ burden got shifted from the private to the public sector, “PIIGS” and “profligate” States became the new target for media-fuelled public anger. Later still, it was the turn of foreign migrants coming from countries that had already been squeezed in previous decades by unsustainable debt, the IMF’s heavy-handed technical advice, and the dubious wisdom of currency unions (e.g. the French-Franc-tied CFA currencies in Central and Western Africa). In an eerie recurrence of the 1930s, “the deepening crisis would produce a xenophobic, illiberal, anti-Europeanist nationalist” reaction (482). To add scorn to injury, “it is one of history’s cruel ironies that Nazism is rearing its ugly head in Greece” with the electoral success of the ultra-right Golden Dawn party (215).
As a scholar and a citizen of Iceland, which despite its geographic isolation and economic peculiarities (e.g. energy security by geothermal power) experienced a complete financial collapse immediately after the 2008 credit crunch, Varoufakis’ account of the recent “Greek tragedy” flags out significant differences worth thinking about (49; Iceland’s woes have been covered extensively in Nordicum-Mediterraneum, especially issues 6(1), 7(1) and 8(1)).
- Iceland, after a failed attempt at rescuing its national banks, opted essentially for letting them go bankrupt. Greece and the whole European Union committed themselves to saving them at any cost, even if it meant letting Greek pensioners starve, Greek citizens die because of unaffordable healthcare, and Greek homelessness explode (i.e. the “humanitarian crisis” denounced by Varoufakis, 37).
- “[C]apital controls” were reintroduced in Iceland “in the wake of its own financial collapse in 2008” and kept in place for a decade in order to prevent capital flight and allow the Icelandic State to have a manageable monetary mass whereby to restart and reorganise the national economy (121). The European Union did nothing of the sort, and actually allowed financial speculation between member countries to take place as well as the continued siphoning of large amounts of money into non-EU countries and tax havens (cf. the recent Panama Papers and Paradise Papers scandals).
- A new Icelandic government not tainted by collusion with the banking sector came eventually into power in 2009. Their role was to clean up the mess left by the conservative parties that had always claimed to be the business-savvy ones. The new Icelandic government proved genuinely disposed and overall adept to serve the common good, even if it meant conflicting with the IMF or pushing for what Rachael Lorna Johnstone and Aðalheiður Ámundadóttir call “progressive regressive measures”, i.e. austerity for the better off so as to pay for the welfare needed by the worse off in times of dwindling resources (“Defending Economic, Social and Cultural Rights in Iceland’s Financial Crisis”, The Yearbook of Polar Law, 3, 2011: 454-77). Syriza’s new and largely untainted government in Greece, under its creditors’ enormous pressure, did much less to alter the regressive-regressive measures that the previous two governments had already enacted. Varoufakis regrets that his own achievements as finance minister were, in this respect, meaningful but scarce, given the extent of his country’s gruelling humanitarian crisis (e.g. the prepaid “plastic card[s]” providing for the needs of the poorest families, 476).
- Iceland’s currency could be devaluated and was devaluated, first by sheer speculative pressure and then by central bank’s fiat, thus making the nation’s export goods and incoming tourism more attractive. Greece’s Euro, which is also the currency of its chief creditor countries with a very different set of post-2008 problems, could not and was not devaluated.
- In Iceland, the new government, the central bank, the trade unions and the industrialists’ representatives participated in largely cooperative and constructive behaviour to keep unemployment in check and favour the nation’s recovery. In Greece, not to mention within the EU, bitter divisions affected all interest groups and prevented the same synergy from being firmly established. The pulverising atomism of selfish furbizia trumped comprehensive cooperation: the common good, consequently, agonised.
- Debt bondage by foreign loan or so-called “rescue packages” became a likely outcome of the Icelandic crisis too. The international pressure towards this dubious solution was noteworthy, as epitomised by Gordon Brown’s Labour government invoking in 2008 the UK’s anti-terrorism legislation so as to freeze the assets of all Icelandic nationals and businesses based on British soil. Against all odds, the Icelandic nation rejected debt bondage, i.e. getting loans to repay other loans to repay other loans to repay other loans and so on ad nauseam (French economist Gérard de Bernis used to call it “the usury model” of State funding: cf. his 1999 essay “Globalization: History and Problems“). This refusal occurred via two referenda promoted by a president of the republic in search of lost popularity—this long-time president having been too vocal a cheerleader of the banks that, a mere five years after their privatisation, had brought the country to its knees. Only one allegedly ‘populist’ centre-right party supported the rejection of the “Icesave” agreement with the Dutch and British governments on both occasions (i.e. the Progressive Party), while the self-proclaimed “responsible” parties spoke favourably of it, on either occasion (e.g. the Left-Greens) or even on both occasions (e.g. the Independence Party). In 2015, the people of Greece voted by a sizeable majority against the third bailout agreement that the Syriza government had itself opposed but ended up accepting nonetheless—a U-turn that Varoufakis defines aptly as “the overthrowing of a people” (467).
Varoufakis’ new book is most interesting, well-written and, above all, it constitutes a political memoir that future scholars, politicians and activists should consult in order to be ready for the next major crisis that, sooner or later, will come to pass. On top of that, it is an apology, in at least two senses. First of all, it is a self-defence by a politician who, in the panic and confusion of the Greek depression, has been accused of all sorts of nasty schemes and treacherous actions, sometimes grotesquely. Secondly, it is a token of self-promotion, for Varoufakis has now a Europeanist party to sponsor, with the aim of making European institutions much more democratic and considerably less technocratic.
Apologetic partiality aside, there is no doubt that the conversations and the events reported in Varoufakis’ book did occur as we are told, or at least the vast majority of them, as the robust critical apparatus of the book can help confirm. Any person interested in current socio-political affairs should read them and meditate upon the astounding amount of deceitful cynicism, harmful cleverness and obtuse pride that they display. Every attempt at improving the world’s economic order and political praxes—and Varoufakis’ book spots good will, intelligent leadership and responsible policy too, in both Nordic and Mediterranean nations, as well as on both sides of the Atlantic Ocean—is bound to have to face and, hopefully, surmount such obstacles. Varoufakis, on his part, has been trying hard for years, but to no avail.