Book Review: “Adults in the Room” by Yanis Varoufakis

Adults in the Room by Yanis Varoufakis

Anyone who has been part of a large organization knows that when the powers-that-be sermonize about “adult conversation”, what they usually mean is “you’re screwed”.  In order to serve you better, you will be required to “voluntarily” agree to whatever bad deal they have decided to impose.

One of the most trenchant criticisms of Thomas Piketty’s Capital in the Twenty-First Century (2014)  [3], is that there is no politics in his Political Economics [1].  If you don’t understand that point, Varoufakis’ book is a long, detailed example of exactly what it means.  There is a pretty clear case that the crushing inequality in Greece (and all of the Eurozone) was not created by ‘s > r’ or any other economic factors. It is a product of power politics, plain and simple.

Varoufakis recounts his version of his tenure as Finance Minister for Greece, struggling to dig out of the disaster triggered by the 2008 crash.  Greece was poorly governed for a long time, possibly forever.  (It might be said to be ‘the Illinois of Europe’, which is not a prize to be sought.)  As documented by Stiglitz [4] and others, when it joined the Euro, the stage was set for local financial mismanagement to undermine the whole of Europe.

The origin of the story is well known, if not widely reported. The Euro created a common currency without a corresponding political union. National governments and their central banks continue to answer to their own parliaments, but because they all use the same currency, their (local) policies impact everyone.  The European Central Bank was designed to be a weak entity, without power to deal with the political economic tasks required to sustain a currency.  A currency with many masters has no master. From the start, this approach was doomed, and we can now see the UK’s rejection of the Euro as a brilliant, if probably accidental, salvation for them.

In the “good years”, banks and companies poured loans into Greece (and Spain, and Portugal), confident that Euro denominated loans could not be depreciated by future weakness in the Greek economy.  The Greek government had little ability to control this flood of credit, even if had wanted to.  Nor did any other government.

When the music stopped, and the bubble burst, these feckless lenders had lunatic levels of bad debt on their books.  French and German banks were short by amounts far greater than the entire national income of their home countries.  As in the US and elsewhere, there was little choice but to bail them out from public money.

In the US, bailouts were nasty and unpopular, but nation-wide.  Whatever bad decisions had been made in Florida or Arizona, the US acted to protect everyone (like it or not).  In Europe, each separate country needed to bail out their own banks.  This was not a popular idea, but the Euro left no alternative, other than total collapse.

The European powers that be hit on the brilliant tactic that combined blaming the idiot debtor to pay off the idiot creditors.  Note that the debtors were poor people in other countries, and the creditors were not only German, French, etc., but also powerful political donors.  So, the bailout of French and German banks was disguised as “loans” to Greece (and Spain and others), which immediately went to pay off the creditors (i.e., French, German, etc., banks)—loans that Greece had no possibility of paying off, not least because they never got any of the money.

This scam was dressed up in a morality tale about what a poorly run place Greece is, and demands for “austerity” and forfeiture not only of assets but sovereignty.  These “austerity” policies had nothing to do with either reforming Greece or getting the money back, they were and are just plain colonialism.  Plus, Greece had to be made an example to pressure all the other small economies to toe the (mainly German) line.

Rather than a rational bankruptcy, leading to eventual recovery, Greece has been converted into a debtors prison.  Bankruptcy would mean that feckless creditors would lose money, so it was better to deny the truth. If the entire Greek people are enslaved in the process, so be it.

The accompanying morality tale boils down to the principle that only the rich people in Europe get social benefits or democratic votes.  The ordinary people of Greece have been forced to cede control of their government, and have been stripped of pensions, civil rights, and opportunity.

How did this disaster happen?

Varoufakis tells his version of the inside story, and it isn’t pretty at all.  When he refers to “the deep state”, he is talking about Greek oligarchs and unelected EU masters who worked to successfully undermine the legitimately elected government of Greece, to protect their own financial stakes at the expense of ordinary Greeks.

As Varoufakis cries out, this is a violation of everything that the European project is supposed to stand for.  If Europe does not mean democratic self-determination for all its citizens, then it has failed.  It’s that simple.

The book goes on and on, from one shocking betrayal to another.

Anyone with experience in a large organization is likely to be familiar with the “it’s not my decision” game.  The Greek disaster was implemented by “the Troika”, a joint assault by the IMF, the European Central Bank, and the European Commission (i.e., the national governments).  Each organization had its own rules and processes, but the combined group operated ad hoc and often in highly opaque and irrational ways.  And, above all, every decision was non-negotiable, because, hey, don’ talk to me, those other guys have decided, I can’t do anything about it.

As finance minister—of a constitutionally elected sovereign government—Varoufakis received constant demands that he “sign the paper” or else.  Bear in mind that his government had mandate to negotiate, so he had no moral right to betray his own people.

The “or else” amounted to the Troika deliberately crashing Greece’s banks and economy.  In fact, they did so, several times and eventually the Greek government surrendered.  (Naturally, many blamed Varoufakis for the disaster, though he was little more than a fall guy for the crimes of the Troika.)

Some of the most telling episodes of the story was when Greece made overtures to the US, Russia, and especially to China.  If Greece had to sell off the country, shouldn’t they try to get the best deal possible?  And China in particular might have invested a lot in Greek ports and infrastructure as part of the Belt and Road Initiative.

But these plans were blocked by the EU, especially by Germany.  That is to say, the governments were told that Greece, it seems, in inside the German economic sphere, and China (or Russia or US) may not intervene.  This division of the world makes sense to the big powers, who can demand reciprocal rights in their own neo-colonial zones.  But it surely was not the original concept of the EU.

Indeed, Germany pressured other countries (notably Spain) to toe the German political line, lest they be on the receiving end of the same “or else”.  It is interesting to read Varoufakis description of now-President Macron of France, who was increasingly uncomfortable with the “or else” that was being leveled even at France.  One wonders how he is felling these days.

I have no way to verify many of the details of this book.  Autobiography must be taken with caution, especially highly political autobiography.  But everything in this book is consistent with the information I independent knowledge about, so I have a certain amount of confidence in what I read here.

Unfortunately, this book seems dramatically out of date.  The anguished cry of the Greek people, and the desperate pleas for solidarity between progressive democracies of Europe are now lost in the rise of Fascism across Europe. With Russia pressing hard to break the EU, Britain’s suicidal exit, and America reeling in its own anti-democratic, neo-isolationist fever, mere currency troubles and bankrupcy  seem quaint.

However bad Greece has it, we are all heading for an even greater abyss.

This is a difficult book to read, because it is so infuriating and so tragic. It’s hard to find any good news here, or even see a path forward.  But it is pretty important to know this history, because it certainly isn’t over.

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1. Heather Boushey, J. Bradford DeLong, and Marshall Steinbaum, After Piketty: The Agenda for Economics and Inequality, Cambridge, MA, Harvard University Press, 2017.
2. David Graeber, Debt: The First 5,000 Years, Brooklyn, 2011.
3. Thomas Piketty, Capital in the Twenty-First Century, Cambridge, MA, Harvard University Press, 2014.
4. Joseph E. Stiglitz, The Euro: How A Common Currency Threatens the Future of Europe, New York, W. W. Norton& Company, 2016.
5. Yanis Varoufakis, Adults in the Room: My Battle with the European and American Deep Establishment, New York, Farrar, Straus and Giroux, 2017.

 

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