Yanis Varoufakis Was Right, the EU and the Troika Were Wrong

Remember Yanis Varoufakis, the Greek finance minister who attempted to negotiate with the EU and get his country out of disastrous austerity and debt peonage? He was a wacky guy, right? He didn't wear a tie! He wasn't appropriately respectful to the Eurocrats! He actually tried to talk about economics at meetings and whether the EU prescriptions actually made any economic sense!

While all this was going on, there was endless tut-tuting in the press about how irresponsible Varoufakis was being. If only he played by the rules, Greece would get a much better deal.

Hah! If you believe that, I've got a most excellent bridge to sell you. As Martin Wolf puts it in his review of Varoufakis' new book, Adults in the Room: My Struggle with Europe's Deep Establishment: 

This is a superbly written account of the struggle to alleviate the austerity imposed upon the Greek people by the eurozone. Greece, argues Varoufakis, has been put in a debtors’ prison and robbed of autonomy and dignity for the indefinite future. Critics would argue that he failed as finance minister in 2015 because he was insufficiently politic. More plausibly, he could never have succeeded, such were the vested interests arrayed against him. This outcome was — and is — a tragedy, because he was — and is — right. The bulk of Greek debt should indeed be cancelled outright. Read and weep.

So he was right, they were wrong and no, if he had been "nicer" it wouldn't have made any difference.

I am now reading the book and it is excellent. Highly recommended if you're interested at all in the European mess. Only available in Europe though, so you'll have to order it from there.

Varoufakis also has an op-ed in the New York Times last Thursday laying out his case for an international New Deal to rectify the current crisis. This is also worth reading. An excerpt:

For too long, the political establishment in the West saw no threat on the horizon to its political monopoly. Just as with asset markets, in which price stability begets instability by encouraging excessive risk-taking, so, too, in Western politics the insiders took absurd risks, convinced that outsiders were never a real threat.

One example of the establishment’s recklessness was releasing the financial sector from the restrictions that the New Deal and the postwar Bretton Woods agreement had imposed upon financiers to prevent them from repeating the damage seen with the crash of 1929 and the Great Depression. Another was building a system of world trade and credit that depended on the booming United States trade deficit to stabilize global aggregate demand. It is a measure of the sheer hubris of the Western establishment that it portrayed these steps as “riskless.”

When the ensuing financialization of Western economies led to the great financial crisis of 2007-8, leaders on both sides of the Atlantic showed no compunction about practicing welfare socialism for bankers. Meanwhile, more vulnerable citizens were abandoned to the mercy of unfettered markets, which saw them as too expensive to hire at a decent wage and too indebted to court otherwise.

When the insiders’ rescue schemes — including quantitative easing, the buying up of toxic assets, the eurozone’s bailouts and temporary nationalizations of banks — succeeded in refloating banks and asset prices, they also left whole regions in the United States, and whole countries on Europe’s periphery, stagnant. It was not rising inequality that provoked undying anger among these discarded people. It was the loss of dignity, of the dream of social mobility, as well as the experience of living in communities that were leveled down, so that a majority of people were increasingly equal but equally miserable.

As more and more voters became mad as hell, governing parties lost elections between 2008 and 2012 in the United States, Britain, France, Italy, Spain, Portugal, Ireland, Greece and elsewhere. The problem was that the incoming administrations were as much part of the establishment as the outgoing ones. And so they made bipartisan the very approach that had caused the wave of anger that carried them into office.