YANIS VAROUFAKIS: Good evening, we don’t have anyone to introduce us, so I’ve been asked to kick off by saying firstly that isn’t this wonderful that we are all here just to subvert the notion that nothing good can come out of the public sector? (laughter) Noam.
NOAM CHOMSKY: Well, the fact that I’m here, barely, actually has a relationship to that comment. I came from Boston, my wife and I came from Boston, it took seven hours, and any society that hasn’t been smashed by neoliberal policies of the kind you describe, it would have taken maybe an hour and a half, two hours. (laughter) There is a train, the pride of the public sector, which I took for the first time in 1950, and it’s about fifteen minutes faster now than it was then, (laughter) when it makes the schedule, which is a chancy situation, so we decided to come by airplane and spent most of the afternoon on the runway.
YANIS VAROUFAKIS: Well, Noam, what shall we talk about?
NOAM CHOMSKY: Well, we can talk about the neoliberal assault on the world’s population in the last generation, which you’ve written so brilliantly about.
YANIS VAROUFAKIS: What strikes me given the last quite eventful year of my life, what really strikes me is the major disconnect between the philosophy and ideology of neoliberalism and that which I encountered when negotiating, inverted commas negotiating, when being dictated by the greater good of the neoliberal international financial establishment. Think about it. If you take the great libertarians, the great neoliberals, who castigate all tax-funded activities, and you consider the reason why I’m here today and I’m not still the minister of finance of Greece. Why? It’s because I refused another hundred billion smackers, dollars, of tax-backed loan to my insolvent government, which the creditors insisted that I should take.
NOAM CHOMSKY: The three-year loans.
YANIS VAROUFAKIS: It’s astonishing, so here it is, here you have the international monetary fund, the European Central Bank, and the European commission insisting that our bankrupt state takes on another hundred billion, under conditions that guarantee we will not be able to repay the taxpayers of Europe that will be granting us that money, and that comes from neoliberals, who supposedly are against all tax-funded loans to government, and who supposedly believe that an insolvent entity doesn’t have the moral right to take on more loans.
NOAM CHOMSKY: But as you point out, what is it, 90 percent of those loans go to French and German bankers.
YANIS VAROUFAKIS: That was the first loan. This loan it would go from the one pocket of the creditors to another pocket of the creditors so they would maintain the pretense that Greece was not bankrupt. But effectively what I’m trying to say is the intense hypocrisy of the neoliberal establishment, which is not really even interested in sticking to its own neoliberal ideology. This is just nineteenth-century power politics of crushing anyone who dares stand up to them and say a simple word, “No.”
NOAM CHOMSKY: But I think that’s actually traditional. One of the paradoxes of neoliberalism is that it’s not new and it’s not liberal.
YANIS VAROUFAKIS: Exactly. Exactly.
NOAM CHOMSKY: If you look at what you describe is a form of hypocrisy but the same is true of saying that we should not support tax-funded institutions. The financial sector is basically tax-funded.
YANIS VAROUFAKIS: Of course.
NOAM CHOMSKY: You recall the IMF study of the leading American banks, which determined that virtually all their profits come from their implicit government insurance policy, cheap credit, access to higher credit ratings, incentives to take risky transactions which are profitable but then if it’s problematic, you guys pay for it, or just take the basis of the contemporary economy, which actually I’ve been privileged to see developing in government-subsidized laboratories for decades. MIT, where I’ve been since the 1950s, is one of the institutions where the government, the funnel in the early days was the Pentagon, was pouring in money to create the basis for the high-tech economy of the future and the profitmaking of the institutions that are regarded as private enterprises. It was decades of work under public funding with a very anticapitalist ideology. So according to capitalist principles, if someone invests in a risky enterprise over a long period and thirty years later it makes some profit, they’re supposed to get part of the profit, but it doesn’t work like that here. It was the taxpayer who invested for decades. The profit goes to Apple and Microsoft, not to the taxpayer.
YANIS VAROUFAKIS: Indeed, indeed. If you take an iPhone apart, every single technology in it was developed by some government grant, every single one.
NOAM CHOMSKY: And for long periods.
YANIS VAROUFAKIS: And some of them by government grants from other countries, like WiFi from the Australian Commonwealth.
NOAM CHOMSKY: And it’s—you see an interesting picture of it from a place like MIT, or other major research institutions. So if you walked around the building where I work fifty years ago, you would have seen electronic firms, Raytheon, ITech, others, IBM, there to essentially rob the technology that’s being developed at public expense and seeing if they can turn it into something applicable for profits. You walk around the institution today, you see different buildings, you see Novartis, Pfizer, other pharmaceutical, big pharmaceutical corporations. Why? Because the cutting edge of the economy has shifted from electronics based to biology based, so therefore the predators in the so-called private sector are there to see what they can pick up from the taxpayer-funded research in the fundamental biological sciences, and that’s called free enterprise and a free-market system. So speak of hypocrisy, it’s pretty hard to go beyond that.
YANIS VAROUFAKIS: Quite right. This hypocrisy is fundamental to the whole enterprise culture of capitalism from 250 years ago.
NOAM CHOMSKY: From the beginning.
YANIS VAROUFAKIS: I mean the whole notion that there can be a market system which is at an arm’s length separated from a state, which is the enemy, is the sickest joke in the history of humankind. If you think that this narrative of private wealth creation which is appropriated by the big bad wolf, the state, on behalf of trade unions and the working class that need a social welfare net, is just a preposterous reversal of the truth that wealth is being created collectively and appropriated privately but right from the beginning. I mean, the enclosures in Britain would never have happened without the king’s army and without state brutality for pushing peasants off their ancestors’ land and creating the commodification of labor, the commodification of land which then gave rise to capitalism. Just half an hour ago, we were being shown, some of us, the magnificent collection of maps of the city of New York in this wonderful building and you could see in one of the maps of Alabama, the precise depiction of the theft of land from Native Americans, the way in which it was parceled up, commodified. Now that would never have happened without the brutal intervention of the state and created the process of privatization of land and therefore of commodification.
NOAM CHOMSKY: Actually one of my favorite passages from Adam Smith is where he gives advice to the new colonies, to the newly liberated colonies, as to how they should pursue sound economics, which is pretty much what the IMF tells the third world today. What he said is the advice was you should concentrate on what was later called comparative advantage, produce agricultural products, you’re good at that, export furs, fish, and so on, but don’t try to produce manufacturing goods, because Britain, England has superior manufacturing goods, so therefore you should import them from England, they’re good at that, you’re good at cotton and corn. Incidentally, the cotton was hardly by free enterprise. And you should certainly not try to monopolize the resources that you have, and if you pursue those practices, then everybody will be better off, economic theory proves that.
Well, the United States happened to be free of English control so therefore they were able to do the opposite, just as England had done. High tariffs to block English goods, enabled them to create a textile industry, the beginning of the industrial revolution. Later in the century a steel industry blocking superior British steel, and right up to the present, as I’ve mentioned, with high tech.
As far as monopolization is concerned, the United States made a major effort to monopolize the basic resource for the early industrial revolution, namely cotton. That’s the oil of the nineteenth century, and the U.S. had most of it, not all of it, and the conquest of Mexico, which was not exactly by free enterprise, was largely undertaken to try to contain, to gain a monopoly of cotton which would overcome the major enemy in those days, which was Britain. Britain was the big force, the enemy, and the Jacksonian presidents, Tyler, Pierce, the mid-nineteenth century, their position was that if we could monopolize cotton, we could bring England to her feet, that way we could really defeat them. Didn’t quite make it, but made a lot. Incidentally, that effort was what Saddam Hussein was charged with in 1990, the charge was ludicrous, but the charge was he was going to try to monopolize oil and bring us all to his feet, which was crazy, but the U.S. try to monopolize cotton and that’s part of the way in which power shifted from England to the United States, and I think that’s a pretty good record of the way sound economics has worked over the years.
There have been places where sound economics was applied, liberal policies. It was called the third world and it’s not an accident. You take a look at the global south. One country developed, Japan, the one colony that was not colonized. Take a look at East Asia, the tigers of East Asia, with one exception, the one that was conquered by the United States, 1898, with a couple hundred thousand people killed and stays semicolonized, not part of the Asian Tiger explosion of industrialization. The pattern is just uniform but somehow hasn’t entered economic theory. I wonder why. You’re an economist.
YANIS VAROUFAKIS: Well, the reason why it never entered economic theory is because economics in universities was—began to evolve from the 1950s onwards as the queen of the social sciences, and what gave discursive power and monopoly power within the academic environment to economics was the claim that it was the only social theory which was peddling universal truths to be proven by mathematical means and it succeeded, so when a sociologist, an anthropologist, and an economist applied for a grant, it was always the economist who got it on the basis of this discursive monopoly.
However, in order to close the model mathematically, the only way to solve the equations is by making assumptions that distance the model from really existing capitalism. So for instance you have to assume that there’s no time and there’s no space, because if you allow time to interfere with your model, or space to enter, you end up with indeterminism. In other words, you end up with a system of equations that cannot be solved or that have an infinity of possible solutions and then you have no predictive power. You can’t say, “well, this is what’s going to happen.”
So you have a very interesting inverse Darwinian process. The more successful economists were at creating models that said precisely nothing about capitalism, the greater their success in the academy, so they became the opposite of the public intellectuals that you’ve been writing about. They create wonderful abstractions, aesthetically pleasing models that I spent quite a few years studying in the same way that you go to a museum and you look at a piece of abstract art but you don’t expect to find the truth of capitalism in its form. So this is the interesting sociology of knowledge within the economics profession.
But then there is a parallel shift, the end of Bretton Woods, which unleashed banking. Remember, Roosevelt made sure that in the Bretton Woods Conference, which designed the postwar—the first postwar phase between the 1940s and 1971, 1973. He had stipulated that one kind of person should not be allowed into the Bretton Woods conference. You know who these people were. Bankers. Not one banker attended the Bretton Woods Conference and that was at the explicit order of FDR.
NOAM CHOMSKY: And it showed.
YANIS VAROUFAKIS: So you had boring banks between 1944 and 1971, but after 1971 and we can discuss why that is, suddenly banking was unleashed and their capacity effectively to mint private money became unlimited and essential to the second postwar phase of global capitalism, of American capitalism, of American hegemony. During this unleashing there was a need for a theoretical and ideological cover, so I don’t blame my fellow economists for pulling the trigger that created so much devastation in 2008 and before that and after that, but I blame them for providing the economic, the mathematical models, the sermons which steadied the hand of the financiers and allowed them to believe that what they were doing was perfectly okay, consistent with science, provable mathematically that it was riskless, and therefore allowed them the mental and emotional strength to do a lot more damage than they would have done otherwise.
NOAM CHOMSKY: Actually one of the more interesting moments in the history of science and scholarship was actually in 2008. For, as you know, for decades economists had been claiming with extreme arrogance that they completely understood how to control and manage an economy. There were fundamental principles, like the efficient market hypothesis, rational expectations, and anyone who didn’t accept this was dismissed as a kind of a, some strange kind of moron. The whole system collapsed, the whole intellectual edifice collapsed in a most amazing fashion and had no effect on the profession.
YANIS VAROUFAKIS: None at all. Well, it did have. It had the effect that sometimes when we’re driving on a freeway, and I usually go well above the speed limit, condemn me if you will, and I get stopped by the police, for the next twenty minutes I drive below the speed limit, but it doesn’t last for more than twenty minutes. After a while, I just go back to where I was. This is exactly like the economics profession. They had a brief moment of—
NOAM CHOMSKY: Some did.
YANIS VAROUFAKIS: Some, some or at least of being a bit humble and keeping their heads under the parapet for a bit, but then within twenty minutes they forgot about it and they carried on teaching the same rubbish to their students. But what is interesting, Noam, is two small points. It’s not that the economists went headlong into this mathematicized religion, because that’s what it is, a religion with equations and a bit of bad statistics. What happened was two things.
Firstly, there was a kind of ethnic cleansing of anybody that had retained their wits about the economy. So there were economists who challenged this view and who were simply not reproduced by the system. They never got the grants, they never got the PhD students, their PhD students never got lectureships, never got assistant professorships. So there was a purge of this type. The second, which is a far more interesting phenomenon, is that the wonderful minds that created the general equilibrium models, the highest, the popes of the Catholic Church, were not believers. So take for instance Ken Arrow. Ken Arrow is, you know, and Gerard Débreu, they are the ones that, John Nash, they established the mathematical theorems upon which all this hypocrisy is based.
Now, these people, Ken Arrow, I remember in the early 1990s, he was giving a talk at NYU. There were about twenty people. It was a highly mathematized paper. Okay, so he was enthusiastically going through the equations and one of the professors there interrupted him at some point and said, “Professor Arrow, equation 3.3 reminds me of the argument in favor of this kind of taxes opposed to that kind of tax,” and Ken stopped him immediately and said, “My dear boy,” he was a bit condescending, I think rightly so, he said, “You are confusing that which is interesting with that which is useful. (laughter) This is interesting. If you try to apply it to anything real, it is dangerous.”
So the gurus, the popes, understood that this theory was examining a postcapitalist world, a world without labor markets, a world without the, you know, labor exploitation, without monopolies, without even the slightest of capacities to alter prices on the behalf of employers, of entrepreneurs, of conglomerates, a world without firms. Because what is a company? A company is a market-free zone, it’s a hierarchy, it’s a small Soviet Union with Gosplan and central planning. If you look at Google, if you look at Microsoft, that’s what it is.
NOAM CHOMSKY: Then you have Coase’s theorem, that’s a big help.
YANIS VAROUFAKIS: Yes, but the Coase’s theorem is taught for five seconds and then forgotten, in order to—to make them feel that they’ve said something about the reason why firms exist. But then in those models that produced the macroeconomic policies that were applied even under Clinton, especially under Clinton, there are no firms, there is no times, no firms, no space, everybody resides at the same point in space, so that there are no costs of transport or anything like that, so imagine a world in which economic policy is predicated upon models that assume there is no time, space, firms, profit, or economic event.
NOAM CHOMSKY: Or monopolies.
YANIS VAROUFAKIS: It’s time to get really scared.
NOAM CHOMSKY: You know, there’s a question that I’m sure you know the answer to from your own experience which has kind of puzzled me about contemporary economists. It has to do with the IMF and your experience as Greek finance minister. From what I could see from the outside, it looked as if the IMF economists were pretty harshly criticizing the austerity policies of the troika, but the IMF itself was strongly supporting them. What was going on in there?
YANIS VAROUFAKIS: Well, this is exactly what was happening and is happening to this very moment. Wikileaks leaked a wonderful conversation between my old friend Poul Thomsen who made his name by crushing the Greek economy and as a result being promoted to IMF chief in Europe, (laughter) and a Romanian lady going by the name of Delia Velculescu. Read this exchange, just read it, it came out a few weeks ago, Wikileaks, go and look at it. It’s fantastic, because they’re telling the truth, and they’re telling exactly what you’re saying. They are admitting that which they—Poul Thomsen and I had this conversation.
The first time I met the IMF chief in Europe was in a hotel in Paris, and I was elected with a mandate to negotiate a debt write-down for the Greek debt against the troika of lenders, against the wishes of the creditors, but at the same time, because I had a mandate to negotiate, not to clash, with the creditors. I was prepared to clash if I had to, but my intention was not to clash, my intention was to come to an honorable agreement between us. Because I knew that the German government had a very serious political problem going to the federal parliament in Berlin, to the Bundestag, and admitting that the money they had given to the Greeks was not money for the Greeks but for the Deutsche Bank, and therefore that they were never really expecting to get it back, so this is why we are going to give the Greeks a restructure. That’s what Mrs. Merkel should have said to the Bundestag, but of course this is not something she could have said and remained chancellor of Germany.
So I knew that the Germans had a political problem admitting to what they had done, in the sense of having given money to the Greeks so that effectively the German taxpayer and the Slavic taxpayer, because they spread the risk like good financiers do to the other Europeans. Effectively they were bailing out their banks a second time in twelve months. Of course I knew that and I was trying to find a formula that would allow our debt to become more manageable and less toxic for the Greek people while at the same time achieving a kind of political arrangement with Berlin that would make it palatable for them to say yes to it.
So first meeting with Poul Thomsen I come to him with a proposal for a kind of debt swaps, financial engineering, that Wall Street is very good at. Not the kind of thing the one expects from a left-wing minister of finance, but I wanted to make things work at that point, not so much to go and clash with him. Do you know what he said? “This is too mild. We need to take a large chunk of your debt and write it off, immediately.” I said, “Well, that’s music to my ear, Poul. How are you going to convince Wolfgang Schäuble to do this?” “This is a problem, you know, but we’ll find a way.”
So at this level of bilateral discussions even with the leadership of the IMF, you got the idea that they understood what they had done. They knew that they had done a nasty deed. They were subterfuging with what they had done. There was a bailout for banks presented as solidarity to a suffering nation and they were trying to do something about it. But then when it came to the final settlement, as creditors, they stuck to one another, they remained loyal to one another. They spread the rumor that our government was putting forward impossible demands, that we didn’t want to reform, that we had no proposals.
We came to them with financial engineering proposals from Wall Street, they had nothing to suggest except for the signals that they were emitting. But I think that the most important discussion I had was with somebody really high up in the IMF. The name will not be mentioned. Higher up than Poul Thomsen, you can imagine.
After ten hours of negotiations when we got into the nitty-gritty, these were extremely boring meetings with aides, with advisers, with experts, with committee on pensions and another committee on VAT, in the end we ended up together and we had a discussion, confidential discussion, tête-à-tête. I heard the following words, “Yanis, of course you’re right. These policies we’re trying to impose upon you can’t work.” I thought, “Oh, no.” I don’t know whether you have this. You probably don’t, you’re Noam Chomsky, you wouldn’t. I’m less experienced in this game of clashing with powers that be at that level.
And deep down, if I think, if I psychoanalyze myself, I really wanted to think that the adults know what they are doing, and that I am a child that is recalcitrant, kicking and screaming, but deep down, the adults, the people in power, at the top of the IMF, know what they are doing, and my complaints and protestations, maybe they are not completely accurate. Maybe they know more than I think they do, but when these big people turn around to me and say, “You’re right, it can’t work. What we are trying to impose on your nation can’t work. But, Yanis, you must understand we have invested so much political capital in this program, we can’t go back, and your credibility,” my credibility, “depends on accepting it.” I think that answers your question.
NOAM CHOMSKY: Well, how do they—how do the participants in the troika deliberations react to the technical papers that are coming out from the IMF economists saying, their own economists, Blanchard, others, saying, these policies of austerity under recession are just destructive.
YANIS VAROUFAKIS: It’s very simple. They ignore them.
NOAM CHOMSKY: What do they say?
YANIS VAROUFAKIS: In the Eurogroup, these were never mentioned. I mentioned them. I quoted chapter and verse from their own statisticians and economists, like Olivier Blanchard and those people. I quoted. There was also a remarkable study from the IMF showing that the liberalization of labor markets, the removal of the protection of labor, of trade union protection, of trade union rights, protection from unfair dismissal and all that, that that in the end is counterproductive when it comes to competitiveness and productivity. The IMF came out with this in the spring of 2014. A beautiful report. It could have been written by a progressive economist from the New School.
NOAM CHOMSKY: What exactly did it conclude—what did it conclude exactly?
YANIS VAROUFAKIS: It concluded that these labor market reforms that the IMF had been pushing down the throat of countries from Africa to Asia to Europe, they don’t work, they do not enhance competitiveness, especially when investment is acute. Which is always my argument. So I quoted that as well in the Eurogroup. I might as well have been singing the national anthem of Sweden. (laughter) It was exactly the same thing. Because you’ve got to understand that these meetings are quite brutal. They have already decided what they are going to do. The ministers are treated like vermin by their own minders and by the representatives of the troika. Something very few people know is that the Eurogroup is actually led by the troika, not by the finance ministers, the elected representatives of the nations. So you’ve got the head of the Eurogroup, who is usually, let’s face it, appointed by Dr. Wolfgang Schäuble. Then next to him there is the real ruler of the European Union, a gentleman named Thomas Wieser, nobody’s heard of him, he holds the real power.
NOAM CHOMSKY: What is his position?
YANIS VAROUFAKIS: He is the head of the Euro Working Group, which is the cabinet under the Eurogroup.
NOAM CHOMSKY: The nonexistent group.
YANIS VAROUFAKIS: They are the shadow cabinet of the nonexistent Eurogroup. And this gentleman has been around now—
NOAM CHOMSKY: How does the Eurogroup get established? You don’t discuss this in your book, you just say it’s there.
YANIS VAROUFAKIS: I think it just sprung out, out of the shell like, you know, Aphrodite in Cyprus. (laughter) Look, when we created in our infinite wisdom, a common currency and we had a common central bank but without a state to correspond to this central bank, and with a couple states that did not have a central bank, because that common central bank was created on the proviso that it would not come to the assistance ever of any of the states of which it would be the central bank. They decided that well, every now and then, these finance ministers of these nations that now don’t have a central bank but have created a common central bank should get together and discuss economic policy to coordinate. This is how it emerged. It’s not in any treaty. Do you know how I found that out?
NOAM CHOMSKY: So the Eurogroup consists of the finance ministers?
YANIS VAROUFAKIS: Yes, well, that was the initial idea, the finance ministers, and one of them chairs it. Before Dijsselbloem, who is now the president, it was the head of the largest tax haven in the world, Luxembourg, a certain Jean-Claude Juncker.
NOAM CHOMSKY: The United States is getting close.
YANIS VAROUFAKIS: Not as badly as Luxembourg, not as badly as Luxembourg.
NOAM CHOMSKY: A couple of states are getting there.
YANIS VAROUFAKIS: It’s close but not as bad—
NOAM CHOMSKY: Not at that level.
YANIS VAROUFAKIS: But ever since this Eurozone, which by the way the euro is a carbon copy of the gold standard of the 1920s. It was created in the image of the gold standard of the 1920s. So you know what happened to the gold standard of the 1920s. It gave rise to the roaring twenties, to immense financialization, immense concentration of industrial power, funded by the consolidation of the financial sector and then Wall Street 1929.
NOAM CHOMSKY: And enormous inequality.
YANIS VAROUFAKIS: Of course enormous inequality which is the result of this easy private money minting by the financial sector and when the chickens came home to roost in 1929, the common currency of that era, the gold exchange standard, collapsed, started fragmenting, very soon, the Germans hated the French, the French hated the Germans, everybody hated the Greeks, (laughter) and we descended into the abyss of the 1930s and 1940s.
After our generation’s 1929, which took place in 2008, guess what happened? The gold standard started fragmenting, it was called the euro in Europe, and very soon after that, the Germans started pointing moralizing fingers at the Greeks, the Greeks remembered the Nazi occupation, everybody hated the French, and we are now in a state of disintegration where refugees are the problem.
NOAM CHOMSKY: Actually you should bring up 1953, the London Agreement.
YANIS VAROUFAKIS: Of course.
NOAM CHOMSKY: Which most people don’t know about, that’s rather critical maybe you want to say a few words about that?
YANIS VAROUFAKIS: Of course. But let me just complete the story about the Eurogroup. I’ll just tell you the story about how the Eurogroup doesn’t exist in law. By the way, one more point, after our country started failing—
NOAM CHOMSKY: Is it inconsistent with European law or just orthogonal to it?
YANIS VAROUFAKIS: No, it doesn’t exist in law.
NOAM CHOMSKY: It’s kind of orthogonal, no connection.
YANIS VAROUFAKIS: It’s outside the framework of European law.
NOAM CHOMSKY: Now, do its decisions impact—how do its decisions impact—
YANIS VAROUFAKIS: It makes all the important decisions that determine the future of Europe. Every single one of them.
NOAM CHOMSKY: How are those decisions transmitted to the official decision-making bodies, to the Brussels bureaucracy?
YANIS VAROUFAKIS: Oh, yes! What happens is first there is the Eurogroup meeting, and then afterwards there is an Ecofin meeting. The Ecofin meeting—Ecofin does exist. It’s the meeting of all the European Union finance ministers, including the ones who are not using the euro. So George Osborne from Britain is there, the Danish finance minister is there, and what happens is it’s a rubber-stamping process. So whatever the Eurogroup has decided, Ecofin says, “okay, we’ll do it.” There is never any debate.
NOAM CHOMSKY: No debate. No debate.
YANIS VAROUFAKIS: Let me tell you, this is quite interesting. How I came to understand that this is a paralegal group. At some point, the troika inside the Eurogroup, because it’s not just the finance ministers, it’s the IMF, Lagarde is sitting there, Thomsen is sitting there, the European Central Bank is sitting there, the Commission is sitting there, they set the scene and then the vermin, us, the finance ministers, simply nod, happy.
NOAM CHOMSKY: And the IMF has no reaction to the Eurogroup decisions?
YANIS VAROUFAKIS: Well, it’s in the Eurogroup, the IMF is part of the Eurogroup. It’s astonishing, isn’t it?
NOAM CHOMSKY: So they’re represented in the Eurogroup.
YANIS VAROUFAKIS: Well, let me give you an example. When the ultimatum was presented to me on the 25th of June, on a take-it-or-leave-it basis, and what that meant was that if I said, “No, I’m leaving it,” our banks would have been closed, as they were, five days later. So that’s a pretty powerful ultimatum, it’s like making me an offer that I can’t refuse, even though we refused it. For a while.
NOAM CHOMSKY: For a while.
YANIS VAROUFAKIS: Until we caved in and then I resigned. But this is interesting. I was presented with this ultimatum. It comprised three chapters. One was the fiscal policy that we would have to follow for the next twenty years. Interesting. It’s interesting given that our mandate from the Greek people was only for four years.
NOAM CHOMSKY: This is spelled out.
YANIS VAROUFAKIS: Spelled out. In black and white, what the primary surplus should be, what the tax take should be, what measures we should use, what the VAT rate should be in order to get that primary surplus. Chapter 1. Chapter 2—
NOAM CHOMSKY: And this is specifically for Greece.
YANIS VAROUFAKIS: Only for Greece.
NOAM CHOMSKY: Has there been something similar for Spain, or Italy?
YANIS VAROUFAKIS: Yes. Portugal. This colonization is at full blast. It started with Greece, all bad things start with Greece. (laughter) And then they spread out. Greece is the laboratory of misanthropy.
NOAM CHOMSKY: How do they deal with France?
YANIS VAROUFAKIS: France of course is a final destination.
NOAM CHOMSKY: Is that beginning, to give orders to France?
YANIS VAROUFAKIS: Of course.
NOAM CHOMSKY: That is. From the Eurogroup.
YANIS VAROUFAKIS: Noam. The beauty of those five, six months in power. Power. Not, what power. In office—
NOAM CHOMSKY: Watching power.
YANIS VAROUFAKIS: In office. The beauty of it was, you know, we academics all our lives we theorize about things. Okay, we try to get evidence, but we theorize. During those five months I didn’t have to theorize, and to answer your question about France, at some point I was having a very interesting conversation. I had many interesting conversations with the finance minister of Germany, Dr. Wolfgang Schäuble, at some point when I showed him this ultimatum and I said to him, it’s a long story, but I’ll cut it short.
I said to him, “Would you sign this?” I said, “Let’s take off our hats as finance ministers for a moment. I’ve been in politics for five months. You’ve been in politics for forty years, you keep barking in my ear that I should sign it. Stop telling me what to do. As human beings. You know that my people now are suffering a grave depression. We have children at school who faint as the result of malnutrition. Advise me on what to do, don’t tell me what to do, as somebody with forty years, a Europeanist, somebody who comes from a democratic country, Wolfgang to Yanis, not finance minister to finance minister.”
To his credit, he looked out of the window for a while, and he turned to me and he said—Well, the question that I’d actually asked him was, “Would you sign this?” And he turned around and said, “As a patriot, I wouldn’t.” Of course the next question was, “So why are you forcing me to do it?” He said, “Don’t you understand? I did this in the Baltics, in Portugal, in Ireland, you know. We have discipline to look after, and I want to take the troika to Paris.”
NOAM CHOMSKY: He said that.
YANIS VAROUFAKIS: Yes, so I don’t need to theorize. It starts with Greece. Greece is a pipsqueak country, it’s not that important. With that small problem you impose these unsustainable loans, which give creditors huge power and then you start cutting, cutting, cutting, because the final intention, and I try to explain this in this book, is to curtail the Parisian elite’s long-standing ambition to usurp the power of the Deutsche Mark for the purpose of expanding the French nation-state’s reach and control of Europe.
NOAM CHOMSKY: And also I presume for the Bundesbank to be able to control the French budget.
YANIS VAROUFAKIS: Absolutely, not so much the Bundesbank, but the finance minister himself. And I don’t blame the Germans for that. If you go back to 1992, when the euro was first created, the Maastricht Treaty, to convince the French to vote for it, the French conservative newspaper Le Figaro had a headline that was offensive to human beings. It read, as an encouragement to the French to love the Maastricht Treaty, “Maastrict,” and underneath, “A New Versailles Treaty without a shot being fired.” Now that is offensive to the German people, it is offensive to anyone who understands the pain of the Second World War. It is offense to all well-intentioned human beings.
NOAM CHOMSKY: And do you think French elites actually believed that at Maastricht?
YANIS VAROUFAKIS: Absolutely. And this was the intention. De Gaulle in 1965, in response to a journalist, who asked him don’t you worry that with this European Economic Union, Germany is going to become the powerful country here, and his response was, “They’re going to be the horse and we are going to be the carriage driver.” It’s clear.
NOAM CHOMSKY: The Brussels bureaucrats.
YANIS VAROUFAKIS: The French graduates of the great Grandes Écoles who would be populating the Brussels bureaucracy. We should not be anti-German, anti-French, we just must understand that the elites of Europe have made a complete and utter mess of the project of European union.
NOAM CHOMSKY: Yes but when you get to Maastricht, the French elites still believed that they were controlling German power in the Maastricht Treaty?
YANIS VAROUFAKIS: Yes.
NOAM CHOMSKY: That’s pretty astonishing.
YANIS VAROUFAKIS: It’s an astonishing error on their part. But so was the German elite’s estimation that—Helmut Kohl for instance, who was a Europeanist, who was a federalist deep down, that you create a currency union first and when it gets in trouble, the political union would follow. What an error. When you create a gold standard and it starts fragmenting, you’re not going to end up with a political union, you’re going to end up with an abyss. You’re going to end up with Le Pen in government in France, the Golden Dawn in Greece, the AfD there in Germany and the fragmentation.
NOAM CHOMSKY: Do you think he understood say Nicholas Kaldor’s prediction?
YANIS VAROUFAKIS: He never did.
NOAM CHOMSKY: Never?
YANIS VAROUFAKIS: No. None of them did.
NOAM CHOMSKY: Including Kohl?
YANIS VAROUFAKIS: Including Kohl. He didn’t understand it and he didn’t believe it. He really genuinely thought and in a rather simpleminded manner that we are creating this monetary union. Its fragmentation is going to bring about humungous costs for Europeans, so our successors, when this fragmentation begins, must fix it by creating a political union. Well, yes, they must, but they are not doing it. And they are not doing it because they are falling prey to this self-reinforcing negative feedback mechanism between authoritarianism and bad austerity policies.
NOAM CHOMSKY: How did the Fed respond to Maastricht?
YANIS VAROUFAKIS: The Fed?
NOAM CHOMSKY: Yeah.
YANIS VAROUFAKIS: It is interesting. Remember Alan Greenspan was not the most astute of central bankers.
NOAM CHOMSKY: He was in some ways. He understood why the economy was working so well. Remember his testimony to Congress where explained how magnificent the economy was that he was administering. He said it was based on growing worker insecurity.
YANIS VAROUFAKIS: True.
NOAM CHOMSKY: That was a good remark.
YANIS VAROUFAKIS: Yes, so he was a real class warrior, but he did not understand finance.
NOAM CHOMSKY: Yeah.
YANIS VAROUFAKIS: Unlike Paul Volcker.
NOAM CHOMSKY: But he understood power.
YANIS VAROUFAKIS: Yes, he understood power, but Paul Volcker, his predecessor, understood both power and the pitfalls of overreliance on markets.
NOAM CHOMSKY: Yeah, okay, so what was the reaction to Maastricht by the Fed?
YANIS VAROUFAKIS: None.
NOAM CHOMSKY: None? They didn’t pay attention?
YANIS VAROUFAKIS: Yeah, there was—well, I did not know of any substantial reaction. I haven’t seen any, I’ve done some research, they were just going along. They would be making comments about the specifics, technicalities, but not any—Paul Volcker did make some very interesting comments.
NOAM CHOMSKY: What was his reaction?
YANIS VAROUFAKIS: All very critical. He was very critical of the lack of checks and balances and shock-absorbing mechanisms. But Alan Greenspan and the Fed under Alan Greenspan indulged in autolobotomy regarding these structural aspects of global capitalism.
NOAM CHOMSKY: Actually I want to bring up the 1953 story. That’s quite critical.
YANIS VAROUFAKIS: Well, it’s part of a broader story of American hegemony after the Second World War, which has two dimensions that are of course interwoven. One is the Cold War story, which is a very important story, and the increasing authoritarianism of the United States after Truman.
NOAM CHOMSKY: Yeah.
YANIS VAROUFAKIS: Beginning with the Truman Doctrine, again, Greece, remember, everything bad starts in Greece, like the Cold War, which began in the streets of Athens in December 1944, not in Berlin, then spread to Berlin, with the first attempts by the CIA, successful attempts, to overthrow governments that they considered inimical to the interests of the global empire. Like the Mosaddegh government, then later our government. I grew up in the dictatorship that the CIA managed to create before the Pentagon had its own coup with the generals.
You know, there was a wonderful race between the Pentagon on the one hand and the CIA as to who was going to stage the Greek coup in 1967 first, and they were working quite separately from one another, the Pentagon with generals and the king, the CIA with the colonels, and the colonels got in first, they were more agile, so they moved in first, then you had Pinochet, you had the Latin American brutality and so on, so that’s one story. We all know about American imperialism post 1944.
But the second dimension, which is much more interesting and much more benign. Because if you look at—it starts with Bretton Woods, an attempt to prevent by the New Dealers in power, and by some very good people, to prevent another Great Depression in the states. The great fear of course was in 1944, they could see that the war would end, they could see that the wonderful factories that were churning out the aircraft carriers, the tanks, the bullets, the jeeps, and so on, even if they were reconfigured to produce white goods and cars and consumer durables, there would not be sufficient demand within America for all those products that these factories could potentially make, so eventually they would scale down investment at a time when the American GIs, the American soldiers would be coming back from the front and that would spear—and they called it “the 1949 moment,” they feared that the 1949—that twenty years after 1929 there would be another crash.
NOAM CHOMSKY: The famous dollar gap.
YANIS VAROUFAKIS: Exactly. So they sat down and designed a magnificent global plan to prevent this from happening. They also knew—there was the Cold War of course, there was the pressing agenda of making sure that Europe doesn’t fall to the communists and Asia doesn’t fall to the communists, so the two dimensions were combined and the global plan of which the Bretton Woods system was just one part, entailed just to put it as succinctly as I can, the following characteristics and dimensions.
Europe would be dollarized, so that Europeans could buy the gleaming cars and the gleaming aircraft and washing machines from Westinghouse and so on and so forth that America would not be able to absorb on American soil. Europeans were in ashes after the war, so they needed to be dollarized. So they would be allowed to recreate all their own currencies, but their currencies would be pegged to the dollar, effectively they would have the dollar in different form. And that was a fixed-exchange-rate regime.
It was very similar to the gold exchange standard but with a very great difference. The New Dealers who had felt the Great Depression in their bones, most of them, if you look at their biography, had actually suffered during the Great Depression, and they were very keen to avoid it again, understood that what was missing in the gold exchange standard, was a system of surplus recycling, of taking surpluses from jurisdictions where they were being created through a political mechanism and siphoning them in the form of productive investments or some kind of investment into the deficit areas, in order to be able to generate the income in the deficit areas that were necessary to keep purchasing stuff from the surplus countries, so the surplus countries could remain surplus countries, like America for instance. To keep recycling surpluses and deficits to maintain this global plan. If you think about the—This is an extension of the New Deal.
NOAM CHOMSKY: It’s worth bringing out the role of reconstructing Germany—
YANIS VAROUFAKIS: Of course.
NOAM CHOMSKY: —in this system, which was quite critical.
YANIS VAROUFAKIS: I have looked at Senate papers from 1946 talking exactly about that, because this global plan had to rely on a European pillar and an Asia pillar, and they had to have a strong European currency and a strong Asian currency to act as shock absorbers. There are these amazing documents where they say, “American capitalism is going to going to go through a spasm like capitalism always does,” that shows a kind of understanding that today on the last twenty years is absent from policymakers. So they could see that there would be a recession.
And the question that we’re asking, if we only have one currency after the war, because Europe was destroyed and we would be dollarizing them. If we only had the dollar, any crisis in the dollar zone, in America, would be transmitted very quickly both to Asia and Europe and maybe those shocks would be magnified instead of being dampened. So we need shock absorbers, we need the European currency and the Asian currency that would do the shock absorbing. But in order for those currencies to be sufficiently strong they would have to have—
NOAM CHOMSKY: They’d have to be subordinate—
YANIS VAROUFAKIS: Industry. Industry.
NOAM CHOMSKY: And crucially subordinate to the dollar. Not—
YANIS VAROUFAKIS: Exactly. Exactly. So they would have to be net exporters in their vicinity. Germany within the rest of Europe, Japan within China.
NOAM CHOMSKY: Within the global system managed and run—
YANIS VAROUFAKIS: Within the global system under the tutelage—
NOAM CHOMSKY: That’s the Keynes/White dispute.
YANIS VAROUFAKIS: The Battle of Bretton Woods, which is an amazing episode in intellectual and financial history. At that point the problem they had when they were thinking about this in 1946, late ’45, early ’46, is they already had agreed with the French to turn Germany into a pastoral land, to deindustrialize Germany. So they had to go back to the French and say, “We changed our minds,” and they did, and they offered them a bargain. “You will agree to the reindustrialization of Germany. You will agree to a write-down of German debt, otherwise the German economy will never be able to recover if it is in a dark cloud of unsustainable debt. And in return what we’re going to give you is the leadership of Europe.” This is the goal idea, that they are the drivers of the carriage and Germany is the horse that powers it, and indeed this is what happened. If you think of—where is the OECD? It’s in Paris. What is the OECD? The OECD is a relic of the Marshall Plan. So the French were distributing Marshall aid in Europe. Think about Brussels. Brussels was completely and utterly designed by the French elite.
NOAM CHOMSKY: Yeah.
YANIS VAROUFAKIS: Think about the IMF. Why is Christine Legarde the managing director of the IMF? Why was Strauss-Kahn the manager —this is still the relic, the leftover of this deal with the French and the Germans. Interestingly, so going to ’53. Fifty-three is where the Americans grabbed the heads of the British, of the French, of the Italians, and of the Greeks, incidentally, and banged them together and said, “You are going to write down German debt.” So Greece was owed money by Germany that it throws off so that Germany could reindustrialize in the 1950s.
NOAM CHOMSKY: And that illustrates the title of your book. The French got something in return, the Greeks didn’t, the weak suffer as they must.
YANIS VAROUFAKIS: Yes, indeed. But of course I always like to leave a degree of optimism hanging in the air (laughter) so you may have noticed that my book ends with—the title ends with a question mark, and the emphasis is on the question mark and the dedication is to my mother and it says that my mother would have slaughtered with immense kindness anyone who dared say that the weak suffered what they must. And even the original expression comes from Thucydides in the History of the Peloponnesian War, when he recounts as an Athenian—remember, Thucydides is an Athenian historian and soldier and general who is recounting the story of when Athens sent a fleet with troops, the marines, the Athenian marines, to the island of Melos to crash the local society, the local city-state. Why? Because Melos refused to take sides in the cold war, or actually the hot war at the time, between Athens and Sparta. And Athens had its own NATO in the archipelago of the Aegean and it was very worried that if the Melians were allowed to be independent, then the rest might get ideas that they want to exit NATO, the NATO of the time, so they sent the troops to crush them. And there is this interesting meeting when the Athenian generals meet the Melian representatives, delegates to announce to them, but you know, your life is over, surrender quietly and we will sell you as slaves. If you resist, we are going to crush you. And the Melians gave them a Kantian argument that you should never treat human beings as a means to an end, you should treat them as an ends in themselves. Not exactly but more or less this.
NOAM CHOMSKY: They hadn’t read Kant yet, remember.
YANIS VAROUFAKIS: Of course, but it was more or less that kind of Kantian argument. You should treat those in a position of weakness in the same way you would want to be treated in a position of weakness, because one day you will be in a position of weakness, as of course the Athenians of course did become—
NOAM CHOMSKY: Very soon.
YANIS VAROUFAKIS: Shortly afterwards when they lost the war to Sparta, and the Athenian general responded, no, you’ve got it just wrong, the strong do what they can, and the weak suffer what they must. But Thucydides is telling us this story in order to allow us to criticize it. Thus the question.
NOAM CHOMSKY: Well, I think the real optimistic element in the book is the Condorcet quote about power really being in the hands of the masses if they take it.
YANIS VAROUFAKIS: In the mind of the masses.
NOAM CHOMSKY: In the mind, and in fact that goes back to and he was probably quoting David Hume, who in “The First Principles of Government” makes that point very clearly. He says it’s surprising to see the easiness with which the great mass of the population is subordinate to their governors, because power is in the hands of the governed, and if we inquire into the means by which this wonder is achieved we see that it is by consent alone that the powerful are able to govern. Meaning that if the governed refused to consent, to use your words, the game is over.
YANIS VAROUFAKIS: That’s exactly right. That’s exactly right. And I and Danae, my wife, we felt that on the third of July last year. And that was a magnificent moment. Because you’ve got to remember our government won the election in January 2015 with a mandate to speak truth to the powerful, to say no to them and, “do your worst, we are not accepting any more of your toxic loans under conditions that will shrink our economy and our people further.” And we won this election, but because of the system of disproportional representation, we won government with 36 percent of the vote. The previous governing party received something like 25 percent, so we had enough seats in parliament to form a government, but that’s 36 percent of the vote, and we had the whole media of Greece and the world completely and utterly, militantly against us.
We had the central bank, third day I was in my office, the president of the Eurogroup visited me to say, “Either you accept the existing policies,” the ones we were elected to challenge, “or your banks will be closed within a month.” So this is the—you can’t be weaker than that. We did have a strategy, we did have a secret weapon, we can talk about this later when we open this up, but when they closed our banks down, I believed that it was just a matter of days before our support would wane. And we had called for a referendum to support us to carry on fighting.
So remember, we had only won 36 percent. The banks were closed, people didn’t have access to their money. Pensioners were fainting in line in front of closed banks to get some money out in order to feed themselves. The press is bombarding, terrorizing people in their living rooms on their television sets, saying to them that if they went with us against the troika, Armageddon is going to come, and we’ll be expelled from the universe, not just Europe. (laughter) And those crazy, magnificent Greeks gave us 62 percent. Why? Because the one deficit they could not bear was the deficit of dignity. And they had a Condorcet moment.
NOAM CHOMSKY: So what happens to Greece now?
YANIS VAROUFAKIS: Well, unfortunately, that very night of the referendum, our government, my prime minister, surrendered.
NOAM CHOMSKY: But now.
YANIS VAROUFAKIS: Well, to answer your question. That surrender meant that that we have the worst possible combination. We have a neoliberal ideology with completely anti-neoliberal policies. They increased the corporate tax rate, they increased the VAT rate, they increased the income tax rate, they reduced pensions, they reduced wages. So they did—
NOAM CHOMSKY: Even harsher conditions than the ones you refused.
YANIS VAROUFAKIS: Even harsher conditions. The Greek economy is fading, all business plans are going haywire, in a sense remember “liquidate, liquidate, liquidate” under President Hoover, Mellon, I think was the name of the U.S. treasury secretary that said that. That is what’s happening. Complete liquidation of Greek business, the Greek state, and the Greek people. And all that is happening in the context of the nineteenth-century gunboat diplomacy, the purpose of which is not so much Greece, it is how to keep France, Spain, Portugal.
After my prime minister’s surrender on the 13th of July, he signed the document of surrender, and you know what happened, the Spanish right-wing prime minister came out of the room wielding this document like this in front of the cameras, and speaking in Spanish to the Spanish media he said, “this is what you get if you vote for the Syriza of Spain,” for Podemos.
NOAM CHOMSKY: Podemos.
YANIS VAROUFAKIS: Well, thankfully, the Spanish voted him out but didn’t vote Podemos in, so they now have a hand parliament in Spain, no government.
NOAM CHOMSKY: No government.
YANIS VAROUFAKIS: Well, actually that’s much better than having that government.
NOAM CHOMSKY: So what do you think the future is for the peripheral—when you say “liquidate,” do you mean liquidate into German hands primarily?
YANIS VAROUFAKIS: No what I mean is, what’s going to happen is there’s going to have hundreds of thousands of small businesses, people who will lose their shops, they will lose their pharmacies, they will become homeless, they will leave the country, with their kids, who are well educated, they will go to Germany, they will go to Spain—Spain, no, because the Spaniards are leaving—they will come here, they will go Canada, they will go to Australia, they will go to South America, somewhere to find a way of making ends meet. You are going to have the liquidation of households with foreclosures and foreclosures in Greece are worse than here, because here you can take the keys to your house and go to the bank and say, “Take it. Bye.” In Greece, you can’t do that. Even if you lose your house, you still have the debt, you carry it with you, like Mephistopheles walking around with hell around him, you are walking around the world with that same debt, even though you no longer have the house.
NOAM CHOMSKY: It’s kind of like student debt here.
YANIS VAROUFAKIS: Exactly. So in answer to your question, what is now the prospect of progressive politics and of hope in Greece? I think that now we had a window of opportunity in Greece to reboot this loan agreement and to reboot Europe, because had we succeeded there, then it would have really spread to Spain and to Italy and throughout the rest of Europe, we missed that. This is why I and some other utopians and recalcitrants throughout Europe, we have created what we call DiEM, the Democracy in Europe Movement, with our manifesto that Noam Chomsky signed, making me the happiest person in Europe.
For the same very simple reason, I think we are in a 1930 moment. Shortly after the collapse of Wall Street, the great financial crisis, and just before the slide into a postmodern abyss of xenophobia, misanthropy, failed economic policies, austerity, debt deflation that will become a major source of uncertainty, of misanthropy, of pain and unnecessary not just for Europe but for the rest of the world. Allow me at this point, I have a pin that I’ve brought with me for DiEM to give to you which I am wearing, and this is a bit of propaganda for our Democracy in Europe Movement, and I can’t not give this to Noam Chomsky since he signed our manifesto.
NOAM CHOMSKY: Thank you very much.
YANIS VAROUFAKIS: And I’m being signaled to that we have to open this up to Q and A.
NOAM CHOMSKY: It’s a good point, good point.
Q: Mr. Chomsky, Mr. Varoufakis my question is about European integration policy, the then and now. We know that in 1992 the leaders of the day signed the Maastricht Treaty, which stipulated those convergence criteria to measure well, I guess, the similarity between economies such that if they were able to fulfill those criteria, they qualified for the initial round of euro membership. Are EU policymakers only looking at those criteria now, those deficit criteria, or are they looking at other measures of integration given what we know about what’s—is that their only policy focus?
YANIS VAROUFAKIS: Well, let me say that they never looked at those criteria. These were bogus criteria. Greece didn’t meet those criteria. Italy didn’t meet those criteria. Far from it. The criterion was 60 percent of debt over GDP as a maximum. Italy had 100 percent. But of course the whole point of creating the Eurozone was in order to stop Fiat producing cars that would remain competitive vis-à-vis Volkswagens through devaluation of the lira. So they needed Italy, so they violated their own criteria. They just ignored them, and they brought Italy, Greece in. And you know how Greece got in? We had some smart people in the finance ministry, in the central bank of Greece, and they copied exactly the same tricks that they used to let Italy in. They said, “Well, we know what you’ve been up to. So if you let Italy in, we were doing the same tricks, we will present the same data, so either you have to kick the Italians out or allow us in as well.” So this is how we got caught up.
You’ve got to understand that it’s a very hypocritical concept, the whole thing, the whole process, so it was never a question of integration, really. It was a question of expanding the limits of predatory financialization. What did Greece have to offer the Eurozone? Can I tell what we had? We had no oil, we had really—we were not a traditional colony that had natural resources to—what we brought to the Eurozone was a population with minimal debt and a lot of equity. Because Greeks loathe debt. My parents’ generation didn’t have credit cards, personal loans, mortgages. They worked for thirty years, put some money aside, borrowed some money from an aunt or an uncle and bought a house, okay? So we were a dream come true for German and French bankers. We had a Protestant almost ethic in terms of debt, and there was very little debt. And a capacity, once extended, once the Deutsche Mark was extended to Greece, okay, we had the capacity to borrow and borrow and borrow on the basis of very sound collateral.
So this edifice was never designed to sustain an economic crisis. You know which were the two countries that violated the Maastricht criteria first, before anybody else? Germany and France. So these rules were written not to be respected, but were written to be used as a club by which to beat the weak and the ones who dare speak out against the irrationality of the system.
Q: Thank you.
YANIS VAROUFAKIS: Thank you.
Q: Hello. My question is for Mr. Chomsky. In the past you’ve been very critical of the way in which the West has engaged in political and economic imperialism around the world behind closed doors, kind of smoke and mirrors. How do you believe that transparency and democratizing the Eurozone—
NOAM CHOMSKY: And democratizing the Eurozone.
Q: How it will kind of affect or possibly deter this behavior?
NOAM CHOMSKY: Well, actually one of the things that Yanis discusses in his book is that the Eurozone—in the Eurozone, democracy has declined arguably even faster than it has in the United States. During this past generation of neoliberal policies there has been a global assault on democracy, that’s kind of inherent in the principles. And in the Eurozone it’s reached a remarkable level. I mean, even the Wall Street Journal, hardly a critical rag, (laughter) pointed out that no matter who gets elected in a European country, whether it’s communist, fascist, anybody else, the policies remain the same. And the reason is they’re all set in Brussels, by the bureaucracy, and the citizens of the national states have no role in this, and when they try to have a role, as in the Greek referendum, they get smashed down. That’s a rare step. Mostly they are sitting by passively as victims of policies over which they have nothing to say, and what Yanis said about the Eurogroup is quite striking. This is a completely unelected work group. Not in any remote way related to citizens’ decisions, but it’s basically making the decisions, the choices and decisions. That’s even beyond what happens here. Here it’s bad enough, but that’s more extreme.
YANIS VAROUFAKIS: Let me add to this just to clarify something. Actually I will go further than Noam about Europe. The European Union doesn’t suffer or the Eurogroup from a democratic deficit. It’s like saying that we are on the moon and there is an oxygen deficit. There is no oxygen deficit on the moon. There is no oxygen, full stop. (laughter) And this is official in Europe.
At my first Eurogroup, as the rookie around, I was given the floor to set out our policies and to introduce myself, which is nice, and I gave the most moderate speech that I thought it was humanly possible to make. I said, “I know that you are annoyed I’m here. Your favorite guy didn’t get elected, I got elected, I’m here, but I’m here in order to work with you, to find common ground, there is a failed program that you want to keep insisting on implementing in Greece, we have our mandate, let’s sit down and find common ground.” I thought that was a pretty moderate thing to say. They didn’t.
And then after me, after I had expounded the principle of continuity and the principle of democracy, and the idea of having some compromise between the two, Doctor Wolfgang Schäuble puts his name tag forward and demands the floor and he comes up with a magnificent statement, verbatim I’m going to give you what he said, “Elections cannot be allowed to change the economic policies of any country.” (laughter) At which point I intervened and said, “this is the greatest gift to the Communist Party of China, because they believe that too.” (laughter)
Now, while I was in there at the twelve Eurogroup meetings that I attended before I resigned, I noticed in those very lengthy, incredibly intense and depressing sequences of discussions, some of them lasted more than twelve hours. The room was full of cameras, microphones, you know, these screens, we had thirty of them, we were in the same room with people and I was watching them on television. Because, you know, this is the power of the screen. You don’t watch the person speaking, you watch him on the screen, or her. Yeah?
And at some point it hit me, “We don’t need a revolution here, somebody in the control booth just press a button and connect all these cameras to the Internet.” Just imagine if that were to happen, huh? You don’t need a treaty change, a constitution, a revolution, nothing. Somebody just press a button, like in a science fiction movie, you press a button and suddenly have a new universe. What would happen? Would Schäuble say this? I don’t know, maybe he would, but you know what, it would make a difference for the Germans, the French, the Portuguese, to hear him say those words, instead of reading the Financial Times where people like Peter Spiegel were simply saying that Yanis Varoufakis was resisting reform in his country and he demanded more money for it. So transparency is everything. It’s a first step. It’s a huge revolutionary step that takes nothing more than the press of a button so this is why on our side again, I’m a salesperson here tonight.
In DiEM25.org, there’s a transparency in Europe now campaign where we’re demanding the livestreaming of all these meetings. We’re demanding that the ECB publishes its minutes. (applause) We’re demanding that all the TTIP negotiating. Do you know that as the minister of state for finance in Greece in order to look at the TTIP documents of the negotiations between the European Union to which I was a finance minister and the United States I had to sign a nondisclosure agreement? In other words, the price of looking at those documents was that I promised not to tell my electorate. So if you can, get into our site and sign the petition for transparency. It’s a small step, just to make it difficult for them. Even if they have to answer the question why are they not livestreaming the meetings, that’s a small step, because you are putting them in a difficult position.
PAUL HOLDENGRÄBER: I just want to say that we are also livestreaming, (laughter) and that I’m not going to tell you how many questions we’re going to take, but we’re going to end at 8:59, so next question.
YANIS VAROUFAKIS: 8:59, you and your precision.
PAUL HOLDENGRÄBER: 9:01.
Q: Hi, it’s a little bit follow-up question to the previous one to Varoufakis. You wrote that Wolfgang Schäuble wants to kind of have a superminister of all of the Eurozone. Nonelected, will just kind of decide on national—that’s his plan. But I’m just wondering what do you propose instead because sometimes it’s a bit unclear to me if you also want kind of a superminister, just an elected one, or if you want more power taken back to the national countries? And also—
YANIS VAROUFAKIS: You have a second question?
PAUL HOLDENGRÄBER: Just one question.
Q: But also just that Eurozone, if you want to keep the euro in the long term or if it should be maybe slowly—
YANIS VAROUFAKIS: It’s the same question.
YANIS VAROUFAKIS: Let me be brief. What Schäuble wants and I know that because he’s written about it and we’ve discussed it, is a semblance of federation where the Eurogroup becomes a—he doesn’t feel good that it’s not legal. He wants to legalize it. And he wants to turn the president of the Eurogroup the fiscal leviathan of the Eurozone. He doesn’t call him that, but he wants him to be if you want the fiscal representative of—or the treasurer, the treasurer of the Eurozone. But he wants to give this person a tiny little budget, tiny federal budget, 1 percent of GDP, nothing, in other words, and the main function of this person will be to have a veto power over national budgets.
Now this is a monstrous notion. Let me give you an example. On the one hand you have a parliament, the French National Assembly, voting in a budget. OK? The budget of the French government is 50 percent of GDP; half of the economy of France is controlled by the state. Now you’re going to have a fiscal overlord in Europe, that has a 1 percent budget, in other words has absolutely no capacity to affect surplus recycling within Europe and stabilize European capitalism, but he is going to have—I was going to say he or she but we know it’s going to be a he, don’t we? He is going to have the right to veto the budget that National Assembly of France voted. And why? To keep countries within the fiscal constraints of the Maastricht Treaty, which has so spectacularly and abundantly failed.
And let me give you an example of why this is just mad, and makes absolutely no sense, even from a neoliberal perspective. Take Ireland, Ireland before 2008 was the blue-eyed boy or girl of the international neoliberal Washington consensus. They had turned their markets so elastic that they, you know, they resembled the circus. They had a debt-to-GDP ratio of 25 percent. Half that of Germany. They were never above budget, they had a surplus, actually they had a surplus in their, they call it their federal budget, I call it their state budget. So they were the model country, the model citizen of the neoliberal mantra, okay?
Now, of course, if you look at what was happening in the private sector, they had gone crazy with, there was a frenzy of indebtedness like here in Wall Street and so on and so forth. The moment the credit crunch begun after Lehman Brothers, the developers went bust, the developers’ loans to the Anglo-Irish Bank and the various other shady banks in Ireland went bad, they became nonperforming, those banks immediately became insolvent, and then the president of the Central Bank, a certain Mr. Jean-Claude Trichet, called the Irish prime minister, “transfer all the losses of the private sector onto the public books, onto the taxpayers, or else, or I will close down your banks.” Remember that happened to me a few years later too. And at that point suddenly Irish public debt went from 25 percent to 120 percent.
Now, what would the fiscal overlord do then? Nothing. Would he veto this? No, because it was the Central Bank’s direct directive that pushed all the losses of the private sector onto the taxpayer. So this system that Dr. Schäuble is proposing is just an attempt to legitimize the illegitimate current informal system. It has absolutely no capacity to stabilize European capitalism. The only thing it will do, it will formalize the current impasse.
You’re asking me what I want. I would like a federal democracy. I would like a European parliament, I would like a federal government with a substantial budget and proper surplus recycling and I would like to have a European Union constitution that is fifteen, twenty pages and not written by a failed former president of France that scripts the preface, that happened 2005, beginning with the rights of capital. You knew that one, didn’t you? That there was an attempt to write the European Union that began, the preface, the bill of rights was all about the rights of capital. You can’t make it up.
NOAM CHOMSKY: Schäuble’s comment about elections.
Q: Hi, first of all, I’m very honored to be here in front of both of you. I wanted to ask a quick question for Yanis. To what extent do you agree with the notion that the Greek government was caught in a tragic circumstance, and they did what their options allowed them to do at the time, given that the other option might have been an exit from the euro combined with the refugee crisis that they have now. And for Mr. Chomsky, I wanted to ask a little bit your evaluation on the Bernie Sanders phenomenon in American politics and how do you evaluate that for the future of American politics?
NOAM CHOMSKY: Sorry, say it again?
YANIS VAROUFAKIS: Bernie Sanders.
NOAM CHOMSKY: Oh, Bernie.
YANIS VAROUFAKIS: Bernie. You start with Bernie.
NOAM CHOMSKY: Well, Bernie Sanders is an extremely interesting phenomenon. He’s a decent, honest person. It’s pretty unusual in the political system. (laughter) Maybe there are two of them in the world. (applause) But he’s considered a radical, an extremist, which is a pretty interesting characterization, because he’s basically a mainstream New Deal Democrat. His positions would not have surprised President Eisenhower, who said, in fact, that anyone who does not accept New Deal programs doesn’t belong in the American political system. That’s now considered very radical.
The other interesting aspect of Sanders’s positions is that they’re quite strongly supported by the general public and have been for a long time. That’s true on taxes, it’s true on health care. So take, say, health care. His proposal for a national health care system, meaning the kind of system that just about every other developed country has, at half the per capita cost of the United States and comparable or better outcomes. That’s considered very radical, but it’s been the position of the majority of the American population for a long time. So if you go back say to the Reagan—Right now, for example, latest polls about 60 percent of the American population favor it.
When Obama put forward the Affordable Care Act, there was you recall a public option, but that was dropped. It was dropped even though it was supported by about almost two thirds of the population. You go back earlier, say to the Reagan years, about 70 percent of the population thought that national health care should be in the constitution because it’s such an obvious right, and in fact about 40 percent of the population thought it was in the constitution, (laughter) again because it’s such an obvious right. And the same is true on tax policy and others.
So we have this phenomenon where someone is taking positions that would have been considered pretty mainstream during the Eisenhower years, that are supported by a large part or from a considerable majority of the population, but he’s dismissed as radical and extremist. That’s an indication of how the spectrum has shifted to the right during the neoliberal period, so far to the right that the contemporary Democrats are pretty much what used to be called moderate Republicans. And the Republicans are just off the spectrum. (laughter) They’re not a legitimate parliamentary party anymore.
And Sanders has the—significant part of the—he has pressed the mainstream Democrats a little bit towards the progressive side. You see that in Clinton’s statements. But he has mobilized a large number of young people. These young people who are saying, “look, we’re not going to consent anymore,” and if that turns into a continuing organized mobilized, mobilized force, that could change the country. Maybe not for this election but in the longer term.
YANIS VAROUFAKIS: I’m going to answer your question by saying, and I hope you don’t consider this to be too harsh a judgment of your question. I will say that embedded in your question is the most toxic form of TINA, of the proposition that there is no alternative. The idea that in the end we had to surrender because the alternative would be worse effectively denigrates the 62 percent of Greeks who ordered us not to surrender. And it denigrates those of us who actually won government, because if what you said is right, we wouldn’t leave. We walked in there and thought that with the power of our rationality and the force of our personality we would convince the troika of lenders to be kind to us, we were relying on the kindness of creditors. No, we were not naïve. From 2012 to 2013 I had long conversations with our team, the team that eventually became the negotiating team, the government, the inner cabinet, the war cabinet as we called it, and we were talking about how are we going to respond to the threat of bank closures that would happen on the first day of our government. And we had worked out a plan of what our retaliation would be. I won’t bore you now, we don’t have the time, I have spoken about this extensively, we would have to haircut the bonds that the ECB held that were in Greek law. It was perfectly simple to do it and we would not end up as Argentina because it was Greek law, the ECB would have to come to a Greek court to contest it, they would not be dragging us to Luxembourg to London or to New York and that would have crippled QE, it would have brought down with a very high probability the euro, so if they closed down our banks, we had a weapon by which to retaliate. We were planning a parallel payment system in case the banking system was in disrepair, could not be used for transaction.
We had that agreement. It’s the only reason I stood in front of the Greek people and asked them to vote me in. I didn’t ask them to do this in order for me to go in there and go in to the Eurogroup and give nice speeches and hope for the best. And we did not see this through. To say that it was inevitable that we would surrender and that the alternative would be worse is effectively to confirm that there is no alternative to barbarism, and I shall not confirm this.
Q: Thank you.
PAUL HOLDENGRÄBER: If this would be okay for you, may I suggest that we take, we bundle three questions together and so you ask three brief questions, you ask one question, you ask one question, and that gentleman there asks one question, and the others of you there I applaud you for being so hopeful.
Q: Thank you very much for this conversation and I would like to ask my question to both of you. You have discussed the situation in Spain and we have just found today that after four months without being able to form a government there will be new general elections on the 26th of June so my question would be which would be your message in this critical juncture in the battle of ideas in Europe for the Spanish people and also for Podemos? Thank you.
PAUL HOLDENGRÄBER: Question number 1. Question number 2?
Q: Yes, thank you for a fascinating evening. Austerity is bankrupt. It’s bankrupt empirically, it’s bankrupt intellectually, it continues to be imposed on the people of Europe. You have framed this tonight as primarily a political conflict, primarily between Germany and France. Can’t we interpret this as an agenda by people who have no particular political or national allegiances to impose Reagan- and Thatcher-style capitalism on the core of Europe, including Germany, what happens to German pensions at the end of this game?
PAUL HOLDENGRÄBER: And the last question.
Q: My question was concerning some of the other peripheral countries in Europe—Ireland, Spain, and Italy and their national governments did not support you last year during the crisis. Now would you comment on that and also what do you think the prospects for those countries are now, economically?
NOAM CHOMSKY: Well, the message for the people of Spain I think should be this, (applause) that’s what they should be voting for, and they can achieve it. Go back to David Hume. Power is in the hands of the people if they don’t consent, and that’s critical.
YANIS VAROUFAKIS: I have nothing to add to this. I’ll try to combine with the last question, because what applies to the people of Spain applies to the people of Italy, to the people of France but indeed also to the people of Germany, and that brings us to the other question as well. We’re in it together.
The notion that Europe is split between north and south and that north is populated by all the ants whereas the grasshoppers have congregated to the south and to Ireland is a very strange idea. There are ants and there are grasshoppers everywhere. What happened before 2008 was the grasshoppers of the south and the grasshoppers of the north got together into a splendid alliance of debt-driven frenzy. They were the bankers. They were the spivs, they were those who predicated their growth on transfers from the European Union budget to create motorways that went to nowhere, Olympic Game sites in Greece, and so on and so forth, and they became fabulously rich. This was the alliance of the grasshoppers. The ants were working very hard and were finding it very hard to make ends meet during the good times. And then when the grasshoppers’ empire collapsed, it was the ants of the north and the ants of the south that had to bail them out, and it’s time for the ants of the north and the ants of the south to unite in Europe to change that crazy regime.
PAUL HOLDENGRÄBER: Any final words?
NOAM CHOMSKY: I think—
YANIS VAROUFAKIS: I want to pay my respects to this institution, and I want to thank you and to your staff—I met some of them before—for the diligence and the dedication and the enthusiasm. If only our rulers had a modicum, a percentage, a small percentage to public service, the world would have been a much better place.
PAUL HOLDENGRÄBER: Continue, continue a little more. (laughter) Thank you very much!