Against Varoufakis’ conformist sci-fi
Stavros Mavroudeas, Professor of Political Economy, Panteion University
In a recent (much publicized by systemic circles) article, G. Varoufakis, referring to the current international banking turmoil, uttered the supposedly radical slogan ‘let the banks burn’. Of course, G. Varoufakis is not famous for the coherence of his economic analyses. As he has described himself, he is a fairy tale creator impersonating an economist. This article fully falls within this rule.
Moreover, Varoufakis’ political views vary – many times simultaneously – from radical (but never really left-wing) to blatantly conservative. Recently, for purely opportunistic electoral reasons, he professes a ‘left’ turn. In his recent masquerade he found only a few willing and equally opportunist accomplices but their electoral success is still hanging in the balance. Of course, as in his scientific analyses, ‘creative ambiguity’ (which is synonymous with opportunism and unreliability) is the hallmark of his supposedly radical political turn.
What exactly does G. Varoufakis propose with his call for letting the banks to burn?
It is a bit complicated (but not difficult) to trace his theoretical perspective. Putting aside an older bogus self-description that he is an ‘erratic Marxist’ (as he is too erratic to be a Marxist), he once again proves himself to be a superficial Keynesian. He blends this perspective with the erroneous theory of financialization (that is the thesis that today there is a new capitalism dominated by bankers who usuriously exploit both workers and entrepreneurs). Characteristically, in a solitary class reference, G. Varoufakis argues that the class of ‘creditors and banks’ tightens the noose around the neck of society as a whole.
He then attributes the contemporary financial problems to government policy that ‘poisoned the money of the West’ by (a) not having a single’”, i.e., fail). It does not take deep political-economic knowledge to know that, at the level of economic policy, there has never been a single nominal interest rate but that states conduct monetary policy by intervening in interest rates. At the level of general theory, it would be interesting if G. Varoufakis clarified how – in his opinion – is determined a market-clearing interest rate in capitalism. Is it a purely monetary quantity equating the money supply with the peculiar Keynesian demand for money (which depends on the psychologically determined demand for liquidity)? Is it a natural rate of interest as the Neoclassicals claim? Or is it the balance between the demand for and the supply of loanable capital, but limited by the rate of profit, as Marxism asserts? But these questions are fine print for G. Varoufakis.
On more practical matters, Varoufakis’ view that the banks should be allowed to go bankrupt is something hardly novel. The dogmatically Neoliberal Hayekians are constantly voicing it.
Subsequently, G. Varoufakis indulges as usual in science fiction projects. He proposes closing down private banks (?) and creating (a) a digital currency by the Central Bank (obviously, in the european case, the ECB as for Varoufakis exiting the euro is a disaster and only realistic European disobedience saves!!!) and (b) a digital wallet based on blockchain technology (not to forget his earlier involvement with the dirty world of cryptocurrencies). Citizens will keep full-guaranteed deposits there. If they want to have a return on their deposits, then they could – assuming the risk of bankruptcy – place them in investment banks (?). Such a banking system is capable of ‘complying with the rules of an orderly market’ (as Varoufakean radicalism can only go so far).
He ignores of course that the financial system in capitalism exists to channel capital to capitalists and not to serve small depositors. And that money capital does not do this mediation for free.
But even if the Central Bank undertakes the collection of funds, it does not do so for free either. Where will it make profits to buy public goods (as Varoufakis benevolently but obscurely suggests)? If it gives a lower interest rate (as a risk premium) and/or imposes a higher seigniorage then it will exploit the depositors.
Varoufakis’ subsequent heated argument with the more Neoliberal cryptonomists about ‘big brother’ and the proposal for a legacy monetary oversight committee is unworthy of serious discussion.
The epilogue of Varoufakis’ article is revealing: he equates miners with bankers as harmful recipients of subsidies from society. Excellent class perspective indeed!!
But the most essential problem of Varoufakis’ science fiction is the ignorance (?) of the relationship of the financial system with production and real accumulation. In the financialisationist high clouded cuckoo land, the interest rate is pure usury that has nothing to do with the rate of profit.
In the contrary, Marxism aptly shows that interest is part of the surplus-value created by the workers, appropriated by the industrial capitalists, and redistributed among the latter and the money capitalists. Today’s financial turmoil is due to the inability to increase profitability which, in turn, limits the income of the financial system and leads to the collapse of the capitalist structure of debt and fictitious capital. Capitalism responds to this problem by supporting strategically important capital (as the big banks) and increasing the exploitation of labor.
For the labour movement and the real Left this is the main front and not the search for utopian banking reforms that only cause confusion and misdirection. Against the ‘creative ambiguity’ of the fellow-travelers of bourgeois politics, the transitional program of the real Left gives clear and adequate answers.
Τράπεζες: Να καταστρέψουμε τη δημιουργική ασάφεια για να αλλάξουμε τον κόσμο
