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The Global Minotaur – as featured in the New York Times Magazine

15/02/2012

Russell Shorto kindly interviewed me for the New York Times Magazine on my Global Minotaur, as part of a long article entitled The Way Greeks Live Now. For the complete article, as it appears on the New York Times website, click here. The piece that concerns my book follows here:

One of the grandest piles of ancient stones in a country full of glorious ruins lies on the island of Crete. It is called Knossos, and it was to Greece what Greece is to Europe: the cradle of its civilization. At the core of its prehistory is the legend of King Minos, who ruled over the Greek islands. Minos maintained his hegemony over Greece by requiring that Athens, the second power in the Aegean world, send him tribute in the form of young men and women, whom Minos fed to the beast he kept in his labyrinth: the Minotaur.

Improbably enough, a Greek economist named Yanis Varoufakis has been drawing attention in many of the hot spots of global finance lately, offering the Minotaur myth as a metaphor for understanding recent macroeconomic events. As Varoufakis writes in his recent book, “The Global Minotaur,” the world in which we have been living until recently functioned thanks to the voracious consumption of a different kind of beast. After World War II, the U.S. built up the infrastructure of its European allies as well as its former enemies, all of whom became trading partners. The U.S., with its great industrial and financial might, became the world’s surplus nation: its profits flowed out to its allies in the form of aid and investments. By the early 1970s, however, other countries had robust economies, and the U.S. was a debtor nation. “At that moment, certain very bright men within the American financial hierarchy made a stunning realization,” Varoufakis told me. The realization was that it didn’t matter if the U.S. was the biggest surplus or biggest debtor nation. What mattered was controlling the world’s primary currency, which would allow the United States to continue to recycle the global economic surplus. The idea was not unlike the thinking behind a casino — whichever gamblers are winning or losing, the house, which sets the terms and takes its cut, always wins.

So a new system came into being, in which a huge part of the world’s capital flows went to service debt originating in the United States. American debt, and the need to feed it, would be the modern Minotaur. The Wall Street financial houses became the handmaidens of the Minotaur. “The massive flow of capital into Wall Street gave it the impetus for financialization,” Varoufakis said, referring to the creation of derivatives and other risky financial vehicles. “And so Wall Street created a great deal of private money, with which it flooded the world and created huge bubbles, in the U.S. housing market and elsewhere.”

When that system came crashing down in 2008, Varoufakis says, “it was then only a matter of time that the euro would come into crisis.” Europe’s powerhouse economies — essentially, the northern countries — no longer had a place to sell their goods.

And where, in this grand picture, does Greece fit? Part of the logic of the eurozone involved the strong economies’ providing loans to the weaker ones, in order to build up their infrastructure so they could then buy products from the stronger countries — a kind of replay of what the U.S. did vis-à-vis Europe with the Marshall Plan. But while Greece took the loans, it didn’t invest wisely, and its own debt kept mounting.

As the weakest link in the eurozone, Greece gives us the clearest picture of what the larger economic downturn portends. And for all the hopefulness of some of the Greeks I met in my travels, others take a dimmer view of their future. Near Thessaloniki — Greece’s second-largest city — I visited a family home. Husband, wife and son were present. The woman is one of the top bankers in Greece. She spoke on condition that I not use her name or the name of her bank. When I asked for her views on the future, she said: “Last week, in the town of Larissa, I was sitting at an outdoor cafe, and a clean, well-dressed Greek man of about 60 passed by and politely asked if he could have the biscuit that came with my coffee. What you say about successful companies is good to hear. But the reality is that man who asked for my biscuit. You can’t see the crisis results fully yet because people have been living off their savings. Soon the savings will end. I believe that by the end of 2012, you will see a different Greece, a different country, with real poverty.”

According to Yanis Varoufakis, the future — for Greece and for much of the rest of the Western world, never mind recent upticks in the U.S. economy — is one of even more upheaval. “The Minotaur died, and that is what held everything together,” he said. “Until a new system is invented, we are in for turmoil.” As anecdotal evidence of the situation in Greece, he told me that all of his top Ph.D. students at the University of Athens were seeking jobs abroad. Then he added that he, too, would soon be leaving, possibly for a position in the United States.

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