Interview with China's '21st Century Business Herld'

Just interviewed by Chinese business daily 21st Century Business Herald (21世纪经济报道|). Here is the Q&A, in English of course…

1. May I take the liberty to ask why you moved from Greece to the United States?

Momentous decisions never have a single cause. It was a combination of factors spanning different realms that led me to leave Greece. An indicative list follows:

First, everything I had worked for at the University of Athens has imploded because of (a) the dearth of funds, (b) a new legislative framework that dismantled our Political Economy Division (pushing us into the poisonous embrace of some third rate business school), (c) the usual process that sets in during a period of financial cutbacks (which give an impetus to the commercialisation and commodification of academic life, thus demeaning it and empowering the lesser academics who are ready and willing to ‘sell out’).

Secondly, over the past two years I have been involved in the public debate with a view to arguing that the Greek state should desist from borrowing huge amounts on condition of reducing the national income (for this is what ‘austerity’ means) from which the loans (old and new must be repaid). In this I failed spectacularly. The powers-that-be went ahead, twice, with hideous long term results for our country and for Europe. Meanwhile, I realised that I had divided public opinion; that I had become a divisive figure. It was not my intention to do that and I did not like it at all when it happened – especially in view of the fact that my efforts to influence policy were in vain…

Thirdly, my commitment to not having a second job (e.g. consulting with financial institutions), so as to preserve my right to speak independently, meant that my personal finances were always precarious. Once the Crisis caused my (already low) university salary to dip considerably, and given that I must support my daughter who lives in Australia, the writing was on the wall…

2. ‘The Global Minotaur’ reveals the real source of this global crisis, but with the Greek case what went wrong and how did Greece come to its current sorry state?

Greece has its own special problems and malignancies. Nevertheless, its recent ‘Fall’ has all the hallmarks of the massive Crisis that began in the USA before spreading to Europe; the Crisis which I explained in my book in terms of the metaphor of the Global Minotaur’s mortal wounding (i.e. the end of a global recycling system which involved: (a) the US deficits creating demand for European, Japanese and Chinese net imports, and (b)  European, Japanese and Chinese net profits flooding to Wall Street and, therefore, paying for the US deficits). Greece’s recent tragedy can be usefully understood in the context of this global analysis: The massive flow of capital into Wall Street gave rise to financialisation; effectively the generation (by the big US banks) of huge quantities of private money (derivatives, options etc.). That private money then flowed back to Europe’s Periphery (Greece included), pushing growth rates up. Thus, countries like Greece went through a period of impressive (by Eurozone standards) growth, on the basis of capital flows into Greece from Wall Street, from the City of London and from French and German banks. While those capital flows kept coming, Greece was booming. But when, in the Fall of 2008, Wall Street collapsed, the private money that was maintaining capital flows in Greece, Ireland, Spain etc. disappeared. That ‘disappearing act’ meant the beginning of the Crisis. In places like Ireland, it was the private sector that went bankrupt (real estate developers in particular), before the losses were shifted to the state. In Greece it was the State that had borrowed directly during the ‘good times’ and, so, the Crisis took, in Greece, the form of a public debt crisis. Once it began, Europe’s denial that it was a systemic Crisis (that cannot be dealt with by means of loans and austerity) guaranteed that it would go on and on, with catastrophic effects.

3. Some people say that the combination of corruption, rent-seeking and political opportunism in many years led to the Greece crisis today, which is an inevitable result of political system being high jacked by the privileged class (this is similar to the current situation in China).

Corruption, tax evasion, rule by a political kleptocracy are all, undeniably, characteristics of Greece. Always have been, in fact. They help explain why Greece was the first domino to fall in the Eurozone. They do not, however, explain the domino effect itself. The latter can only be explained in terms of the Eurozone’s faulty design. To prove this, consider Ireland and Spain. The state there was not corrupt and tax evasion was not a problem. Yet they are just as bankrupt as Greece. Regarding the high jacking of the state by a privileged class, you are of course right: this is at the heart of the problem. However, this is not specific to ‘failed states’ like Greece. It is also true for ‘successful’ states like Germany where, for instance, the Parliament and the people are misled into thinking that their loans to Greece are necessary in order to show solidarity to Greece – when, in reality, they are funds whose purpose was to flow back into the German and French banks while the Greek social economy was allowed to implode.

4. What are your thoughts about the possible change which will be brought by the coming general election in Greece? And what do you think about the self-healing ability of the Greek democracy?

I do not harbour any positive expectations of the government that will be elected shortly. I very much fear that we shall have another coalition, like the current one, of politicians and ‘technocrats’ whose greatest qualification for the job is that they never contest the idiotic policies dictated to them from Berlin and Frankfurt. As for Greek democracy, it will, eventually, be reinvigorated. I cannot see it happening any time soon. But it will happen. Greece has overcome worse crises in the past. The tragedy is that a whole generation, maybe more, will suffer needlessly in the meantime.

5. Will vote in the general election in Greece next Sunday? Whom will you vote for and why?

Unfortunately, I shall be in the United States and will, as a result, miss out on voting. But if I were in Greece, I would vote for one of the small leftwing parties that supports the idea of remaining in the Eurozone but defaulting within it.

6. Since the outbreak of Greece debt, there has been a lot of talk about the root causes, of the so-called cultural differences in Europe between the North and South — diligent and efficient within the North and lazy, indulging in the pleasures of life in the South, et cetera. I also noticed the reflection among the Greeks, which claimed the spirit of the Greek nation has been gradually lost since join the euro.

All generalisations based on sentences beginning with “The Greeks are..” or “The Germans are..”, or indeed “The Chinese are..”, are the first step to an analysis that is profoundly unhelpful and, indeed, the first step along a slippery road that ends in racism. These generalisations, and the loss of confidence in Europe, are the result of the Crisis as well as of the spectacular political failure, by Europe’s rulers, to respond rationally to the Crisis.

7.  Greek economic growth is inseparable from the tourism and shipping industry, however, Greek tourism revenue was €1 billion in 2000 and €960 million in 2010, coupled with inflation means a decrease of 28%. Greek shipping net revenue was European, Japanese and Chinese net imports €460 million in 2000 and €450 million in 2010, coupled with inflation we have a 27% decline. Logically both pillar industries should have benefited since joining the euro. So, why this decline? Is it true that tourism and shipping are fundamentally free of government control in Greece?

Yes, both sectors are in private hands. The reason why they have declined is that 2010, when compared to 2000, was a recessionary year in Europe and the United States. Traffic was down (both in terms of tourism and cargo) and, as a result, Greece’s income from both has declined.

8. Greek politicians say there is still great potential to explore in Greece. Is there real hope of Greece’s future?

Hope is never extinguished in a country that, like China, has a long and, mostly, proud history. Nevertheless, it is my considered opinion that for Greece to rebound Europe must first get its act together. Of course, this does not mean that, if Europe does get its act together, Greece will automatically recover. Europe’s reforms are a necessary but not a sufficient condition for Greece’s recovery.


  • Professor Varoufakis

    Like Louis XIV’s l’Etat c’est moi, you are obsessed with being the CENTRE of the world with your appearances in interviews all over the continents. When are you going to make a comment on the crucial importance of the Greek elections and on the parties that contend for its leadership?

    • Tomorrow. In Greek. At

      PS. At least my ‘obsession’ is benign, devoid as it is of any interest in exercising authority (which I disdain…)

    • I have 2 basic disagreements with Yanis’ thesis:

      1. The PSI nonsense is a fault of Venizelos and Merkel alone. Papademos (despite the fact that he was asked to implement a technical aspect of the transitional government) was/is clearly against the PSI. So was Orphanides the Central Banker of Cyprus and he was booted out because of this opposition to the PSI nonsense.

      2. Implicating Samaras in a “quick & dirty” about face due to ephemeral ties with the Papademos transitional government is more like wishful thinking. This is part of a strategy to paint both parties with the same brush (I am sure a long standing fantasy of all smaller Greek parties) by quickly lump summing responsibility and attributing causes without a clear understanding of the nuances involved. In other words, saying that Samaras is equally guilty as Venizelos (albeit in different ways) makes good popular theater but could hardly withstand a careful examination of the issue.

      As I have said before, forcing a unity/coalition government between ND and PASOK as the most likely scenario after May 6th will be an unmitigated disaster for Greek politics. It’s the Merkel game squared.

      The vote in Greece is not about the Memorandum anymore. This is water under the bridge. The fight now is to gradually reserve all Memoranda terms by skillful alliances with other political forces in Europe.

      Any party who is attempting to gather votes on “anti-memoranda” grounds shows the same naivety as asking people whether they would like to live or die. Any normal person in Greece ought to be 100% anti-memoranda. But this is not the issue any longer. The issue now is how to gradually nullify the hideous terms and regain self-determination in the process. Asking the voters to make the May 6th election a referendum on the Memoranda is very cheap politics. It’s the proverbial “let’s close the bran door after all the cows have left”.

  • At least the Chinese o something useful with dogs. They eat them. In the central planning paradise called the EU, where noone is responsible for money, since it comes from central funds we waste money on dogs:

    “A Hungarian company was paid more than £350,000 by the European Union last year to build new facilities to “improve the lifestyle and living standard of dogs”, a project that never materialised. ”

  • Sad and disappointed that you are leaving the European arena. It was always educational to hear your concise analysis. You will be missed! However I predict great success for you on the American academic scene and the market is huge.

    Any time you decide to return just let me know and we’ll book the Albert Hall in London, much better than the pokey room at the LSE.

    The very best of good fortune…..but we shall continue to be reading you, I hope?

  • I ll looking forward to hear your arguments about the parties formerly known as “little” parties 🙂
    Please elaborate as much as you can on how you believe is possible to default within Europe and remain in Eurozone. I know that we can not be kicked out, but it will be unbearable for Greece to stay within.
    For instance how growth will be funded? How the unemployment will be dealt?
    Under the current memorandum, we can not close any deals with any country unless they are permitted by Troika.
    Are the option suggested by you on 2010 still available?
    Why is important for Greece to stay within Eurozone. Euro has been a disaster, can you imagine a way to go back to national currency that will be less painful for Greeks in the beginning.
    And last, do you believe in Greece staying in a Merkozy type of Europe? It’s nice to believe in the Europe of nations, but is this the Europe we live in today? Your view is to stay within Europe no matter what?
    I know that your view is that such crisis can not be dealt by Greece itself and its origins stem from eurodesign and you are absolutely right, but what if other european countries are not willing to proceed creatively into this direction? You must keep in mind that as time goes by, this policies imposed by memorandum means blood flow!

  • BTW:

    Venizelos is the destructive force in Greek politics today, best described as a political crime already committed and now in search of collaborators after the fact.

    A modern day Brutus, with blood dripping down his hands, pandering for complicitors:

  • Thanks for your excellent work and your critical leadership in the advancement of New Economic Thinking. Congratulations on your new post, and welcome to the States. Texas is looking more intelligent already.

  • Δύσκολα μένεις, δύσκολα φεύγεις, σε μια τόσο ενδιαφέρουσα στιγμή για τη χώρα σου. Ομως “παντού μπορώ να πεινάσω” λέει ένα άλλο ξενάκι.Συνέχισε και μην σωπαίνεις. Χρειαζόμαστε τη γνώση και την ευφυΐα σου -οι φιλομαθείς, εναγώνιοι μη κρατούντες

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