Financialisation, politics & the future of socialism: A conversation in Seattle with Casey Jaywork

In April 2016, in the context of a talk I gave in Seattle’s City Hall, Casey Jaywork (of the  Seattle Weekly) and I had this conversation. For Casey’s site click here. Or…

CJ: We in Seattle hold the arrogant belief that as a laboratory of democracy, we can invent solutions to national and even global problems. In terms of the work you do, how can we live up to our aspirations?

Yanis Varoufakis: Dreaming up utopias is the salt of the earth. It’s essential. And a city like Seattle is what it can produce because it combines the progressive movement, a history of struggle, with technological innovation and high-end financialized capital. So you’ve got everything in one city, which is atypical in the context of the United States…

We live in a world that is in crisis. This is not a Seattle crisis, it’s not even an American crisis, it’s a global crisis. So unless the utopians of Seattle manage to frame their ideas in a global context, and aware, to inform those ideas, by a nuanced and sophisticated analysis of the kind of crisis we’re all facing together, then it’s simply going to be interesting blueprints.

Am I correct in understanding your basic view as Marxist, in the sense that you think the financialization of capital starting in the 1970s as something that delayed economic problems until they finally broke through in the 2008 crisis?

I would be a little more radical than that. What happened in 1971, as I tried to explain in my book, not only delayed the crisis itself, but it created a brave new world, which would not have existed otherwise: the world of financialized capitalism. So by financializing capitalism, it turbo-charged it, changed its colors, created astonishing imbalances that appeared as some “great moderation”–you remember Ben Bernanke? He referred to the completely unbalanced model of capitalism in the early 2000s as “the great moderation.” What he meant was that there were no violent ups and downs, inflation was subdued, and there was wholesale growth. So it looked like a great moderation. There was this illusion of riskless risk and of the end of boom an bust.

So this is an amazing new world that was created, and it was always meant to combust and cause untold damage. But nevertheless, it changed the world. It gave to rise to China. It gave rise to the Americans of Latin America…It changed the United States. So, it’s not just that it delayed stuff.

Tell me about financialization.

Take General Motors. It used to be a car company, with a small…financing department to allow customers to get a loan to buy General Motors cars. By 2008, it was a financialized company, a financial institution making cars was on the side…

There was always a struggle in capitalism between industrial capitalism and financial capital, always…There was always this tussle between the two. After ’71, ’72, ’73, ’75, we have the complete domination of financial capitol over labor and over industrial capital, which gets displaced to the four corners of the earth increasingly with manufacturing shifting to China, Vietnam, Bangladesh, and so on. And manufacturing companies turning into financial institutions–until the whole thing collapses under the weight of its own hubris in 2008.

And now we’re in the period afterward, where we don’t really know where we’re going?

Yeah. To quote another–this time Italian–Marxist, Antonio Gramsci, “The old has died, but the new is struggling to be born.” So we’re caught up in between, in this interregnum, which is the reason we have such volatility in the financial markets, and such uncertainty in the mind of people.

You’re best known for leading resistance to the financial Troika during negotiations over Greek debt, and now you’re working on this pan-democracy movement which in my head I’m abbreviating as “Occupy Europe”–

[laughs] Occupy the institutions of Europe. When I was in there, in the corridors of power and the venues where we all met as ministers and prime ministers and presidents, it became abundantly clear to me that we were caught up in a vicious circle of authoritarianism, awful policymaking, and bad economic outcomes. And this was self-reinforcing, in the sense that the policies led to terrible to terrible economic outcomes, the terrible economic outcomes reduced the legitimacy of those in authority amongst the population, which led to more authoritarianism in order to keep imposing the same policies. And this was creating a democratic vacuum, and a slow-burning great recession. This is Europe.

We’ve seen it before in the 1930s–this is a post-mortem version of the 1930s. Lots of friends, colleagues, comrades, radicals disagree with me on what needs to be done. Their view is that this European Union of ours has failed, it is a neoliberal project, we’d better do away with it. Let it collapse–let’s just get rid of it.

This is very similar to what the Left was saying…after the 1929 crash. “Capitalism got its comeuppance, it’s collapsing, let it collapse and something brand new and wonderful will emerge from it–socialism, whatever. The good side.” Well, fascism emerged. We can see history repeating itself. In Austria yesterday there was a presidential election (the first round; there will be a second round). And the neo-fascist topped it. Came first! Not second or third.

And these are explicit fascists?

Ah, explicitly! Just hear him talk. Ultra right-wing, racist, and in my view neo-fascist.

On a local level, what can Seattle do to address the anti-democratic, authoritarian economic policies you’re combatting?

Look, it is impossible to declare the People’s Republic of Seattle, and cut it off…But every city, every town, every neighborhood has a duty to rebel against this very fast slide, to end an unsustainable situation…And you can see it in the United States today just by looking at the presidential election. The primaries. Donald Trump is a very good manifestation of what happens when the crisis has led to so much subterfuge on the part of the political establishment that capitalism and its political representation become illegitimate in the eyes of voters. And then you have a combination of apathy and protest vote that leans towards the neo-fascist. I just spoke about Austria, you have it here in the United states now. This is the dialectics of it all. On the other side, you have hope, as well. In my mind, this comes in the form of Bernie Sanders–

Which you don’t see as a protest vote.

No, not in the slightest. Trump is a protest vote, to a very large extent. Sanders is a man who’s been saying the last thing for the last thirty years…

The collapse of the dream of shared prosperity, which was always powering Democratic politics and the Democrat party, this has led to a rupture in the Democratic establishment, between someone like Clinton who is just an apparatchik [i.e. party official], and Sanders, who wants to bring us back to the New Deal, effectively. That’s what he’s doing. He’s invoking the New Deal. That’s not populism, it is not a protest vote. The New Deal is a sensible way of preventing the fragmentation of a capitalist society in crisis. It worked brilliantly–not so much in the 1930s, but in the ‘50s and ‘60s. Because that’s what it was: an extension of the New Deal, all the way to LBJ, in terms of his ‘Great Society’ program (forget Vietnam for a moment).

So the Keynesian welfare state, basically?

Mm-hmm. Not just that. The idea of understanding the idea, the comprehension, grasping of the huge imbalance between savings and investment. This was what was the matter in the 1930s, it is what is the matter today. Between Europe and America, we have something like $6 trillion doing nothing. Savings refusing to be invested. This is one of the causes of this fragmentation of the political center, which leads to polarization between Sanders and Trump, between the Golden Dawns and the neo-nazis and neo-fascists in Austria on the one hand, and progressive forces, like our movement, for example.

Are you familiar with Socialist Alternative?


We have an elected socialist councilmember named Kshama Sawant.

I’ve met her, I think. I met her a couple of years ago, here. It was a great experience. But the last two years of my life are such a tumult. But I remember her, we had a very good meeting.

A lot of the local political establishment dismiss her as a rabble-rouser who doesn’t get much done. What do you think?

That’s how I was dismissed, exactly: as somebody who has good ideas and catchy phrases but absolutely no policies that are realistically implementable. That’s how I was being dismissed. This is how the establishment dismisses: anybody whose policies they do not want to contemplate, they claim you don’t have any. It makes sense, doesn’t it? It’s called discrediting the dangerous opponent.

Let’s talk about one specific policy: basic income. You wrote that if we have too much inequality for too long, it can lead to a World War III, Nazi uprising-type situation. You say a basic income is a policy that could keep society afloat, and keep that inequality from igniting. I hear that, and I’m like, ‘Great. How do we pay for it?’ How could we realistically implement a basic income?

It needs to be done at the level of the state, because you cannot have taxation that is municipality-specific and sufficient to fund something like this. At least at the level of the state, if not at the level of the nation.

If you look at the social democratic tradition, what was it about? It was about using political power to create a better contract between capital and labor–a referee that substitutes some of the bargaining power that labor lacks through the political process. The idea for this was what? That if you do that, you provide better education, better investment in the human capital of the working class, and in the end everybody benefits. That’s the first idea.

The second idea is social justice, and the third idea is that it’s an insurance policy against the ups and downs of the business cycle. So essentially…this is the working class insuring itself against bouts of unemployment that are inevitable because of the business cycle. That was social democracy. Now I think we’re moving into a different era, where capitalism is producing technologies that are threatening to undermine capitalism–without the Left organizing against it.

Because they’re too efficient.

Because they’re too efficient, and because effectively what you’re doing is getting rid of marginal costs…At some point, one asks the question, ‘Why would corporations continue to exist?’ Because corporations exist on the basis of economies of scale. But if there are no longer economies of scale, because anybody, three people can get together and put together a design, email it to a customer who prints it on a 3-D printer. You cut out the middle person, you cut out the manufacturing process, and the 3-D printers become like huge public utilities. You can produce anything from pens to airplanes, in theory. We’re not very far off this. It’s happening as we speak.

So suddenly, corporate capitalism will be in a serious crisis. If you combine this with second, third, fourth, whatever machine age, where machines overcome the Turing Test, and you pick up phone, call the bank, and have no idea whether you’re talking to a human being or a machine–we’re not there yet.

But we’re approaching the singularity.

Yeah. When you get to that singularity, you can have for the first time a massive dismissal of service workers, and you will not have an equivalent creation of new jobs–or at least equally good quality jobs. Now when this happens, this combination of the demise of corporations–the crisis of corporate capitalism–and the elimination of millions of service sector jobs, this from a macroeconomic perspective is just a recipe for massive deflation. A realization crisis, as Marx used to call it: incapacity of capitalism to absorb all the products that it is capable of producing.

Because workers are also consumers.

They are the consumers. [The richest] 0.1 percent, there’s no way they can consume everything their factories and means of production can produce. And if the workers are destitute, unemployed, or part-time on minimal wages, then you are going to have the present [social problems] times a hundred.

In that sense, basic income is not only fair, but it is efficient. And to put this very simply: take a rich kid, Paris Hilton, who was born with a trust fund–everybody should have a trust fund. And those trust funds should be replenished by means of a cut from the returns to aggregate capital. That’s the idea of basic income, as I see it. And it’s not means-tested. It is not insurance against unemployment. It is a given. So it’s like general share ownership of capital, at least a percentage of equity in aggregate capital.

Now, is this likely? I have no idea. [But] that would be a way of creating a stable kind of post-capitalism. Otherwise I can see no source of hope that we’re going to achieve stability and reproducibility of our societies.

So otherwise we’re headed for a crash of civilization?

Well, you never know. I’m not a prophet. But I can’t see how it could be avoided.

In terms of concrete organizing, what can my readers do, tomorrow, to work toward the progressive social democrat future that we’re talking about?

In the context of the now, I think the Bernie Sanders campaign should not be allowed to go to waste. All this energy that has been generated must begin a process of a new nationwide political force that discusses all this and begins to set an agenda regarding social transformation and political transformation and what he calls ‘political revolution’ in the United States. This is not something that can be intermittent, that happens every four years and maybe it happens and maybe it doesn’t. Finance operates 24 hours a day. We need to operate 24 hours a day. And this is a unique moment in American history. You haven’t had such an utterly unpredictable flourish of political activity and excitement for decades. If I lived here and I was an American, this is what I would be very interested to do: to make sure that this is not just a flash in the pan. Should find ways of linking it with other movements, in Europe in particular but more broadly as well.

One more thing I wanted to say. I have been mightily impressed by what’s happening at the level of cities in places like Spain. So if you look at Barcelona–it’s a very rich city, similar to Seattle–it’s a major city, but it’s not the capital…And yet they elected Ada Colau to be the mayor. In case our readers don’t know: she was a woman who worked at the level of neighborhoods with one issue as the organizing principle, to prevent foreclosure on families that could not meet their house payments, and to help them resist legally and to help them organize themselves.

This is very interesting. In a rich city, where the rate of foreclosures was less than in other parts of the country, by organizing, organizing, organizing, she created a movement. Only three, four years later, she won the [mayoral] elections. Now she’s the mayor of Barcelona. We’ve had similar experiences in other Spanish cities, like Valencia [and] Madrid. And now there’s a network of rebel cities that are creating an alternative system of governance at the local level. But they are smart enough to know that they need an overarching program, so this is why we’re working together at the level of this pan-European democracy movement. These are ideas that can become possibly, potentially applicable here [in the US].

Of cities working together, linking together–

Yes. And solidarity between cities. When one city has a deficit one year and another has a surplus, instead of going to the bankers and to the muni bond markets, they lend to one another.

This is something you think could be feasible, if there were political will?

Yes. It’s happening in Spain. Never happened before.

We live in a strange moment in history, after the 2008 financial crisis. It seems like the common sense of the past no longer works, and there’s not a new common sense about how the world works.

That’s right. The way I put it in 2008 was that from now on, nothing can be made sense of in terms that seemed sensible until last year. So we need a new paradigm–or at least we need to subvert the paradigm that was dominant until 2008.

What’s that new paradigm? We can’t go back to old-style communism–for instance, Stalinism.

Absolutely not. I would be the first one to object…Let me put it very succinctly to you: I would be in the gulag under that regime. People like me would be in the gulag and people like Hillary Clinton would be in the Politburo.

So what should we be going toward?

Look, the way I see it is this. Marx…never created a blueprint of communism. Whenever somebody asked him what communism would look like, he said, ‘I don’t know. I have no idea. I can only tell you that capitalism is not sustainable and that something like communism is going to emerge. But those who live through the transition are the ones who will have to create it. This is not for some intellectual to come up with a blueprint of what it should look like.’ And I think that is pretty sensible advice. We don’t know what should happen, or will, but we know what shouldn’t happen and what can’t happen. So this is what theory and political thinking can produce. The rest is the result of action and praxis–

That’s a very Marxist thing to say.

Well, it is, isn’t it? I mean, people make the world as they go along. And you can’t say, ‘I’m going to design the world, and then people will implement my design.’ You’ve got to be completely bonkers to think that. But what we know–what I think I know–is that as long as we have this radical separation between those who own means of production but do not work them, and those who work them but do not own them (and there you have the separation between profits and wages)…

Forget the ethics and the morality and the justice of it. You have a tendency in that economy to waste a lot of potential. To go through spasms, to go through periods of crisis, to overreach before 2008 and then a depression or recession, fall flat on its face and refuse to wake up or get up. Meanwhile, a whole generation of people have lost.

You have so much unproductive labor. Think of the financial sector–what is the financial sector doing? There are these extremely smart people working every day doing nothing. They’re just creating fake forms of debt. And they’re extremely smart. Some of them have PhDs in physics. They could be doing interesting things like green energy, right? And they are producing [financial innovations] that the world would be better off without. So the Marxist critique of capitalism is not that it is unjust; it is that it is inefficient and irrational. This is important: the Left has made the very big mistake of allowing the free marketeers to claim the mantle of liberty and efficiency, and for us Leftists to say, ‘Yes, but we need justice.’ No, no, no–Marx loathed that kind of idea and so do I. The problem with capitalism is that it is grossly inefficient. It wastes so much human potential.

So if I’m right that at the heart of this waste is the separation of those who own but don’t work from those who work but don’t own, clearly we need to overcome this separation. Now, how exactly we do it is up for debate. Under Stalinism the idea was that no one has private property, everything belongs to the state, and the party will tell people what to do. And then we have an institution of goodies, with party members getting a bit more but still very low inequality.

That system is profoundly anti-democratic and inefficient in the sense that the total pie is particularly small. It stifles innovation–all the critiques of the Right against it, I think they apply. But that doesn’t mean that that’s the only way of ending this division. Imagine a society where the only way you can have shares in a company is if you work in it. Imagine we had a rule everywhere that you can work in that company and have shares in it, but if you work in that one then you can’t have shares in the other. You can lend money to the other, you can lend some of your capital, but you cannot have equity. Because equity gives you a claim to the profits that the people who are working in the other company are making. And then you get the capitalist dynamic, which leads to inefficiency and crisis. So in the end you end up with cooperatives, but you can have now smart stock exchanges where people can, as they move jobs, carry their capital with them. That creates mobility and different forms of corporate organization where the people who work are the shareholders of the company, and when they move they take their capital with them.

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