During the Peloponnesian War between Athens and Sparta, the Athenians captured the small island of Melia, considered to be friendly to their rival city state.
The Melians, powerless before the might of Athens, pleaded for mercy but to no avail. The Athenians stated that justice belonged to the strong, they would do as they pleased “and the weak suffer what they must” (note that the original quote is a statement, not a question — a subtle but important difference).
And so it turned out. The Athenians put much of the population to the sword and enslaved the survivors. However, the story doesn’t end there. The Melians had argued that the Athenians should show mercy because they too would one day suffer misfortune and “be visited by the most terrible vengeance, watched by the whole world”. In other words, your actions have consequences. One year later Athens fell to the Spartan army and was itself destroyed.
This trip into the depths of ancient history explains the title of Yanis Varoufakis’s recent book and acts as a metaphor, admittedly rather tortured at times, for the rest of his analysis. Who are the “Athenians” and who are the “Melians” shifts as we work our way through an economic history which Varoufakis cites as beginning with the Bretton Woods agreement (at the end of World War Two) and going up to the present day trials and tribulations of the Eurozone. It isn’t always an easy narrative to follow and someone trained in the dark arts of international finance may make more sense of it than the present reviewer. Varoufakis himself is by now well-known as the bald-domed “bad boy” of the European Union who told the German and French bankers what they could do with themselves before he resigned his post as Minister for Greece’s collapsing economy.
According to Varoufakis, the European Union, but particularly his native Greece, is in the mess it is in primarily because of the establishment of the Eurozone. Although a staunch European, he is scathing of the way that the Eurozone was set up and has been administered. He draws some kind of rough parallel between the adoption of the Gold Standard between the wars and the adoption of the Euro by the major European states (with the exception of the UK and some others).
There was no political framework (or at best an inadequate one) in which the gold standard could operate. That left the weaker economies, such as war-shattered Germany, at the mercy of the big boys, namely the USA and to a lesser extent Britain. A similar pattern is behind the present impasse and mess in the Eurozone. As support for his argument Varoufakis cites, of all people, Margaret Thatcher, who opposed a single European currency and an independent European Central Bank on the grounds of its lack of accountability to national parliaments.
Varoufakis goes on:
“The notion that money can be administered apolitically, by technical means alone, is dangerous folly of the greatest magnitude. The fantasy of apolitical money was what rendered the gold standard in the interwar period such a primitive system whose inevitable demise spawned fascist and Nazi thugs with effects we all know and lament.” (p. 97)
A few pages later, referring specifically to the establishment of the Eurozone, he adds:
“Ideally, Europe’s institutions should have harmonized the national interests of its members into a common European will. But to assume that monetary union would automatically achieve this harmony was a dangerous flight of fancy.” (p. 99)
The powers that be but particularly German bankers (the “Athenians”) assumed arrogantly that the establishment of European monetary union would be good for the European economy. Under the impulse of the neo-liberal, free-market dogma that now holds sway in such circles, monetary union was a given, not an idea to be tried and tested. So what, if the Greek, Irish and Portuguese economies were devastated; so what if monetary union went hand-in-glove with austerity policies that reduced millions across Europe to destitution – the weak suffer what they must. People who raised objections, like Varoufakis, were ignored.
All this raises the even bigger question, which I suspect is the main thrust of Varoufakis’ book: how can the European Union, which at the moment exists primarily to serve a bureaucratic and economic elite, be transformed into “a democracy serving a sovereign European people”? (p. 103)
His answer, partly, lies in the “modest proposals” he makes at the end of the book. Space does not allow a detailed consideration of the proposals but briefly Varoufakis is proposing a stronger role for European institutions such as the European Stability Mechanism to help ailing national banks and economies; an investment-led recovery which would include a pan-eurozone investment programme (using 8% of the Eurozone’s GDP), concentrating on large infrastructural projects, green energy research, technical innovation, etc.; the European Central Bank to act as a mediator between investors and member states, providing more favourable conditions and facilities for loans and repayments; an emergency social solidarity programme to combat austerity by the provision of food stamps and a European minimum energy programme.
This would shift the emphasis for recovery from the “surplus” nations (primarily Germany) who are supposedly bankrolling the lazy Mediterranean countries (and Ireland) — but who are also, crucially, the main drivers of austerity economics — to a European-global solution free from the vested interests of national governments and national banks.
Although these “modest” proposals may be too modest for some, they may offer some way out of the current impasse and, Varoufakis argues, they could be achieved within the existing framework of the European Union and would require no new institutions or rules. He doesn’t however give the reader any indication how all this, however modest, is to be achieved.
This is not an easy book to recommend. Sometime the account rambles and sometimes the detail overwhelms, particularly in the field of international finance, Varoufakis’s explanations aren’t always as clear as I think they ought be and its 318 pages would have benefited by some pruning.
The most memorable aspects of the book, for me, were the personal accounts of incidents from the author’s life and, particularly the encounter, given in detail, between an Irish journalist and a representative of the European Central Bank. The latter attempts to stonewall the probing questions of the journalist, eventually refusing to speak further, he slopes off, tail between his legs.
There only remains one more thing to add: Varoufakis, for all his trenchant criticisms remains a European; for him the consequences that would follow the collapse of the European project, particularly the growth of the far right, are catastrophic.