Yanis Varoufakis: Lest We Forget – The Neglected Roots of Europe’s Slide to Authoritarianism

By Yanis Varoufakis, Professor of Economics at the University of Athens. Cross posted from his blog

Europe is being torn apart by a titanic clash between (a) the unstoppable popular rage against misanthropic austerity policies and (b) our elites’ immovable commitment to more austerity. Precisely how this clash will play out no one knows, except of course that the odds do not seem to be on the side of the good. While at the mercies of this crushing uncertainty, it is perhaps useful to take a…short quiz. So, dear reader, will you please read the following ten quotations and, while so doing, try to imagine who uttered or wrote these words?

[1] “Above and beyond the concept of the nation-state, the idea of a new community will transform the living space given us all by history into a new spiritual realm… The new Europe of solidarity and cooperation among all its peoples, a Europe without unemployment, without monetary crises, … will find an assured foundation and rapidly increasing prosperity once national economic barriers are removed.”

[2] “There must be a readiness to subordinate one’s own interests in certain cases to that of the European Community.”

[3] “The solution to economic problems… with the eventual object of a European customs union and a free European market, a European clearing system and stable exchange rates in Europe, looking towards a European currency union.”

[4] “The results of excessive nationalism and territorial dismemberment are within the experience of all. There is only hope for peace by means of a process which on the one hand respects the inalienable fundamental patrimony of every nation but, on the other, moderates these and subordinates them to a continental policy… A European Union could not be subject to the variations of internal policy that are characteristic of liberal regimes.”

[5] “A new Europe: that is the point, and that is the task before us. It does not mean that Italians and Germans and all other nations of the European family are to change their spots and become unrecognizable to themselves or to one another, from one day or one year to the next. It will be a new Europe because of the new inspiration and determining principle that will spring up among all these peoples.” … “The problem of the hierarchy of states will no longer arise. At least in its usual form, once we have cut off the dragon’s head; that is, the notion of state sovereignty. Moreover, this does not have to be dne outright, but can be achieved indirectly, e.g. by creating interstate European bodies to look after certain common interests (exchange rates, communications, foreign trade etc….)”

[6] [Here I shall quote from a well received, at the time, policy document which recommended the need to] “…put forward a European con-federal solution based on free cooperation among independent nations” [culminating into uniting Europe] “on a federal basis” [and adding that, to see this federation process through], “all that is required of European states is that they be loyal, pro-European members of the community and cooperate willingly in its tasks… The object of European cooperation being to promote peace, security and welfare for all its peoples.”

[7] “We must create a Europe that does not squander its blood and strength on internecine conflict, but forms a compact unity. In this way it will become richer, stronger and more civilized, and will recover its old place in the world.” “National tensions and petty jealousies will lose their meaning in a Europe freely organised on a federal basis. World political development consists inevitably in the formation of larger political and economic spheres.”

[8] “It is not very intelligent to imagine that in such a crowded house like that of Europe, a community of peoples can maintain different legal systems and different concepts of law for long.”

[9] “In my view a nation’s conception of its own freedom must be harmonised with present-day facts and simple questions of efficiency and purpose… Our only requirement of European states is that they be sincere and enthusiastic members of Europe.”

[10] “The people of Europe understand increasingly that the great issues dividing us, when compared with those which will emerge and will be resolved between continents, are nothing but trivial family feuds.” … “In fifty years Europeans will not be thinking in terms of separate countries.

OK, now that you have read the quotations, you may take a look at the list of their authors below.

Lest I be misunderstood, allow me categorically to state what the purpose of listing these quotations is not: It is not to imply that the European Union we have created since WW2 was founded on nazi-fascist principles. And it is not to insinuate that today’s Germany bears similarities with Hitler’s Germany (for why else would I be calling for an hegemonic Germany?).

No, the reason for relating these quotations here is that we Europeans have a moral obligation to dispel the dangerous illusion that the notion of a European Union, within which nationalisms and the nation-state might gradually dissolve, was an enterprise to be understood as the polar opposite of plans drawn up by the autocratic, misanthropic, racist, inhuman war-mongers that rose to prominence as a result of the mid-war European Crisis.

As the quotations above demonstrate (and however insincere their authors might have been), the notion of a European Confederation or even Federation is, in itself, not incompatible with what the Nazis had in mind. The lesson to be drawn from this is not that the European Union is totalitarian by nature but, instead, that it is not incompatible with totalitarianism and, thus, that the current democratic deficit that grows with every twist of the austerity screw bodes ill for Europe’s democrats.

In brief, a multitude of evils can hide behind the ideological veil of top-down European integration, especially when it is accomplished in the midst of (even by means of) a vicious, asymmetrical recession. So, I am writing today’s post as a Europeanist who wants to imagine Europe as our common home but who also fears that Europe is sliding into an unbearable authoritarianism threatening to turn our common home into a shared concentration camp.

—————————————————————

[1] Arthus Seyss-Inquart, Minister of Security and the Interior in the post-Anschluss Nazi government, 1938, and later Prefect of Occuppied Holland – here he is addressing his Dutch subjects

[2] Walther Funk, Finince Minister in Hitler’s government, 1942.

[3] Memorandum of the Reich Chancellery), 9 July 1940, signed by Hermann Göring

[4] Alberto de Stefani, Finance Minister in Mussolini’s government, 1941

[5] Camillo Pellizi, editor of Civilita Fascista, in an article entiled ‘The Idea of Europe’

[6] Cicile von Renthe-Fink, Nazi official holding the diplomatic rank of minister of state, 1943.

[7] Vidkun Quisling, Norwegian Nazi Collaborator, ‘Prime Minister’ of Occupied Norway, 1942

[8] Adolph Hitler, addressing the Reichstag, 1936

[9] Joseph Goebbels, 1940

[10] Joseph Goebbels, 1942

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49 comments

  1. Chris Engel

    Politicians from Cameron in the UK to Barroso in Spain, Monti in Italy, all the way to Merkel in Germany are fully vested in the idea of austerity, regardless of its obvious failures.

    They’re either too intellectually dishonest to admit the shortfalls of the policy or they have some other plans for intentionally generating social unrest on the continent to get their desired outcome of a unified martial-law-governed Europe (I hope people will heed the warnings you provide in this paper, and not dismiss them as hysterical, as the risk and threat of authoritarianism is very real).

    And of course the bankers are just as bad, sure Draghi was a lot better than Trichet, but it’s more of the same: commitment to low prices while ignoring the human factor of unemployment.

    We’re already seeing a rise of the right-wing across the most austerity-destroyed parts of Europe, and in places like Hungary the totalitarian motives are gratuitous.

    These kinds of social situations can turn on a dime from valuing democracy and liberal values (easy to do when you’ve got money in your pocket) to suddenly demanding order above all (to protect whatever you’ve got left).

    1. Gerard Pierce

      Part of the problem is that their liberal leftist leadership has no clue what to demand, and when they do have a clue they lack the guts to lead.

      The message is “Please sir, may I have more?” in the hope that their exploiters will dish out another cup of gruel.

      After their constituency experiences enough austerity – at a certain point they sign up with a group like Golden Dawn.

      There is something empowering about being part of a group that doesn’t say please – and someone who has been screwed over badly enough loses sympathy for the victims of their new affiliation.

    2. fajensen

      In Sweden and Denmark a growing number of people do not care a whole lot for “democracy and liberal values” anymore.

      Those values belong to the system that screwed them over and placed them on a “carreer-track” of permanent “work-training” in menial jobs where one is paid only the basic social security with no unemployment insurance rights, no holidays earned and no prospect of ever getting a real job since employers can get the “work-trainees” for Free from Social Services!

      The majority of them do not even think that “the alternatives” are better, they basically just want what they percieve as the elite to suffer also.

  2. Sanctuary

    Brilliant. It reminds me of Yeats’ poem, The Second Coming, only Yeats had it wrong. The problem is not that the center cannot hold and the best lack all conviction. The problem is the “center” holds on to all the wrong ideas, even as they are repeatedly proven wrong, and the “best” have a conviction for “stability” and being seen as “serious”, all because they cannot fathom a world without those ideas and are scared to see them go. It is this irrational cleaving onto failed ideas and determination to ignore the pleas of those suffering from those ideas, that then causes the worst to be filled with passionate intensity and the blood dimmed tide to be loosed upon the world.

  3. Chris Rogers

    For what its worth, whilst I’ve always been a pro-European – the original ideas of Robert Schuman being most appealing to me as the European project was concerned, i.e., preservation of peace, the idea of a federal Europe is one I despair of.

    Having studied in-depth the history of the Pan-European project and the UK’s initial scepticism towards this goal, I’m still of the opinion that a Confederate solution to Europe is preferable to the Federal solution that many support – European Currency Union being a necessary step in this direction, and one that has now failed shall we say.

    Again, looking at matters with hindsight and the development of Federalism within the USA and how over the decades this has been perverted to say the least, Europe would be better served if economically speaking all its constituent members were economically competing with each other, whilst all military and foreign policy options were held by a weak Confederate central governing body.

    Presently in Europe we have the worst of all possible worlds with national governments, the Council of Ministers, the European Central Bank and the so called ‘Troika’ ignoring the mass of public opinion by ramming austerity measures down our throats, which in turn feeds anti-European sentiment whilst fuelling nationalism and populism.

    Time for all to set out a new stall and commit to a limited European governing body based on the wishes of the electorate, which on the whole is anti-war and anti-austerity.

    1. Laughing_Fascist

      The 2007-8 crisis was a watershed. More accurately, an apocolypse (i.e. the revelation of what was hidden). The revelation for many people is that there is an 800 pound man behind the curtain who is pulling the levers of centralized institutions, and he is not interested in the general welfare. Twenty-five percent of working age Greeks have encountered this man personally, and they say he is very heavy.

      Having been through this apocalypse, its a wonder that these same people who now clearly see the real purpose of centralized power are not advocating the dissolution of centralized institutions. Sure there is a possibility that a European Union can improve prosperity for all. But there is also the possibility that the EU can be coopted to cause Europeans to lose significant freedoms. Like the freedom to control the budget of the nation where you reside, vote and pay taxes.

      This problem of coopting institutions has become so extreme in the U.S. that federal agencies are used by certain large corporations as if they were wholly owned corporate subsidiaries; the corporations appoint their own executives to run them. These corporate subsidiaries issue rules that supersede the authority of 50 elected state legislatures. And the voters suffer.

      Its better to keep power and the foundation of liberties local, even if it means a slower economic growth rate. Liberties are at risk when ever someone starts talking about the need for central authority to secure the general welfare.

  4. steve from virginia

    I agree, Hitler is not appealing. It’s very important that we avoid ‘Hitler 2.0’, particularly since waging an all-out war as was fought 1939-1945 is completely unaffordable. Once a Hitler 2.0 becomes entrenched you are stuck with him, the Americans won’t do anything or care.

    We could pop in a few nukes but that’s about it. Someone would have to pay us … more than Hitler will pay us.

    @ Varoufakis:

    “Europe is being torn apart by a titanic clash between (a) the unstoppable popular rage against misanthropic austerity policies and (b) our elites’ immovable commitment to more austerity.

    Okay, let’s stop right here. There is the Great Myth of Our Time … that the supine yet virtuous ‘Productive Economy’ is crushed … under the weight of parasites … the evil, neo-liberal finance industry like a gigantic tapeworm … (or, if you are from Zero Hedge, it is the bloated welfare state and evil Bernanke, hideous governments and public sector workers/unions).

    Keynesians on one side, Austerians on the other, either antagonist weighing down virtuous productive main-street industry, the ‘Real Economy’. Will someone please set her free to be reborn like the mythical Phoenix, to rise from the ruin and take flight again?

    This myth is backward and incorrect. The real economy is the tapeworm, destroying whatever is in reach. It has already destroyed Europe. Both governments and private sector finance are its servants. Right now it has fallen and can’t get up. Best to drive a stake through its heart while it’s vulnerable.

    Industry is credit dependent, it cannot exist without bottomless loan subsidies and government deficits that service the private sector lending. That this is so is self evident: if industry could pay its own way it would certainly have done so after 400 years of trying!

    Machines require debt, machines also convert capital (natural resources) into waste, that is their purpose. The waste process is collateral for loans: the more waste, the more loans.

    Because industries are desirable but cannot pay for themselves the world is indebted in amounts of hundreds of trillions of dollars. Our wonderful tycoons borrow billions against the worth of their industries’ waste … everyone else … must repay the debts.

    Currently, the costs of both debt and resource capital cannot be met by taking on more debt. This is because the credit system is saturated, new debts service and roll-over older debts: there is not even the illusion of output.

    Meanwhile, the establishment desires to retrieve capital that no longer exists. Efforts to retrieve expended capital are doomed to failure: jubilees, defaults, restructuring, redenomination, stimulus, monetary easing, etc. All these efforts do is add to the Everest of claims against the diminishing capital stock, or accelerate its depletion.

    The austerity policies of bailing out senior creditors of banks is a joke, the real austerity is already underway. Soon enough the senior creditors will be ruined, there is nothing in the world’s waste-based economy that is really worth anything.

    The only possible solution is stringent conservation: to conserve what little capital remains and husband it at all costs. If this be austerity, it must be endured. Once capital is gone it is gone forever, there are no second chances. If conservation is not chosen, there will be conservation by other means as countries fall bankrupt and are unable to consume … look to Greece as an example. There is no ‘bottom’ to this process and those who believe that Spain or France cannot become permanent economic invalids … in ‘civilized, prosperous’ Europe … well, kids, just do nothing or more of the same and watch what happens. It won’t be pretty.

    1. Chris Engel

      I’m struggling to follow the thesis of your comment.

      You seem to renounce austerity on a human level, then insist that austerity may be the only solution to a problem that you see as capital decay on the continent?

      You’re promoting “conservation”, and refer to a flight of capital — but there’s a large industrial base in Europe and to discount it as something that’s disappearing and will never come back is not something I find supported in the data.

      Capital is incredibly mobile. The industrialized Western nations can survive merely off of accumulated wealth and foreign holdings, as many small countries in fact do!

      I envision a future where the West more overtly manages the third world in an economic sense, where we use the military to protect the legal ownership of our holdings across the developing world and reap benefits for our own geographic locations (this is something we’ve already seen in the works since the 80’s).

      I really don’t understand the argument for “capital conservation” at all. We can survive on perpetually expanded credit as long as it’s managed accordingly. I’m not a proponent of the debt-based banking system per se, but I’m not going to support this idea that it’s an inherently unsustainable ponzi scheme, because mathematically it’s just not true if it’s properly managed!

      It’s the industrialists who utilize credit which give value to our currency, they aren’t creating an unsustainable path by using real assets to create credit, that’s the essence of our system. They’re dependent upon credit, and they help contribute to the sytem’s value-addition.

      In a fiat system where the state creates reserves, which serve as the base of the entire credit market and banks, there’s NO limit to credit and your contention that “credit markets are saturated” is not grounded in operational reality.

      1. Zog

        “I envision a future where the West more overtly manages the third world in an economic sense, where we use the military to protect the legal ownership of our holdings across the developing world and reap benefits for our own geographic locations (this is something we’ve already seen in the works since the 80′s).”

        Gee, what a great solution. For those unashamed of being a parasite. I wonder if the 3rd world might have anything to say about your clever plan?

        1. Chris Engel

          I’m less concerned with the third world than I am about the wellbeing of my own countrymen.

          The fact is we have accumulated tons of capital and have an effective monopoly on the financial system. Either we converge with the third world and take a hit to our standard of living, or we continue Western hegemony and promote a continued improvement in our own societies.

          It may be crude to admit what everyone already fully believes in their actions and attitudes: the life of a Westerner is far more important than that or a third world dweller.

          We have to leverage our wealth and human capital to exercise power over the third world and utilize their growth for our benefit (ideally a mutually beneficial outcome).

          But if necessary, and if we are at some Pareto-optimal point, I’m going to promote marginalizing the third world for the benefit of the West, because that’s the rational position to take for any Westerner.

          A tendency for a lot of limousine liberals (not _necessarily_ calling you one) is to reject the value of human life of one’s fellow countrymen, and to insist that we’re all just people and the lives of Iraqis and North Koreans is JUST AS IMPORTANT as Americans and liberal Europeans. Well to that I say: NONSENSE! This is the consequence of putting money first. You care only about taking care of your own needs and then you are unable to understand how FUNDAMENTAL a role nationalism and promoting American hegemony has been to your own success

          These uppity faux progressives put the life of a third world worker on the same level of that of a fellow American or European.

          In fact, workers in the West are (or at least should be) downright tired of being debased and viewed by their elite powerbrokers as just a labor commodity that can be traded between other nations.

          What ever happened to at least some healthy dose of nationalism? Seems like the days are gone where people give a crap about their fellow countrymen and instead see everything in the greedy “me first” framework that then puts the rest of the world on equal footing once you’ve actually met your own desire for wealth accumulation.

          1. Zog

            As an inhabitant and citizen of the third world my response is: Fuck you. And fuck your parasitic people. Most of my countrymen would concur as they have done for the last few hundred years of European exploitation.
            That’s what 3rd world China did. Soon you will be their bitch.

        2. Chris Engel

          That’s fine, but I have no moral obligation to you as a third world inhabitant, regardless of the behavior of my forefathers.

          And you dare have the nerve to call a Westerner a parasite? It’s Western capital that has allowed the third world to develop the way it has. Don’t bite the hand that feeds you.

          I don’t understand your argument beyond the “fuck you, fuck you” statements. If you would like to clarify by adding some actual substance I’d be glad to respond to an actual point if you choose to make one.

          China’s development hasn’t been at all about “fuck the west”. Their entire success has been contingent upon American hegemony, consumption, and finance. China has created many billionaires, but not just in China, also in the US. We’ve been exploiting their labor while keeping Chinese capitalists in the dark about a lot of our trade secrets. So looking to them as a success story is a bit funny, considering by any objective analysis China has been OUR bitch. The future might change in that regard, depending a lot on Chinese demographics and willingness to confront the world’s military superpower.

          I respectfully await a coherent point on this matter from you.

          1. Zog

            I say fuck you because your plan to save your culture from collapse and marginalisation basically boils down to “we can’t seem to compete hard enough to produce the surplus that we have become accustomed to, so lets go over to the niggers place and stick a gun in his back and take his surplus. Problem solved.”

            As the nigger in question I say the problem is not solved. As the nigger in question, the unwilling party to your solution,I will resist your implementation of it. By force.

        3. Chris Engel

          You don’t get seem to get it, it has nothing to do with us not being willing enough to work hard to produce our own surpluses. We’ve already run plenty of surpluses before and accumulated savings which have been used to invest in your third world country in order to help you run surpluses and improve your own standard of living.

          You willingly accept our capital to help you produce surpluses, and then you get angry when we want to get a return on our investment?

          It has nothing to do with putting a gun to your back, it’s just like China in the modern day, they’re going around to Africa and other places to invest their surpluses now, just the way the US has and does. Either you want our money, or you don’t.

          The third world is nothing without Chinese and American financing to produce the capital expenditures needed to set up a productive base. And yes, who are you going to sell your goods to? How will you realize your surpluses? By using the financiers (America/EU and China) as your customer base as well. These are terms that you have accepted long ago.

          If you want to go ahead and try to develop an industrial base without any initial financial outlay from capital accumulated by the dominant economies in the world, go ahead and try.

          Credit runs the system, we’ve extended credit to the third world, and you’ve benefited from it, but so have we. That’s the name of the game, and you can’t (unless you’re an Arab) cry foul about sticking guns in your back.

          I’m sympathetic to the underdog, and i understand the frustration of being part of a marginalized third world country, but that’s how the game has played out, and either you accept the terms, or you’re left out in the cold.

          And the point of my very original post was in fact to highlight that I don’t want Westerners to become third-worlders because of selfish elites in the West who don’t care about nations, country, anything like that, just money and power, and they look at you third worlders as just the same as Joe Worker, and that’s something I reject as a policy matter for empowering Western labor.

          1. Zog

            IF you want to invest capital youre welcome to do that. You can do that now. If you get treated in an unfair way there are many channels you can follow to get redress. If these do not work to your satisfaction you can withhold your capital and the party treating you unfairly will be the poorer for it. Just like you experience in everyday personal life.

            But you talk of using the western military.

            You say “leverage our wealth and human capital to EXERCISE POWER over the third world and utilize their growth for our benefit” (capitals added for emphasis)

            You say: “if necessary … I’m going to promote marginalizing the third world for the benefit of the West, because that’s the rational position to take for any Westerner.

            You say: “faux progressives put the life of a third world worker on the same level of that of a fellow American or European.”

            If you can’t fathom why a third worlder finds these statements and proposals unappealing then you’re pretty dumb. This lack of appeal only increases when third worlders have already taken the other advice you offer, that is when they get a “healthy dose of nationalism”.

            Bottom line: If you come to my REPUBLIC with a gun in your hand, with the intent to impose your authority on me and my people, we’ll kill you buddy.

          2. Zog

            BTW: I’m objecting mainly to the inhumane and plainly fascist tone of your proposal and not on practical grounds.

            Practically, controlling the third world by military force stopped being a viable proposition after WW2 – which is why it stopped shortly thereafter.

            In the age of asymmetric warfare, cheap WMDs, improvised munitions and Jihad any attempts to return to the historical methods of colonialism and conquest is assured to cost much more than it will gain.

        4. Chris Engel

          Well if you don’t pay your bills, and complain about the terms of an agreement made under a prior regime, and reneg on contracts, then you have to pay in one way or another.

          There are courts and channels to get redress, but they are often inefficient, insufficient, and corrupt.

          That’s why every American debt is backed by a threat of force, which helps keep the system credible.

          Are we supposed to sit by while third world countries nationalize, without adequate compensation, American-owned assets legally held within said country’s boundaries?

          What good is being a creditor (yes, on a BOP term we do run net deficits, but that doesn’t mean we aren’t a major creditor through other institutions like IMF, WB, etc.) if we don’t have the force to collect on collateral/alternative means of payment? That’s the end-game in the credit-based system.

          Pay your bills, don’t screw us on our deals that you’ve agreed on, and we don’t come with guns. Seems fair enough, doesn’t it?

          1. Zog

            So poah leedle amereeka keeps on getting cheated by those nastee third world folks who exploit the kind, pale masters and steal their stuff. their ore and all that amerikan oil that just happened to drop out of your pocket and find its way to the ground under their feet?

            Poah amereeka. Poah West. Cheated so often by nastee lesser peoples that don’t believe they should be marginalised for the benifit of rational Chris Engels?

            Your lack of historical perspective is frankly, mindblowing.

          2. Paul W

            Chris, the world you wish for already exists. Colonialism and neo-colonialism created the West’s surpluses. Today anyone not keeping to the deal gets a humanitarian mission to save their country.

            What I don’t get is how this process benefits you or the average westerner. We see it in action now and it is only enriching the 1%. Even worse, the 1% are now turning on its host countries, giving average citizens the “third world” treatment. No suprise that such a morally reprehensible ideal should lead to the most unethical elements of society running it.

            Hey! if you’re in the 1% it’s a great idea, if it’s sustainable. A handful of Charlotte Cordays would make it unsustainable pretty fast. If you’re not in the 1% then you are just supporting a process designed to impoverish yourself, along with everyone else. That seems foolish.

          3. Chris Engel

            Paul W,

            If you read my posts more carefully I was originally discussing the need for reforms domestically (which can be done easily with government stimulus and monetary measures) against austerity which benefit us.

            The discussion regarding third world influence was a sub-thread unrelated.

            I’m saying that we should maintain that international order, but that’s separate from the needs at home for a more empowered worker, reduced inequality, etc.

            There’s no need for there to be a plutocratic order domestically just to maintain such an international order. It’s totally unnecessary and the way the current domestic system of taxation and deregulation is it’s not benefiting me or the average Westerner.

            They’re not mutually exclusive by any stretch of the imagination. Post-wwII is an example of maintaining this world order while having a sane domestic economic policy that more equitably distributed the wares.

          4. Alan

            It’s really funny how what you misguidedly consider to be “rational” for any Westerner is actually best described as psychopathic in any decent person’s value system.

            Normally I would advise you to read history to get a clue, especially about colonialism to understand a) the whole main idea of using military power to exploit other peoples masquerading as a moral imperative that will also benefit the oppressed and b) how your pathetic “creditor” moralism was developed, but your condescending manner reveals a person incapable of examining, learning and valuing anything that might shake your fast-food-like moral system.

            Your politeness doesn’t change the fact that you are the enemy. Not only of the peoples of the Third World, but indeed of the higher ideals of the Western civilization that people like you always defiled.

            Btw, you will find a lot of your polite psychopathy masquerading as plain “rationality” in fascist writings. You might want to start with Alfred Rosenberg. You’ll be vindicated. Happy reading.

          5. Chris Engel

            Alan,

            Is it possible that if we did not have the military presence worldwide and the intelligence network keeping our grip on world power and enforcing agreements and such, that our economy would even be at the point it is at now ? That we would even be sitting at computers, having this discussion? Order in the markets hinges on political and social order, which is enforced through militaristic force as a backstop.

            This isn’t my personal view of how I would paint the world in my ideal sense, it’s an observation of reality. And as for my statement of a rational Westerner, read the whole comment. I stated that in a Pareto optimal situation, if it was to take actions that benefit the third world at a net cost to us, it’s not rational to advocate such policies. But I haven’t said that it’s our growth vs. their growth, there can be mutually beneficial growth and of course there has been!

            If you have specific books you’d like to recommend I’m always open to reading things that challenge my worldview.

            But I’m not going to pretend like if we suddenly started playing Santa Claus and not being a hard-ass on foreign policy and international credit, that there would be world peace and explosive perpetual growth.

            If someone’s got to be in charge, and it wasn’t us, chances are they would be doing the same stuff we’re doing. So we may as well benefit being on the right side of things and promote our interests economically.

            Imagine, just for a moment, if the tables were turned, how other civilizations would behave in position of world militaristic and economic power, toward us and our liberal values.

            Are you that cynical that you think we Westerners are abnormally cruel and sadistic, that we are uniquely aggressive to the extent that the things we’ve done wouldn’t have been done if we were a developing smaller country in a different civilian’s world order?

      2. jake chase

        You don’t understand what Steve means by capital. Capital remains all things to all people. I think he’s really talking about resource limitations. Part of the problem is rent extraction and part of the problem is resource depletion. Only lip service is paid to either aspect, because the only objectives of our elite are looting and power grabs, and the only objectives of our population are consumption and mindless entertainment and breeding.

        Everything will be hunky dory when the whole world becomes selfless and honest, and we return to the technologies of the Eighteenth Century.

        Too bad the Amish do not prosyletize.

      3. Sanctuary

        You negate your own point with the repetition of the notion of proper management. It’s been centuries upon centuries and it has been made abundantly clear that this is never properly managed for very long.

  5. leroguetradeur

    The problem with these postings is that the author never defines ‘austerity’.

    In the UK, austerity means a current account deficit of 9% of GDP, rising government spending, rising total state debt.

    So if the author is objecting to this in such emotional terms, what exactly does he want to see? What level of deficit will not count as austerity? What total level of debt does he want to see?

    At the moment, the UK total debt, state, corporate and personal, is 500% of GDP. That apparently is inhuman austerity. OK, how high do you want to take it?

    What once sees in posts like this is what a total wreck the post romantic sixties made of the education system. The West seems to be full of people who learned how to emote but not to think.

    1. Yves Smith Post author

      Please read up on sectoral balances. If the private sector is deleveraging and the country is not running a pretty hefty current account surplus, the government NEEDS to run a fiscal deficit or the economy shrinks. So yes, it’s austerity in these conditions. If households weren’t deleveraging and businesses were investing (as in net spending), we’d have a different picture.

      You seem unable or unwilling to acknowledge that what the appropriate level of deficit or surplus is is context dependent. The UK is going into a triple dip. That’s proof that deficit cutting is all wrong now. It will just make debt to GDP worse, since the denominator falls faster than the numerator. The IMF has already ‘fessed up that austerity is a big fail, to the consternation of the rest of the Troika.

  6. Hugh

    The euro and austerity are tools of looting. Europe is a kleptocracy ruled by the rich and their servant elites. Varoufakis’ desire for a socially responsible, hegemonic Germany is just nuts. It is like hoping that a shining white knight will ride to the rescue. It’s not realistic on its face. Worse it completely ignores that the proposed white knight is owned by the very forces (the 1%) that created and is profiting from the current crises.

    I mean this in the best possible way but Varoufakis had better come to the realization soon, if he wishes to retain any credibility, that no solution to Europe’s crises can come out of the current system. No solution is possible unless and until Europe’s elites, its political classes, are overthrown, and the power of its kleptocratic rich is broken.

    It is all fine and good to point out that the modern construction of Europe accords well with the rhetoric of its authoritarian and totalitarian antecedents. What I don’t understand is why Varoufakis is not calling for a democratic movement to harness that “popular rage” and oppose these tendencies.

    Perhaps it is because Varoufakis is dead wrong to describe this as a clash. It is war, a class war, not between North and South or core and periphery, but between the 1%s and their servants on one side and the 99%s of Europe on the other. What is lacking in Varoufakis is a motivation for why Europe’s elites have so embraced austerity. Kleptocracy explains precisely why they persist in it despite overwhelming evidence of its failure and the huge damage it causes. It is time for Varoufakis to wake up and smell the coffee and stop looking at this as some act of nature and start looking at it for what it is, a crime.

      1. Chris Engel

        as I’m unable to reply to your other comment on the thread due to reaching the limit of the sub-threads, I’ll clarify it here:

        I disagree with the classification of Westerners as “parasites” due to the dominance and effective monopoly we have over the financial system.

        But it seems there is an agreement in practical terms of not being ashamed of world hegemony and putting one’s own country and self-interest ahead of faceless third worlders.

        You can see the main complaint of Socialists and COmmunists and losers of war in the past that “hey you’re supposed to extend credit to us to help us grow” etc (e.g., post-WWII with Soviet complaints about not being adequately supported)

        So then when we do that, we’re accused of exercising monopoly power over international capital? Gee, lots of appreciation there from the likes of Latin America, Asia, et al.

        We just can’t win against the perma-anti-Westerners who will call us a parasite if we help them develop economically by providing credit, goods, etc under our financial system and guidelines…and then call us heartless if we won’t help them by extending credit to facilitate development!

      2. Laughing_Fascist

        Lambert:

        If I can be permitted to add a question to yours. Why are banks advocating austerity?

        1. Chris Engel

          Austerity = less gov spending = smaller federal deficits = a society more reliant upon private credit as opposed to gov spending/financing.

          Using a sectoral analysis (that MMTers are quite fond of) the reasoning behind austerity as promoted by private bankers is crystal clear.

          Also, with prosperity there comes individuality and empowerment and inherent instability, and a demand for more equality and thus more onerous taxation and regulation against the powerful.

          But more than anything, the push for austerity is rooted in a deep ignorance of the monetary system and economics in general. At least that’s why the general public likes austerity (fearmongering over OMG THE NATIONAL DEBT IS XYZ).

        2. toxymoron

          Say you owe the bank 100, you earn 100/yr, you pay back 10/yr. If there is (big) inflation, after a year you earn 110, you still owe 90 (which really is worth only ~81). So over time, the bank gets less and less while it costs you less and less.
          If there is (big) deflation (austerity), after a year you earn 90, you owe 90 (which really is worth ~99). So over time, the bank gets more and more, while at the same time, it costs you more and more.
          So inflation is good for debtors, deflation is good for creditors. Everything else is window-dressing.

      3. jake chase

        Austerity enables more looting than prosperity because it displaces government operations with private concessions. A good example is the privatization of Medicaid and Medicare. Other examples abound, from parking meters on up.

        If you were rich wouldn’t you like to own all the beaches of Greece? So would they.

      4. JTFaraday

        I think an answer to your question lies in drawing a distinction between looting and functioning supremacist hierarchies.

        Looters loot what is there for themselves as individuals.

        Functioning supremacist hierarchies seeks to further conditions that enable those in its top layers to cream material benefit, autonomy, and the best of what life has to offer in a way that is sustainable over some longer period of time. Here self interest is conceptualized broadly in terms of “class,” within stratified class system.

        Looters, who loot for themselves as individuals, have no concern for this and are usually myopically unaware that
        sustainability even ought to be a factor of concern** in terms of their own futures. Looters may combine with others in a narrow, factional interest group (financial services, let’s say), but they don’t embed their factional interest within a larger, sustainable class structure.

        In the 20th century, Americans (and most Europeans) lived in a functioning supremacist (and technocratic) hierarchy that was smoothed over by democratic rhetoric and the rhetoric of opportunity. People can “move up” in the hierarchy.

        I’m guessing that some of the friction on this blog stems from the fact that there are people reading it who are long time critics, not only of not merely myopic looting, but of America’s once-functioning supremacist hierarchy.

        Steve from Virginia’s mention of globally or geographically restricted natural resources on this thread actually nicely reveals that the two are not necessarily entirely distinct, in that looting may have always lain at the base of the functioning supremacist hierarchy.

        Let me add that Steve from Virginia, who believes the Keynesian industrial economy is unsustainable in the face of real resource constraints, is frequently shouted down by the one-dimensional MMT fanboy cultists, who demonstrate more than a little incapacity to exit their restrictive mental loops, which seem to almost never move past the level of generalization and into the real world that they themselves accuse the “neoclassicals” of being unable to enter.

        This is particularly interesting given that the MMT-ers claim the only restriction on Helicopter Ben are real resource constraints. I take it Steve from Virginia threatens to get in the way of their proposed functioning supremacist hierarchy.

        **Part of the reason for this is that we, as a society, have enabled people to become part of the technocratic elite who are wholly ignorant of political and economic history over the longue duree.

        Knowing something about the great depression, filtered through the particularist (or broadly “partisan”) lenses through which history is almost always presented, as do most economists engaged in the limited cage battle between “freshwater” and “saltwater” looter/economists does not an educated technocrat make.

        The reason I say this is that they all, “fresh and salt,” seem to think some semblance of the 19th-20th century jobs driven industrial and corporate industrial economy is a virtually timeless state of existence.

        As it has no beginning, it can have no end. It will be globally extended way of life and there is only one right way to live. Of course, they dimly know this isn’t true despite their dramatically foreshortened historical time line, but it makes no difference when they think it’s time to start dictating public policy to the public that exists for them only as an object of their political will.

        1. JTFaraday

          Or, okay, I should have put a finer point on that.

          Looting enables more looting because the looter is myopically looting short term for himself. To loot long term, you have to constitute a sustainable political economy, which likely means that the looter loots less in the short term.

          There is a plausible analogy to limited natural resources there. Obamacare and the student loan department of Citibank is only going to loot the graduate students at NYU so long before they run out of loot to loot because they are part of a currently UN-sustainable supremacist hierarchy that has been constituted by myopic short term looters.

          1. JTFaraday

            Oh, see that. You said “austerity” and I automatically substituted it with “looting.” I guess I don’t see austerity as anything other than an opportunity to dismantle public assets either.

            It’s not like VP-candidate Paul Ryan merely advocates cutting the budgets of the health programs. He advocates privatizing them, under the guise of “austerity.”

            But, I’ve said that over and over again.

        2. JTFaraday

          “In the 20th century, Americans (and most Europeans) lived in a functioning supremacist (and technocratic) hierarchy that was smoothed over by democratic rhetoric and the rhetoric of opportunity. People can “move up” in the hierarchy.”

          Or, to put a finer point on it (sort of!), Western Europeans did so. More recently the former-USSR was subjected to the tutelage of the Harvard Business School and “looting” became its new middle name.

      5. Sanctuary

        Because of the notion of There is No Alternative. When there is prosperity, people have an alternative and so, strong arm klepto tactics can’t work.

      6. Alan

        “Why does austerity enable more looting than prosperity? Aside from the sheer pleasure of causing human suffering and death, of course.”

        Here is the perfect answer:

        “Never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.” Rahm Emanuel.

        So in this case, because it creates the special, emergency circumstances under which the agenda of breaking the back of labour and unions and destroying any last pockets of resistance can be implemented. As long as there is no serious threat to overall status quo stability, the policies exacerbating the crisis will continue, on purpose, and not because the Eurocrats and their masters are supposedly ignorant, or out of touch, or stupid, or whatever dumbfounded pundits and “sophisticated” media allege in exasperation as the reason.

        The dismantling of the post-WWII social model is the true agenda, both in the US and Europe, and the method used is a truly brilliant “starve the beast” strategy.

        It’s really funny in a way. Growing up in Europe, I never thought I would experience class warfare. Back then I found Marx’s early writings and critiques of Capitalism very forceful and highly interesting intellectually, but I would have never thought them truly relevant in my socioeconomic environment. Maybe that is exactly why we have to relearn everything, including the true meaning and importance of grassroots political action and so on.

        We took too many things for granted. But not much has really changed in human nature over the past millennia.

      7. Hugh

        Austerity affords opportunities to dismantle the social safety net, cut back on government services to the 99%, and sell off the commons. Bad economic times and austerity increase the relative wealth and power of the 1% at the expense of everyone else.

        This is an important point. In good times, like the Clinton years, wealth inequality grew faster, but the wealth of the 99% also grew. From a kleptocratic point of view, this is suboptimal. Their power is not growing or not growing as fast. The 99% is not as debt burdened and so freer. Bad times are actually better, especially for a mature kleptocracy. The rich are hit harder early on, but their wealth quickly rebounds through government bailouts. The wealth of the 99% does not rebound and even goes negative with debt. The pie might be a little smaller than it might otherwise have been but the rich own, and more importantly control, more of it.

  7. Skeptic

    Mr. Varoufakis, that is stunning. It is not Europe that is important but who controls and loots it. Let us not also forget that The Third Reich lasted only THIRTEEN YEARS! How many years now left for the Fourth Reich Euro Project?

    About ten years ago, I read the diaries of Professor of Literature, Victor Klemperer who documents the Third Reich Disaster. His understanding of the Nazi manipulation and use of language is remarkable. Goebbels would only look with wonder and envy upon the activities of the IMF, WTO, G8 countries today.

  8. Duncan Hare

    Precisely how this clash will play out no one knows, except of course that the odds do not seem to be on the side of the good.

    It will continue, as there is no end – only a continuation, toward another bloody european war.

    The questions are:

    1. Who against whom in the war
    2. What will be the result, after the sides have exhausted themselves, physically and financially.
    3. What to do about unified Germany, which yet again, is a cause of the war.

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