Marx returns from the grave

Misjudgment and poor policy choices have led to the Greek crisis and Ukrainian conflict

Yanis Varoufakis, the Greek Finance Minister, has become a bit of a cult figure and even a sex icon. With his bald head, untucked shirt and clever turn of phrase, he has become the center of attention for many who want to throw a gauntlet to the status quo. In a smashingly brilliant article in The Guardian, he makes a complex argument for preserving “repugnant European capitalism” in order to buy time to formulate an alternative.

Varoufakis points out that the democratic deficit combined with a faulty monetary union has put European economies in permanent recession. However, he worries that the crisis might unleash regressive forces and lead to a bloodbath. He declares himself to be an “erratic Marxist” who blames two spectacular mistakes of his hero for the left’s current ineffectiveness. First, Marx did not take into account the adage that power corrupts and his disciples might turn tyrants. Second, the mathematical fanaticism of his model failed to take into account that human labor is impossible to quantify, paving the path for errors and authoritarianism.

Varoufakis’ beliefs are important because a third meeting is starting in Brussels to solve the stalemate over the Greek crisis.

Right from the start of the crisis, it was clear that the Greeks would never have the money to repay their debts. Just as the Greeks had been reckless debtors, the Germans had been lazy lenders who failed to conduct due diligence. Greek debt should have been renegotiated to a realistic level and Germans should have forgiven some loans or, in other words, taken a haircut. Instead, the bailout was predicated on the absurd notion that Greece would follow the austerity program prescribed by the International Monetary Fund (IMF) and grow miraculously to pay back its debt. So, good money was thrown after bad only to kick the can down the road. The chickens have come home to roost.

The pretence that creditor rights are inviolable has led to bailouts in both Europe and the United States. Banks that made bad loans were bailed out. While this may have prevented a depression, it also benefitted financiers inordinately. It led to capitalism on the upside and socialism on the downside. We are seeing a return to medieval-era inequality. It is to protest against this crazy economic order that the Greeks voted in a new government. It has promised to end austerity and, therefore, is unlikely to accept the existing bailout deal. It is high time for Berlin and Brussels to stop flogging a dead horse and propose a new deal. The future of the euro and the European Union (EU) hangs in the balance.

By: Atul Singh