Published by Zed Books, £8.99
The Greek government's decision to call a referendum to endorse or reject a new agreement with its creditors, and then ignore the result by accepting an even worse deal, has been disastrous for the country's economy. But it has undeniably turned Yanis Varoufakis, Greece's charismatic ex-finance minister, into an international celebrity. The former economics professor may have been forced to resign as the votes were being counted, but he can now bank on a lifetime career as a pundit.
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Zed Books has capitalised on Varoufakis's growing fame by rereleasing an updated version of his 2011 book The Global Minotaur: America, Europe and the Future of the Global Economy. Naturally enough, Varoufakis blames the "global minotaur" of financial capitalism for both the 2008-2009 crisis and Greece's current predicament, but part of his argument is less unconventional. Most economists agree that, from the mid-1980s onwards, US consumers in effect used Asian savings to go on a spending spree. This flow of capital was accelerated by the financial liberalisation that occurred during the 1980s and 1990s, and played a large part in inflating the American housing bubble.
When housing debts became unsustainable, leading to the subprime blow-up, the subsequent collapse in demand damaged the American economy, but also hit the economies of those countries that relied on exports to America. Varoufakis is correct to identify this imbalance as a major cause of the world's economic problems, and he is also right to criticise Germany for expecting Greece to repay its debts in full while remaining within the single currency.
However, the problem is that Varoufakis severely underestimates capitalism's resilience. Even by 2011, the date at which most of the book was written, the recession was drawing to a close in Britain and America. Two years later when the book was first updated growth was starting to take off, except in the one region of the world where policymakers had tried artificially to fix exchange rates through a single currency ie, the eurozone. The financial sector got off extremely lightly in the fallout from the crisis, benefiting hugely from bailouts and money printing. But it is undeniable that the adjustment was much easier than might have been expected.
The demonstrated superiority of a system of free-floating exchange rates makes the author's dream of a return to a new Bretton Woods-style arrangement of fixed exchange rates, policed by some sort of global authority, extremely dubious. There is a reason why every attempt to fix exchange rates on either a global or even regional level has either failed, or produced agreat deal of economic pain. Some conspiratorial thinking, including the implicit suggestion that banks pressured America to invade Afghanistan in order to secure access to the country's mineral wealth, also damages Varoufakis's arguments.
In a review in the FT, Giles Wilkes is generally dismissive of the book, calling it "less a work of economics, more a drawn-out conspiracy fable that just happens to use economic terms". Nonetheless, he agrees with Varoufakis's criticisms that "the eurozone has failedto disperse spending sufficiently withinits borders, with crisis the inevitable result". The Evening Standard's Andrew Neather is more sympathetic, notingthat while "Varoufakis himself tried valiantly and failed" to change things in Europe, his "incisive analysis may yet inspire others".
The Global Minotaur: America, Europe and the Future of the Global Economy by Yanis Varoufakis. Published by Zed Books (£8.99).//
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