The Global Minotaur - A Yanis Varoufakis Fan Page

The Global Minotaur
America, the True Origins of the Financial Crisis and the Future of the World Economy
A Yanis Varoufakis Fan Page
Book Review
In this remarkable and provocative book, Yanis Varoufakis explodes the myth that financialisation, ineffectual regulation of banks, greed and globalisation were the root causes of the global economic crisis. Rather, they are symptoms of a much deeper malaise which can be traced all the way back to the Great Crash of 1929, then on through to the 1970s: the time when a 'Global Minotaur' was born. Just as the Athenians maintained a steady flow of tributes to the Cretan beast, so the 'rest of the world' began sending incredible amounts of capital to America and Wall Street. Thus, the Global Minotaur became the 'engine' that pulled the world economy from the early 1980s to 2008.  Today's crisis in Europe, the heated debates about austerity versus further fiscal stimuli in the US, the clash between China's authorities and the Obama administration on exchange rates are the inevitable symptoms of the weakening Minotaur; of a global 'system' which is now as unsustainable as it is imbalanced. Going beyond this, Varoufakis lays out the options available to us for reintroducing a modicum of reason into a highly irrational global economic order.  An essential account of the socio-economic events and hidden histories that have shaped the world as we now know it.

Reviews
'Yanis is one of the best, brightest and most innovative economists on the planet' - Steve Keen, author of Debunking Economics  'In the most comprehensive guide to the contemporary economic crisis yet written, Yanis Varoufakis traces out the path from post-war US economic supremacy to the current predicament. This book's provocative thesis, written in lively and impassioned prose, is that which neither the US nor the EU nor any other nation can now restore robust global growth. Whether you agree or disagree, this book's lively and impassioned prose will engage you both heart and mind, and hold you in thrall to the last word. The Global Minotaur is a masterwork that registers for all time the challenge of our time.' - Prof. Gary Dymski, University of California, Riverside  'If you want to know how serious the current crisis is, you should read his book. With much eloquence, Yanis Varoufakis argues that the current financial problems are connected to the emerging fault lines of the international monetary system. The US (the Minotaur) used to govern the international monetary system, but no more; and this crucially means that there is no surplus recycling mechanism that can reliably stabilise the world economy. The elephant in the room, so to speak, is a stumbling Minotaur.' - Prof. Shaun Hargreaves-Heap, University of East Anglia  'Yanis Varoufakis is a rare economist: skilled at explaining ideas, happy to join in public debates and able to put his discipline in a broader context. You may not agree with what he says, but you'll enjoy the way he says it.' Aditya Chakrabortty, The Guardian lead economics writer 
Table of Contents
1. Introduction 2. Laboratories of the future 3. The Global Plan 4. The Global Minotaur 5. The Beast's Handmaidens 6. Crash  7. The Handmaidens Strike Back 8. The Minotaur's Global Legacy: The Dimming Sun, the Wounded Tigers, a Flighty Europa and an Anxious Dragon 9. A future without the Minotaur?
About the Author:
Born in Athens, 1961, Varoufakis completed his secondary education in Greece before moving to England where he read mathematics and economics at the Universities of Essex and Birmingham. After teaching in various British Universities (Essex, East Anglia, Cambridge, Glasgow), he spent twelve years teaching at the University of Sydney (Australia) before, eventually, returning to Athens where he now directs the University of Athens' Political Economy Division. This is his first book intended for a broad audience. His earlier, more stuffy, books include Modern Political Economics: Making sense of the post-2008 world (with J. Halevi and N. Theocarakis, Routledge), Game Theory: A critical text (with S. Hargreaves-Heap, Routledge), Foundations of Economics: A beginner's companion (Routledge) and Rational Conflict (Blackwell). Recently, he has emerged as an active participant in the debates over the Global, European and Greek Crises as well as a co-founder of www.vitalspace.org
I was just asked to prepare a shortened version (600 words) of theModest Proposal for publication in the UK Government Gazette. Since some of you may be interested in a handier, punchier version, here it is:
It is now abundantly clear that each and every response by the eurozone to the galloping sovereign debt crisis has been consistently underwhelming. The reason is simple: The eurozone is facing an escalating twin crisis but only seeks to address one of its two manifestations – the sovereign debt crisis afflicting many of its member states. This the EU does by confronting the debt crisis with (a) huge, expensive loans to, effectively, insolvent states, and (b) massive austerity drives.
Meanwhile, a second crisis, of equal significance, is spiralling out of control – that of Europe’s private sector banks. Over-laden with worthless paper assets, they constitute black holes into which the European Central Bank (ECB) keeps pumping oceans of liquidity that, naturally, only occasion a trickle of extra loans to business. Moreover, the EU’s policy mix against the sovereign debt crisis constrains economic activity further and fuels the expectation of future sovereign defaults. In a never ending circle, these bilaterally negotiated ‘bail outs’ (e.g. Greece, Ireland) pull the rug from under the bankers’ already weakened legs. And so the crisis is reproducing itself.
Is there an alternative? Yes there is, and one such is sketched out below. It would attack both manifestations of the crisis head on, create the circumstances for Europe’s recovery and, crucially, is immediately implementable under the eurozone’s existing institutional framework (thus bypassing any need for substantial, politically infeasible, Treaty changes).The proposed resolution comes in three steps.
The first step is for an invitation to be jointly issued by the ECB and the EU Commission to (a) the heads of the fiscally-challenged member-states, and (b) representatives of the European banks holding the former’s bonds. In a meeting that would not need to last for more than an hour or two, a deal is brokered according to which the banks swap the existing bonds issued by debt stricken states for new ones with a much lower face value and longer maturity. In exchange, the ECB offers the banks guarantees of continued liquidity for at least five years. The mere announcement of this deal will signal to the bond markets that, while no bondholder will be taking a haircut (except for the participating banks), the European periphery’s debt burden is immediately reduced. Spreads will fall and even banks will be boosted by the news that their liquidity lifeline will last well into the future.
The second step will deflate the debt burden further: The ECB takes on its books forthwith a tranche of the sovereign debt of all member states equal in face value to (the Maastricht-compliant) 60% of GDP. To finance this, it issues EU bonds that are its own liability (rather than by eurozone members in proportion to their GDP). Just like the US Treasury backs its bills, without reference to California or Ohio, so should the ECB back its own eurobonds. (It is high time Europeans were reminded that President Roosevelt did not fight the Great Depression by buying up the debt of California or Delaware, nor by asking them to guarantee Treasury Bills.) Member states thus continue to service their debts but at the lower rates secured by the eurobond issue.
The third and final step seeks to pave the ground for a future of growth with fiscal rectitude: Empower the European Investment Bank to fund, drawing upon a mix of its own bonds and the new eurobonds, a pan-European large-scale eco-social investment-led program by which to put in place a permanent counter-force to the forces of recession in peripheries that keep dragging the rest of the currency union toward stagnation. With this European Surplus Recycling Mechanism in place (without which no currency union can survive for long), it will then be possible to put in place (as the Germans are constantly requesting) mechanisms that enforce fiscal discipline at the member-state level.

End the European Blame Game! Keynote at the British Foreign Press Association’s 2011 Awards Night
24
NOV
The Foreign Press Association, London, paid me the compliment of inviting me to deliver a keynote speech at its 2011 Annual Awards Night. Here is the text of my talk (kindly transcribed by a journalist that wishes to remain anonymous).
Ladies and Gentlemen,
You can tell from my wide smile that it is a distinct honour and a great pleasure to be part of this celebration of fine journalism – even if my role tonight is to serve as a living reminder of our world’s steady descent into generalised austerity.
I knew that this would be my sad role the moment I read the list of recent after-dinner speakers:
The Prince of Asturias
The Prince of Wales
The Mayor of London
A Greek economist!!!
A sharp drop of standards that a cynic would interpret as the Foreign Press Association’s fall from grace. However, I am quite convinced, that my invitation to be a keynote speaker tonight is a deliberate ploy by the Foreign Press Association to educate the public to, and to remind its members of, the sad and deteriorating state of our world.
Until two years ago, ladies and gentlemen, I was just a second rate economist. Now, I am considered a first rate Greek economist. A most dubious promotion, allow me to say.
Nevertheless, I must tell you that I do not mind at all appearing in front of you as the personification of failure. After all yours is a country that knows how to appreciate grand failure – a nation that has cherished Eddie the Eagle, developed a soft spot for Paul Gascoigne, even tolerated Nick Clegg was always quite likely to lend me an ear.
Truth be told, I would not be here now if my country, Greece, had not imploded and if Europe had not indulged in its current reverse alchemy, turning gold into lead – daily.
The curious thing about Crises, especially when afflicting foreigners, is that they can be a great boon for those in need of self-confirmation.
·         When the City of London imploded, along with Wall Street, we on the continent smiled smugly: The anglo-celts had gotten their comeuppance, we thought.
·         When Greece went belly up, soon to be followed by the popping corn kernels of Ireland, Portugal and then Italy and Spain, you Brits congratulated yourselves for having kept the Queen on your banknotes, rather than trade her for the non-existent bridges and gates of our euro notes.
·         Leftie economists saw the whole debacle as confirmation that free market capitalism cannot be civilised and, indeed, that it does not work.
·         Based on precisely the same facts, free marketeers concluded that it was all the fault of government getting in the markets’ otherwise brilliant ways.
In short, Crises confirm everyone’s prejudices, locking us ever more firmly into the same mindset that produced them in the first place.
Meanwhile, the human cost is piling up.
The result is that in my native Athens, in Dublin and in Cork, in Oporto and in Valencia, in mighty Germany and lovely Italy, countless people will go to bed tonight anxious, terrified – worried about how they will make ends meet in the morning. Speaking about Greece, the earthquake’s epicentre, I shall not bother you with standard macro statistics. Suffice to mention in passing the 50% increase in suicides, the quadrupling of the number of babies left at orphanages by despairing parents, the stories of young men who try to infect themselves with HIV in order to qualify for a small social security benefit, the old age pensioners who flock to the Electricity Company not in order to pay their bills but to request that their electricity supply be terminated, unable to pay for it.
In short, ladies and gentlemen, the lights are literally going out in our cities.
And those who initially thought this was a Greek problem are realising now that it is no such thing. That we are all embroiled in a systemic crisis that began in 2008 and which has been mutating and migrating ever since, picking out the weak links first before proceeding to the stronger.
This is of course not the time to dwell into causes and remedies. I am so relieved that, tonight, I can take a break from outlining proposals for dealing with the Crisis. And to be able to relate my experience with the countless journalists with whom I have spoken over the past two years – visitors in Greece trying to make sense, on behalf of their audience, of the mess that used to be a proud country.
To begin with, let me say that the quality of most foreign journalists I encountered surpassed my, admittedly, low expectations. In sharp contrast to Greek journalists, you were thoughtful, sensitive and had a keen eye trained on the reality on the ground. We Greeks may deserve our politicians but, at the same time, we do not deserve our appalling journalism.
Having praised you, I would like to present you with two pieces of advice, if I may. When trying to make sense of this Crisis, especially when abroad, you must avoid the fallacy of aggregation and the error of generalisation:
·         First, the fallacy of aggregation: Things rarely add up! What may work for one household, one firm, one sector, usually does not work for a large economy. If I tighten my belt during hard times, I shall overcome. If we all do likewise, throughout Europe, we shall all descend into greater debt and deeper misery.
·         Secondly, the error of generalisation: There is, ladies and gentlemen, no such thing as The Greeks or The Germans or, for that matter, The Brits. We are all individuals, as Brian famously struggled to convince his self appointed disciples. And we have more diversity among our people than we have differences across our nations.
1929 should have taught us two things:
·         First, that unless governments coordinate action effectively and create new institutions for integrating their societies further, a banking-cum-debt-cum-real economy crisis destroys the common currency of the era. The Gold Standard then, the euro today.
·         Secondly, that such a deep crisis engenders a Hobbesian war of all against all that starts when we utter sentences beginning with “The Greeks do this” or “The Germans think that”.
Our very own crisis, that started in 2008 and is continuing with a vengeance, must teach us a fresh lesson:
Rather than play the blame-game, we might as well accept that everyone is to blame. If you want, it is time to acknowledge that We Are All Greeks Now.Including the Germans!
This is not to say that some do not bear a larger share of the responsibility than others. We Greeks paid ourselves more than we could afford. Tried to avoid paying taxes. Over-borrowed. And produced little to account for our life-style. A whole nation tried to behave like the City of London’s bankers! Only the Greek state could not give its citizens knighthoods and could not stop many of them from actually moving to the greatest tax haven there is: London.
Seriously now, the blame-game is the worst legacy of this crisis. It dulls our reason and does to us that which hyper-activity inflicts upon those caught in quicksand.
Lastly, I note with satisfaction that the organisers invited tonight a Greek and a German. I submit to you that if we manage to drop the penchant for the blame-game, and instead shine the bright light of reason on the true causes of our crisis, we shall soon see that the problematic euro coin has two sides that are equally problematic. A Greek side but also a German one. For in the same way that Greece cannot seriously expect to be perpetually in deficit, Germany cannot seriously believe that it can escape the global crisis by expanding its surpluse svis-á-vis the deficit countries while insisting that the deficit countries eliminate cut their deficits.
It is time, ladies and gentlemen, to do something that Europeans have never done before – and I include you Brits in this. To look into each others’ eyes in the midst of a continental, a global crisis, and stop searching for someone to blame, to belittle, to despise. To look into each others’ eyes and, suddenly, recognise a partner with whom to plot a course out of our collective mess.
Hopefully, you will be around when this happens to report it in full technicolour and with words that warm the heart and inspire the mind.
Thank you.

Of Debts and Denial: The Crisis in the context of the post-2008 world – Presentation at the LSE on Tuesday 6th December
2
DEC
In London next Tuesday? Perhaps you may want to come along to this talk. I shall be using the occassion to make the basic claims that:
   .   The eurozone, in its original/present form, could never survive the shock of the Crash of 2008,
   .   Greece was just as much of a problem for the eurozone as Germany (and vice versa),
   .   the future of the euro will depend on a radical redesign of its architecture which will simply not happen unless it is preceded by change in the dominant narrative concerning (i) the Euro Crisis’ causes and (ii) the global economy’s post-2008 predicament.
A monetary union will not last forever - that has shown the past. The euro-zone should be prepared that members retire. Simply will not, however.

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Enough is enough: do not end after endless quarrels Greece is thrown from the monetary union. But wait: We do not write the year 2011, but the year 1908.

DISPLAY

At that time, France, Italy, Belgium and Switzerland, Greece expelled from the Latin Monetary Union. So no one should claim that monetary unions would guarantee an eternity.1948-1997 were alone there are almost 130 cases in which a monetary union was dissolved.

But how to solve for a monetary union, how to get back to a national currency? Even if you do not like this idea, you just have to think, just as one takes when driving a spare tire, in the hope that it must never use.
What might such an outlet, which is to be observed? An escape from a monetary union creates problems on three levels: the logistical, economic and political level.
Even the logistical dimension of adventure national currency is a nightmare: Corporate balance sheets have to be rewritten, pensions, life insurance , mortgages and credit card debt, employment contracts, price lists, and parking meters should be changed.
Are likely to be problematic, especially cross-border debt of companies in the country that emerges: If you compare the debt to the new currency, this would be expected due to the devaluation of a partial-payment equal. Remain in the old currency denominated debt, can (and will) it several debtors, primarily driven companies into bankruptcy. Similar problems raise funds by foreigners in domestic banks.
Banks and capital markets would be closed temporarily
It is very important in the transition: everything has to happen almost overnight, because the biggest problem with the introduction of a new currency is capital flight. Citizens know that is a new currency, and they justifiably fear a loss in value of the new money, then they will try to withdraw their assets and invest in foreign currencies or in tangible assets.
Such capital flight would lead to a collapse of the banking system and the domestic investment activity - in the case of Greece, the capital flight seems to be already under way. In order to prevent worse, the return made to a national currency overnight, the banks and the national capital markets must be closed during this transitional phase - if necessary over an extended period of time - otherwise it can lead to a shocking decline in the exchange rate.
Therefore, one must get used to the idea that the convertibility, ie the free transferability of the new currency, only in slow increments possible, for example, as did the Federal Republic of Germany after the Second World War with the D-Mark. That means at least a temporary reversal of the four fundamental freedoms of the single European market. Perhaps one could counter the flight of capital through tax incentives for domestic and capital punishment for repentant tax evaders.
Real property would be subject to taxes
But not only the flight of capital abroad can be a problem, but also the flight into real assets such as real estate or gold. If capital is reallocated on a large scale in such values, this does not increase the productivity of the land, but favors the emergence of asset price bubbles.
In addition, means a drastic devaluation of the new currency, a politically sensitive redistribution of purchasing power. Owners of life insurance and pension products would be similarly disadvantaged as compared to property owners, because their assets lose value dramatically. A tax or a levy on fixed assets that could happen to both problems and provide additional revenue to the state. This is, moreover, he also need to clean up the domestic banking system, which are equipped in the wake of the changeover with fresh capital needs.
This reflects the economic dimension: An escape from a monetary union with subsequent devaluation of the new national currency is useful only with the help of an orderly bankruptcy - with all the relevant costs and consequences. Above all, the banks at home and abroad probably would have drastic losses on its government bonds to cope.
In addition to these immediate costs of a leak, there are also enormous indirect costs. Although there is little empirical evidence of how expensive a withdrawal from the euro zone could be. A look at the history of sovereign defaults, there is at least a rough idea.Studies show that a bankruptcy reduces the growth of the GNP of the country by 0.5 to two percentage points. Associated with the collapse of the state banking crisis is likely to impede the financing of foreign trade, at worst, importers deliver only against prepayment.
In the past, several countries during their so-called Paris Club debts have been restructured - a group of creditor countries.Studies suggest that the bilateral trade of such states was up to 15 years adversely affected by the insolvency. A fall of up to eight percent per year. Moreover, it is uncertain how many companies remain due to the currency conversion on the road - with further consequences for domestic and foreign banks.
Other resignations were hard to prevent
These considerations make it clear that a country that leaves the monetary union, help needed - this is the political dimension of a leak. Most important may not be the immediate financial and construction assistance. Rather, the country, leaving the monetary union get the opportunity to grow out of its problems. This means that this country take advantage of a weaker currency has to - so mainly to improved competitiveness.

DISPLAY

Opponents warn of a leak in this regard before a devaluation race. Nor can the currency devaluation of the emerging country from other countries will be answered with duties, and at worst threatening a trade war.

These are not economic but political problems: If the answer states of the European Union, the emergence of a country from a monetary union with a devaluation of the euro or with punitive tariffs, it would be political failure. It stood in stark contrast to the vociferous expressions of European solidarity.
The question remains as to whether a discharge of a country leads to more spills or even the entire monetary union is endangered.This danger is - but there is probably no countermeasures. The resignation of a country would not be the cause for further withdrawals, but the occasion. States that do not fit into the currency union are likely to fall anyway, sooner or later the basic law for victims of optimal currency areas: a common currency dress does not fit every state.
A monetary union will not last forever - that has shown the past. The euro-zone should be prepared that members retire. Simply will not, however.

Tweet

Empfehlen

68
Enough is enough: do not end after endless quarrels Greece is thrown from the monetary union. But wait: We do not write the year 2011, but the year 1908.

DISPLAY

At that time, France, Italy, Belgium and Switzerland, Greece expelled from the Latin Monetary Union. So no one should claim that monetary unions would guarantee an eternity.1948-1997 were alone there are almost 130 cases in which a monetary union was dissolved.

But how to solve for a monetary union, how to get back to a national currency? Even if you do not like this idea, you just have to think, just as one takes when driving a spare tire, in the hope that it must never use.
What might such an outlet, which is to be observed? An escape from a monetary union creates problems on three levels: the logistical, economic and political level.
Even the logistical dimension of adventure national currency is a nightmare: Corporate balance sheets have to be rewritten, pensions, life insurance , mortgages and credit card debt, employment contracts, price lists, and parking meters should be changed.
Are likely to be problematic, especially cross-border debt of companies in the country that emerges: If you compare the debt to the new currency, this would be expected due to the devaluation of a partial-payment equal. Remain in the old currency denominated debt, can (and will) it several debtors, primarily driven companies into bankruptcy. Similar problems raise funds by foreigners in domestic banks.
Banks and capital markets would be closed temporarily
It is very important in the transition: everything has to happen almost overnight, because the biggest problem with the introduction of a new currency is capital flight. Citizens know that is a new currency, and they justifiably fear a loss in value of the new money, then they will try to withdraw their assets and invest in foreign currencies or in tangible assets.
Such capital flight would lead to a collapse of the banking system and the domestic investment activity - in the case of Greece, the capital flight seems to be already under way. In order to prevent worse, the return made to a national currency overnight, the banks and the national capital markets must be closed during this transitional phase - if necessary over an extended period of time - otherwise it can lead to a shocking decline in the exchange rate.
Therefore, one must get used to the idea that the convertibility, ie the free transferability of the new currency, only in slow increments possible, for example, as did the Federal Republic of Germany after the Second World War with the D-Mark. That means at least a temporary reversal of the four fundamental freedoms of the single European market. Perhaps one could counter the flight of capital through tax incentives for domestic and capital punishment for repentant tax evaders.
Real property would be subject to taxes
But not only the flight of capital abroad can be a problem, but also the flight into real assets such as real estate or gold. If capital is reallocated on a large scale in such values, this does not increase the productivity of the land, but favors the emergence of asset price bubbles.
In addition, means a drastic devaluation of the new currency, a politically sensitive redistribution of purchasing power. Owners of life insurance and pension products would be similarly disadvantaged as compared to property owners, because their assets lose value dramatically. A tax or a levy on fixed assets that could happen to both problems and provide additional revenue to the state. This is, moreover, he also need to clean up the domestic banking system, which are equipped in the wake of the changeover with fresh capital needs.
This reflects the economic dimension: An escape from a monetary union with subsequent devaluation of the new national currency is useful only with the help of an orderly bankruptcy - with all the relevant costs and consequences. Above all, the banks at home and abroad probably would have drastic losses on its government bonds to cope.
In addition to these immediate costs of a leak, there are also enormous indirect costs. Although there is little empirical evidence of how expensive a withdrawal from the euro zone could be. A look at the history of sovereign defaults, there is at least a rough idea.Studies show that a bankruptcy reduces the growth of the GNP of the country by 0.5 to two percentage points. Associated with the collapse of the state banking crisis is likely to impede the financing of foreign trade, at worst, importers deliver only against prepayment.
In the past, several countries during their so-called Paris Club debts have been restructured - a group of creditor countries.Studies suggest that the bilateral trade of such states was up to 15 years adversely affected by the insolvency. A fall of up to eight percent per year. Moreover, it is uncertain how many companies remain due to the currency conversion on the road - with further consequences for domestic and foreign banks.
Other resignations were hard to prevent
These considerations make it clear that a country that leaves the monetary union, help needed - this is the political dimension of a leak. Most important may not be the immediate financial and construction assistance. Rather, the country, leaving the monetary union get the opportunity to grow out of its problems. This means that this country take advantage of a weaker currency has to - so mainly to improved competitiveness.

DISPLAY

Opponents warn of a leak in this regard before a devaluation race. Nor can the currency devaluation of the emerging country from other countries will be answered with duties, and at worst threatening a trade war.

These are not economic but political problems: If the answer states of the European Union, the emergence of a country from a monetary union with a devaluation of the euro or with punitive tariffs, it would be political failure. It stood in stark contrast to the vociferous expressions of European solidarity.
The question remains as to whether a discharge of a country leads to more spills or even the entire monetary union is endangered.This danger is - but there is probably no countermeasures. The resignation of a country would not be the cause for further withdrawals, but the occasion. States that do not fit into the currency union are likely to fall anyway, sooner or later the basic law for victims of optimal currency areas: a common currency dress does not fit every state.
Eurobonds that can work now! A critique of the European Commission’s Green Paper on ‘Stability’ Bonds, by Stuart Holland
30
NOV

http://yanisvaroufakis.eu/2011/11/30/eurobonds-that-can-work-now-a-critique-of-the-european-commissions-green-paper-on-stability-bonds-by-stuart-holland/
Today, Stuart Hoilland and I are in Brussels to talk with euro-MPs about ourModest Proposal. My simple brief is to impress upon them that, at the eleventh hour, ECB-bonds are sine qua non for saving the euro-system. We need, in short,a simple and boring common bond that is guaranteed solely by the only serious eurozone instution there is. Stuart is bringing along, to our meetings, a fresh document in which he compares and contrasts our ideas to those of Mr Baroso’s Green Paper. Stuart’s document follows:
It is to be welcomed that bonds are on the Commission’s agenda and that the Green Paper addresses the manner in which they could lead to lower financing costs in the euro area.[1] It also has merit in proposing three variants of bonds as the basis for public debate. But the Green Paper is flawed in narrowing the scope of bonds for both stability and growth only to stability, displacing the Commission’s recommendation of Union Bonds in 1993 for growth and economic and social cohesion and neglecting also successive endorsement of such wider scope for Union Bonds or Eurobonds by heads of state and government.
The Green Paper also is flawed in that Angela Merkel has already rejected its proposals by repeating her claim that bonds are not a solution. One of the reasons for this is that most proposals for bonds depend on mutual guarantees by other member states which would mean their being underwritten by German taxpayers. YetGermanyherself is not immune from the crisis. She has just failed to gain a successful issuance of her own bonds in part because markets already sense that, without a more radical European solution,Germanywill need to underwrite those of other member states yet cannot, on her own, assure this.
This paper both critiques the Green Paper and proposes Twin Track approaches for Union Bonds to stabilise the crisis and Eurobonds to finance growth. It claims that this should be acceptable to Germany and other surplus Member States on the grounds that neither such proposal needs Joint Guarantees, Fiscal Transfers or Debt Buyouts, that a conversion of a share of national debt to the Union could be on an enhanced cooperation basis, and that Eurobonds for the recovery of growth would be funded not by German or other taxpayers but by inflows to the Union through their purchase by the central banks of emerging economies and sovereign wealth funds.
1. Displacement
The Green Paper opens with the claim that the concept of a European bond was first discussed in by Member States in the late 1990s.
“The concept of common issuance was first discussed by Member States in the late 1990s, by the Giovannini Group”.
It then refers to publication in September 2008 discussion paper issued by the European Primary Dealers Association (EPDA) of a discussion paper “A Common European Government Bond”.
To claim that there was no other discussion by Member States than of these two technical documents not only is wrong, but displaces the Commission’s own recommendation to issue common bonds – Union Bonds – in the Delors White Paper of December 1993 on Growth, Competitiveness and Employment. This then was discussed by the Essen European Council in the spring of 1994.Luxembourg and theNetherlands were in favour. Helmut Kohl, forcefully, and François Mitterrand, with reservations, were against.
But Mitterrand then changed his mind later in the year, when Michel Rocard had been briefed on the case for bonds by the economic committee of the French Socialist Party and called for a 50 billion ecu European Fund for Jobs, financed by bonds, at the autumn conference of the French Socialist Party. When questioned by the press on whether he supported this, Mitterrand replied:
`I agree with him completely, and would even go so far as to say – and I have checked this with the Commission this morning – that his figure could be doubled. If 100 billion ecus were made available to develop a European infrastructure, we could show thatEuropecan be a key factor in promoting growth, work and jobs.’ (Source L’Heure de Verité, France 2, 25 October 1994)
Jacques Chirac then recommended action on the Delors proposals at his first European Council at Cannesin June 1995. Agence Europe reported him as submitting to the Council that Own Resources had been entirely absorbed by the CAP following exchange rate realignments and arguing for “expansion of the new financial instruments” (i.e. the Delors’ Union Bonds).
Bonds again were on the agenda of the June 1996 Florence European Council, when only John Major and Helmut Kohl were against a decision to issue them. Both Jacques Chirac and Romano Prodi had called for them not only to finance growth and jobs but also to underpin what at the time was the projected single currency.
All of this was before the “later 1990’s” to which the Commission Green Paper attributes the “first discussion by Member States” of the common issuance of bonds, while their discussion of the Delors proposal of Union Bonds at European Council and Ecofin level continued thereafter with high press and media coverage rather than in the at the time unnoticed Giovannini Group, or a discussion paper published by the European Primary Dealers Association.
Such as when Giulio Tremonti gained discussion of common bonds in Ecofin on the lines proposed by Delors when in the Berlusconi government from June 2001, although Germanystill was opposed. As also in the call of Manuel Barroso and Tony Blair in Lisbonin February 2003 for bonds to finance a 10 year programme to create the 15 million jobs which was the employment growth target of the 1993 Delors White Paper.[2] As well as the statement by Manuel Barroso on the relaunching of the Lisbon Agenda that:
“It’s about growth and about jobs. This is the most urgent issue facing Europetoday. We must restore dynamic growth which can bring back full employment and provide a sound base for social justice and an opportunity for all”.[3]
2. Narrowed Parameters
The Green Paper outlines three different options for bonds, but has chosen to narrow the definition and role of bonds to stability rather than growth, claiming in a footnote that:
“The public discussion and literature normally uses the term “Eurobonds”. The Commission considers that the main feature of such an instrument would be enhanced financial stability in the euro area”.
Although the Green Paper recommends broad public consultation on the concept of Stability Bonds, with “all relevant stakeholders and interested parties”, it defines these as, in particular:
“Member States, financial market operators, financial market industry associations, academics, within the EU and beyond, and the wider public…”
No reference is made in these recommendations for “broad public consultation” to the European Parliament, the Economic and Social Committee, the Committee of the Regions, to Social Partners or the resolution of the May 2011 Congress of the European Trades Union Congress in favour of bonds to achieve both stability and growth.[4]
The word ‘social’ itself appears only once in the Green Paper in a footnote referring to the title of a document from the European Parliament. The words ‘employment’ and ‘cohesion’ do not appear at all. Other than in a reference to the Stability and Growth Pact, the word ‘growth’ appears once in submitting that lower interest rates could “underpin the longer-term growth potential of the economy”.
This neglects that low interest rates are not a sufficient condition for growth. When there is slow or nil demand growth with spare capacity, compounded by a sense that governments cannot govern a deepening financial crisis, entrepreneurs will not invest simply because interest rates may be low. Besides which, since the financial crisis, and with demands for recapitalisation, few banks are on-lending even the public funds which salvaged many of them from their purchase of toxic derivatives, and are charging high interest rates on commercial or personal loans to fund their recapitalisation.
3. Limits of the Proposals
The Green Paper admits that many of the implications of Stability Bonds go well beyond the technical domain and involve issues relating to national sovereignty. Also that some of the pre-conditions for the success of such bonds would depend on a high degree of political stability and predictability.
A fundamental limit of its three proposals is not only that they focus exclusively on stability but also that the German government, on the day they were pre-released, declared that it would not support them. Yet this is not surprising, especially for the first two proposals.
Proposal No. 1 is for full substitution of Stability Bond issuance for national issuance, with joint and several guarantees, i.e. the end of national borrowing.
Proposal No. 2 is for partial substitution of national bonds by Stability Bonds with joint and several guarantees. [5]
The first proposal is imaginative but would not redress the current financial crisis since it would imply major Treaty revisions. The second proposal is that of the Bruegel Institute for a transfer of debt of up to 60% of GDP to a new European Debt Agency which also could imply a Treaty revision.
Yet the first proposal is unrealistic sinceGermanyand several other Member States are not willing to forego their own bonds, far less transfer all their borrowing to theUnion. Either proposal also would imply that surplus Member States underwrite the debt of others though joint guarantees which they not only are not prepared to do but also arguably have good reasons to oppose.
Proposal No. 3 is for partial substitution of national bonds with Stability Bonds and several but not joint guarantees. This approach differs from proposal No. 2 since Member States would retain liability for their respective share of Stability Bonds as well as for their national bonds.
However, as the Green Paper recognises, the key issue with this proposal would be the nature of the guarantees underpinning such a Stability Bond. In the absence of any credit enhancement, the credit quality of such a Stability Bond underpinned by several but not joint guarantees would at best be the weighted average of the creditworthiness of the euro-area Member States and could risk being compromised by that of the lowest-ratedMemberState.
It thereby recognises that a cascade of rating downgrades could be set in motion, e.g. a downgrading of a largerAAA-ratedMemberStatecould result in a downgrading of the Stability Bond, which could in turn feedback negatively to the credit ratings of the other participating Member States due to their contingent liability for all Stability Bond issuance.
The German Council of Economic Experts (GCEE) proposal presented in their Annual Report on 9 November [6] is not endorsed by the Green Paper but considered as an example of the partial issuance approach. This is for a debt redemption fund that would pool government debt exceeding 60% ofGDP of Eurozone Member States.
Like the Green Paper Proposal 1, and the Brueghel proposal, this is both bold and imaginative. Like the alternative proposals outlined below it would mean that all member states thereby becameMaastrichtcompliant on their national debt. Each participating country would, under a defined a consolidation path, also be obliged to autonomously redeem the transferred debt over a period of 20 to 25 years.
Analytically, the Council of Economic Experts’ proposal is the Brueghel proposal in reverse, pooling debt over and above 60% rather than that up to it. But it suffers from the same limits in that it would be based on the joint liability to which not only the Merkel administration but also most German electors are opposed. It also would not necessarily redress the current crisis since it anticipates that the debt transfer would take up to five years to effect.
4. Twin Track Alternatives
The Green Paper not only displaces the vital importance of growth, and fails to refer to the Delors White Paper whose aims resonated for more than a decade at the highest political level.
It also is recommending proposals which imply not only mutual guarantees and therefore potential fiscal transfers, but also Treaty revisions and new institutions.
In so doing it neglects to cite other proposals for bonds both to stabilise the crisis and to fund growth which could be effected without the need for Treaty revisions. These include “Twin Track” alternatives with Union Bonds for Stability and Eurobonds for growth.[7] This approach:
► does not imply joint guarantees, fiscal transfers – or a general buying out of national debt – to which Germany and other key Member States are opposed;
► recognises that this could be by an enhanced cooperation procedure which would not bind all member states and with the key political advantage that Germany and other member states could keep their own bonds;
► distinguishes Union Bonds for stability which would not be traded from Eurobonds for growth which would be traded and attract inflows from the central banks of emerging economies and sovereign wealth funds.
- Without Joint Guarantees, Fiscal Transfers or Debt Buyouts
The precedent that neither transfer of a share of national debt to the Union nor net issues of bonds need joint guarantees, fiscal transfers of debt buyouts is that of the European Investment Bank which has issued bonds without them for more than 50 years and has been so successful that it now is more than twice the size of the World Bank and the world’s largest multilateral development bank.
- By Enhanced Cooperation
The case for introducing Union Bonds for stability by enhanced cooperation by whichGermanyand other surplus member states could keep their own bonds has not been considered by the Commission Green Paper. But the precedent is strong in the introduction of the Euro itself which was a de facto case of enhanced cooperation.
The procedure for enhanced cooperation within the institutional framework of the EU requires nine member states. The voting procedure for enhanced cooperation depends only on the consent of the member states instigating it, not a qualified majority decision. [8]
- Union Bonds
On lines similar to the Bruegel proposal (Commission Green Paper Proposal 2) a conversion of national debt of up to 60% of GDP could be converted to Union Bonds for debt stabilisation by those member states consenting to them.
Unlike the Bruegel proposal, these need not be traded but could be held in a consolidated EU debit account. Such a debit account could not be used for credit creation any more than a credit can be drawn on a personal debit card.
Since the converted bonds would not be traded they would be protected against speculation by rating agencies. But they would not need fiscal transfers between member states. Member States whose debt is converted into Union Bonds would service their share of them.
The Bruegel Institute has proposed a new institution to hold the conversion of such a share of national debt to theUnion. But a new institution is not needed. The converted Union Bonds could be held by the European Financial Stability Faculty and, after it, by the ESM.
- Eurobonds
Eurobonds to finance recovery and growth would be traded and attract inflows to theUnionfrom the central banks of emerging economies and sovereign wealth funds. Brazil, Russia, India, China and South Africahave re-stated in September 2011 that they are interested in holding reserves in Euros in order to help stabilise the euro area.
Doing so by investing in Eurobonds rather than by national bonds both could strengthen the Eurozone and enable the BRICS to achieve their ambition of a more plural global reserve currency system.
- Not Counting on National Debt
Eurobonds would not count on national debt since they would be the bonds of theUnionrather than member states. An analogy is US Treasury Bonds which do not count on the debt of member states of the American Union such asCaliforniaorDelaware. They would not need member state guarantees anymore than do European Investment Bank bonds, while EIB bonds also do not cunt onMemberStatenational debt (see below).
- Union Bonds and the ECB or the EIF
Parallel proposals have suggested that the converted national debt should be held by the European Central Bank and net bond issues also managed by it.[9]
Alternatively eurobonds could be issued by the European Investment Fund which was set up by Delors to issue Union Bonds and now is part of the European Investment Bank Group. The EIF would gain from the EIB’s vast experience and expertise in bond issues while the ECB could back them withut any further backing from the member-states or anyone else. The case that net issues of Eurobonds (for financing growth rather than existing debt-conversion) should be by the EIF as part of the EIB Group also makes operational sense in that the EIB has decades of experience of net bond issues whereas the ECB has none.
- Growth
Growth would be enhanced since Eurobonds would co-finance EIB investment projects which are serviced by the revenues of the Member States benefiting from them, rather than fiscal transfers between Member States.
None of the major Eurozone Member States, nor Ireland, Portugal or Greece, count EIB project funding against their national debt, nor need any member state do so. The decision whether or not to do so is governmental and does not depend on a Treaty revision.
- Cohesion
Cohesion would be enhanced in that, since the Amsterdam Special Action Programme, the EIB already has a cohesion and convergence remit for investment projects in health, education, urban renewal, the environment and green technology, as well as financial support for small and medium firms and new high tech start-ups.
- Competitiveness
Competitiveness would be enhanced by a share of the net inflows into Eurobonds financing a European Venture Capital Fund for small and medium firms, or a European Mittelstandspolitik, which was one of the original aims of the European Investment Fund.[10]
- Maastricht Compliance
With a conversion of debt of up to 60% of GDP to Union Bonds all Member States other thanGreecewould beMaastrichtcompliant on their remaining national debt.Greecewould remain a special problem, since still well in excess of the 60%Maastrichtlimit but, as such, an exceptional case meriting continued debt buy outs.
- Stability and Growth Pact
The “Twin Track” strategy of Union Bonds for debt stabilisation and Eurobonds to finance growth also would give political and public credibility to the SGP where growth has been sacrificed to stability and would further be so by the proposals in the Commission Green Paper.
- Debt Restructuring and Reducing National Debt
None of the above is to the exclusion of debt restructuring in the sense of debt write downs. Nor does it deny the case for reducing national debt. But this could be phased over the medium to longer term in line with the “Twin Track” Strategy for combining stability through Union Bonds with growth through Eurobonds.
The case for reducing national debt through for growth has been demonstrated in the UScase by the adoption of such a strategy by the Clintonadministration and that in each of the four years of its second term the federal budget was in surplus.[11]
sholland@fe.uc.pt
24 November 2011
NOTES
[1] European Commission (2011). Feasibility of Introducing Stability Bonds.Green Paper. COM(2011)XXX, November 20th
[2] The case for the 15 million jobs target in the Delors White Paper, echoed by Tony Blair and Manuel Barroso in their February 2003 declaration, was based on econometric analysis of employment creation through of social investments in health, education, urban renewal and the environment – plus social negotiation of more labour intensive employment in the social sphere and the right to reduced working time to enhance work-life balance. Both of the latter were endorsed by the Essen European Council.   See further Stuart Holland, (1993).The European Imperative: Economic and Social Cohesion in the 1990s.Nottingham: Spokesman Books. Foreword Jacques Delors.
[3] Striedinger, A and Uhart, B. (Eds). (2006). The EU Lisbon Agenda – An Introduction. Brussels: ESIB, p. 10.
[4] European Trades Union Confederation, (2011). Mobilising for Social Europe.Athens, May 19th.
[5] Von Weizäcker, J. and Delpla, J. (2010). The Blue Bond Proposal.The Bruegel Institute. Policy Brief 2010:3.
[6] GCEE, 9 November, 2011 http://www.sachverstaendigenrat-irtschaft.de/aktuellesjahrsgutachten.html
paragraphs 9-13 and 184-197
[7] Yanis Varoufakis and Stuart Holland (2011). A Modest Proposal for Overcoming the Euro Crisis. Levy Economics Institute of Bard College Policy Note 2011 / 3.
Giuliano Amato and Guy Verhofstadt (2011). A Plan to Save the Euro and Curb the Speculators. The Financial Times International Edition July 4th. The proposal also was supported by Enrique Baron, Michel Rocard, Jan Pronk, Jorge Sampaio, Mario Soares and Jacek Saryusz-Wolski, as well as this author.
See also Stuart Holland (2006). Financial Instruments and European Recovery – Current Realities and Implications for the New European Constitution.CEUNEUROP Discussion Paper no. 16. Faculdade de Economia, Universidade de Coimbra. July.
Stuart Holland (2003). After the European Constitution: Twin Action Proposals. CEUNEUROP Discussion Paper no. 38. Faculdade de Economia, Universidade de Coimbra.. July.
[8] A decision authorising enhanced cooperation shall be adopted provided that at least nine Member States participate in it. The Council shall act in accordance with the procedure laid down in Article 280 D of the Treaty on the Functioning of the European Union. All members of the Council may participate in its deliberations, but only members of the Council representing the Member States participating in enhanced cooperation shall take part in the vote. The voting rules are set out in Article 280 E of the Treaty on the Functioning of the European Union.
[9] Varoufakis and Holland (2011), Op. Cit.
[10] Stuart Holland (1993). The European Imperative: Economic and Social Cohesion in the 1990s. Op cit.
[11] Luce, E. (2011). Hope versus Experience. The Financial Times, November 12th – 13th.

Abandoning a sinking ship? A plan for leaving the euro
27
NOV
As regulars of this blog know, I am of the view that the eurozone’s collapse will be a harbinger of a postmodern 1930s. While virulently opposed to the eurozone’s creation, in its time of crisis I have beencampaigning for saving the euro. Of course, as Alain Parguez wrote aptly here, it is impossible to save someone, or something, that does not want to be saved. In this post, while not going back on my personal commitment to keep trying to save a monetary union bent on self-destruction, I shall relate to you an idea on how a peripheral member-state could try to minimise the (huge) socio-economic costs of an exit from the eurozone forced upon it by the latter’s steady disintegration.
The said plan was put together with Ireland in mind. Its authors are Warren Mosler (an investment manager and creator of the mortgage swap and the current Eurofutures swap contract) and Philip Pilkington, a journalist and writer based in Dublin, Ireland. Their starting point is a (perfectly spot on) diagnosis: “austerity programs” are “an abject failure and yet European officials continue to consider them the only game in town. So, we can only conclude at this stage that, given that European officials know that austerity programs do not work, they are pursuing them for political rather than economic reasons.”
For reasons that I have also put forward repeatedly, unless overturned, this political project will, perhaps unintentionally, lead to the eurozone’s collapse. Should a country like Ireland wait until the bitter end or should it prepare for an exit before the final nail has been hammered into the euro’s coffin? Mosler and Pilkington argue for an exit. But how can Ireland, or for that matter Portugal or Greece or Italy, exit without the sky falling on our heads? Here is what they propose. For the complete text click here:
1. Upon announcing that the country is leaving the Eurozone, the government of that country would announce that it would be making payments – to government employees etc. – exclusively in the new currency. Thus the government would stop using the euro as a means of payment.
2. The government would also announce that it would only accept payments of tax in this new currency. This would ensure that the currency was valuable and, at least for a while, in very short supply.
And that is pretty much it. The government spends to provision itself and thereby injects the new currency into the economy while their new taxation policy ensures that it is sought after by economic agents and, thus, valuable. Government spending is thus the spigot through which the government injects the new currency into the economy and taxation is the drain that ensures citizens seek out the new currency.
The idea here is to take a ‘hands off’ approach. Should the government of a given country announce an exit from the Eurozone and then freeze bank accounts and force conversion there would be chaos. The citizens of the country would run on the banks and desperately try to hold as many euro cash notes as possible in anticipation that they would be more valuable than the new currency.
Under the above plan, however, citizens’ bank accounts would be left alone. It would be up to them to convert their euros into the new currency at a floating exchange rate set by the market. They would, of course, have to seek out the currency any time they have to pay taxes and so would sell goods and services denominated in the new currency. This ‘monetises’ the economy in the new currency while at the same time helping to establish the market value of said currency.
My reaction to this plan is simple: It is a blueprint for anyone who thinks that the euro system is past the point of no return. Once that point has been and gone, it is perhaps essential to move into this direction swiftly. However, I do not believe that the eurozone is, presently, past the point of no return. It is still possible to salvage the common currency by means of something akin to our Modest Proposal. It may take more intervention by the ECB than the Modest Proposalenvisions (courtesy of the awful delay in implementing a rational plan, continuing instead on the present unsustainable path) but it is still, I think, feasible.
The reason why I am adamant that this is not, yet, the time to abandon ship, is the huge human cost of the eurozone’s breakdown. Consider for example what will happen if we, indeed, adopt the exit plan proposed above.
       All contracts by the government to the private sector (abroad and domestically) will be renegotiated in the new currency after the initial depreciation of the latter. In other words, domestic suppliers will face a large haircut instantly. Many of them will declare bankruptcy, with another large lump sum loss of jobs.
       The banks will run dry and will not be kept open by the ECB. Which means that the only way Ireland or Greece or whoever adopts this plan can keep its banks open is if they are recapitalised in the new domestic currency by the Central Bank. But this means that bank account deposits will, de facto, be converted from euros to the new currency; thus annulling the beneficial measure of no compulsory conversions of bank holdings into the new currency (see above).
       The authors claim that the above ill effects will be lessened by the government’s new found monetary independence which will enable it to discontinue austerity programs immediately and adopt counter-cyclical fiscal policy, as Argentina did after its default and discontinuation of the pesos-dollar peg. This may be so but all comparisons with Argentina must be taken with a large pinch of salt. For Argentina’s recovery, and associated fiscal policies, was far less due to its renewed independence and much more related to a serendipitous rise in demand for soya beans by China.
       While it is true that the weaker currency will boost exports, it will also have a devastating effect: The creation of a two tier nation. One nation that has access to hoarded euros and another that does not. The former will acquire immense socio-economic power over the latter, thus forging a new form of inequality that is bound to operate as a break on development for a long while – just like the inequality that sprang up in the post 1970s period did enormous damage to our countries’ real development (as opposed to GDP growth numbers) in the second postwar phase.
       Last, but certainly not least, even if one country exits the eurozone in this manner, the eurozone will unwind within 24 hours. The European System of Central Banks will break instantly down, Italian spreads will hit Greek levels, France will turn instantly into a AA or AB rated country and, before we can wistle the 9th Symphony, germany will have declared the re-constitution of the DM. A massive recession will then hit the countries that will make up the new DM zone (Austria, the Netherlands. possibly Finland, Poland and Slovakia) while the rest of the former eurozone will labour under significant stagflation. The new intra-European currency wars will suppress, in unison with the ongoing recession/stagflation, international and European trade and, therefore, the US will dive into a new Great Recession. The postmodern 1930s that I keep speaking of will be a tragic reality.
In summary, this plan may end up being the only way out of a vessel heading for the rocks. We must keep it in mind given that our European leaders’ bloodymindedness has put, and keeps, a whole Continent on the rock-bound path. But it is not time yet to adopt it. For it will come at an incredible human cost; a cost that can still be averted (assuming that I am right in saying that the point of no return has not been reached – yet). We still have a chance to storm the bridge and change course. Failing that, a plan like that by Mosler and Pilkington may be the equivalent of our lifeboats. We should, however, always keep in mind that our lifeboats will be launched in icy seas and, while stranded on them, many will perish.
A fresh proposal for escaping the euro crisis. Guest post by Alain Parguez
25
NOV
The following proposal is due to Alain Parguez, Emeritus Professor of Economics, University of Franche-Comté, Besançon-France (www.neties.com/parguez ). Professor Parguez has been a longstanding critique of European Union affairs. His incisive critique of the eurozone’s architecture predates by many years the current Crisis. Always fascinated by his views , I am grateful for the opportunity he afforded me to post this piece. Looking forward to readers’ comments.
A Proposal
By decree of the European council wealthiest States whose debt is still rather well rated, create a pool , a special fund managed by the European Investment Bank (EIB), issuing euro-bonds sold to the ECB, technically to the respective central banks at zero or quasi zero rates.
Proceeds from euro creation by the ECB will be borrowed at quasi zero rates by Greece, Spain , etc… which could cancel enough share of their debt to reverse private banks expectations.
The success depends on three conditions.
       First condition : No more destruction plans imposed on Greece. All existing destruction plans should be stopped.
       Second condition : Proceeds of this acquisition of euro bonds should not be included into public debt, borrowing should be purely conventional.
       Third condition : what about the future?
The technique is to fail if it only deals with past never to be reimbursed debt. It must free the future, allowing all member States to change the course of their policy and play again their anchor role. It means that the principle of privatisation of public finance should be jettisoned. Euro bonds must be issued by all member States to allow the reconstruction of the Euro-zone economy and society by public investments bypassing the still frightened private banks. The counterpart of these bonds is the accelerated growth of the stock of public capital including of course its crucial component; human capital.
Proceeds will be transferred to all member States and especially to poorest States to reconstruct their real economy devastated by addiction to punitive austerity imposed by France and Germany alike.
Comments:
“Could this solution be accepted? I have to express my strong doubts since it violates the hidden supreme purpose of the “Union”. Instead of an hyper-capitalist system which is dying it could achieve a new mode of production what could be deemed social-capitalism. How could this evolution be accepted by Germany and especially by France which are more than ever starting the race to “Austerity” or “Rigor Mortis”?
No shrewd financial innovations can save what cannot be saved because it does not want to be saved.
The dismantling of the State, its privatisation shared by the whole EU rulers is the true cornerstone of the Union. What would banks do with the money created to save them, invest it in private assets never issued for real value generating expenditures. Henceforth, while destroying the real base of the economy and depriving public bonds of any real value, forced “reimbursement” of the debts will generate a new wave of hyper-speculation and capital gains plus dividends to former productive corporations motivating them to abandon without remorse the real economy! As for wished reimbursement before terms decreed by Germany and France for their own debt one can only cry before such a folly of the ruling elite!!!
Finally, the loss of value of private assets, the collapse of the “financial markets” will be the twilight of the gods of EU Walhalla”
A sadly apt poem for Europe’s current course…
24
NOV
Who is in charge of the clattering train The axles creak and the couplings strain The pace is hot and the points are near Sleep has deadened the driver’s ear And the signals flash in the night in vain For Death is in charge of the clattering train.
[From an old, yellowing copy of Punch magazine. Apologies about the bleakness. It was just too apt to resist posting...]
The Global Minotaur versus the Age of Greed: A debate on the ABC Radio National’s Late Night Live, chaired by Philip Adams
19
SEP
Since the late 80s one of my daily pleasures has been to listen to Late Night Live, the ABC Radio National’s daily program in which Philip Adams, the renowned Australian film maker, author and public intellectual reviews the current political, social and cultural climate, talks to authors about a great variety of interesting books (that he has in fact read) and, generally, sets out to create a little oasis within his audience’s lives in which the cacophony of life yields to nuanced and critical thinking.
So, imagine my joy when last Wednesday (14th September) I was invited on the program to partake of a tripartite debate, chaired by Philip, on what caused theCrash of 2008 and its continuing aftermath. The other two interlocutors were Jeff Madrick, editor of a magazine called Challenge, visiting professor of humanities at the Cooper Union and author of Age of Greed (Random House), and Oliver Marc Hartwich, research fellow at the libertarian Centre for Independent Studies. The program’s, and the debate’s, stated purpose was to pit Jeff’s explanation of the Crash of 2008, as developed in his Age of Greed, with the one I present in The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy (Zed Books).
You can listen to the 45 minute debate that resulted here. Below I annotate our debate, giving myself the opportunity we all crave, ex post, to add arguments that I was either too constrained (by time limitations) or too slow to think of on the hoof (my excuse being that I participated in that debate by phone, sitting in a Dublin hotel, straining to hear the challenging ideas bandied about on the other side of a substandard phone line…)
Notes on the debate
       Jeff kicked off the discussion by making the valid point that greed and financialisation exploded after the 1970s.
       Philip then turned to Oliver who took us back to the Old Testament suggesting that, while greed is a defining feature of human beings, the problem is how to tame it.
       Soon after, Philip asked me to outline my Global Minotaur’s explanatory thrust, with particular emphasis on the merits of my Minotaur metaphor. No comment here. You make of it what you will.
       Jeff made a point of objecting to my preceding mini presentation by saying that he is wary of metaphors and that in his work he tries hard to write without using them. He argued that one should eschew metaphor, suggesting that when one begins to “put detail to the metaphor” the metaphor begins to look less impressive. Before referring to two other important points that Jeff raised, let me take this opportunity to retort that Jeff was probably unaware of the painstaking manner in which my metaphor has been ‘detailed’ not only in the book itself but also in another volume entitled Modern Political Economics: Making sense of the post-2008 world(published earlier this summer by Routledge), jointly authored by Joseph Halevi, Nicholas Theocarakis and myself. In its 500 pages the reader will find a great deal of detail supporting the Global Minotaur metaphor. Granted that ‘easy’ metaphors, unsupported by painstaking research, can be extremely dangerous (as Jeff implied), the Global Minotaur is not one of them!
       Jeff also disputed two factual points that I raised. First, he disputed that the US had a rational plan for managing the global economy after the war, adding that that he only wished it were true. Well, it was true. The Bretton Woods era was a period during which the US run the global economy according to an ambitious, well thought out, blueprint for recycling US surpluses to Japan and Western Europe (Germany in particular). And that when Global Plan (as I refer to it in my book) broke down, some extremely astute US policymakers (Paul Volcker being one of them) engineered a “controlled disintegration of the world economy” for the purposes of reversing the flow of trade and capital surpluses in a manner that allowed the US to retain its hegemony while running increasing trade and budget deficits. The resulting tsunami of capital flows into Wall Street was the foundation on which Wall Street built its audacious financialisation that gave greed a new lease of life and turned greed into a form of ideology.
       Jeff’s second objection was that US trade surpluses in the 1950s were small and relatively unimportant. By this, he disputed my point that the Global Plan entailed surplus recycling between the US and Japan-Germany. It is of course true that immediately after the war US trade surpluses were a small portion of US national income. How could it be otherwise when the rest of the world was still immersed in the war’s ashes and had hardly had a chance to rise from the ruins? This is precisely why the New Dealers were keen to recycle US surpluses to Japan and Germany: to prop them up so that, in due course, Asia and Europe would become capable of absorbing increasing quantities of American exports. And this is exactly what happened. Indeed, within a decade, by 1957, US trade to Asia and Europe had quadrupled, thus creating a rising tide of demand for America’s manufacturing industry. Its importance should not be underestimated.
       Oliver came in at that point arguing that world capitalism lost its ‘anchor’ in 1971, when the Global Plan died. He put forward a standard libertarian point that the moment money was divorced from gold the scene was set for the bubble that led to 2008. No need to say much more on this, save to comment that such views seriously misunderstand the character of modern capitalism: Tying up oligopoly capitalism to the quantity of money (via a link with the almost fixed quantity of gold) is equivalent to inviting the sort of trouble that befell the world economy in 1929. Metal fetishism is an illusion that some turn to in times of trouble, like our present era, but does nothing to throw light on the reality we are facing.
       Next I was given a chance to reply to Jeff’s hypothesis: Greed, unregulated bankers, Central Bank policies etc all played a role in bringing 2008 about. Sure. But the question we ought to ask (I argued) should go deeper: What is it that gave greed a new, toxic twist? How come the authorities stood aside, allowing the banks to run riot? The Global Minotaur answers these questions.
       Oliver rightly lambasted economic theory for misunderstanding really existing capitalism. What he seems to have overlooked however was that economics’ failure was a motivated one. That the less relevant economic models are to really existing capitalism the greater the academic and political discursive power of the economists who conjure them up.
       Jeff re-entered the conversation accusing me, and possibly Oliver, of historical myopia. I have no idea why he said that since he immediately went into a narrative that was utterly consistent with that which I had said just before… Jeff also challenged my point that greed has always had a good ‘potential’ in the libertarians’ mind. Indeed, Adam Smith’s most powerful point was that free markets serve the public interest by harnessing greed and pressing it into society’s service. Jeff reacted to this by saying that Smith never mentioned the word greed. True, though irrelevant. For Smith’s point can be faithfully summed up by the expression ‘private vices, public virtues’; where the dominant vice in question is none other than greed.
       At that point Philip asked me about, what else, Greece. No need to add to what I said on this sad topic. Oliver, in a bid to confirm my view that libertarians are just as predictable as unreconstructed Marxists, added his bob’s worth: The euro will collapse because all currency unions go that way; drawing the parallel with the 19th Century’s Latin Union. Of course he is wrong, though Europe is currently conspiring to prove him right.
       Philip turned to Jeff with a question about a particular story in his book featuring an American financier who was a pioneer of deregulation but who, at the same time, was rescued by the ever generous taxpayer thrice. An early precursor to what I call Bankrutpocracy…
       As an aside, Jeff agreed with me on the importance of instituting a Surplus Recycling Mechanism both globally and in Europe.
       Philip then asked me to elaborate on my account of how capitalism placed finance at the very beginning of the chain that leads to production, following the Enclosures in Britain. Since then debt and debt crises became indispensible to capitalism. Any comments on that story of mine?
       Oliver lamented that we do not have the kind of capitalism that Adam Smith and Friedrich von Hayek imagined. That we live under crony capitalism. My retort was that Smith’s and Hayek’s capitalism never existed because it cannot exist. That libertarian political economics bears as much of a relationship with really existing capitalism as Marxism with Soviet Communism: none whatsoever.
       Jeff was then asked to talk about another interesting character in his book. Which he did.
       Finally, Philip gave me a chance to narrate the way in which, during the Global Minotaur era (1970s to 2008), the rest of the world voluntarily sent its capital to New York, resembling a latter day form of tribute that kept, by recycling the world’s surpluses and deficits, the world economy going – until, that is, Wall Street’s private money burned out mortally wounding the Minotaur and causing a mountain of debt on the one side and a glut of savings on the other. The causes of our current mutating, ever evolving, Crisis.
All in all, I enjoyed participating in this debate hugely. Thanks Philip and the LNL team…
The Global Minotaur versus the Age of Greed: A debate on the ABC Radio National’s Late Night Live, chaired by Philip Adams
19
SEP
Since the late 80s one of my daily pleasures has been to listen to Late Night Live, the ABC Radio National’s daily program in which Philip Adams, the renowned Australian film maker, author and public intellectual reviews the current political, social and cultural climate, talks to authors about a great variety of interesting books (that he has in fact read) and, generally, sets out to create a little oasis within his audience’s lives in which the cacophony of life yields to nuanced and critical thinking.
So, imagine my joy when last Wednesday (14th September) I was invited on the program to partake of a tripartite debate, chaired by Philip, on what caused theCrash of 2008 and its continuing aftermath. The other two interlocutors were Jeff Madrick, editor of a magazine called Challenge, visiting professor of humanities at the Cooper Union and author of Age of Greed (Random House), and Oliver Marc Hartwich, research fellow at the libertarian Centre for Independent Studies. The program’s, and the debate’s, stated purpose was to pit Jeff’s explanation of the Crash of 2008, as developed in his Age of Greed, with the one I present in The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy (Zed Books).
You can listen to the 45 minute debate that resulted here. Below I annotate our debate, giving myself the opportunity we all crave, ex post, to add arguments that I was either too constrained (by time limitations) or too slow to think of on the hoof (my excuse being that I participated in that debate by phone, sitting in a Dublin hotel, straining to hear the challenging ideas bandied about on the other side of a substandard phone line…)
Notes on the debate
       Jeff kicked off the discussion by making the valid point that greed and financialisation exploded after the 1970s.
       Philip then turned to Oliver who took us back to the Old Testament suggesting that, while greed is a defining feature of human beings, the problem is how to tame it.
       Soon after, Philip asked me to outline my Global Minotaur’s explanatory thrust, with particular emphasis on the merits of my Minotaur metaphor. No comment here. You make of it what you will.
       Jeff made a point of objecting to my preceding mini presentation by saying that he is wary of metaphors and that in his work he tries hard to write without using them. He argued that one should eschew metaphor, suggesting that when one begins to “put detail to the metaphor” the metaphor begins to look less impressive. Before referring to two other important points that Jeff raised, let me take this opportunity to retort that Jeff was probably unaware of the painstaking manner in which my metaphor has been ‘detailed’ not only in the book itself but also in another volume entitled Modern Political Economics: Making sense of the post-2008 world(published earlier this summer by Routledge), jointly authored by Joseph Halevi, Nicholas Theocarakis and myself. In its 500 pages the reader will find a great deal of detail supporting the Global Minotaur metaphor. Granted that ‘easy’ metaphors, unsupported by painstaking research, can be extremely dangerous (as Jeff implied), the Global Minotaur is not one of them!
       Jeff also disputed two factual points that I raised. First, he disputed that the US had a rational plan for managing the global economy after the war, adding that that he only wished it were true. Well, it was true. The Bretton Woods era was a period during which the US run the global economy according to an ambitious, well thought out, blueprint for recycling US surpluses to Japan and Western Europe (Germany in particular). And that when Global Plan (as I refer to it in my book) broke down, some extremely astute US policymakers (Paul Volcker being one of them) engineered a “controlled disintegration of the world economy” for the purposes of reversing the flow of trade and capital surpluses in a manner that allowed the US to retain its hegemony while running increasing trade and budget deficits. The resulting tsunami of capital flows into Wall Street was the foundation on which Wall Street built its audacious financialisation that gave greed a new lease of life and turned greed into a form of ideology.
       Jeff’s second objection was that US trade surpluses in the 1950s were small and relatively unimportant. By this, he disputed my point that the Global Plan entailed surplus recycling between the US and Japan-Germany. It is of course true that immediately after the war US trade surpluses were a small portion of US national income. How could it be otherwise when the rest of the world was still immersed in the war’s ashes and had hardly had a chance to rise from the ruins? This is precisely why the New Dealers were keen to recycle US surpluses to Japan and Germany: to prop them up so that, in due course, Asia and Europe would become capable of absorbing increasing quantities of American exports. And this is exactly what happened. Indeed, within a decade, by 1957, US trade to Asia and Europe had quadrupled, thus creating a rising tide of demand for America’s manufacturing industry. Its importance should not be underestimated.
       Oliver came in at that point arguing that world capitalism lost its ‘anchor’ in 1971, when the Global Plan died. He put forward a standard libertarian point that the moment money was divorced from gold the scene was set for the bubble that led to 2008. No need to say much more on this, save to comment that such views seriously misunderstand the character of modern capitalism: Tying up oligopoly capitalism to the quantity of money (via a link with the almost fixed quantity of gold) is equivalent to inviting the sort of trouble that befell the world economy in 1929. Metal fetishism is an illusion that some turn to in times of trouble, like our present era, but does nothing to throw light on the reality we are facing.
       Next I was given a chance to reply to Jeff’s hypothesis: Greed, unregulated bankers, Central Bank policies etc all played a role in bringing 2008 about. Sure. But the question we ought to ask (I argued) should go deeper: What is it that gave greed a new, toxic twist? How come the authorities stood aside, allowing the banks to run riot? The Global Minotaur answers these questions.
       Oliver rightly lambasted economic theory for misunderstanding really existing capitalism. What he seems to have overlooked however was that economics’ failure was a motivated one. That the less relevant economic models are to really existing capitalism the greater the academic and political discursive power of the economists who conjure them up.
       Jeff re-entered the conversation accusing me, and possibly Oliver, of historical myopia. I have no idea why he said that since he immediately went into a narrative that was utterly consistent with that which I had said just before… Jeff also challenged my point that greed has always had a good ‘potential’ in the libertarians’ mind. Indeed, Adam Smith’s most powerful point was that free markets serve the public interest by harnessing greed and pressing it into society’s service. Jeff reacted to this by saying that Smith never mentioned the word greed. True, though irrelevant. For Smith’s point can be faithfully summed up by the expression ‘private vices, public virtues’; where the dominant vice in question is none other than greed.
       At that point Philip asked me about, what else, Greece. No need to add to what I said on this sad topic. Oliver, in a bid to confirm my view that libertarians are just as predictable as unreconstructed Marxists, added his bob’s worth: The euro will collapse because all currency unions go that way; drawing the parallel with the 19th Century’s Latin Union. Of course he is wrong, though Europe is currently conspiring to prove him right.
       Philip turned to Jeff with a question about a particular story in his book featuring an American financier who was a pioneer of deregulation but who, at the same time, was rescued by the ever generous taxpayer thrice. An early precursor to what I call Bankrutpocracy…
       As an aside, Jeff agreed with me on the importance of instituting a Surplus Recycling Mechanism both globally and in Europe.
       Philip then asked me to elaborate on my account of how capitalism placed finance at the very beginning of the chain that leads to production, following the Enclosures in Britain. Since then debt and debt crises became indispensible to capitalism. Any comments on that story of mine?
       Oliver lamented that we do not have the kind of capitalism that Adam Smith and Friedrich von Hayek imagined. That we live under crony capitalism. My retort was that Smith’s and Hayek’s capitalism never existed because it cannot exist. That libertarian political economics bears as much of a relationship with really existing capitalism as Marxism with Soviet Communism: none whatsoever.
       Jeff was then asked to talk about another interesting character in his book. Which he did.
       Finally, Philip gave me a chance to narrate the way in which, during the Global Minotaur era (1970s to 2008), the rest of the world voluntarily sent its capital to New York, resembling a latter day form of tribute that kept, by recycling the world’s surpluses and deficits, the world economy going – until, that is, Wall Street’s private money burned out mortally wounding the Minotaur and causing a mountain of debt on the one side and a glut of savings on the other. The causes of our current mutating, ever evolving, Crisis.
All in all, I enjoyed participating in this debate hugely. Thanks Philip and the LNL team…
End the European Blame Game! Keynote at the British Foreign Press Association’s 2011 Awards Night
24
NOV
The Foreign Press Association, London, paid me the compliment of inviting me to deliver a keynote speech at its 2011 Annual Awards Night. Here is the text of my talk (kindly transcribed by a journalist that wishes to remain anonymous).
Ladies and Gentlemen,
You can tell from my wide smile that it is a distinct honour and a great pleasure to be part of this celebration of fine journalism – even if my role tonight is to serve as a living reminder of our world’s steady descent into generalised austerity.
I knew that this would be my sad role the moment I read the list of recent after-dinner speakers:
The Prince of Asturias
The Prince of Wales
The Mayor of London
A Greek economist!!!
A sharp drop of standards that a cynic would interpret as the Foreign Press Association’s fall from grace. However, I am quite convinced, that my invitation to be a keynote speaker tonight is a deliberate ploy by the Foreign Press Association to educate the public to, and to remind its members of, the sad and deteriorating state of our world.
Until two years ago, ladies and gentlemen, I was just a second rate economist. Now, I am considered a first rate Greek economist. A most dubious promotion, allow me to say.
Nevertheless, I must tell you that I do not mind at all appearing in front of you as the personification of failure. After all yours is a country that knows how to appreciate grand failure – a nation that has cherished Eddie the Eagle, developed a soft spot for Paul Gascoigne, even tolerated Nick Clegg was always quite likely to lend me an ear.
Truth be told, I would not be here now if my country, Greece, had not imploded and if Europe had not indulged in its current reverse alchemy, turning gold into lead – daily.
The curious thing about Crises, especially when afflicting foreigners, is that they can be a great boon for those in need of self-confirmation.
·         When the City of London imploded, along with Wall Street, we on the continent smiled smugly: The anglo-celts had gotten their comeuppance, we thought.
·         When Greece went belly up, soon to be followed by the popping corn kernels of Ireland, Portugal and then Italy and Spain, you Brits congratulated yourselves for having kept the Queen on your banknotes, rather than trade her for the non-existent bridges and gates of our euro notes.
·         Leftie economists saw the whole debacle as confirmation that free market capitalism cannot be civilised and, indeed, that it does not work.
·         Based on precisely the same facts, free marketeers concluded that it was all the fault of government getting in the markets’ otherwise brilliant ways.
In short, Crises confirm everyone’s prejudices, locking us ever more firmly into the same mindset that produced them in the first place.
Meanwhile, the human cost is piling up.
The result is that in my native Athens, in Dublin and in Cork, in Oporto and in Valencia, in mighty Germany and lovely Italy, countless people will go to bed tonight anxious, terrified – worried about how they will make ends meet in the morning. Speaking about Greece, the earthquake’s epicentre, I shall not bother you with standard macro statistics. Suffice to mention in passing the 50% increase in suicides, the quadrupling of the number of babies left at orphanages by despairing parents, the stories of young men who try to infect themselves with HIV in order to qualify for a small social security benefit, the old age pensioners who flock to the Electricity Company not in order to pay their bills but to request that their electricity supply be terminated, unable to pay for it.
In short, ladies and gentlemen, the lights are literally going out in our cities.
And those who initially thought this was a Greek problem are realising now that it is no such thing. That we are all embroiled in a systemic crisis that began in 2008 and which has been mutating and migrating ever since, picking out the weak links first before proceeding to the stronger.
This is of course not the time to dwell into causes and remedies. I am so relieved that, tonight, I can take a break from outlining proposals for dealing with the Crisis. And to be able to relate my experience with the countless journalists with whom I have spoken over the past two years – visitors in Greece trying to make sense, on behalf of their audience, of the mess that used to be a proud country.
To begin with, let me say that the quality of most foreign journalists I encountered surpassed my, admittedly, low expectations. In sharp contrast to Greek journalists, you were thoughtful, sensitive and had a keen eye trained on the reality on the ground. We Greeks may deserve our politicians but, at the same time, we do not deserve our appalling journalism.
Having praised you, I would like to present you with two pieces of advice, if I may. When trying to make sense of this Crisis, especially when abroad, you must avoid the fallacy of aggregation and the error of generalisation:
·         First, the fallacy of aggregation: Things rarely add up! What may work for one household, one firm, one sector, usually does not work for a large economy. If I tighten my belt during hard times, I shall overcome. If we all do likewise, throughout Europe, we shall all descend into greater debt and deeper misery.
·         Secondly, the error of generalisation: There is, ladies and gentlemen, no such thing as The Greeks or The Germans or, for that matter, The Brits. We are all individuals, as Brian famously struggled to convince his self appointed disciples. And we have more diversity among our people than we have differences across our nations.
1929 should have taught us two things:
·         First, that unless governments coordinate action effectively and create new institutions for integrating their societies further, a banking-cum-debt-cum-real economy crisis destroys the common currency of the era. The Gold Standard then, the euro today.
·         Secondly, that such a deep crisis engenders a Hobbesian war of all against all that starts when we utter sentences beginning with “The Greeks do this” or “The Germans think that”.
Our very own crisis, that started in 2008 and is continuing with a vengeance, must teach us a fresh lesson:
Rather than play the blame-game, we might as well accept that everyone is to blame. If you want, it is time to acknowledge that We Are All Greeks Now.Including the Germans!
This is not to say that some do not bear a larger share of the responsibility than others. We Greeks paid ourselves more than we could afford. Tried to avoid paying taxes. Over-borrowed. And produced little to account for our life-style. A whole nation tried to behave like the City of London’s bankers! Only the Greek state could not give its citizens knighthoods and could not stop many of them from actually moving to the greatest tax haven there is: London.
Seriously now, the blame-game is the worst legacy of this crisis. It dulls our reason and does to us that which hyper-activity inflicts upon those caught in quicksand.
Lastly, I note with satisfaction that the organisers invited tonight a Greek and a German. I submit to you that if we manage to drop the penchant for the blame-game, and instead shine the bright light of reason on the true causes of our crisis, we shall soon see that the problematic euro coin has two sides that are equally problematic. A Greek side but also a German one. For in the same way that Greece cannot seriously expect to be perpetually in deficit, Germany cannot seriously believe that it can escape the global crisis by expanding its surplusesvis-á-vis the deficit countries while insisting that the deficit countries eliminate cut their deficits.
It is time, ladies and gentlemen, to do something that Europeans have never done before – and I include you Brits in this. To look into each others’ eyes in the midst of a continental, a global crisis, and stop searching for someone to blame, to belittle, to despise. To look into each others’ eyes and, suddenly, recognise a partner with whom to plot a course out of our collective mess.
Hopefully, you will be around when this happens to report it in full technicolour and with words that warm the heart and inspire the mind.
Thank you.
The Globalising Wall
Fences have a longstanding relation both with liberal individualism and imperialism. But it was only after 1945 that walls took over from fences, with an unprecedented determination to divide. They spread like a bushfire from Berlin to Palestine, from the tablelands of Kashmir to the villages of Cyprus, from the Korean peninsula to the streets of Belfast. When the Cold War ended, we were told to expect their collapse. Instead, they grew taller, more impenetrable, longer. They began resembling a mighty Wall. They globalised. Their spectre is upon us from the West Bank to Kosovo, from the streets of Baghdad to the favelas of Rio, from the killing fields of old Ethiopia to the US-Mexico border. Globalisation was meant as their death knell, only it ended up strengthening them.
About

Thank you for visiting my blog. A short introduction seems in order. So, let me begin with a confession: I am a Professor of Economics who has never really trained as an economist. But let’s take things one at a time.
I was born in Athens back in the mists of 1961. Greece was, at the time, struggling to shed the post-civil war veil of totalitarianism. Alas, those hopes were dashed after a brief period of hope and promise. So, by the time I was six, in April of 1967, a military coup d’ etat plunged us all into the depths of a hideous neo-Nazi dictatorship. Those bleak days remain with me. They endowed me with a sense of what it means to be both unfree and, at once, convinced that the possibilities for progress and improvement are endless. The dictatorship collapsed when I was at junior high school. This meant that the enthusiasm and political renaissance that followed the junta’s collapse coincided with my coming of age. It was to prove a significant factor in the way that I resisted conversion to the ways of anglosaxon cynicism in the years to come.
When the time came to decide on my post-secondary education, around 1976, the prospect of another dictatorship haδ not been erased. Given that students were the first and foremost targets of the military and paramilitary forces, my parents determined that it was too risky for me to stay on in Greece and attend University there. So, off I went, in 1978, to study in Britain. My initial urge was to study physics but I soon came to the conclusion that the lingua franca of political discourse was economics. Thus, I enrolled at the University of Essex to study the dismal science. However, within weeks of lectures I was aghast at the content of my textbooks and the inane musings of my lecturers. Quite clearly economics was only interested in putting together simplistic mathematical models. Worse still, the mathematics utilised were third rate and, consequently, the economic thinking that emanated from it was atrocious. In short shrift I changed my enrolment from the economics to the mathematics school, thinking that if I am going to be reading maths I might as well read proper maths. After graduating from Essex, I moved to the University of Birmingham where I read toward an MSc in Mathematical Statistics. By that stage I was convinced that my escape from economics had been clean and irreversible. How deluded that conviction was! When looking for a thesis topic, I stumbled upon a piece of econometrics (a statistical test of some economic model of industrial disputes) that angered me so much with its methodological sloppiness that I set out to demolish it. That was the trap and I fell right into it. From that moment onwards, a series of anti-economic treatises followed, a Phd in… Economics and, naturally, a career in exclusively Economics Departments, in every one of which I enjoyed debunking that which my colleagues considered to be legitimate ‘science’.
Between 1982 and 1988 I taught at the University of Essex, the University of East Anglia and the University of Cambridge. My break from Britain occurred in 1987 on the night of Mrs Thatcher’s third election victory. It was too much to bear. Soon I started planning my escape. But where to? Continental Europe was closed to non-native academics, at that time, and Greece awaited with open arms – to enlist me into its conscript army. No, thanks, I thought to myself. Even Thatcherism is preferrable. My break came shortly after when, out of the blue, I was invited to take up a lectureship at the University of Sydney. And so the die was cast. From 1988 to 2000 I lived and worked in Sydney, with short stints at the University of Glasgow (and an even shorter one at the Université Catholique de Louvain). In 2000 a combination of nostalgia and abhorrence of the concervative turn of the land down under (under the government of that awful little man, John Howard) led me to return to Greece. Since then I have been teaching political economics at the University of Athens. Besides surviving life in a country that is very tough on those who are not used to working in an institutional setting where everything needs to be created from scratch, I feel a sense of accomplishment from having set up an innovative, progressive, pluralist, international Doctoral Program in Economics, also known as UADPhilEcon.
My next pivotal moment, and the last I shall be bothering you with, is the year 2005. For it was in that August that my extremely young daughter, Xenia, was taken away from me, leaving me behind in a state of shock (she has been living since then in Sydney, thus guaranteeing the longevity of my relationship with Sydney). As luck would have it, a few months later, I was saved from near oblivion by Danae Stratou with whom, ever since, we have been sharing life, work and a myriad of projects. An artistic-cum-political project called CUT- 7 dividing lines brought us together. That project evolved into another one called The Globalising Wall. The latest project to come out of this fortunate (for us) union is called www.vitalspace.org. Above all else, we are having fun doing the things that matter (to us).
Lastly, the Crash of 2008 and the subsequent metamorphoses of the crisis (in Europe and in the world at large) seem to have energised me no end. The very motivation behind this blog is to help in the dissemination of ideas and suggestions concerning the way we interpret and act upon our mad, sad and highly mysterious post-2008 era.
For those of you interested in some radio interviews and/or my published work, here is a whiff of it:

A selection of YV’s podcasts on the Greek economy:
   .   23rd October 2010, Doug Henwood interview on the euro crisis, Ireland and Greece (from 29th minute)
   .   15th September 2010, Doug Henwood interview on M. Lewis’ Vanity Fair article and the Greek crisis (from 30th minute)
   .   23th July 2010 BBC Radio 4, ‘The World Tonight’, On the Bank Stress Tests(from 10.45 min)
   .   27th May 2010 ABC Overnights (from the start)
   .   14th May 2010 BBC World Service ‘Europe Today’ – Naming doctors (from 3.45 min)
   .   14th May 2010 Citizen Radio – US (from 29.30 min) For the corresponding blog article click here.
   .   7th May ABC Radio News (from 2.10min)
   .   7th May ABC Television (from 1.29min)
   .   6th May 2010 BBC World Service News Hour (from 44min)
   .   6th May Europe Today – BBC World Service (from 27.40min)
   .   5th May 2010 ABC Radio National AM
   .   2nd May 2010 BBC Radio 5 Wake Up to Money
   .   27th April 2010 BBC World Service Business News
   .   23 April 2010 Radio Four World Tonight BBC’s Radio Four World Tonight Program (from 12.20min)
   .   31st March 2010 Mini debate on the BBC World Service Program ‘Business Daily’. Click here to listen (from the start)
   .   4th March 2010 – Doug Henwood PBS -New York (from 32.40min)
   .   8th October 2009 – Doug Henwood PBS – New York (from 8.05min)
FORTHCOMING BOOKS
       The Global Minotaur: The true causes and nature of the current economic crisis, London: Zed Books, October 2011
       Modern Political Economics: Making sense of the post-2008 world,London and New York: Routledge, with J. Halevi and N. Theocarakis, April 2011
PREVIOUSLY PUBLISHED BOOKS
       Game Theory: A Critical Text, London and New York: Routledge, 2004 with S. Hargreaves-Heap), 2004
       Foundations of Economics: A beginner’s companion, London and New York: Routledge, 1998
       Rational Conflict, Oxford: Blackwell Publishers, 1991
BOOKS IN GREEK
       Game Theory: The theory with the ambition to unify the social sciences(Θεωρία Παιγνίων: Η θεωρία που φιλοδοξεί να ενοποιήσει τις κοινωνικές επιστήμες), Athens: Gutenberg Press, 2008
       Political Economy: Economic theory in a critical light (Πολιτική Οικονομία: Η οικονομική θεωρία στο φως της κριτικής), Athens: Gutenberg Press, 2008
       Microeconomic Models of Partial and General Equilibrium (Μικροοικονομικά Υποδείγματα Μερικής και Γενικής Ισορροπίας), Athens: Gutenberg Press, 2005
ARTICLES:
       ‘Where the customers are always wrong: some thoughts on the societal impact of a non-pluralist economic education’, International Journal of Pluralism and Economics Education, 2009, 1, 46-57
       ‘Pristine Equations, Tainted Economics and the Postwar Economic Order’, presented on 10th April 2009 at the Cold War Politics and Social Science Workshop, Heyman Centre for the Humanities, Columbia University
       ‘Game Theory: Can it unify the social sciences?’, Organisational Studies, 2008, 29, 1255-77
       ‘Capitalism according to Evolutionary Game Theory: The impossibility of a sufficiently evolutionary account of historical change’, Science and Society, 2008, 72(1), 63-94
       ‘The bonds that impede: A model of the joint evolution of apathy and corruption’, Indian Economic Journal, 2006, 54, 84-103
       ‘Rational Rules of Thumb in Finite Dynamic Games: N-person backward induction with inconsistently aligned beliefs and full rationality’, American Journal of Applied Science, 2005, 2, 57-65
       ‘Toward a Theory of Solidarity’, Erkenntnis, 59, 157-188 (with C. Arnsperger), 2003
       ‘The Global Minotaur’, Monthly Review, 55 (July-August), 56-74, 2003 (with J. Halevi)
       ‘Some experimental results on discrimination, co-operation and perceptions of fairness’, The Economic Journal, 112, 678-702 (with S. Hargreaves-Heap). 2002
       ‘Deconstructing Homo Economicus? Reflections on an encounter between postmodernity and neoclassical economics’, Journal of Economic Methodology, 9, 389-396, 2002
       ‘Against Equality’, Science and Society, 66,448-72, 2002
       ‘Central Bank Independence and the Value of Ambiguity: A three player reputational game’, Rivista Internazionale di Scienze Economiche e Commerciali, 47, 531-57 (with P. Gangopaydhya). 2000

Gall Darn It we had 10 years left 5 years ago?