July 19, 2015 12:11 pm
This is some week to be reviewing Yanis Varoufakis. Greece teeters on the edge of the eurozone, its fate a matter of ferocious dispute between European finance ministers. Until recently Varoufakis was one of them, by most accounts the most irritating and self-assured man in the room. Now he lurks venomously on the fringes, spitting disdain upon a rotten bargain that he believes will doom his nation to further misery, all of which he foretold.
Did he? That is what will preoccupy anyone perusing The Global Minotaur, the polemic he has updated for the latest leg of the crisis. Regrettably it is too uneven for any clear verdict, providing material enough only to confirm the prejudices of those on either side of the argument.
Those who see Greece as the nation-state equivalent of a welfare scrounger need only turn to the dismissive explanation of what ails Europe. Lethargic growth rates are blamed not on inflexible labour or munificent benefits payments but on “the way most of Europe was falling under the spell of German surpluses”. Forever making too much and consuming too little, the Germans doom the European project through their refusal to permit a “global surplus recycling mechanism” — a phrase so common it is given the acronym GSRM.
It is no exaggeration to describe this book as an attempt to model the world economy on GSRM. To those with a surplus, this will feel pernicious. They see it as a mark of virtue and thrift, not a lurking incubus of financial havoc. To German ears, any call to disperse surpluses smacks of a vagrant hustling loose change for his whisky budget. One can imagine Wolfgang Schäuble, German finance minister, warning: “Beware these Greeks bearing surplus recycling mechanisms.”
The “global minotaur” of the title is not Germany but the twin deficits of the US. Just as the bull-headed monster of Crete was fed a gory human tribute, so the US sat until recently at the heart of a system that siphoned capital towards Wall Street. This was then spewed out as economic demand — a GSRM of devilish force, keeping the world economy afloat for decades, but doomed to self-destruction. Along the way, this minotaur is deployed to explain everything that irks the leftist polemicist. The Wall Street mergers and acquisitions boom, the US defence budget, Walmart — all were just the creature’s “hand maidens”.
The destruction of the minotaur by a storm of its own making laid bare the instability of world demand. This is where the saga of Greece and the eurozone re-enters the tale. What Germany has built is a system of fixed exchange rates without any means of recycling surpluses towards deficit countries. Neither benign hegemon (like the US after the second world war) nor voracious, irresponsible minotaur, Germany squats sullenly atop the European economy, bargaining stagnation outside its borders for the security of its surplus.
Until last week, my reaction had mostly been to scatter “nonsense” in the margins, and list the bad history and cherry-picked examples that dot the pages of The Global Minotaur. Often it reads less as a work of economics, more a drawn-out conspiracy fable that just happens to use economic terms; the author, at times appearing confounded by supply and demand, is determined to see Machiavellian impulse behind every flow of capital. One of the mysteries the book clears up is how Varoufakis could so annoy Greece’s creditors that his departure proved essential for a deal.
Despite this, his basic diagnosis may be correct: without a rising tide of external demand, the eurozone has failed to disperse spending sufficiently within its borders, with crisis the inevitable result. Until the last phase of the Greek standoff, I thought this would be understood in Europe’s capitals, and that Athens’ final capitulation would be met with some recognition of the need for relief. Instead, there was only a further twist of the ratchet. Yes, reform is needed — and Varoufakis’ dismissal of structural solutions does Greece no favours. But the savagery of the German approach, akin to dragging a collapsed marathon runner back to the race, looks like an economic surplus used as a weapon of coercion. More such behaviour, and this will not be the last edition of Varoufakis’ conspiracy-minded book.
The writer is an FT leader writer
The Global Minotaur: America, Europe and the Future of the Global Economy, by Yanis Varoufakis , Zed Books (£8.99/ $12.95)