From Portside <[email protected]>
Subject 'There is a Glimmer of Hope': Economists on Coronavirus and Capitalism
Date May 15, 2020 5:05 AM
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[ One thing seems clear: we are not going back to where we were,
to business as usual. Greeces former finance minister Yanis Varoufakis
and Irish economist David McWilliams on the hope for a global new
deal.] [[link removed]]

'THERE IS A GLIMMER OF HOPE': ECONOMISTS ON CORONAVIRUS AND
CAPITALISM   [[link removed]]

 

Yanis Varoufakis and David McWilliams
May 6, 2020
The Guardian
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_ One thing seems clear: we are not going back to where we were, to
business as usual. Greece's former finance minister Yanis Varoufakis
and Irish economist David McWilliams on the hope for a global new
deal. _

Commuters wearing face masks arrive at Termini station in Rome as
Italy returned to work on May 4.. , Photograph: Antonio Masiello/Getty
Images // The Guardian

 

DAVID MCWILLIAMS: I think it is fair to say that capitalism – in
the course of this unprecedented crisis – has been suspended. We are
not going back to where we were, to business as usual. The state has
come back, and this episode will not be forgotten by the electorate. I
don’t know where we are going, but one thing seems clear: we are not
going back.

YANIS VAROUFAKIS: I like this phrase: capitalism has been suspended.
The last time capitalism was suspended in the west was during the
second world war, with the advent of the war economy: a command
economy that fixed prices. The war economy marked the transcendence of
the standard capitalist model.

But what we see now is not so much the suspension of capitalism. The
rules of capitalism may have been suspended – all those sacrosanct
policies are gone, the neat separation of fiscal and monetary policy
is gone, the idea that public debt is a bad thing is gone.

But the institutions that are necessary to build “the war economy
without war” so to speak – to suspend and transcend capitalism –
those have not been put in place. There is a profound difference
between saying: “It’s all going to shit, so we don’t expect you
to stick to the rules,” and saying: “The rules themselves have
changed, and we must make new ones to prevent an economic collapse.”
All this talk of quantitative easing
[[link removed]] by the
European Central Bank suggests that we remain very far from a war
economy mindset.

DM: This is a familiar category error in Europe
[[link removed]]. If you are basing
your economic policy on the willingness of people who are too
traumatised and sick to borrow – which is the core logic of
quantitative easing – then you have a very serious problem. A common
image of quantitative easing is the hose: a huge monetary hose, with
water gushing out to stop the fire of crisis. But the hose of monetary
policy is limited by this little valve called the banks, a little
valve called the credit committee, a little valve called the
“willingness of business to borrow money”. And ultimately, that
hose of money becomes a trickle – and even that trickle stands to
benefit the wealthy much more than the poor.

So I take your point that despite the suspension of the rules, the
infrastructure remains in place. But people across Europe are now
saying: “Hey, there is an alternative.” This second phase will be
about how we move ahead in rethinking capitalism, in rethinking
finance, rethinking how economies work and for whom – potentially
toward a new Bretton Woods-style settlement
[[link removed]] for
the entire global economy.

So that’s where we are: in the first year of the third decade of the
21st century. Looking out at the next decade, armed with history as
well as economics, what do you think the global and European economy
will look like?

YV: We are sitting on a saddle point, prepared to tip in either
direction. It is utterly indeterminate which of the two directions we
travel.

Let us start with the positive scenario. It builds from your point
about the prospects for a new Bretton Woods – with its particular
manifestation in the European Union.

The fact that Germany is now in the same pile of shit as the rest of
us offers a glimmer of hope

If we are going to have continental consolidation, what should it look
like? It would not be a federation, because – even though that is
more necessary than ever – it is less likely than ever, because the
centrifugal forces of the coronavirus crisis, the migration crisis,
and the euro crisis are pulling us apart. But the alternative is to
deploy the existing [EU] institutions in a way that can simulate a
federated Europe, and we can do this tomorrow, if we so choose: to
provide immediate cash to all those who are struggling in poverty, to
invest in the green transition
[[link removed]].

There is a glimmer of hope here, because there is a profound
difference between 2020 and 2010. Back then, when Ireland and Greece
went belly up, there were remarkable dissimilarities between what our
countries were experiencing and what Germany was experiencing, what
Holland was experiencing. Today, Germany’s industrial machine is
broken – and was broken long before coronavirus hit. Two main
industries – automobiles and machine tooling – were already in
serious trouble. So the fact that Germany is now in the same pile of
shit as the rest of us offers a glimmer of hope that they might say:
what should we do? It’s no longer: “Your problem: here’s
the Troika
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DM: And we will send you the bill as well! So that’s the positive
scenario. The interruption of “business as usual” gives way to new
policies and new possibilities for Europe and beyond. What’s the
other option?

YV: Well, we humans – and we Europeans, in particular – love to
miss fantastic opportunities and end up with dystopian outcomes
instead. It’s very likely that we will encounter the same
recalcitrance by the same set of European ordoliberals
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who will keep putting roadblocks
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the way of moves toward a genuine, democratic federalism.

DM: Obviously, such a roadblock will have a disproportionate impact
on the southern member states of the European Union. What do you think
the impact of this particular trauma will have on, say, Italy – a
founding member of the European Union, and a crucial part of
Europe’s emotional hinterland?

YV: Every time there is a crisis in Europe, Italian growth rates
fall. Every time there is a problem, Italy sinks deeper into
stagnation – with Salvini waiting
[[link removed]] in
the wings. If Frankfurt, Berlin, and Brussels fail again to move
toward the positive scenario, Italy – not just Italy, but all of
Europe’s most devastated regions – will move again toward the
neo-fascist right. In that case, all bets are off.

This is the endpoint of the negative scenario: a giant domino effect,
leading to the disintegration of the European Union. Not that the EU
will cease to exist. Only that it will become irrelevant, like
the Commonwealth of Independent States
[[link removed]].

DM: Oh, I remember the Commonwealth of Independent States very well


YV: It still exists! It still has an office in Moscow. So the
negative scenario is that the European Union will become like the CIS.
And that will be music to the ears of the Trumps, Bolsonaros, and
Modis
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this world. We would move into a transactional, Hobbesian global
economy: nasty, brutish, and poor for the majority of people.

My sense is that the period when you could travel, engage, move, we
might have reached the end of that open period.

DM: When I was born in Ireland, the country was very poor. And then
it became quite wealthy, on the back of the European project, on the
back of Europe’s position in the global supply chain, and with a tax
policy that attracted lots and lots of capital. My sense is this model
might be gone, and this style of globalisation along with it. I fear
that the period when you could travel, engage, move – we might have
reached the end of that open period. People will say: “This virus
came from the cosmopolitan world, from the world of international
movement.” Whether it’s right or not, we might begin to blame
people. We know that the Black Death
[[link removed]] resulted
in ferocious antisemitism in Europe. People asked: “Who can we blame
for this?” And so they blamed the one community that was already in
isolation in the ghetto.

This is what terrifies me most, sitting here in the first year of the
third decade of the 21st century. What we saw before may come again,
and we turn back to Yeats: “Turning and turning in the widening gyre
/ The falcon cannot hear the falconer; / Things fall apart; the centre
cannot hold; / Mere anarchy is loosed upon the world.” I fear now,
unless we move quickly and in a new direction, the world that my kids
will inherit is going to turn very nasty, indeed. So it’s a clarion
call.

YV: The loudest call in a generation. I share all of your concern for
the future, although I must challenge the analysis on which it is
based. The openness that you describe has always gone hand in hand
with severe restriction
[[link removed]]:
Nafta and the US-Mexico border; freedom of movement in Europe
and Frontex [[link removed]] along the Mediterranean.
This is not a contradiction; it is the logic of a system that prizes
the movement of capital over the freedom of human beings.

_[Yanis Varoufakis [[link removed]] is the co-founder
of DiEM25 (Democracy in Europe Movement), former finance minister of
Greece and author of And the Weak Suffer What They Must? Europe's
Crisis and America's Economic Future._

_David McWilliams [[link removed]]
is one of Ireland's leading economists, broadcasters and commentators.
He is also the country's best-selling non-fiction author. He is often
cited has one of the first economists who didn't buy the hype
surrounding the Irish economic boom in the 1990s after predicting that
the economy would ultimately decline.]_

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