February 9, 2015, by criticalmoment

Syriza and the Global Minotaur

Abi Rhodes, taking our MA in Critical Theory and Politics, provides some much-needed perspective both on the situation in Greece and on a key text by Greece’s newly elected finance minister, Yanis Varoufakis, who now faces an enormous but crucial task in challenging the politics of autsterity in Europe ….

Syriza and the Global Minotaur

The beginning of 2015 has heralded the light at the end of Greece’s debt-laden tunnel with the triumph of Syriza. At the end of January this year, the anti-austerity party won the Greek general election with a pledge to renegotiate the enormous bailout that the country received in 2010 from the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission (EC). To date the Troika have loaned the Greek government €240 billion in order to try to restore fiscal balance following the financial crisis of 2008.

What the debt-restructuring programme has achieved, however, is to cripple the country’s economy. Conditions in Greece have become unbearable with cuts to employment and to wages, for those lucky enough to keep their jobs, resulting in the need for citizen-run medical care, food centres and social services. Syriza has promised to turn the tide by writing off of a sizeable part of Greece’s enormous debt, which is currently at 175% of its gross domestic product, and to hold a “European debt conference” in order to discuss the sustainable repayment of the remaining debt.

Leading these negotiations will be the newly appointed Finance Minster, Yanis Varoufakis, who has left his position as a Professor of Economic Theory at the University of Athens to take up the position. He has been a long-standing critic of the Troika and the bailout, describing the programme as ‘fiscal waterboarding’ that ‘wasn’t really a bailout but a debt-inflationary trap.’

In his book, The Global Minotaur, published in 2011, Yanis Varoufakis lays out a critical guide to the path that led us to the 2008 financial meltdown. He puts forward the argument that greed, casino-style gambling by bankers, ineffectual regulation of the banking industry and globalisation are not the only reasons why the world is in such a financial mess. Rather, these are simply the symptoms of a much greater crisis that began in 1929 and was later fuelled by the influx of capital to Wall Street, where the ‘Global Minotaur’ was born, from the 1980s onward.

As more money poured into Wall Street during the following decades, the banking industry has become stronger and stronger. This is in part due to the fact that ‘mountains of cash shifted from all over the world to Wall Street’, so companies and households had access to cheap equity and loans. At the same time that financial institutions were being strengthened by the ‘pseudo-scientific theory’ that the sector should be deregulated, the profitability of loans and equity was producing huge returns for investors. This led to the global banking industry devising more and more financial products designed to make a large profit, such as collateralised debt obligations (CDOs) and sub-prime mortgages (in the US).

When the bubble finally burst and the banks were left with toxic debt filling their balance sheets, governments were forced to step in to prevent a global financial collapse. It was in this way that the US bailed out its banks to the tune of $10 trillion and the reason why the Greece debt is so high. Varoufakis claims that most of the €240 billion loaned to his country was used to bail out the banking sector. Many of the people who have been left homeless and jobless thanks to the financial collapse are disgruntled, and rightly so. A system that can bail out those who recklessly caused the global economy to fall to its knees whilst shunning those who work hard to make a living is surely a rotten one.

According to Yanis Varoufakis, a social system that is run by bankrupt banks is to be called a bankruptocracy (or ptocho-trapezocracy in Greek), and he tells us that this is the system we are facing today. But Syriza’s win in last month’s election has boosted the belief that times are changing and injected hope into the notion that anti-austerity politics can prevail. The publishers of The Global Minotaur, Zed Books, have released a free eBook by the author this week entitled Europe After the Minotaur, which outlines how Varoufakis believes that Greece and Europe can move beyond cuts and austerity.

Yanis Varoufakis. The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy. London: Zed Books, 2011. 264 pp. £12.99

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