Capitalism will eat democracy unless we speak up Yanis Varoufakis
Democracy.
In the West,
we make a colossal mistake
taking it for granted.
We see democracy
not as the most fragile
of flowers that it really is,
but we see it as part
of our society’s furniture.
We tend to think of it
as an intransigent given.
We mistakenly believe that capitalism
begets inevitably democracy.
It doesn’t.
Singapore’s Lee Kuan Yew
and his great imitators in Beijing
have demonstrated beyond reasonable doubt
that it is perfectly possible
to have a flourishing capitalism,
spectacular growth,
while politics remains democracy-free.
Indeed, democracy is receding
in our neck of the woods,
here in Europe.
Earlier this year,
while I was representing Greece –
the newly elected Greek government –
in the Eurogroup as its Finance Minister,
I was told in no uncertain terms
that our nation’s democratic process –
our elections –
could not be allowed to interfere
with economic policies
that were being implemented in Greece.
At that moment,
I felt that there could be no greater
vindication of Lee Kuan Yew,
or the Chinese Communist Party,
indeed of some recalcitrant
friends of mine who kept telling me
that democracy would be banned
if it ever threatened to change anything.
Tonight, here, I want to present to you
an economic case
for an authentic democracy.
I want to ask you
to join me in believing again
that Lee Kuan Yew,
the Chinese Communist Party
and indeed the Eurogroup
are wrong in believing
that we can dispense with democracy –
that we need an authentic,
boisterous democracy.
And without democracy,
our societies will be nastier,
our future bleak
and our great, new technologies wasted.
Speaking of waste,
allow me to point out
an interesting paradox
that is threatening
our economies as we speak.
I call it the twin peaks paradox.
One peak you understand –
you know it, you recognize it –
is the mountain of debts
that has been casting a long shadow
over the United States,
Europe, the whole world.
We all recognize the mountain of debts.
But few people discern its twin.
A mountain of idle cash
belonging to rich savers
and to corporations,
too terrified to invest it
into the productive activities
that can generate the incomes
from which you can extinguish
the mountain of debts
and which can produce all those things
that humanity desperately needs,
like green energy.
Now let me give you two numbers.
Over the last three months,
in the United States,
in Britain and in the Eurozone,
we have invested, collectively,
3.4 trillion dollars
on all the wealth-producing goods –
things like industrial plants, machinery,
office blocks, schools,
roads, railways, machinery,
and so on and so forth.
$3.4 trillion sounds like a lot of money
until you compare it to the $5.1 trillion
that has been slushing around
in the same countries,
in our financial institutions,
doing absolutely nothing
during the same period
except inflating stock exchanges
and bidding up house prices.
So a mountain of debt
and a mountain of idle cash
form twin peaks,
failing to cancel each other out
through the normal
operation of the markets.
The result is stagnant wages,
more than a quarter of 25- to 54-year-olds
in America, in Japan and in Europe
out of work.
And consequently, low aggregate demand,
which in a never-ending cycle,
reinforces the pessimism of the investors,
who, fearing low demand,
reproduce it by not investing –
exactly like Oedipus' father,
who, terrified
by the prophecy of the oracle
that his son would grow up to kill him,
unwittingly engineered the conditions
that ensured that Oedipus,
his son, would kill him.
This is my quarrel with capitalism.
Its gross wastefulness,
all this idle cash,
should be energized to improve lives,
to develop human talents,
and indeed to finance
all these technologies,
green technologies,
which are absolutely essential
for saving planet Earth.
Am I right in believing
that democracy might be the answer?
I believe so,
but before we move on,
what do we mean by democracy?
Aristotle defined democracy
as the constitution
in which the free and the poor,
being in the majority, control government.
Now, of course Athenian democracy
excluded too many.
Women, migrants and,
of course, the slaves.
But it would be a mistake
to dismiss the significance
of ancient Athenian democracy
on the basis of whom it excluded.
What was more pertinent,
and continues to be so
about ancient Athenian democracy,
was the inclusion of the working poor,
who not only acquired
the right to free speech,
but more importantly, crucially,
they acquired the rights
to political judgments
that were afforded equal weight
in the decision-making
concerning matters of state.
Now, of course, Athenian
democracy didn’t last long.
Like a candle that burns brightly,
it burned out quickly.
And indeed,
our liberal democracies today
do not have their roots in ancient Athens.
They have their roots in the Magna Carta,
in the 1688 Glorious Revolution,
indeed in the American constitution.
Whereas Athenian democracy
was focusing on the masterless citizen
and empowering the working poor,
our liberal democracies are founded
on the Magna Carta tradition,
which was, after all,
a charter for masters.
And indeed, liberal democracy
only surfaced when it was possible
to separate fully the political sphere
from the economic sphere,
so as to confine the democratic process
fully in the political sphere,
leaving the economic sphere –
the corporate world, if you want –
as a democracy-free zone.
Now, in our democracies today,
this separation of the economic
from the political sphere,
the moment it started happening,
it gave rise to an inexorable,
epic struggle between the two,
with the economic sphere
colonizing the political sphere,
eating into its power.
Have you wondered why politicians
are not what they used to be?
It’s not because their DNA
has degenerated.
(Laughter)
It is rather because one can be
in government today and not in power,
because power has migrated
from the political to the economic sphere,
which is separate.
Indeed,
I spoke about my quarrel
with capitalism.
If you think about it,
it is a little bit like
a population of predators,
that are so successful in decimating
the prey that they must feed on,
that in the end they starve.
Similarly,
the economic sphere has been colonizing
and cannibalizing the political sphere
to such an extent
that it is undermining itself,
causing economic crisis.
Corporate power is increasing,
political goods are devaluing,
inequality is rising,
aggregate demand is falling
and CEOs of corporations are too scared
to invest the cash of their corporations.
So the more capitalism succeeds
in taking the demos out of democracy,
the taller the twin peaks
and the greater the waste
of human resources
and humanity’s wealth.
Clearly, if this is right,
we must reunite the political
and economic spheres
and better do it
with a demos being in control,
like in ancient Athens
except without the slaves
or the exclusion of women and migrants.
Now, this is not an original idea.
The Marxist left
had that idea 100 years ago
and it didn’t go very well, did it?
The lesson that we learned
from the Soviet debacle
is that only by a miracle
will the working poor be reempowered,
as they were in ancient Athens,
without creating new forms
of brutality and waste.
But there is a solution:
eliminate the working poor.
Capitalism’s doing it
by replacing low-wage workers
with automata, androids, robots.
The problem is
that as long as the economic
and the political spheres are separate,
automation makes the twin peaks taller,
the waste loftier
and the social conflicts deeper,
including –
soon, I believe –
in places like China.
So we need to reconfigure,
we need to reunite the economic
and the political spheres,
but we’d better do it
by democratizing the reunified sphere,
lest we end up with
a surveillance-mad hyperautocracy
that makes The Matrix, the movie,
look like a documentary.
(Laughter)
So the question is not
whether capitalism will survive
the technological innovations
it is spawning.
The more interesting question
is whether capitalism will be succeeded
by something resembling a Matrix dystopia
or something much closer
to a Star Trek-like society,
where machines serve the humans
and the humans expend their energies
exploring the universe
and indulging in long debates
about the meaning of life
in some ancient, Athenian-like,
high tech agora.
I think we can afford to be optimistic.
But what would it take,
what would it look like
to have this Star Trek-like utopia,
instead of the Matrix-like dystopia?
In practical terms,
allow me to share just briefly,
a couple of examples.
At the level of the enterprise,
imagine a capital market,
where you earn capital as you work,
and where your capital follows you
from one job to another,
from one company to another,
and the company –
whichever one you happen
to work at at that time –
is solely owned by those who happen
to work in it at that moment.
Then all income stems
from capital, from profits,
and the very concept
of wage labor becomes obsolete.
No more separation between those
who own but do not work in the company
and those who work
but do not own the company;
no more tug-of-war
between capital and labor;
no great gap between
investment and saving;
indeed, no towering twin peaks.
At the level of the global
political economy,
imagine for a moment
that our national currencies
have a free-floating exchange rate,
with a universal,
global, digital currency,
one that is issued
by the International Monetary Fund,
the G-20,
on behalf of all humanity.
And imagine further
that all international trade
is denominated in this currency –
let’s call it “the cosmos,”
in units of cosmos –
with every government agreeing
to be paying into a common fund
a sum of cosmos units proportional
to the country’s trade deficit,
or indeed to a country’s trade surplus.
And imagine that that fund is utilized
to invest in green technologies,
especially in parts of the world
where investment funding is scarce.
This is not a new idea.
It’s what, effectively,
John Maynard Keynes proposed
in 1944 at the Bretton Woods Conference.
The problem is
that back then, they didn’t have
the technology to implement it.
Now we do,
especially in the context
of a reunified political-economic sphere.
The world that I am describing to you
is simultaneously libertarian,
in that it prioritizes
empowered individuals,
Marxist,
since it will have confined
to the dustbin of history
the division between capital and labor,
and Keynesian,
global Keynesian.
But above all else,
it is a world in which we will be able
to imagine an authentic democracy.
Will such a world dawn?
Or shall we descend
into a Matrix-like dystopia?
The answer lies in the political choice
that we shall be making collectively.
It is our choice,
and we’d better make it democratically.
Thank you.
(Applause)
Bruno Giussani: Yanis …
It was you who described yourself
in your bios as a libertarian Marxist.
What is the relevance
of Marx’s analysis today?
Yanis Varoufakis: Well, if there was
any relevance in what I just said,
then Marx is relevant.
Because the whole point of reunifying
the political and economic is –
if we don’t do it,
then technological innovation
is going to create
such a massive fall in aggregate demand,
what Larry Summers
refers to as secular stagnation.
With this crisis migrating
from one part of the world,
as it is now,
it will destabilize
not only our democracies,
but even the emerging world that is not
that keen on liberal democracy.
So if this analysis holds water,
then Marx is absolutely relevant.
But so is Hayek,
that’s why I’m a libertarian Marxist,
and so is Keynes,
so that’s why I’m totally confused.
(Laughter)
BG: Indeed, and possibly we are too, now.
(Laughter)
(Applause)
YV: If you are not confused,
you are not thinking, OK?
BG: That’s a very, very Greek
philosopher kind of thing to say –
YV: That was Einstein, actually –
BG: During your talk
you mentioned Singapore and China,
and last night at the speaker dinner,
you expressed a pretty strong opinion
about how the West looks at China.
Would you like to share that?
YV: Well, there’s a great
degree of hypocrisy.
In our liberal democracies,
we have a semblance of democracy.
It’s because we have confined,
as I was saying in my talk,
democracy to the political sphere,
while leaving the one sphere
where all the action is –
the economic sphere –
a completely democracy-free zone.
In a sense,
if I am allowed to be provocative,
China today is closer to Britain
in the 19th century.
Because remember,
we tend to associate
liberalism with democracy –
that’s a mistake, historically.
Liberalism, liberal,
it’s like John Stuart Mill.
John Stuart Mill was particularly
skeptical about the democratic process.
So what you are seeing now in China
is a very similar process
to the one that we had in Britain
during the Industrial Revolution,
especially the transition
from the first to the second.
And to be castigating China
for doing that which the West did
in the 19th century,
smacks of hypocrisy.
BG: I am sure that many people here
are wondering about your experience
as the Finance Minister of Greece
earlier this year.
YV: I knew this was coming.
BG: Yes.
BG: Six months after,
how do you look back
at the first half of the year?
YV: Extremely exciting,
from a personal point of view,
and very disappointing,
because we had an opportunity
to reboot the Eurozone.
Not just Greece, the Eurozone.
To move away from the complacency
and the constant denial
that there was a massive –
and there is a massive
architectural fault line
going through the Eurozone,
which is threatening, massively,
the whole of the European Union process.
We had an opportunity
on the basis of the Greek program –
which by the way,
was the first program
to manifest that denial –
to put it right.
And, unfortunately,
the powers in the Eurozone,
in the Eurogroup,
chose to maintain denial.
But you know what happens.
This is the experience
of the Soviet Union.
When you try to keep alive
an economic system
that architecturally cannot survive,
through political will
and through authoritarianism,
you may succeed in prolonging it,
but when change happens
it happens very abruptly
and catastrophically.
BG: What kind of change
are you foreseeing?
YV: Well, there’s no doubt
that if we don’t change
the architecture of the Eurozone,
the Eurozone has no future.
BG: Did you make any mistakes
when you were Finance Minister?
YV: Every day.
BG: For example?
YV: Anybody who looks back –
(Applause)
No, but seriously.
If there’s any Minister of Finance,
or of anything else for that matter,
who tells you after six months in a job,
especially in such a stressful situation,
that they have made no mistake,
they’re dangerous people.
Of course I made mistakes.
The greatest mistake
was to sign the application
for the extension of a loan agreement
in the end of February.
I was imagining
that there was a genuine interest
on the side of the creditors
to find common ground.
And there wasn’t.
They were simply interested
in crushing our government,
just because they did not want
to have to deal with
the architectural fault lines
that were running through the Eurozone.
And because they didn’t want to admit
that for five years they were implementing
a catastrophic program in Greece.
We lost one-third of our nominal GDP.
This is worse than the Great Depression.
And no one has come clean
from the troika of lenders
that have been imposing this policy
to say, “This was a colossal mistake.”
BG: Despite all this,
and despite the aggressiveness
of the discussion,
you seem to be remaining
quite pro-European.
YV: Absolutely.
Look, my criticism
of the European Union and the Eurozone
comes from a person
who lives and breathes Europe.
My greatest fear is that
the Eurozone will not survive.
Because if it doesn’t,
the centrifugal forces
that will be unleashed
will be demonic,
and they will destroy the European Union.
And that will be catastrophic
not just for Europe
but for the whole global economy.
We are probably the largest
economy in the world.
And if we allow ourselves
to fall into a route
of the postmodern 1930’s,
which seems to me to be what we are doing,
then that will be detrimental
to the future of Europeans
and non-Europeans alike.
BG: We definitely hope
you are wrong on that point.
Yanis, thank you for coming to TED.
YV: Thank you.
(Applause)