“If you can’t explain it to a six-year-old, you don’t understand it yourself” And Yanis Varoufakis understands economics.
It was a surprise to find that Varoufakis had published something that was not academic. And an even bigger surprise that the topic of said publication was the difficult task to explain to a young person, and probably layman to the subject, the intricacies of economics. But once one reads the book, one starts
to think that economics is much simpler than what the economists make us believe, and this book is a testament of that fact.
Yanis Varoufakis is an economist and Greek politician member of the SYRIZA party. He was the minister of finance during the Tsipras Government in 2015 that had to oversee the immense debt and tight European economic regulations. Like his political convictions or not, he is an acclaimed economist that knows the political implications of the EU in economics. Not only as a minister, but also as a lecturer with many years of teaching in the UK, Australia, Greece, and the US. The book that I want to present was written before 2015, before the Tsipras government, but after the 2008 crisis and during the time of the second bail out loan of 2012. This context should be taken into consideration.
Talking to my Daughter: A Brief History of Capitalism was first published in 2013 in its Greek Text and later published in English in 2017. The book takes the form of a father monologue to his daughter, beginning with a question from her “Why so much inequality, Dad?”. In an attempt to explain not only why but how humans arrived to inequality, Varoufakis starts to tell a story of capitalism. Beginning in Societies with markets and how they came to be, moving to Market Societies and later not only speculating, but also giving solutions to the future. Varoufakis exemplary explains a history of economics not based on the materialistic views of History.
Varoufakis brings a perspective of the History of Economics that could be agreed between Leftists and Right Wingers. I would go as far as to argue that two thirds of the book are less political than the last third that discusses the future of economics. Instead of writing about policies or economical decisions, Varoufakis tells us a History of an economical phenomenon, going from infrastructure, to currency, labour, banks, loans, the economical organizations of society and its shifts when moving from feudalism to capitalism, and the impact of technology in humans life’s and economics.
Why am I bringing this book to the table? There are 3 reasons:
1- I would like to bring a modern author of political and economical issues to The Politician. As much as I believe and appreciate the work of thinkers that came before us, there is no one better to testify for modern problems than modern authors.
2- I felt that bringing a modern author and his views was something that I had to do after writing my article on the European Commission Decisions. Specially because that article involved funding and thus progress after a crisis, and because the book I present is of an European author with an European perspective of history of economics and solutions for the future based on those economical models.
3- And, at last, because I believe that Varoufakis makes at least one point that could be of interest to everyone in politics. And even if some people do not agree with his solutions, Varoufakis is posing a very important question that is not being taken in consideration by most in politics.
For me, the strong points and most thought provoking of this book are two:
The first one is the notion that economics changed drastically when we changed from feudalism to capitalism. To Varoufakis, capitalism is like a car that has debt as fuel. And the debt that is mentioned is not necessarily loans. Varoufakis presents us the fact that once capitalism started moving its gears, the serfs that were working for the lords were either expelled out of their work and housing, or taken in as entrepreneurs. These would be forced entrepreneurs, that through their work would have to pay their rents, materials, and expect to make a profit to buy whatever they could not produce.
While in feudalism there was production and then a share of the production was taken by the lord, with capitalism the serf passed to a state in which he had to produce enough to pay his rent, and his rent was his debt, having to produce enough to guarantee his work as well as a roof over his head. Many of us would argue that there is nothing wrong with this, that this is the way that all of us grew up in and it is fine. Or some would even argue that it is still better to pay a fixed price for a property, and let the newly created entrepreneur maintain as much profit he could produce.
But the problem is not necessarily the model but its implications. If profit is necessary to pay the debt that exists to just maintain a business or living conditions, then producers may manipulate prices just so they can pay their debt. An example of this is given later in the book, with a reference to Steinbeck’s The Grapes of Wrath chapter in which the narrator details how farmers were throwing food away while many were dying of hunger. The producers were doing this so their prices would not plunge with the flooding of cheap products trying to increase demands. If their products would give less profit, then the farmers would not be able to pay their rent and thus not even maintain their business. So, throwing away the food was the correct action to maintain the possibility to pay their debt that is rent, production expenses etc.
The second point in this book that is noteworthy, and the point that is interesting to every quadrant in politics, is the question on what to do with the technological advancements and the progressive mechanization of labour. If you would like to read more about this topic I recommend Isaac Vitorino’s Article The Unfortunate Appeal of Inertia
Varoufakis points how it is much inevitable to stop or avoid the progressive mechanization of labour. But the question is what to do if we keep pushing humans out of the labour force. Is it cheaper for business owners to have machines instead of humans as labourers? Yes, it is. But this is removing a part of the money to go back into the economy. In other words, who will buy the products if there are less people in the working force?
It is a situation in which both business owners and workers lose. With more people in unemployment, less people will be able to buy the products, and thus decrease the profit for the business owners. And thus, the whole economy shrinks. The best example of an economy shrinking because people stop consuming is happening right now with the coronavirus pandemic. Unemployment on the rise and business are shutting down because less people feel confident in consuming.
For Varoufakis there is a solution: to attribute a percentage of the profit of the machines to every human. And thus, money would flow back in the economy.
It is obvious that people on the left applaud this solution and capitalists look at it with suspicion. But it is a problem that if capitalists ignore it will eventually lead to the implosion of their economic system, so solutions should be taken in consideration.
I would like to conclude by strongly recommending this book to our readers. It has something for everyone, from politics, to economics, markets, and History. For leftists, it is a welcomed addition to their ideas from a man that is on their side but is an economist, and for right wingers, it is a window into how the other side of politics thinks about economics.