2008 & 2020: The Combination That Changed Capitalism Forever [Yanis Varoufakis]

good morning everyone or afternoon in the case of our speaker I'm Rob Johnson the president of the Institute for new economic thinking I nest very excited and pleased to present Yanis varoufakis on the crash of 2008 the pandemic of 2020 and the combination that changed capitalism forever just as a matter of ground rules at the end of the presentation we'll have time for a QA please use the Q&A button at the bottom of your screen to send your questions Yanis is an economist philosopher author politician he's a member of the Hellenic Parliament secretary-general of may rod 25 and the co-founder of diem25 he was the former finance minister of Greece together with Bernie Sanders he co-founded Progressive International to unite progressives around the world he's taught economics at University of Cambridge University of Texas at Austin he's the author of several books including adults in the room and the weak suffer what they must and the global Minotaur my personal experience included a wonderful podcast with he and his wife just a few weeks ago that you can find in the economics and Beyond series and I will confess you can feel my heartfelt affection for this brave an imaginative man I remember back at our Paris conference when he and Joe Stiglitz and I had a conversation how moved I was both that he chose to support inet when so many things were on his shoulders but also with the courage and the illumination that he brings to bear throughout his professional and personal life be honest thank you for being with us here today Rob it's always a great pleasure to be with you and in proximity or through teleconferencing and support what I on it does because I it lots of things that need to be supported in this day and age thank you so much for the introduction and thank for asking me to talk about something that really you know touches me because today there is this tendency by almost everyone isn't that almost every commentator compares and contrasts the current disaster 2020 recovered 19 induced pause in economic activity across the world more or less to the crash of 2008 and the reason why I'm a bit miffed by this comparison is my conviction this is a mistake 2020 is not in different crises it's an escalation of the crisis that started in 2008 but let's begin at the beginning as they say in the era of global capital flows and financialization which preceded a pace after the end of Bretton Woods to be indulging in the standard economic analysis looking at the American economy the British economy the Greek economy the Japanese economy all those nation state based analysis are bound to mislead if we have learned anything from the last 12 years or so maybe longer it is that it is pointless to continue to do macroeconomic analysis the way we used to focusing on a single country and looking at it with weaknesses and stagnant strengths the key to unlocking the mysteries around us it's not anymore you know trade volumes or fiscal data it is the ebb and flow of financial capital this is why financialization has changed capitalism and the world we live in so profoundly and why the crash of 2008 which wounded financialization very significantly has changed the world in such a way that now a mindless piece of RNA not even DNA copy 19 comes along with such profound impact an impact which is a profound because financialized capitalism was in such dire straits before copy 19 he does so it is through this prisoner that I want us to have this conversation today of understanding 2020 as an escalation of something large that started occurring in 2008 and which never left us the crisis I shall be proposing of financialization 2008 never went away financial markets recovered lots of money was made in them but financialized station as the linchpin of globalized capitalism has never managed to heal its wounds from 2008 and in other words if I'm correcting my hypothesis to understand the post covered nineteen world that we're all so keen to talk about we cannot do that independently of understanding the post 2008 world now let's take it right from the from the start once upon a time yeah money moved between countries mostly to finance trade much of domestic consumption was satiated by domestic producers include not only in country's large almost attackee countries like the United States but also in my big squeak of a nation in Greece we produced a lot more of the stuff that we used to consume than we do now back then therefore it was possible to assess the strengths and malignancies of a national economy not anymore since the 1980s the malignancies of the China's and the Germans in Germany's of the world are viciously intertwined with the malignancies of countries like the United States and Greece now why am i lumping your great nation the hegemony of the world with bankrupt little Greece because we to share one thing we're deficit countries now there isn't why I am referring to the end of Bretton Woods as a pivotal moment in capitalist history it's because with the demise of Bretton Woods we moved away from a system where the finances were shackled they were severely circumscribed in what they could therefore allowing for a direct correspondence between the real economy and money flows but the end of capital controls after the demise of Bretton Woods especially after the nine early 1980s enabled gargantuan trade imbalances to be funded by even larger rivers of money mostly created privately through financial engineering now since I mentioned the United States and I'm speaking to you in the United States what I think it is historical historians of the future are going to mark out as very weird and profound phenomena that began to emerge in the 1980s is that American hegemony effectively grew in proportion to the American trade deficit that has never happened before in the history of the world usually when an empire or large economy a hegemon sleeps from being a surplus country to a deficit country that ghost hand in hand with a diminution of his Germany in power this opposite happened in the United States why because while it the United States was sleeping from a surplus to a deficit position with every trade at the same time Wall Street played a central role in recycling the profits of the foreigners the non-americans the Germans the Japanese later the Chinese whose net exports to the United States were creating those profits but profits that ended up being recycled through Wall Street it was on the back of this very interesting unbalanced dynamic equilibrium with the United States becoming the greatest importer of the world both of commodities and of other people's profits on the back of these gigantic flows of money into Wall Street and then from Wall Street to the rest of the world including the United States we had the phenomenon of financial education in 2008 this financialization phenomenon actually like a house of cards came from crashing down why because financialization had created volumes of private money that were simply unsustainable like a house of cards if you keep doing it you know building more and more stories or floors on it then at some point will collapse it collapsed and even though it was refloated majestically by the Fed by the g20 central banks that in April 2009 came together and refloated International Finance nevertheless the capacity of Wall Street and of financialization to recycle the world's surpluses from mere money to productive investments the investments of the sort that can create on a large scale good quality jobs in the United States in Britain in Europe in India in Latin American zone that capacity never recovered after 2008 that would be my hypothesis maybe we need a different session in order to maintain demand in to support that hypothesis to add to it empirical evidence but I want to go further than that because I want to come to 2020 but before doing this bubala permit me to say that after the crash of 2008 in Wall Street and in the financial markets of the West we now look at or we have been observing a very interesting bifurcation of living economies of let's say the early severe burns deficit countries the more you look at them the more they appear very similar at least in one important sense they are condemned to generate dead bug bubbles dead bubbles and for their working classes helplessly to watch as industrial areas move into a spots whether these are powerful countries like yours like the United States or weaklings like Greece because the dead bubbles are the only way that you can keep financing the external deficits once those bubbles in inevitably burst workers from the Midwest to the Peloponnese are engulfed by debt bondage and falling living standards at the other extreme surplus countries differ a great deal more from one another take for example China and Germany both feature large trade surpluses in relation to the United States and in relation to Europe for China and to the rest of Europe for Germany both China and Germany if you look at it macroeconomic and macro sociologically you can see clearly that there is a repression of the working class incoming wealth in China the numbers are particularly telling consumption is less than 50 percent of GDP the working class do not even have rights of residence in the places where they work they have very little access to welfare state they have to save same save in order to survive and even when they do save the actual real interest rates that they receive on their savings traditionally has been negligible so there is a repression of working class income and wealth in China but is the case in Germany the profound difference however between China and Germany is that in China overall investment is very high whereas in Germany it's very low Germany's corporations invest much less and this is a thing at least from the Greek perspective you will appreciate that this is very important German corporations rely for the aggregate demand on credit bubbles that are not created in Germany but which build up in the rest of the eurozone in places like Greece Spain Ireland Italy and so on so forth so in other words anyone who tries to portray the world as a arena where nations clash against one another the Americans against the Chinese the Germans against the Greeks anybody who does that purposely or selectively misleads you this is not a clash between the Germans and the Greeks the Americans the Chinese the main claw a clash is due to the intensification of class war within Germany within the United States within Greece within our nation states and until we understand that in the context of the global financial flows that support an insupportable and maintain a non-viable unbalanced equilibrium between imbalance trade and imbalance financial flows we will never be able to understand finance economics or politics we will never for instance be able to understand the rise of what I call the nationalist international you know Donald Trump was on our we in Brazil Modi in in India the rise and rise and rise in triumph of the ultra-right and the xenophobes across the European Union it is in this context that we need to understand him and I still haven't come to 2020 yet this is an analysis of where we where you know they've been very smart thinkers like Larry Summers who tried to explain part of this through his hypothesis of secular stagnation Joe Stiglitz has thrown an important light of it my concern is that we should look at this globally we should look at the delicious contradiction between on the one hand a planetary financialized capitalism which is combining growing imbalances with an equilibrium that is imposed upon the world and those growing imbalances through financialization this is the planetary level and what happens within our countries now 2008 was the moment when and I think Rob you know this better than anyone because you were at the coalface as they said it was a moment when the bubble of the financial sector burst when we discovered that planet Earth was simply not large enough to contain and to sustain the gigantic mountains of private money that was minted in the form of CB o--'s and CD of squares and so on and so forth but what happened next what happened was that they were floated by the Fed and as I said before the g20 central bankers that go together in a magnificent show of solidarity and socialism for the very few for the thing that sits in order to ensure that whatever wealth was necessary to transfer from the many to the few from varial economy to the financial sector was transferred to save the financial sector but it was a little bit like what is not giving cortisone to the conservation so financialized capitalism is a patient it suffered a major consumers attack and we pumped huge amounts of cortisone in it in the form of liquidity the patient perked up financial markets did magnificently have been doing magnificently ever since and now we have a situation where because those bailouts and the refloating of the financial sector was predicated upon austerity for the many whether we're talking about you know in the Midwest in the United States Britain the content of the European Union of course Greece was the champion of austerity under the aegis of the murderous triger we have austerity that what what it does essentially it sinks two things investment and the capacity of people to actually buy the stuff that companies can create when you have austerity for the many and you've got therefore this diminution of aggregate demand through reductions in investment and consumption of the many of the multitude the only way to keep propping up the system is by pumping more and more liquidity into corporations once the finances were saved by the capital transfers and liquidity thrown at them by the authorities then this excess liquidity had to be channeled somewhere what do you do if you're a financier and you are given free money by the central bank and you have to you have to land it somewhere right because the worst nightmare of a financier is to have liquidity that they do not pass on to to some power now you're not going to give it to the little people you got because you can see that the little peoples incomes due to a starett they're shrinking and you fear default so you're going to give it to the large corporations you're going to give it to the to the Amazons you're going to give it to the folks Ragan's to the Simmons's and so on but if you are now in the shoes of the CEO of a car company in Europe let's say and you get all these free money from the central bank or central bank money that comes to you through Deutsche Bank sent them there and so on from some commercial banker that wants to unload this Mannion to you what do you do this man do you invest it in more cars you see that people are there when they buy them won't be able to afford them at prices that are profitable for you when actually there's something much easier you can do you can take the the dosh right and you can take it to the financial markets to the stock exchange and buy back your own shares is that what's going to push them push them through the roof the company seems to be doing very well and you're doing very very very well thank you so much personally because your bonus as a CEO member of the board board of directors and so on hinges on the share price that creates a very interesting situation financial markets are doing extremely well the real economy doing extremely badly never before did capitalism generate this disconnect between huge quantities of savings and liquidity on the one hand and very low by comparison in relative terms levels of actual investment in fixed capital this disconnect is the reason why we've been having you know trillions and trillions and trillions of dollars dollar-denominated debt in negative yielding territory negative interest rates it is why we had deflationary forces producing the political monsters across the world because deflation unlike inflation deflation with poisons politics but that's yet another discussion to have especially with my German friends for some reason misunderstand their own history and keep on believing that it was hyperinflation that gave rise to to the Nazis no it wasn't it was deflation after her grouping introduced in 1930 fears and stringent austerity that started pushing prices down words creating deflationary forces that took over effect I mentioned two paradoxes that are central to our understanding of how kovat 19 is shaping the future one is connected to what I was just describing now anybody who has studied economics is thought that equilibrium of well-functioning capitalism requires and number a number a number the corresponding to the real interest rate such that simultaneously will have equilibration between savings and investment and in the banking sector alarm it just for those who were lucky enough to escape economics when they were young just a few words about this is not as complicated as it sounds savings is the supply of money and and investment demand is a demand for money so if there is a pile of savings in some bank or under a mattress it is crying out for somebody to take it at an interest rate and put it to work to produce new incomes yeah new businesses whatever a restaurant whatever so saving is the supply of money the entrepreneur who doesn't have money but has ideas and says to somebody a saver give me your money I will use it for good purposes and I'm going to produce profits out of it and I'm going to pay you and a substantial interest rate or interest they are those who demand money the rate of interest is the price of money the private that the price of investment fund now to equilibrate there must exist an interest rate that equilibrate savings and investment because if savings is greater than investment we have deflationary forces if it's lower than investment have inflationary forces so yeah a well-functioning capital requires an interest rate that equilibrate save is an investment now before 2020 right between 2008 and today that interest rate didn't exist it was or at least it was not possible to pinpoint a positive number for that interest rate that's why we had negative interest rates quantitative easing and so on at the very same time it's not enough for capitalism to equilibrate savings and investment because the whole for the fact of the financial system including corporate capital depends on the interstate so if the rate of interest one instance falls below zero then pension funds are destroyed if pension funds have destroyed the whole of the financial market circuit goes into a tailspin and here is my hypothesis or theory if you want from 2008 onwards after the crash of 2008 a number did not exist such that if it prevailed as the rate of interest it could simultaneously turn savings into investment and not destroy the financial sector that's conundrum number one paradox number one contradiction number one and not preceded copy 19 right now the difference between 2020 in 2008 because there is a difference of course is that in 2008 it was not the bubble of the bankers that burst it was the bubble of the corporate debt that was burst I mentioned before the ease with which corporations I mentioned Volkswagen I'm not targeting for swag and it just popped into my head and I mentioned it any correlation the ease with which corporations were addicted to central bank money meant that they could survive and keep rolling over their debts they could survive long periods of low even negative profits because of this liquidity this liquidity allowed them to keep pushing the share price price up even to to reap some rents as a result of this yeah constant minting of central bank money going their way so what the last 12 years before covered 19 hit did was to create a gigantic bubble in the whole of the corporate sector in 2008 it was just the banking sector that was sitting on a bubble that burst with effects that we all remember in 2000 20 this bubble had extended to almost every nook and cranny of corporate capitalism across the world this is why I copied 19 is so significant because it's like a pin that pricked this much larger bubble a much larger bubble that existed in 2008 but a bubble that exists due to the bursting of the 2008 by a bubble and to the attempt of central banks and authorities to refloat that by effectively spreading the bubble of liquidity across the corporate sector and now we have this second vicious paradox or contradiction the first one remember there exists no real interest rate which is low enough to turn savings into investment and not to low as not to destroy pension funds the financial sector was the first part that's now I'm coming to the second one and it is this after 12 years of boosting financial markets asset prices are just far too high I mean look at what has been happening over the last three three months capitalism is in suspended animation somebody pressed pause you know there is no demand and there is no supply people are locked in incomes are falling production is falling and the financial markets nevertheless are doing remarkably well why because of all the public money that has been printed and injected into the financial markets these public monies quantum easing called whatever you want are keeping asset prices artificially high those high asset prices are the opposite side of the same coin or the other face of the same coin that is inequality the reason why asset prices are so high is exactly the same as the reason for which a majority of people in a majority of advanced countries are struggling to make ends meet they work so destroying jobs they work all hours and there is absolutely no connection anymore that's the end of the American dream if you want to put it that way there's no connection anymore between how hard you work and the probability that you will manage to rise up in social mobility sections there is no connection however hard you work you are never going to make it these days at least for the median American for the median grid for the median Greek or German for that matter so huge inequality is the other side of the coin of high asset prices now any new deal Rosevelt in new bill green new deal we hope at a planetary level will have to steadily shift savings to investment in order to produce the good quality jobs and the green transition that the planet needs and society needs but rob and this is my worry I hope I'm wrong any statute is wealthy a new deal at a planetary level which is the only thing that can save us as a species it's going to depress asset prices a relative to other prices because asset prices are kept artificially high through the current refloating of financial markets independently of the real economy but it's not as easy as this because most corporations today survive due to the cheapness of their loans but to get those cheap loans they need collateral and the high asset prices guaranteed by the central banks are essential for maintaining the value of the collateral which is necessary for maintaining the flow of loans to the corporate sector so we are you know damned if we do damned if we don't if we don't deflate asset prices we're not going to create the good quality jobs that will reduce inequality save the planet and society and prevent the poisoning of our politics by the fascists or call them whatever you want right and if we do what corporations are going to collapse so between those two paradoxes I locate the major contradictions of globalized capitalism if you add to this the politics and the technological innovations of our era take for instance the fact that today the fear of infection in the era of coffee 19:00 effectively prepares the human mind for the applications of big tech companies that in cahoots with governments are going to create and spread around for biological data and geolocation data combinations that allow us access to algorithms that can be very useful in the midst of a button pandemic so you know they measure our temperature blood pressure whatever they can even do chemical at some point tests on us and alert us to the probability of being infected if we go into this shopping mall as opposed to you know kind somewhere else to a football match whatever yeah but that but this for me is 1984 or at large because the system that monitors our coughs can also monitor our lives it can know how our blood pressure responds to the great leaders speech to a bosses pep talk you know this idea just makes the KGB look so pathetically Neolithic compared to what we are facing moreover you know some of my and maybe our colleagues who are progressives and prone to more intense on optimism than I am you know they celebrate the fact that the lockdown has created a lot more solidarity between people and I celebrate that too they celebrate the fact that the state now is powerful again or at least people who recognize how powerful the state is they can tell us not to get out of our homes it can just nationalize whole swaths of the economy even under neoliberal regimes but nevertheless when I see state power increase with corporate capitalism being put in control and in fragmentation and in this crisis in this conundrum that I related a moment ago I worry I worry because you know state power does not necessarily mean power of the demos of the people it could be you know the power of Donald Trump of other Hitler or Benito Mussolini or mr. Modi of mr. Bazo Naru and so on to wind it down so that we can shift to the Q&A part and very much looking forward my thought for the moment is that capitalism is not what it used to be financialization and particularly its demise in 2008 has created new contradictions that even Karl Marx could not have imagined at the same time progressives are nowhere near organizing a political movement internationally in order to use state power to rid jig and to plan again an economy that works for the many not a socialism for a very very very few which is what we have today this lacunae of political organization the the lack of a frontal mutual today the lack of a political movement can actually put the financial genie back into its bottle and rethink property rights over the new technologies that are appending capitalism anyway separately from its crisis with financialization Li's lacunae is putting us on effectively a fork in the road where we as a species must decide which way we're going to go are we going to move towards a dystopia in which a stagnant capitalism 2000 8020 yields an industrial feudalism with a very few barricaded behind very tall walls and electrified fences in gated communities and out there you know you have scenes like escape from New York if you remember the John Carter move move it all we're going to move into the post capitalism that combines rationality with solidarity thank you very very powerful Yanis very broad base very historical I guess where I am haunted as you come down the stretch is when you said we are experiencing more activism the state is more powerful they can nationalize various industries formerly private sector entities but that state power does not mean power of the demos it does not mean broad-based representation what reforms do you think we have to look in the eye and demand as people to unlock the constrictions on the representation of the demos well that's the $64,000 question isn't a year ago I would have answered in a new deal kind of way that what we need is to buy the important idea behind results you need of mobilizing public finance for public purpose I still believing that except that now the crisis is escalated with co19 such an extent that I think it's not enough it's important it's a necessary condition but it is not a sufficient condition because even if we manage to do it you know think of Burton woods Bretton Woods was a despite its many many many malignancies it was a remarkable experiment in constraining finance and shrinking inequality nevertheless the system that is predicated upon capital accumulation on the basis of the separation of who works in a company and who owns the company and the ownership of the company through the stock exchange is turbocharged through financialization you know even if we took Franklin Roosevelt John Maynard Keynes you know Jesus Christ the Buddha who put them all together and they in their angels or you know minions designed a global system this process which combines private finance and short and stock exchanges will find a way of subverting it and creating another 15 focus 1971 which was the end of Bretton Woods if you remember when Richard Nixon was force effectively by the system's fragmentation to end Bretton Woods so I think that this is not just a question of mobilizing existing liquidity for good purpose we need to do that absolutely it is necessary but as I said it's not sufficient so what would make it sufficient a redistribution not just of income but of property rights for me the more I think about it you know I go back to an interesting moment in 1599 when in London at the time when William Shakespeare was finishing off up Hamlet we had this remarkable decision to found the East India Company the first joint stock corporation with shares that were anonymous and liquid and it could be bought and sold like pieces of silver you know pretty remarkable thing to do right it's pretty modern to decide that we're gonna have a huge coverage and ownership is going to be anonymous liquid and tradable and independently of what this company does who works in it what effect it has on the world on the environment on the people that it exploits or it deals with I'm increasing drawing the idea of shares like library cards how about that does it sound very named you know you you know you enroll into you go to school you go to college yeah you go to the New York University or Stanford or whatever you know your Community College and you're given a library card it's yours you use it um you can sell it you cannot have any rent at all or lease it to someone it gives you access to knowledge so how about you know corporations where you have one person one vote one share and you know you accumulate capital in it on the basis of bonuses I'm not talking about everybody receiving the same amount of money you can have bonuses that are very different depending on how you know esteemed your contribution is amongst your colleagues and there are voting systems that can generate that and then when you leave you take you know you trade one library card for another you go from one college to another you go from one company to another that would be of course the end of the circle change I think and you know I've just finished a book about this offer this is why you know I I dare speak those words because I've took a lot of thought into it and then my book is coming out in September I'm trying to imagine post capitalism the more think of it the more I come to the conclusion that four markets work well we need to end capitalism we need to which means what to end private banking and end stock exchanges so every corporation is a cooperative one member one share one vote and there is no private banking we don't need private banking you know the Fed could grant every US resident a bank account you know what what is the point of having intermediaries you know think about the absurdity of quantitative easing yeah there is a pandemic the economy goes down the toilet like now right and what the Fed does is it lends money to Bank of America or you know to Citi Citibank in the hope that Bank of America and Citibank is going to give it pass it on to the people and to companies to do good things with that now whenever you put a private banker between the central bank and and and markets out there or society most of it disappears or ends up being misused because you know bankers have a as you know they do they have a very clear rule never lend it to people who actually need it oh who will do good things with two people who speculate you know if if we if except arrested rational extraterrestrials were to visit planet Earth and look at stock exchange look at all this activity these brilliant minds but with all day shuffling paper around or not even paper anymore it's near ions in some digital space with financial engineering and all that creating just you know as Paul Volcker said you know when he was to remember when his common when he was told about all the wonderful financial engineering that was invented you know in all my years in this business all I have seen his new forms of debt being invented so if we had you know imagine if if every if each one of us had been a digital account at the Fed maybe to a concierge savings account and a checking checking account whatever and whenever there was a christ-like now the could simply type into our accounts an additional amount of money to spend so as not to allowed you know demand to crash like you know in in the middle of a pandemic that there will be no point in paying obvious huge fees to bankers and and if you end the combination of private banking and share markets then suddenly you know we have corporations where you know we make decisions democratically within them on the basis of one share one vote okay and it's remarkable how sensible people can be when given an opportunity to vote about things in their own outfits whether it's a corporation or you know a town hall meeting so how about yeah the idea of democratizing the economy which means doesn't mean the end of markets it means the end of share markets and private banking therefore I will finish off with this hypothesis of mine because I like hearing it I'm going to repeat it once more the only way to have properly functioning markets is to end capitalism that's a beautiful paradox one of our audience is watching from Senegal and asks the question I can see clearly the paradoxes in their impact in the developed countries can you say a bit about how this plays out for the developing countries like Senegal I think it's too much for asking this question to our friend because it's so important the relationship between developed economies and countries like Senegal has always been hugely important and toxic remember that very soon after the collapse of Bretton Woods in 1971 it was the developing countries that suffered the trials and tribulations of the first debt crisis created by the emerging financialization remember the structural adjustment programs of the International Monetary Fund they started in places like Senegal in Kenya and so on before once they had hold them completely before they brought them into the midst of Europe with attractive programs increase in Ireland and so on and so forth so we are all interconnected in English the connection at present conundrum that I just described in my introduction in my speech if you worked with what's happening in Senegal today I think the linchpin is the ill effects of massive minting of dollars by the Fed to keep corporates alive because of the spillovers of this money that you remember immediately after 2009 2010 there was a gash of dollars going to developing countries seeking higher rates of return than they could find in the United States or in Europe that created bubbles in Senegal in other countries with the local oligarchs making ill use of this increasing debt that was coming into the country from the quantitive easing packages of the Bank of Japan of the bank of the Fed of the the Bank of England and so on that creates artificial wealth in countries like Senegal it empowers the local oligarchs against the majority of the second Senegalese and then once panic sets in the financial markets in Wall Street in the City of London so on the money that flooded into Senegal flood out of Senegal the bubbles burst in Senegal in the development countries and the IMF comes in and demand the expropriation of your waterworks your electricity grids and the closure of your schools and your hospitals so we're in this together this is why I made the point that it is a gross error to imagine that we live in a world of the Americans against the Chinese of the you know the Europeans against the Senegalese know this is a class war that is raging in every country and the oligarchy without frontiers are very United in this so to my friend in Senegal your oligarchy are on very good terms with our oligarchy here in Greece with a German oligarchy with the American oligarchy they have bonds of solidarity that I only wish the rest of the humanity had there's a question that goes back to your library card analogy is there a bibliographical reference regarding your deflation and politically-motivated episode regarding germany that you spoke about early in the in the conversation is there is there a history of that that they are quite a few sources but you hope you forgive me if i could or referred to my effort you mentioned it kindly in your introductions a book called and the weak sample what they must and the weeks after what they must but with a question mark that gives hope at the end this comes from saying an expression in facilities in which the powerful Athenians just before crashing a weak nation responded to the with nations representative who said you know this is not appropriate behavior just because you're strong does not mean that you've got the right to crashes and one day you may end up in the weak position so it's not very smart to be doing it is now and the athenian general turn around and said the strong to what they will and the weak suffer what they must so anyway this was the title of the book in which I try to explain the dynamics within the European Union and the role of Germany within the European Union in the broader context of the American global plan that also known as Bretton Woods we we have quest since that about the contrast between the United States the United States and scuse me on one hand and Europe on the other when there was a Bretton Woods system and a gold standard there was a constraint or an anchor that when it collapsed things opened wide but the phenomena things like stock buybacks are much more prevalent in the United States in Europe do you see Europe's current structure as more healthy than the United States or does the United States dysfunction is essentially swamped the whole boat of the world economy remember in 2008 how self-confident the Europeans were that this is an American crisis it's an anglo-saxon Anglosphere a crisis of the Anglosphere they used to call it because we Germans great French people you know Italians I wasn't conservative we never put all our eggs in the basket of financialization and so on they were so smug the Europeans in 2008 until they discovered what was inside the books of Societe Generale been Pepa riba Finance Bank Commerce Bank toy bag they realized that the German and the French banks give it with some Italian and Spanish banks were far far worse than anything that was great opening what straight I think the same thing applies here you'll find that you know corporations in Europe are not that different a - - you know Apple and other companies in the United States that combined on the one hand you know they have large savings which is absurd you know why should the corporation of savings yeah when I was a young man I used to be taught by Pro capitalists free marketeers that capitalism fantastic because households save and companies borrow to invest what is the point of Appl having stashed away in Ireland you know 250 whatever billion dollars of savings I mean that is a waste it is a waste its irrationality inaction and at the same time they borrow money from the Fed because it's free and they buy back their own shares and they have you know trillion dollar valuations but in Europe is not different the only thing that is different is because Europe has been so much more in named and incompetent in managing it the crisis 2008 and continues to be than the United States because of the lack of institutions we don't know we don't have a US Treasury we don't have we don't have a US Treasury bill you know we don't have a euro bond and we're still insisting that we shouldn't have I mean this is you know just complete madness but it's not exactly madness its class war again but I don't want to go into this now because of this inanity and terrible management of the crisis Reserve V the United States management now I know that most Americans are so disheartened today in the United States that we find it very hard to believe that Europe can be even more incompetent than the United States believe me it is again because of his incompetence there's been a reversal this be effectively European corporations have fallen behind the United States I was working on some data recently in 2007 2007 a year before the crash [Music] European corporates had earnings about a hundred billion dollars more than American corporation net earnings yeah today the situation is exactly the reverse so European corporations are falling behind but what they do it's not very different to what happens in the United States I've got a couple of questions that feel to me like they were designed to help the president of inet with his agenda so I'm very happy to ask said Jana share his thoughts on the subject of economics are there any theories or areas in the current state that can accommodate his vision and analysis and if not what would be appropriate in the medium term and so I'll let you go but and then the other that comes forward is you mentioned a lack of strong progressive political movement is there a room for conversation on post capitalism and if so what can economists in their political aides do to make it palatable to the average citizen to embrace in other words breaking through the ideologies that have been our false consciousness so up to this time I started the politics and then go to the economics the the answer is that you know this is a good moment to make inroads into the global political scene and to come up with but some of us are putting together in the form of a Progressive International a global political movement that thinks globally and act like activists locally I'll give you a small example right remember some time when was much the story of Chris Moyles the Amazon employee that was vilified as a result of having there to strike or to organize a strike in New Jersey in one of the warehouses for Amazon complaining about protesting league games and hygienic conditions in the warehouse he was fired and from what we now know there was quite a long discussion in the board of directors of religious cooperation in the world on how to vilify him or to portray him in the media as in article 8 imagine if we had a global movement that's called the progressive international because some of us have are creating one we first inaugurated in November 2018 in Vermont between the Sanders Institute and our democracy Europe movement in September we are moving to Reykjavik in Iceland under the aegis of Katrina a cop's daughter who is the prime minister of Iceland to give it another boost to give the progressive national another boost so imagine if this Progressive International existed and was functioning back in March and we could organize a worldwide strike against Amazon consumers rights say we do just one day do not even visit their site just one day it's not a big deal it's not a great cost to people not to visit the Amazon site just one day but that if that took over - - you know if if it was successful at an international level Christmas would not have been fired and we were - combined you know solidarity with one worker one warehouse in New Jersey with global action and imagine we can do this every day one day Nigeria another day in India another day in China another day in Hong Kong in Greece and so on this to me is what is necessary we don't need another system of economic thinking because I you know I used to believe in creating a system of economic thinking that would contradict the dominant paradigm I no longer believe in that I believe in [Music] studying every system of thinking and being eclectic and learning bits and pieces from each one of them so you know I've learned a lot from Marx I would not understand capitalism without his labor theory of value and his business cycle theory which was the first business cycle theory which combines the class struggle with the ups and downs of the business cycle profitability and employment so on I learned things from you know of course John Maynard Keynes without whom it would be impossible to understand financialization today and Minsky I've learned things from my political opponents like you know Hayek he's an understanding and insights on prices are signals that play the coordinating role of course this is Adam Smith's story but hi you know was very good at developing that idea so I believe in you know dipping here and there in different systems of you can a myself I don't believe that capitalism can be understood by a single coherent system of why because capital is unruly capillaries contradicts itself therefore no system of equations to put it mathematically that can be solved can never capture the dynamics the joys and the horrors of capitalism this is why we need to be eclectic and to be you know like philosophers you know I don't believe you can be a decent klas effect if you only follow a manual cont or if you only follow you know David Hume you need to you know like like the bee in the valley to collect juices from different flowers to create you know your own honey yeah we're coming to the end of our time but I want to ask you one last question and it relates to green energy given this austerity Parral recession given the deficiency of aggregate demand is it possible to create moral color green Keynesianism a green fiscal policy to transform the economy and make it more resilient in the question was addressed by the author to Europe but I think it's a global question as well well we run in the last European Parliament election under the green you deal so the answer is the absolutely yes because you see remember that I mentioned before the since 2008 who had this disconnect huge savings very easy investment all we need to do we need to take the savings and invest that's what we need to do which was of course the original idea of FDR Franklin that was the original idea of the New Deal you take you use public finance instruments in order to shift idle liquid the idle cash into investments so that's what we need to do we can do it it's really difficult role imagine a situation where you know the in the same way that the central bank's got together to save finance imagine that we had the Treasury's getting together with the World Bank to create public financial instruments you know green bonds that are issued collectively and the central banks and agree to make one statement one statement they need one statement that we will buy them in a secondary markets if needs be to keep the interest rates rates low suddenly you have a huge amount of money that you can spend on green energy so the technicalities are straightforward to create to use existing we're not talking about creating money we're talking about using existing existing savings and putting it to good use so yes if we can do it but who's going to do it you know Bruce weld is dead and and we didn't do very well in the European Parliament elections yes last year when we had this this program one of the reasons why we didn't do well was because we did not have the money to compete with campaign financing with the juggernauts who were supported by the banking sector who really don't want any of this because they're doing really very well without green energy you know this financialization constantly rolling over debts and constantly being refloated by central banks is fantastically well Yanis we covered a lot of ground a lot of how do I say deep and painful things to explore and I told you before that my virtual background head jumping dolphins because the Dolphins trickster I did for me this morning that rinette's audience thank you what you do for the world and issue the challenge you stir the drink and we certainly need to be stirred and to become more active and create a healthy vision for the future and you are a contributor to that path thank you so much Rob thank you

Channel: New Economic Thinking

Views: 191,134

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Id: wwfM3IKaZgw

Length: 65min 9sec (3909 seconds)

Published: Thu Jul 02 2020

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Critical support for dolphin greenscreen