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Talking About the Economy

If you think Marmite divides opinion, wait until you spend some time in the company of capitalism. Is it the greatest concept in the history of human civilisation? Or is it the root of all that is unfair in the world, helping the rich get richer at everyone else’s expense? It’s probably a topic best avoided at dinner parties.

But, how well do we actually understand how economies work? In his book, Talking to My Daughter About the Economy: A Brief History of Capitalism, Yanis Varoufakis, sets out a beginners’ guide to economics framed in a way his young daughter would be able to understand.

Left-wing economist Varoufakis rose to international fame as the Greek Finance Minister who led the country’s negotiations with creditors during the Greek debt crisis of 2015. As you might expect, he’s no fanboy of capitalism. But neither is this book an anti-capitalist polemic. Instead, Varoufakis posits that we can start getting capitalism to work better for everyone if we improve our understanding of how it works.

Two cartoon hands holding money bags over a pile of coins and banknotes on a pink background.

The Roots of Capitalism

Once upon a time, agricultural surpluses were the basis of bureaucracies and armies, as well as organised religion. The surplus was distributed unequally, benefiting those with social, political and military power. The rulers, however, weren’t strong enough to face the majority of impoverished farmers, who could overthrow the exploitative regime if they joined forces. To maintain power, rulers cultivated an ideology that caused the majority to believe that only they had the right to rule and that this was some sort of divine order. "Without this legitimising ideology, the power of the state didn't stand a chance," says Varoufakis. He highlights how this ideology legitimises the unequal distribution of surplus in everyone's eyes and creates a "web of beliefs similar to a mythology".

People automatically equate "I have X" with "I deserve X", and their minds don't allow them to think about how their affluence may be the product of the same process that led to the deprivation of others.

As Varoufakis notes:

“When our eyes fall on those who lack the bare necessities, we immediately sympathise and express outrage that they do not have enough, but we do not for a moment allow ourselves to think that their deprivation may be the product of the same process that led to our affluence.”

The Profit Motive

Profit motive is a recent development in human history, and the rise of profit as a major incentive for people to do things came hand-in-hand with a new role for debt.

Varoufakis believes that debt, not coal, was "the real fuel that powered the engine of the Industrial Revolution” and generated tons of wealth for a few and misery for the rest. In market societies, all wealth is nourished by debt and all of the riches created over the past three centuries ultimately owe their existence to it, he argues. “There can be no profit without debt”, according to Varoufakis, and “the same process that generates profit and wealth also causes financial crashes and crises”. Ah, yes. Financial crashes. Remember those? Varoufakis notes how bankers often start "uncontrollable fires", yet they almost always get away with arson. This forces the state to intervene, trying to halt the damage caused when economies are caught in what he calls a "destructive vortex". Varoufakis believes this creates a dynamic where politicians need bankers just as much as the bankers need them. He also points out that public servants, whose job is to supervise the bankers, often go on to accept jobs with these same banks once they have retired from public service.

A cartoon set of weighing scales containing money on both sides. Characters surrounded by images of cash and cogs.

The Tech Economy

If humans have struggled to run the economy in a fair way, perhaps we’d be better off delegating the job to robots?

Varoufakis is optimistic that the increasing use of automation and artificial intelligence in the economy could lead to a major shift for the better.

He sees the rise of tech as an opportunity for a new, fairer model where we can all have a stake in owning machines and the riches they produce. Varoufakis argues that a portion of every company's machines should be subject to collective ownership, with a percentage of profits flowing into a common fund to be shared equally by all.

Curbing Capitalism

Varoufakis argues that money is inescapably political and to create a fairer economy for the future, we need to give more people a stake in it while rethinking the importance of profit as a motive. He concludes:

“Today, if we are to have any chance of saving the planet and ourselves, we must find ingenious ways to reactivate humanity’s appreciation for experiential values that no market can recognise, let alone respect.”

Food for thought, and well worth a read.


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