Download The Global Minotaur: America, Europe and the Future of the Global Economy (Economic Controversies) fb2

As I finished reading this eloquent and penetrating book, I was not at all surprised to discover that Professor Varoufakis of the University of Athens had just been appointed finance minister of the new Syriza government of Greece. He even describes a simple 3 step process to resolve the Eurozone crisis (pp. 209-210), but then explains the contrarian German politics that has perpetuated the crisis. And at the end of the book (p. 254) he explains how Keynes' 1944 Bretton Woods proposal for an International Currency Union could stabilize global economy moving again. Yet again political gridlock makes it unlikely unless the US takes a leading role.

To Varoufakis, the key to a well-functioning world economy is a "Global Surplus Recycling Mechanism". Keynes proposal did this in simple and elegant way, but it didn't suit the Americans, who wanted the United States to lead the global economy by running trade surpluses and recycling profits as they saw fit. Keynes had argued that countries with trade surpluses (like the US) should be taxed to give loans to countries with trade deficits (like the damaged economies of Europe). From one point of view, this amounted to a form of altruism to automatically reduce inequality among nations, but practically it would build the foundation for lasting and prosperous peace.

Instead the US came up with the Marshall Plan to turn Europe and Asia into prosperous markets for US goods, especially Germany and Japan. Varoufakis credits key US policy makers, having learnt hard lessons from the 1929 Crash and Great Depression, for the extraordinay policy that led to the 30 year Golden Age of capitalism from 1945 to 1975. Yet, however amazing, this "Global Plan" was not built to last, unlike the Keynes plan.

As in the Global Plan, 70 percent of China's surplus from its spectacular industrial growth is recycled back to Wall Street to balance accounts, but the US government left it to Wall Street to use this bonanza to increase, not decrease inequality in the US. Thus Varoufakis more sinister name of "The Global Minotaur" for what took place after the Global Plan fell apart in 1971 when Nixon took the US off the gold standard. This happened because the US, instead of surpluses, had begun running both budget and trade deficits, especially due to the Vietnam War and the maturing of the German and Japanese economies. By then others had the surpluses, so the flow of funds had to be reversed in some way.

Varoufakis calls the new US plan the "Global Minotaur" by because it formed a system of tribute from the rest of the world to finance the US budget deficit and trade deficit, like the tribute the ancient Athenians gave to Crete in the form of sacrifices to the mythological Minotaur (half human / half bull). It was based on the US dollar as the world reserve currency and the related requirement to trade oil and other commodities in US dollars. The Global Minotaur succeeded in enriching global elites, and eventually China, but fed off many victims in the process. These included the American working class and many a third world country, even the East Asian tigers, until they learned to defend themselves against the financial predations from Wall Street, the transnational corporations, and agents of neoliberalism like free trade agreements and the International Monetary Fund. This neoliberal Minotaur was severely wounded by the financial crash of 2008, but reactionary politics has blocked any new plan, with the prospect that the world will lurch from one crisis to the next.

Varoufakis' explains how this system of imperial tribute and its associated market strategies and finances has driven the ideology of neo-liberalism, or free market fundamentalism, which he calls one of the four "handmaidens" of the Minotaur. The other handmaidens were (1) Wall Street, (2) global corporations like Walmart leading the race to the bottom, and (3) economic theory divorced from reality.

The European Central Bank certainly won't be able to fool Varoufakis. He knows exactly what needs to be done and has many allies on both sides of the Atlantic. Let's hope that he can help leverage the Greek crisis into the long overdue reform of the EU into a true banking and budgetary union.

You don't have to agree with Varoufakis' analysis (I happen to disagree with them but only on the micro level: broadly I think he's right on) to learn a couple of important things about the crisis of 2008. These two things are worth reading the book for ALONE:

1) Trade imbalances (and what causes them) is the source of nearly all the world's economic instability. Most of economic planning revolves around what to do about them (see 2 below)

2) Since WWII, the world economy has been carefully planned, from top to bottom, largely by the US, Japan and Germany. This plan was called The Bretton Woods System and Veroufakis explains it plainly and clearly with the right level of detail. Anyone who yaks on about how the US is an economic powerhouse because of its "free markets" doesn't know what they are talking about.

Lastly, Veroufakis discusses two inherent problems with Capitalism that are the root causes of 1 and 2, above. I won't tell you what they are, you'll have to read the book. It's rather interesting and dives directly to heart of many sacred cows of our civilization. Read it an decide for yourself.

This man is a delight to read. He is perhaps a sconce more to the left politically than me, but he has my sympathies and his description of the functioning of the American system in world finance from world war II to the present (at least to about 2010) is superb. I would love to see him update his views to 2016 because the mythical beast he declared mortally wounded in the crash of 2008 still, it seems, has some life left in it, but its thrashing around has left deep social and political marks on both the U.S. in the present election season and throughout Europe. If you are looking for an overview of the global macro economic situation this would be a good place to start. Non technical and an easy read. The author tells a great tale.