Archive for September 26th, 2011

Yanis Varoufakis – New Bottle, Old Keynesian Wine
September 26, 2011

I have been enjoying Yanis Varoufakis’s blogs (introduced to the forum by Andrew Purlfield) and including his latest, which is a transcript of his recent talk (with Pearse Doherty and Fintan O’Toole) at the new SF headquarters (the Shelbourne).

But essentially, for all his stance as critic of mainstream economists and of the ECB and EFSF, his own viewpoint is still that capitalism can be made to work, by adopting the right technical solutions.

He advocates an ECB 20 year bond to clear all debt above the level of the Maastricht agreement, along with ECB-backed investment bank that raises the quantity of finance put in to European firms.

I recommend his talk, which gives a marxist-influenced historical account of the development of finance capital that is well worth reading, as it shows the various means by which capitalism has borrowed from the future and produced fictious capital in an attempt to sustain a severely ailing, terminally sick system which imo has reached the end of its historical tether.…-hotel-dublin/

I’m forcibly struck by what Varoufakis leaves out of his analysis. He describes well the way that a massive credit bubble has been created, in an attempt to sustain the system, and is now collapsing, leaving every bank in Europe bankrupt. He also describes well the panic and bewilderment of EU financial “leaders.”

But there is no reference to the shift of manufacturing to the east and to the enormous increase in global productive capacity and increased costs of production that have come with technology. Fundamentally, the world economic crisis is one of overproduction and depressed average rate of profit, not of underinvestment.

A couple of Chinese factories, the size of large towns, can produce enough mugs for the entire needs of the world, in short order. But there is so much highly competitive production, so many companies driven out of business, that on average, very little if any profit is made.

Capitalism also constantly moves money from the many to the few, with greater and greater inequality, and this also chokes up the economy as the majority of people have less and less to spend. But redistribution by taxation, on its own, can’t overcome the problems of overproduction and reduced profit rate. And while capitalists are in power, they will resist any such redistribution.

Because profit comes from peoples’ labour (physical and mental), the only way that capitalism has of raising the rate of profit is to cut wages and make people work harder (reduced retirement age, longer hours, intensified work rates). We are seeing this being applied across Europe and the US.

We have immense global productive capacity, and an anarchic and crisis-ridden means of financing and organising it. So at the very historic point at which feeding, educating and housing everyone appears to be attainable, huge numbers of previously well-off people are being thrown into poverty. The answer’s imo are not in the issuance of more debt and in the financing of more and more competitive investment.

Before minding banks, we need to safeguard production, and peoples’ skills.
Production needs to be organised and distributed so that enough is produced to meet everyone’s needs – if that can be done in a two or three day working week, people should be able to head off and play with their children, play sports and music, go back to education or whatever they need.

For this to happen, the main means of production – factories and land, and mineral and oil resources – need to be in the control and ownership of the majority, and developed in the interests of the majority.

This is something I’ve never seen Varoufakis say and I’m pretty sure I never will.

C. Flower 26.9.11 (First posted on

Note: Yanis Varoufakis has replied on his blog –

C. Flower paid me the complement of penning a critique, entitled New Bottle, Old Keynesian Wine, of my “Understanding the euro crisis-a talk at the Shellbourne Hotel Dublin” (14th September 2011) as well as of the essence of our “Modest Proposal”. I reproduce this critique here in its entirety, followed by my reply. Before anything else is said, let me thank C. Flower for taking the time to script what is a hugely important critique.