Yanis Varoufakis - Modern Political Economics: Making Sense of the Post-2008 World

Modem Political Economies

Once in a while the world astonishes itself. Anxious incredulity replaces intellectual torpor and a puzzled public strains its antennae in every possible direction, desperately seeking explanations for the causes and nature of what just hit it. 2008 was such a moment. Not only did the financial system collapse, and send the real economy into a tailspin, but it also revealed the great gulf separating economics from a very real capitalism. Modern Political Economics has a single aim: to help readers make sense of how 2008 came about and what the post-2008 world has in store.

The book is divided into two parts. The first part delves into every major economic theory, from Aristotle to the present, with a determination to discover clues of what went wrong in 2008. The main finding is that all economic theory is inherently flawed. Any system of ideas whose purpose is to describe capitalism in mathematical or engineering terms leads to inevitable logical inconsistency; an Inherent Error that stands between us and a decent grasp of capitalist reality. The only scientific truth about capitalism is its radical indeterminacy, a condition which makes it impossible to use sciences tools (e.g. calculus and statistics) to second-guess it. The second part casts an attentive eye on the post-war era, on the breeding ground of the Crash of2008 . It distinguishes between two major post-war phases: the Global Plan (19471971) and the Global Minotaur (19712008).

This dynamic new book delves into every major economic theory and maps out meticulously the trajectory that global capitalism followed from post-war almost centrally planned stability, to designed disintegration in the 1970s, to an intentional magnification of unsustainable imbalances in the 1980s and, finally, to the most spectacular privatisation of money in the 1990s and beyond. Modern Political Economics is essential reading for Economics students and anyone seeking a better understanding of the 2008 economic crash.

Yanis Varoufakis is Professor of Economic Theory at the University of Athens, Greece.

Joseph Halevi is Senior Lecturer at the University of Sydney, Australia.

Nicholas J. Theocarakis is Assistant Professor of Political Economy and History of Economic Thought at the University of Athens, Greece.

Modern Political Economics

Making sense of the post-2008 world

Yanis Varoufakis,
Joseph Halevi and
Nicholas J. Theocarakis

First published 2011
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN

Simultaneously published in the USA and Canada
by Routledge
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Routledge is an imprint of the Taylor & Francis Group, an informa business

2011 Yanis Varoufakis, Joseph Halevi and Nicholas J. Theocarakis

The right of Yanis Varoufakis, Joseph Halevi and Nicholas J. Theocarakis to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

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British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data
Varoufakis, Yanis.
Modern political economics : making sense of the post-2008 world / by
Yanis Varoufakis, Joseph Halevi, and Nicholas J. Theocarakis.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-415-42875-0 (hb) ISBN 978-0-415-42888-0 (pb)
ISBN 978-0-203-82935-6 (eb) 1. CapitalismHistory. 2. EconomicsHistory.
I. Halevi, Joseph. II. Theocarakis, Nicholas. III. Title.
HB501.V362 2010
330.9-dc22

2010037780

ISBN: 978-0-415-42875-0 (hbk)
ISBN: 978-0-415-42888-0 (pbk)
ISBN: 978-0-203-82935-6 (ebk)

Contents

BOOK 1
Shades of political economics: seeking clues for 2008 and its aftermath in the economists theories

BOOK 2
Modern political economics: theory in action

Tables

Figures

Boxes

Three Authors, Three Forewords

Yanis Varoufakis

This book's origins can be traced to 1988 and, in particular, to a sedate corner of Merewether Building (Sydney University's economics department) where Joseph Halevi and I used to loiter until well after all our sensible colleagues had gone home. The conversation monotonously, but also fiercely, negotiated the thorny question of whether one had the right to pursue happiness in a troubled world. Joseph thought that the very idea was preposterous, adopting a position somewhere between Schopenhauer and Comrade Barbuchenko (a fictitious character with whom I identified him). I, on the other hand, having recently escaped England, could not resist a sunnier disposition, one that enraged Joseph.

Then came 1991. The end of the Cold War gave a new twist to our continuing duel. For Joseph it was not just an end of an era but the end of a raison d'tre the dissolution of an identity that allowed him to subvert his origins, to exist as a progressive human being and to wage battles against the sirens of racism, of sectarianism and, in the end, of idiocy organised at a planetary scale. For myself, it was a relief that one no longer had to defend the indefensible but, also, a portent of a bleak future both within the microcosm of academic life and more broadly.

As the 1990s unfolded, our debate lost its antagonistic edge and our conversations edged us closer and closer. In 2000, I decided to leave Australia for my native Greece. It was my first decision that Joseph approved of wholeheartedly, perhaps because a similar move was not, and would never be, open to him. Geographic distance brought our narratives even closer together. The Global Minotaur storyline, which appeared in 2002 in Monthly Review , was our first joint publication and also a marker of a deeper convergence. And when Joseph became, against all prior signs, a gym addict, the foreshadowed union of perspectives was complete.

Soon after arriving in Greece, I met Nicholas Theocarakis, the polymath and a friend-in-waiting. It only took a cruise in the Aegean (during which Joseph, Nicholas and I drank and ate far too much for three days and nights) to forge the Joseph-Nicholas bond. After they passed hours ignoring the splendid scenery in order to debate the most irrelevant and utterly boring minutiae of political economics, it was clear that our trio would, at some point, attempt to inflict some book or other on the world. You are holding the evidence.

Now that the ink is dry and the printer's job is done, it is becoming clear that our book lies at the intersection of a number of failures, some heroic others less so. Capitalism's spectacular failure in 2008, and the unmitigated defeat of the Left that preceded it in 1991, form the bulk of the book's backdrop. Then there are the personal failures of the authoring troika, and a fair share of loss that all three of us experienced, in different contexts, during the book's formative period.