With renegotiations due in a few months, it is a matter of time before tensions resurface. The future of the Euro will hence continue to depend on one small country and its charismatic Minister of Finance. Who is this Yanis Varoufakis, and what does he want? Based on his academic publications, interviews and blogposts an interesting picture emerges.
By training, Varoufakis is not an economist, but a mathematical statistician. And similar to many academics who migrated from the ‘hard’ sciences to economics, Varoufakis has built a career on ridiculing economists’ inferior abilities in math and statistics. Also economists’ too simplistic belief in the miracles of the markets, their tendency only to see positive sides to technological progress, and the idea that to do economics is to build simple mathematical models, is derided by Varoufakis in witty and rhetorically gifted prose. At the same time, Varoufakis has been employed by economic faculties for some twenty-five years, in which he hence felt like an “atheist theologian ensconced in a Middle Ages monastery.”
Of course, that is first of all a surprisingly positive verdict of the open and pluralistic character of the economic discipline, but what is important here is what it indicates about Varoufakis’ intellectual self-perception. Like many heterodox economists, Varoufakis considers it his duty to unmask misguided beliefs, outright corruption, and stupidity in general. (Yes, it’s great fun reading his work.) But at the end of the day, of course, he descends for dinner with the abbot and the other monks.
Varoufakis offers a similar analysis in the case of what he calls the Greek implosion that unfolded since roughly 2010. This implosion was directly caused by fundamental faults in the overall design of the Economic and Monetary Union (EMU), says Varoufakis, faults which themselves were a consequence of a dominating influence of Anglo-Saxon cynicism. The market does not produce a stable equilibrium of prices and quantities, just look at the prices of stocks, houses, oil, and European government bonds. Maybe over a period of, say, ten years it does on average, but the short term fluctuations are far more destructive than such a meager success in the longer term.
As with Varoufakis’ assessment of the economic discipline one cannot but conclude: nice point, well said, even if it’s a pity the problem always lies with the other guys. But the biggest question that emerges is, well, ok, so what should we do? What should this economic discipline look like instead? What could be an alternative organization of the eurozone that all could agree to and that would work better? Which comprise between different interests and ideas should we aim for? And which agreements and democratic control should be organized at which level? The building blocks in the various version of his Modest Proposal are either in the process of being implemented (European banking union), proposed before but politically not feasible right now (Eurobonds), or a bureaucratic nightmare of European proportions (European food stamps program).
The up side is Varoufakis is a smart guy, smarter and better prepared perhaps than the majority of European Ministers of Finance, and he should be able to pull this off. The eurozone anxiously awaits his new blogposts and books.