UCL European Institute


Do Not Fear Austerity: A Public Meeting with Yanis Varoufakis

01 October 2015, 12:00 am


Event Information

Open to


Alessandro de Arcangelis, UCL PhD student in History, reports on a 'public meeting' with Yanis Varoufakis, and his advice to Jeremy Corbyn.
30 September 2015
Alessandro de Arcangelis

It is shortly after 19.00 when the crowd gathered at the Emmanuel Centre in Westminster bursts into a thunderous applause. Former Greek finance minister Yanis Varoufakis walks on stage with unassuming composure. The event, organised on 14 September 2015 by the anti-austerity movement The People's Assembly, sold out in a matter of hours and dozens of people are standing at the back of the room, patiently waiting to hear the polarizing and often controversial Greek politician's address.

Hanging above the speakers' table is a quotation from John 10:10, whose towering presence is made rather apposite by the vibrant left-leaning atmosphere: "The thief cometh not, but for to steal, and to kill, and to destroy: I am come that they might have life, and that they might have it more abundantly". Beneath it, the panel is impressive: Paul Mackney, former trade union leader; Romayne Phoenix, the chair of the People's Assembly; James Meadway, New Economics Foundation chief economist;  Rosa Pavanelli, General Secretary of Public Services International; Diane Abbott, Labour MP; and, obviously, Yanis Varoufakis. Rumour has it that the newly elected Labour leader Jeremy Corbyn may eventually arrive to join the other speakers, but he is at the House of Commons, voting against trade union reforms.The title of the evening is 'Fighting for our Future: a Public Meeting with Yanis Varoufakis' and its theme is undoubtedly ambitious, consisting of the delineation of a blueprint for an 'alternative to austerity, humanitarian disaster and market meltdown'. The first addresses are primarily concerned with illustrating the most immediate symptoms of the aforementioned 'humanitarian disaster': Meadway offers a passionate account of the alleged absurdity of the adoption of austerity measures in order to tackle any form of financial crisis, while Pavanelli details the mechanism by which austerity policies weaken trade unions, suggesting that this process might ultimately erode the notion of democracy central to European politics at large.

The lion's share of the talk, though, lies entirely in Varoufakis' hands. "I call myself a liberal Marxist. I like contradictions", he eventually states, but the most striking contradiction of his address is not a paradox at all: Europe ought to look at Greece as an example of how (not) to implement austerity measures. The draconian magnitude of the spending cuts taking place in Greece from 2008 onwards is simply unprecedented, to such an extent that the country is aptly labelled 'a laboratory of austerity'. Within one year and a half, spending was reduced by 14%, pensions cut by 45% and public sector wages by 38%. Yet, unemployment soared from 8% to 28%. According to Varoufakis, this is sufficient to conclude that austerity simply does not work. This is because, to use his words, "cutting down spending and supply happens when you are shifting tomatoes and potatoes. If you have too many potatoes, you cut the price down to shift them. It works like that, but it does not work with labour".

Varoufakis, then, moved on to reflect on a concept elaborated in his famous 2011 book The Global Minotaur: 'bankruptocracy'. Bankruptocracy, to Varoufakis, is the rule by bankrupted banks, He argued that this was buttressed by the European Central Banks and by the member states of the EU, who socialized banks' losses and turned them into public debt. As a result, while the loss of asset values was somewhat contained - or, as some would say, simply ignored -, the banks' dramatic insolvency remained untackled. As Eurozone membership prevented countries in debt  from devaluing their currency (mainly Greece, Ireland, Spain and Portugal), not only did banks opt to start betting on which weaker economies would eventually default using the money forked out by Central Banks, they also began borrowing money from each other to increase the number of these bets. Consequently, a domino effect ensued and banks, while remaining insolvent and on the verge of bankruptcy, could still carry on playing their betting games. This ultimately transformed Greece, Portugal, Spain and Ireland's debt into Central Banks bets and, at the same time, into more debt owed by one bank to another.

This, in a nutshell, is why austerity is simply nonsensical: the predatory conditions under which loans were proposed to economies in recession are symptomatic of the institutional connivance with the bankers' logic. The Greek financial disaster is a prime example of this tragedy: "The ruling class", Varoufakis continues, "knows that austerity does not work and that by shrinking the state is a massive transfer of wealth and it makes sure that the costs of the financial crisis are transferred onto the shoulders of those who did not cause it". Creditors have always been perfectly aware that Greece would never be able to repay its debt, and their GDP-crippling propositions have never been motivated by a charitable spirit of altruism. Rather, they purposefully sought to bring the Greek economy down further in order to keep it in debt and carry on creating money out of a non-existing capital.

Varoufakis had plenty of advice for Jeremy Corbyn too: "Your opponents are going to use fear as their main instrument. They will say to you that a Corbyn government will push up the pound. This is what the systemic media will tell people in their living room", he passionately roared. "Don't fear them. People are perfectly capable of sifting through this. The people can overcome fear if the leadership overcomes fear". The British left ought to advance a fearless struggle against the imposition of austerity measures. History offers an interesting argument against the effectiveness of these policies in the United Kingdom too: during the Thatcher years, austerity entailed the decrease of public spending by 1%. Yet, this was enough to result in economic stagnation and increase the number of the unemployed from 700,000 to 4.5 million.

Jeremy Corbyn's victory is an extension of a European phenomenon articulated via Syriza, Podemos and the Left Bloc, proving that the Left is still an extremely relevant historical force. Practically speaking, this ought to be used meaningfully to direct the work of the Labour party between 2015 and 2020. As Nobel laureate economist Paul Krugman aptly put it, "if the political opposition won't challenge the coalition's bad economics, who will?" Given that a left-wing culture inevitably entails an ethics of opposition, the struggle against austerity must accept no compromises and, in this sense, Corbyn ought to look to Greece as an example. Syriza undoubtedly fostered a remarkable sensitivity among Greek citizens for the inner predatory mechanisms of the fiscal policies they were being subjected to, as the 5 July referendum indisputably proved. Yet, the country's economy was too weak not to ultimately give in to the creditors' demands. Britain, however, is different as it has much greater capacity for its economy to sustain public spending, as Krugman argued in a much debated article appeared in The Guardian in April 2015: austerity "is not necessary, and does major damage when it is imposed. That was true of Britain five years ago - and it is still true today". This is why the Labour leadership should overcome any fear and concentrate its efforts toward the creation of an opposition which aims to erode the fiscal decision-making mechanisms which created the European crisis of debt in the first place and to challenge the institutions preventing its resolution.

Alessandro de Arcangelis is a PhD student in History at UCL and manages the website and online archive of UCL's Passionate Politics project, supported by the Centre for Transnational History, the European Institute and School for Slavonic and Eastern European Studies at UCL.