‘The Global Minotaur: America, Europe and the Future of the Global Economy’ reviewed by Sean Ledwith

The Global Minotaur: America, Europe and the Future of the Global Economy

Zed books, London, 3rd revised edition 2015. 304pp., £8.99 pb
ISBN 9781783606108

Reviewed by Sean Ledwith

About the reviewer

Sean Ledwith is Lecturer in History and Politics at York College. He is also a regular contributor…


One of the most memorable political moments of 2015 was the sight in February of Yanis Varoufakis, Greek finance minister at the time, strolling nonchalantly up Downing Street for a meeting with one of the doyens of austerian economics, Chancellor George Osborne. Varoufakis, characteristically spurning the regulation suit and tie of bourgeois politics, was dressed in a long leather jacket and an open-necked blue shirt. Shortly after, the two men were filmed inside Number 11 discussing the EU debt crisis with Osborne looking flustered and upstaged by his charismatic Greek counterpart. For many observers at the time, the moment seemed to encapsulate a crucial shifting of European public opinion away from the reheated Thatcherism personified by Osborne that has dominated recent macro-economic policy in the West, and towards a revitalised social democratic and anti-austerity agenda as promoted by Varoufakis. The modest personality cult that accompanied the Greek politician in the following months understandably persuaded the publishers of his 2011 book, ‘The Global Minotaur’, to release this updated paperback version (featuring the author in his Downing Street ensemble on the front cover).

The book sets out to present Varoufakis’ explanation for the implosion of Western capitalism that occurred towards the end of the last decade and which ultimately led Osborne and Varoufakis to their uneasy photo-op in Downing Street. The latter is eminently well qualified to offer a prognosis as he has enjoyed a distinguished academic career as an economist in multiple countries preceding his appointment as finance minister to the Syriza government that came to power in January. His version of events is particularly deserving of attention for the wider left as Varoufakis is a self-proclaimed ‘Erratic Marxist’ and therefore deploys a theoretical perspective not normally associated with finance ministers. He situates the crisis explicitly in the context of Marxist economic theory: ‘For it is capital that usurped the role of the primary force shaping our world, including our will. Capital’s self-referential momentum makes a mockery of the human will, of entrepreneur and labourer alike … it is capital which, in effect owns us all, and that it is we who serve it’ (18). As a starting point for a radical analysis, this proposition is auspicious; however, the rest of Varoufakis’ account confirms that the first part of his inventive moniker is equally appropriate.

Before he presents his own theory, Varoufakis dissects mainstream analyses of the crash which contain some partial insight but which are inadequate in isolation. These include the phenomenon of regulatory capture, based on the cosy relationship in Western capitals, après le deluge, between the master manipulators of Wall Street with ‘a host of treasury secretaries and finance ministers who had either already served for years at Goldman Sachs, Bear Stearns, etc. or were hoping to join that magic circle after leaving politics’ ( 8). Another explanation for the 2008 crash is one of the oldest for any form of economic downturn – irrepressible greed. Varoufakis has an attention-grabbing use of imagery that matches his dress sense. He compares the insatiable appetite of the capitalist class to a well known fairy tale: ‘The Brothers Grimm had a story involving a magic pot that embodied industrialisation’s early dreams … towards the end of the story, the wondrous pot runs amok and ends up flooding the village with porridge’ ( 9). He neatly skewers the hubris of establishment economists who periodically claim to identify solutions to the system’s tendency to overheat: such as the two winners of the 1997 Nobel Prize for Economics who designed a supposedly pioneering formula for stock valuations, only to see it actually trigger the collapse of a major hedge fund a few months later, costing themselves a small fortune (13)!

The core of Varoufakis’ own analysis is built around two pivotal events in the postwar history of Western capitalism. The first is the Bretton Woods conference of 1944 that inaugurated the creation of the IMF and the World Bank. He explains how the organisers of the event intended it to re-stabilise the global economy after the twin catastrophes of the Great Depression and the Second World War. An additional purpose was to contain the ideological appeal and political influence of the USSR, which had played the key role in the military defeat of Nazi Germany and was consequently regarded favourably by the Communist Parties of Western Europe. In order to avert the incursion of Russian influence into Germany and Japan, the two key defeated Axis powers, the Global Plan of 1944 – as Varoufakis terms it – was to deploy the surplus capital the US had acquired due to its productive expansion during the war into the economic and political reconstruction of its former foes. These two countries and their neighbours would provide markets for American exports and enable the US to consolidate its position as the world’s undoubted economic colossus. One of the strengths of Varoufakis’ account is a highlighting of the integration of economic and geopolitical factors in the thinking of Washington’s ruling elite. He notes how the Bretton Woods conference was followed a few years later by the unveiling of the Truman Doctrine, based on the eponymous President’s intention to offer financial and military assistance to the suppression of left-wing insurgencies in Europe and Asia. This included the aggressive crushing by the British of a popular uprising in Varoufakis’ home country. Referring to the architects of the Global Plan, he writes: ‘What makes their story so fascinating is the combination of their sophisticated, discursive Keynesianism, their audacious initiatives and the interaction of their economic planning with the demands of the Cold War’ (82).

He also draws attention to a notable clash of views between the two most important participants at Bretton Woods – Keynes himself and Harry Dexter White, the senior official from the US Treasury. The former wanted to use the postwar window of opportunity to establish an international common currency, managed independently by the IMF that would lubricate a Global Surplus Recycling Mechanism (GSRM) to provide long-term stability to the capitalist system. White, however, vetoed Keynes’ ambitious plan and instead installed an alternative that made the dollar the world’s reserve currency, backed by gold via a system of fixed exchange rates, thus preserving US global economic hegemony. Again, the author identifies strategic rivalry as the root of this crucial decision: ‘It can be argued that the United States having extracted large payments from Britain during the war manoeuvred immediately at the end of the war to ensure that London was deprived of a dominant position in relation to Middle East oil’ (69). He implies Keynes represented a more far-sighted faction of the ruling class than his American counterpart and that the postwar boom might have been more sustainable had the former’s proposal prevailed. Varoufakis uses another vivid image, this time from his own country’s mythology, to convey the point: ‘The new hegemon, blinded by its new-fangled superpower status, failed to recognise the wisdom of Odysseus’ strategy of binding itself voluntarily to some Homeric mast’ (90).

Another aspect of US geopolitical planning to which Varoufakis draws attention is the nurturing of the project of European unity. Modern defenders of the EU like to present it as arising out of a benign desire on the part of France and Germany to avoid a repetition of disastrous conflicts that had blighted the relationship between the two in the first half of the twentieth century. The historical reality, however, Varoufakis observes was that France’s immediate response to the cessation of hostilities in 1945 was to demand that half of her rival’s industrial stock be destroyed. The French were only deflected from this punitive approach by Washington’s insistence that it be abandoned as a pre-condition for economic assistance under the Marshall Plan. The author wryly notes: ‘Contrary to Europeans’ self-adulatory narrative … the reality is that European integration was a grand American idea implemented by American diplomacy of the highest order’ (75). Having astutely identified the imperial roots of the EU project, however, Varoufakis reverts to his ‘erratic’ persona and argues the institution can be redeemed to serve the interests of Europe’s working class. Despite what has been inflicted on his own country in recent years, Varoufakis perversely argues the EU can be reformed by ‘unifying the banking systems of the Eurozone countries, infusing them with capital from the centre and desisting from counting these capital injections as part of the national debt of the countries in which the banks are domiciled’ (239).The irony of reading the author’s cautious optimism regarding the nature of the EU, of course, is that since the book’s publication the institution’s key decision-makers have insisted Varoufakis step down as Greek finance minister for his temerity in trying to tame their incorrigible neoliberal behemoth

Having traced the origins of the postwar geopolitical consensus and the economic boom that was built on it, Varoufakis proceeds to trace how the Bretton Woods system unravelled; leading the Global Plan to be supplanted by the successor alluded to in the title. What Truman, White and the other US strategic planners of the 1940s failed to foresee, he argues, was that the West German and Japanese economies would flourish to the extent that they emerged in the 1960s as economic rivals to the state that had succoured them. Simultaneously, the US lost its position as a surplus economy and declined into deficit status, thanks to the dual burden of waging war in Vietnam and funding Lyndon Johnson’s extensive Great Society welfare programme. As Varoufakis puts it, ‘the Global Plan’s architects apparently neglected to take seriously the possibility that the lack of self-restraint would lead Washington to codes of behaviour that would undermine their brilliant grand design’ (91) The author is undoubtedly correct that these two major expenditure commitments affected the dynamic of American capitalism in that era. However, a less erratic and more orthodox Marxist account of the trajectory of the US economy in the Johnson and Nixon years would link it to a structural focus on the declining rate of profit throughout this era. Economists adopting such a perspective such as Robert Brenner and Andrew Kliman have detected the empirical evidence for such a trend, albeit not always in total agreement with each other. From a Marxist perspective, their approach is theoretically more satisfying than Varoufakis’, as the latter implies welfare programmes such as Johnson’s are a source of capitalist crisis and, hence, might be jettisoned if necessary. The author undoubtedly would not argue as such but his view unwittingly provides credence for the apologists of austerity- such as his erstwhile host in Downing Street.

Varoufakis contends the second key date in the history of the postwar global economy is 1971. In that year the Global Plan began to metamorphose into the Global Minotaur, based on Nixon’s decision to abandon the gold standard, thereby allowing global exchange rates and commodity prices to fluctuate wildly. The author cites the remarkable statement at the time of Paul Volcker, the President’s economic advisor who pushed for the move: ‘A controlled disintegration in the world economy is a legitimate objective for the 1980s’ (quoted 100).Varoufakis, despite his radical credentials, is fulsome in his praise of this decision, interpreting it as a master-stroke of ruling class realpolitik. Ignoring the conventional wisdom that running twin deficits was economic suicide, the US financial and political elite perceived they could exploit the dollar’s status as the world’s most important reserve currency to re-orientate both their own economy and re-assert its geopolitical hegemony in the face of emerging European and Asian rivals. Volcker consolidated the economic gear-change upon becoming Chair of the US Federal Reserve by hiking up interest rates to ‘generate a constant tsunami of New York bound capital’ (109). Once again, Varoufakis refers to the mythology of his homeland to capture the essence of the process: ‘The Athenians’ gruesome payment of tribute to the Cretan Minotaur were imposed by King Minos’ military might. In contrast, the tribute of capital that fed the Global Minotaur flooded into the United States voluntarily’ (101).

The consequent surge of capital into Wall Street, assisted by its epigone in the City of London, provided the ballast for booms in the US economy presided over by the administrations of Reagan and Clinton, cloaked in the ideology of neoliberalism. The author recounts how the era of free market economics has been punctuated by economic contractions such as the dotcom bubble of the early nineties and, of course, the current recession, rooted in an inflated sub-prime property market in the US. Bourgeois economists, or the ‘beast’s handmaidens’ as Varoufakis labels them, promoted the notion that ‘market forces resemble the ebb and flow of the great oceans and that anyone who tries to get in the way is a latter day King Canute’ (143). Again, the author’s analysis is valuable in so far as it draws attention to the role of what Marx calls fictitious capital as a means of rebooting profitability in a declining system. However, a more classical Marxist account of the post-2008 downturn would argue financialisation is a symptom, rather than a cause of the crisis. Varoufakis also tends to give too much credit to the perspicacity of individuals in the ruling elite. Volcker and his ilk clearly exercise a significant degree of strategic insight but only within the constraints of a state committed to reproducing capital accumulation.

Aside from his neglect of core concepts in Marxist political economy, the essential lacuna in Varoufakis’ account is any viable proposal for slaying the Minotaur he has described. The most disappointing section is the conclusion when he incongruously argues the US ruling class itself is the more likely source of global salvation; suggesting it should now supervise a revival of Keynes’ postwar plan for a regulated GSRM (256). His central analogy of the Minotaur as representing contemporary capitalism is actually a powerful one, but requires a credible identification of who or what can play the role of Theseus – slayer of the beast – to be fully coherent. Since the book’s publication, Varoufakis has returned to his academic sanctuary and the Syriza government in Greece has swallowed another tranche of austerity from the EU. Theseus will evidently not take the form of politicians, no matter how chic, who believe the beast can be dealt with by reason alone.

3 November 2015

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