A proposed outline for Professor Varoufakis’s next book

by Jehu

This tweet just crossed my timeline:

Now he has resigned @yanisvaroufakis can get back to what really matters, heterodox microeconomics ( via @McCaineNL )

Nov_1948_strike_negotiations_AAD-5595The reference is to the post-referendum resignation of the wildly popular finance minister of Greece, Yanis Varoufakis. I guess he is supposed to get back to churning out stale academic writing no one reads because this is so much more important than discussing how his approach — fixing capitalism — worked in practice.

If he is going back to academia and writing books as so many suggest, I have some subjects for him to discuss:

  • What can we do to fix capitalism when it doesn’t want to be fixed.
  • How do you end austerity when you don’t control the currency.
  • How do you remain in a currency union controlled by a hostile gang of fascists who have only contempt for ordinary people.
  • What can you reasonably do when the entire financial system of your country is run by ruthless technocrats appointed directly by finance capital.
  • How do you fight depressions when there is neither a policy mechanism for this or hope of producing one.

I ask this this with no hint of insincerity or sarcasm because someone has to keep track of lessons learned and he is in the best position to do that.

To be fair, everything Varoufakis thought would be thrown at Greece was thrown at Greece in the past five months. Thus, what happened is no surprise at all. Yet, he promised he had a solution to this — where is it? Where is this solution that made him so confident in the first days of the SYRIZA government?

The fact is — and this doesn’t appear on anyone’s radar so far as I can tell — the EU doesn’t have to kill Greece or drive SYRIZA from power. Everybody assumes this debacle has to end with Greece’s exit. Why? The EU just has to continue to do what it is doing now. Greece won’t have to leave the euro and the eurozone countries won’t have to expel it. They can just slowly strangle it. As it now stands, the EU controls the entire Greece national capital and doesn’t require SYRIZA’s agreement or approval.

There is no question after the referendum whether the working class backs SYRIZA or not — this is settled. But electing SYRIZA, although a necessary step to ending austerity, was never, of itself, economically sufficient. The working class, which is now unquestionably behind SYRIZA, will have to lay direct hold on the forces of production.

The question then is what SYRIZA intends to do with this support? In terms of policy measures, the national capital of Greece is completely in the hands of the fascists, but, physically and legally, the national capital is in the hands of the working class and its government. The EU controls the currency, and thus controls fiscal and monetary policy in Greece, which are the preferred tools of the fascists. They have no desire to relax this control or to turn it over to a democratic authority elected by the people of Europe.

Thus, the working class of Greece will eventually have to accept that absent a sudden (political) event in other countries this will not change. In this sense the fate of the working class in Greece is tied to the political action of the proletarians of other EU countries. At least in the short run it appears there is no hope for a resolution of the contradiction from this source. Greece is now well in front of its working class counterparts in other countries.

This is the first problem SYRIZA faces: political isolation; the second problem is equally daunting.

Greece is a completely open economy within the EU. The Greece working class is insistent that Greece remain in the EU and the euro common currency. With a completely open economy and with the euro there is no possibility the government can manage the national capital according to a preconceived plan. Both radical Keynesians and communists like KKE realized this and call for withdrawal from those institutions; but withdrawal is not possible given political opinion and even if it were the working class would suffer terribly for that move.

We thus have two things going against Grexit: 1. It would double the impact of austerity; 2. No one wants it. It’s bad enough you take Greece out of the euro against explicit public opinion, but once people experience the disastrous impact of such a move, the Left across Europe is done for a generation.

Thus two big problems face SYRIZA: They cannot get their hands on the currency and have no hope of gaining control of it. And they cannot exit a situation where the currency and hence policy is completely controlled by the fascists. I may be wrong, but this would seem to rule out both the radical Keynesian and soviet-style approaches to the crisis. You simply cannot have either of these options in an open economy where the currency is in hands of the class enemy. The radical Keynesian solution requires the state have control of its own currency. The soviet model approach requires the state have control of the forces of production, including both the currency and foreign trade.

Simply stated, neither of the two models were devised to work when the state had no control at all over its currency, means of production and foreign trade. Keynesian policy arose in conditions of national autarky, while the soviet model was a response to persistent hostility of capitalist state to the newly established workers power.

Frankly, you can go through the literature and you will find no one has ever discussed the particular problem facing a class struggle in open economies. All the solutions you will find in the literature assumes the state controls one or more of the variables listed previously.

Is there a solution? I am not sure, but let me use an analogy here that offers some hope.

Assume Greece today is a union of workers in some factory, let’s call this factory, “Europe, Inc.”, that is owned by the capitalists, who, in this instance, we will call the European Union. The two sides are at the negotiating table for a new contract, which SYRIZA, the union negotiating team elected by the workers seeks to replace the previous one.

How then do we judge the relative power of these two sides?

On SYRIZA’s side, it has no control over the firm’s production processes, revenue, sales, or machines; all of these factors are in the hands of the management, the European Union. It would appear that since all the factors of production are in the hands of the management, the European Union can easily impose its will oon the union and SYRIZA. Yet, we know for a fact that this is not true; the management cannot simply impose its will on the union, because, despite having control over none of the factors of production the union can withhold its labor power — the single commodity it controls.

My argument — which can’t be pushed too far — is that labor is the wildcard in the Greece-EU confrontation. It is the one factor offered by none of the radical Keynesian and soviet-style approaches to crisis in all of those academic papers I have read. No one ever discusses labor in this context, although it is the primary weapon in the working class arsenal. Moreover, this weapon doesn’t require control of the currency, the means of production or foreign trade.

Why is this?

For one thing, labor is ignored because both the radical Keynesians and the conventional Leninists try to place the conflict between Greece and the EU in some other context. According to these writers, the problem is “the wrong fascist state economic policy” or “imperialist domination”. I don’t quibble with either of these ways of framing the discussion, except to note they offer no real options for SYRIZA in this particular context for reasons I have outlined above.

The best option for SYRIZA and for Greece is offered by the simplest possible expression of the class conflict between labor and capital: negotiations for a new contract between the union and capitalist. It is in this framing that the workers now have a very powerful weapon: they control their labor power.

How this weapon might be used creatively needs to be discussed and requires an important caveat: the use of the worker’s control over their labor power is not just limited to strikes. Labor power is the source of value and surplus value and thus is far more powerful a weapon than people think. It is, in fact, vital to the operation of the entire mode of production — the only true capitalistic commodity.

To state this baldly: Only labor power — which is completely in the hands of the working class — has the capacity to turn a worthless currency controlled by the ECB into capital.

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