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Yanis Varoufakis Interview ‘All The Good Stuff That Cannot Be Measured’ (full transcript)

The following is a full transcript of an interview of Yanis Varoufakis, currently serving as Finance Minister of Greece, conducted by Martin Beroš for SkriptaTV in May of 2013 in Zagreb. I believe it provides valuable and timely insight into his thoughts on economic theory, the pitfalls of GDP measurement with regards to the human condition, the role and hope of gift exchange economies, and the future of the European Union.

Creative Commons Attribution License, all uses allowed. Please credit interviewer Martin BevoŠ and this URL in all excerpts. Thank you.

-Nancy Kotting

B: Martin Beroš

V: Yanis Varoufakis

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B Can you comment on the fallacy of reductionism in economic theories?

V From the 1870’s onwards there were two interesting forces that coalesced. On the one hand some economists, political economist at the time, tried to become established  as academics in universities. The way they tried to do that was by mimicking  physics to pretend that they were the physicist of society and to do that they tore up the whole political economics tradition of Adam Smith, David Ricardo, Karl Marx and tried to reconstitute economics on the basis of some kind of analytic synthetic method where the individual was to the economist what the atom was to the physicist. It became optimistic individualistic but the moment you try to mathematize on the basis the atomism of individualism you end up with mathematical models of market exchanges which lose any sight they might have had of the social relations of production and the fact that once you enter into the labor contract at the basis of the corporation, the firm, the business, you exit the market and you have a social relationship with your boss and therefore from the 1870’s onwards what we call neoclassical economics, marginalized economics became utterly disconnected from real existing capitalism. That was one force. the other force was at that time of course with the second industrial revolution capitalism, the powers that be, the ruling classes were desperate for a legitimizing political economy, one that presented them as cogs in a natural science experiment. So that naturalistic mathematical, neoclassical economics suited them down to the ground because in it there was no room for exploitation in these models. There was no room for, ah, social relations and they allowed the economist to create mathematical models which were an perfect ideological, ah, cover, ah, that allowed them to present themselves as parts of a natural system of efficiently allocating resources.

So once we got into that framework of thinking about the economy, capitalist became invisible and therefore any analysis of capitalism became irrelevant. But more generally than that, it took me decades to come to the conclusion – its not something that I always knew, any attempt to create mathematical models of capitalism, whether they are founded on premises like the ones that I mentioned or marxist assumptions, end up spectacular failures because capitalism cannot, just like Darwinism, cannot really be encased in a well defined determinate mathematical model and any attempt to do it will only succeed if it distances the model from capitalism. And this is a fate that unfortunately has befallen even Marxist economists who became scholastic and consumed by their models.

B The mainstream media seem to pay a lot of attention to GDP (Gross Domestic Product) in evaluating the health of an economy. How relevant is GDP as a measure of unemployment, living standards, exploitation, and, generally speaking, use values?

V It can’t do that. All GDP can tell us is whether capitalist activity is going up or down. When GDP is falling by 5, 6, 7% every year as it is in Greece at the moment, you know there is something wrong with your capitalism right.  In that sense, it’s useful but on the other hand it has no capacity to relate to us and to capture the quality of human life and of the human conditions so…. you know the standard example: a forest breaks down, GDP goes up; There is a tsunami in Japan, GDP goes up very quickly because of all the effort to save people which costs diesel fuel and all the effort that reconstruction, putting up tents and so on and so forth. So lets say you’re an extraterrestrial on Mars or some other universe and you are only watching the GDP [indices here], you will have a very distorted view of the human experience.

B Are there alternative statistics that we could rely on in order to emphasize the distinction between measuring the use and exchange value of goods?

V You know one of the great evils of our time is this penchant for quantification of unquantifiable variables. If you look….it started in Britain in the national health services and the universities and then spreads in different realms in different countries. The attempt to quantify for instance the quality of academic research of all the care givers to patients in hospitals there is a logic in doing it in the sense that we want hospitals and universities to be accountable to the people so that we know how well they are doing it but when you try to quantify the quality of the goods that they are providing then what you’re doing is you’re …because this [quantification] will always be false, we will always fail to capture quality because how do you measure beauty? How do you measure love? How do you measure care? How do you measure the quality of a poem or of an essay or for that matter a philosophical text because that is what you’re doing when you quantify the performance of philosophers in universities. The answer is: you can’t. So any attempt to do it would leave out a lot of important stuff which cannot be quantified and that creates awful incentives for people who get rewarded on the basis of the quantities that are reported on their behalf to do all the things that increase their  indices which are sometimes actually more often than not, detrimental to all the good stuff that cannot be measured. So we should beware of the need to quantify.Yanis_Varoufakis_Subversive_interview_2013_cropped

That’s why we need some descriptive data, descriptive statistics that would give us a sense of how society is serviced by different policies. But we have to make sure that these are multiple qualities, not one statistic, the alternative to GDP, ah, ‘Gross Happiness Index’ as in (indecipherable) and so on, there should be a series of statistics and we look at all of them. So, life expectancy, how happy kids are when they come back home from school; the consumption of books, how many people read books, how many people attend concerts in order to gain a sense of cultural life. How well are our museums doing? These are… so I would favor a menu of different quantities which give us a whiff of the qualities.

B Does that presuppose a political movement that considers money spent on healthcare not as a financial cost, but as investment in human life, a type of politics grounded not in scientific legitimation or numbers, but rather on something else?

V Judgement is… I am a science freak, I love science. Science is the greatest instrument we have against superstition and stupidity. But the problem is we have pseudo science. Economics is a pseudo science. Any attempt to measure beauty scientifically is not scientific, it’s rubbish. So I just don’t like rubbish science and when science is used in order to pursue particular political agendas by supposedly creating scientific measurements of things that cannot be measured, this is an affront to science.

B In commenting on global left forces, Immanuel Wallerstein differentiates between “developmentalism” and the “priority of civilizational change” between calls for economic growth as means of rectifying present day economic imbalances (issued by left governments and trade unions) on the one side and ecological and social concerns over the sustainability of economic growth (expressed by environmentalists and movements of indigenous peoples) on the other. How do you propose resolving this dichotomy?

V Well I think that what is of the essence is to decouple and to make the very sharp distinction between growth and development. Growth, I don’t care for, but development I do. So there are lots of things I want to see going into recession not in growth: I want to see the financial sector be in recession – that is to shrink. I want to see CO2 production not grow. I want to see lots of poisonous activities diminish, not grow. But development is a humanist concept because development doesn’t mean necessarily bigger, it means better. It means for me development is to have an educational system which is very unproductive to have one teacher for one pupil if we can, I mean the bourgeoisie wants that, they send their kids to Oxford and Cambridge because they have one to one tutorials. Why shouldn’t the rest of us want the same thing? Perhaps one the one is overstated but one to five is not. So an economy which can sustain one teacher for five pupils right, is a developing economy, is a developmentalist economy but it’s not one that necessarily is into capitalist growth. Growth is a miasma on this planet. Look at the way the suburbs have grown, contributing massively to GDP growth. It is a catastrophic. You’ve got the expansion of cities on the horizontal level, far and deeply into the countryside which means that you have to create very long distribution networks both for people and for goods and services. Which is very inefficient. At the same time you create isolated communities that create a lot of middle class desperation amongst those who live there and the destruction of the environment is, appears in statistics as growing GDP because to sustain these suburbs you need to produce all the stuff that you extract from nature and you destroy. Now that kind of growth of course you have to be mad to be in support of. But if we’re going to create truly sustainable energy solutions we need development and we need a growth in that green industry. So it’s a question of what do we want to grow and what do we want to shrink and it’s a question of not focusing on growth but focusing on development which makes human life happy… and freer.

B There have been reports from Greece of non-market economic activities such as autarchic communities providing communal care and urban horticulture projects aiming to remove certain elements of basic social reproduction from market forces and price regimes. What are the prospects for organizing a larger part of the economy in this manner?

V Creating networks of producers and consumers which find ways to communicate and coordinate their activities that do not rely on market signals but rely on a generalized system of gift exchange, that’s how I say it, is ah, a great hope for creating oasis within capitalism. Having said that, I don’t believe that you can have shared prosperity at the global level on that basis.

The problem with this is that, lets say that we succeed in minimizing the pain experienced during a recession like the one we have in Greece, depression, by having a community which is based on solidarity and gift exchange, that’s wonderful, it’s a wonderful resistance mechanism during the price of recession. But it’s not a model that can threaten globalizing financialized capitalism. Capitalists don’t have a problem with that – they simply don’t have to worry about a particular community rioting, or dying on their doorsteps of hunger. But it is not a real threat. It will become a real threat when through the power of the internet these communities find ways of creating a global version in which capital goods can be produced and shared amongst different communities around the world helping bring about synergies in capital goods production between Kenyans and Greeks and Irish and Croatians and Chinese that will constitute effectively a transcendence of capitalism. THAT should be our task, not simply to retreat to small parochial communities that resemble the middle ages.

B What can you say about the manufacturing of resentment that private sector workers have for public sector workers?

V Well, firstly divide and rule was always a very profitable strategy for capitalism to divide private sector workers from public sector workers and to make one sector think that the other is the enemy has been a very successful policy for making everyone  worse off.

Secondly, the notion that you can not have or that you should not have a state sector because the state sector is antagonistic to the private sector is evidence of the deep seated incomprehension by private sector workers of how capitalism works. It is something that Republicans in the America, conservatives in Europe like to propagate. It’s a fallacy. The fallacy being that the state is antithetical and antagonistic to the private sector , it is not. The private sector would shrivel up and die without the public sector. The state was not created by socialists, it was created by capitalist because it was an essential regulating device insuring that the private sector would have demand so that it could actually function.

So capital creates the state or usurps the state, puts it in its use. It employs public sector workers in order to do that. It uses them in order to intervene in cases of what we call market failure, failures by the private sector, AND THEN succeeds at the same time to set off the private sector workers against the public sector workers and therefore to retain care and control over both of them. The sooner private sector workers realize that reality, the better it will be for them.

B What are your prospects for the European Union as a common political space?

V The European Union offers us a wonderful opportunity for progressive change. It doesn’t give us any guarantees and as an institution it is inimical, it’s an enemy of progressive change but despite itself it’s giving us a great opportunity because it does away with borders, it allows us something that the rest of humanity doesn’t have: if you go to the U.S. Mexican border you’ll realize what I mean. It is great, it is wonderful that we don’t have borders in Europe any more if we are members of the European Union. However, the economic policy of the European Union are trying to create borders and walls in separating our people’s in the [indecipherable] theatre we are divided by a common currency which is a delicious paradox. The only way of not allowing these neoliberal institutions to stop us from uniting in order to achieve a progressive alternative in Europe is by genuinely utilizing the capacity to move around, the lack of borders, in order to stop thinking of ourselves as Greeks, Croatians or Germans. There is no such thing as the Croatians. There is no such thing as the Germans. There is no such thing as the Greeks. There are different perspectives on shared prosperity and who have institutions and the logic of European capitalism which goes against that shared prosperity which is utilized the borderlessness of Europe in order to bring it about.

B What kind of political institutions would utilize this lack of borders? Trade unions, political parties or something else?

V All three. Trade unions, political parties and something else and civil society organizations, a grass roots movement that are pushing our politics and our selves to think of Europe as a vital space that belongs to all of us and in which the human condition could liberate itself from its current shackles and chains.

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