The Global Minotaur: America, Europe and the Future of the Global Economy
by Yanis Varoufakis
(Zed Books, £8.99)

A WEEK before Alexis Tsipras capitulated to the EU Council of Ministers Yanis Varoufakis resigned as Greek finance minister.

The Global Minotaur, written four years ago, is probably not entirely irrelevant to that resignation.

Originally published in 2011 and now updated to 2013, the book focuses particularly on the evolution of capitalism over the past century.

Unlike many such books, it brings together the exercise of both economic and political power and is written in fresh and compelling language.

Its basic thesis, concerning the global role of the United States, argues that the quarter century of fast economic growth after 1945 depended on the US using its superpower position to create a new global currency structure that could fuel post-war recovery in Europe and Japan.

It did so by printing dollar bills and lending the money to Europe and Japan in order to create overseas markets for US multinationals.

As a result of printing too many dollars, this system broke down in 1971. It was eventually replaced by another, which also depended on the superpower status of the US.

In the new circumstances, however, the US borrowed from the rest of world and used the money to import commodities from its creditors — thereby fuelling another 30 years of relatively fast economic growth.

As a system, it depended on the financial stability of the US in a very unstable world and its technologically still dominant economy. The world’s rich lent to the US to share in its profits.

It was, however, growth built on debt. Worse, that debt was increasingly manipulated to magnify bank profits.

“Financialisation,” subordinating economic growth to uncontrolled speculation, eventually produced the crisis of 2008.

This moment of financial terror, Varoufakis argues, destroyed the whole system.

Drawing on the mythical deal between the people of Athens and the King of Crete, by which the city’s survival depended on an annual tribute of 14 young people for sacrifice to the bull god at the centre of the labyrinth, in Varoufakis’s narrative it is the US that is the minotaur.

For 60 years the world paid a similar sacrifice to the US. But now, says Varoufakis, the minotaur is dead — of a heart attack in 2008.

The question is what is to replace it and it is at this point that doubts begin. Varoufakis draws on Marx for some of his history but not for his economics. Here he is essentially a radical Keynesian.

He looks back to Keynes’s proposals in 1944, rejected by the US, for a world currency.

For economic recovery to take place, Keynes argued, such a currency needed to be managed co-operatively by the major powers and, when imbalances occurred, to redistribute money from creditor countries to debtors to maintain long-term global demand and growth.

This, says Varoufakis, is what is needed now. He quotes the ex-head of the IMF, Dominic Strauss-Kahn, speaking to the same effect only days before his arrest by US police agents. Today such a monetary system may sound good — just what is needed in the EU.

But there are two objections to Varoufakis’s proposal. One concerns its political realism and the other whether it gets to the heart of the problem.

Keynes saw the 1930s slump as resulting from a collapse in financial confidence and resulting under-consumption, one which a managed currency could resolve by injecting credit and thereby raising demand.

Marxists like Maurice Dobb differed. They argued that it was a crisis of capitalism in its monopoly stage, in which the distribution of the surplus among capitalists was dislocated by monopoly power. This knocked smaller producers out of the market, cut demand and led to a slump.

In these circumstances, Keynes’s solution would indeed get big business investing again. But printing money was not class neutral. It redistributed income from those who could not control their prices — labour, farmers and small businesses — to those who could, the monopoly firms.

And it would only work in the medium term. The monopolies would get bigger and the underlying dislocation intensify — which is exactly what happened between 1945 and 1971. Then capital’s solution was to attack labour frontally.

It is also the case today.

Big business in the EU now wants an end to the constraints of collective bargaining and to secure a fully flexible labour market. The institutions of the EU are its instrument because this is what they were specifically designed to do — to uphold the neoliberal freedom of the market.

Today the EU is Greece’s minotaur. Offering sacrifices in the hope of salvation, Keynesian or otherwise, simply perpetuates its power.

Maybe this is what Varoufakis realised at the beginning of this month.

• John Foster is international secretary of the Communist Party.