Varoufakis, Y. (2017). Talking to my daughter: a brief history of capitalism. Random House.

Yanis Varoufakis is a progressive politician and economist who negotiated on behalf of the Greek government during the Greek debt crisis of 2009-2018. He has a gift for communication and here has written an economics book that is unusually accessible. As far as possible he avoids economic jargon and assumptions about the economic literacy of his reader. He constantly, and effectively, illustrates his points with reference to popular culture including films (The Matrix is a big favourite), books and classic Greek mythology. The premise of the book – reflected in the title – is that he is conversing with his teenage child about how the world has become mired in inequality, revealing the path we have taken to get here. This amounts to a critique of the world’s dominant economic system – capitalism – that only mentions the word ‘capitalism’ to explain that it will be avoided! (Because the word is loaded with so much baggage and eludes a simple, widely accepted definition.)

Varoufakis may have written it with his young daughter in mind, but the result is a book that this 60 year old reader, for one, found immensely enjoyable and enlightening. The book visits topics that I have researched before – for example on the origins, nature and life-cycle of money and banking – and made me think about them in new ways. The description of the evolution of a financial system in a WWII prisoner of war camp, based on a currency of cigarettes, is a case in point: accessible and fascinating in equal measure.

One stand-out chapter, for me, is the first (Why so much inequality?), which explores the macro-distribution of inequality in the world (e.g. rich North vs poor South), by attempting to answer the question: “Why didn’t the aborigines in Australia invade England?” The short answer is geography: agriculture and thence surpluses, advanced economies and powerful nation states arose in places where they had to – e.g. colder northern climates where year-round subsistence to support hunter-gathering was precarious – and spread across the wide landmass of Eurasia where the climate was relatively homogenous, enabling the translocation and adaptation of agricultural systems.

[market-driven society] has put us, as a species, on a collision course with Earth’s capacity to maintain life.

yanis varoufakis

There are a number of threads which run throughout the book. Perhaps the most powerful of these is the way Varoufakis thinks about the relationship between experiential values and exchange values. Throughout the history of our species, we have appreciated goods for their experiential value to us. But we can also think about goods as commodities that have exchange value. More and more goods have become commodities in the triumph of the market economy: we have transformed from societies with markets where most goods were valued for their experiential value to market-driven societies that prize commodities for their exchange value, “put[ting] us, as a species, on a collision course with Earth’s capacity to maintain life“. Explaining why and how this has happened and, to some extent, what we might do about it is a common theme throughout the book.

Varoufakis’ account of the evolution of the market-driven society from feudalism was interesting and pretty much conforms to the widely accepted notion that feudalism was directly replaced by capitalism. However, this view is increasingly criticised as a gross oversimplification by some historians who point out that it ignores the damage done to feudalism by peasant insurgencies and the social upheavals caused by plagues in the late middle ages. They argue that feudalism was already in terminal decline before capitalism started to emerge. (Jason Hickel makes this case in his book Less is More.)

Despite being published six years ago, Varoufakis’ view on the accelerating role of automation in the labour market, fueled by artificial intelligence, is positively Muskian. He is convinced that we will reach a point where it is technically possible to replace almost all human labour, except perhaps in the design of machines that design machines. Interestingly he argues that there is a built in safety feature of market societies that should help prevent automation taking over completely – what he calls the Icarus syndrome – whereby as automation, fierce competition and reduced demand (due to fewer waged workers) leads to lower margins, there comes a points where a crisis is generated before the machines take over completely: businesses go bust causing the well-known cascade of consequences leading to recession. At some point it becomes cheaper to hire human labour than to keep the machines going, allowing people to regain some ground for a while before the cycle starts again – all at massive real-world cost to millions of people. Varoufakis advocates a couple of remedies to this. Firstly, labour resistance: “It is another paradox hidden in the foundation of market societies that although most employers are dead against it, the worker’s capacity to organise themselves, especially through trade unions, to demand shorter hours, higher wages and more humane conditions, is the antidote to the Icarus syndrome.” Secondly, noting that currently automisation reduces the money going into workers’ pockets and increases the money going to the company owners, he proposes that a proportion of all machines of all companies become the common property of the people, with a corresponding percentage of the profits going to them. Asking what stops this happening now, Varoufakis concludes: “the fierce opposition of the tiny but very powerful minority who own the existing machines, land, office blocks and of course the banks.”

Other topics covered in this relatively short but wide-ranging book include:

• The role of the clergy in the development of the state and inequality.
• The genesis of the industrial revolution.
• The vital role of public debt in generating profit in market societies.
• The black magic of banking including the creation of money by commercial banks.
• The labour and money markets.
• The relationship between politics and money.

The final chapter – Stupid viruses? – brings things back to the human and environmental costs of market-driven societies. With reference to the wildfires that increasingly ravage Greece, Varoufakis notes the perversity of measuring progress by GDP growth when that growth results from our efforts to fight and recover from natural and human disasters resulting from environmental breakdown: “A society that prizes exchange value above everything is one that grossly and criminally undervalues the preservation of the environment” and “today, if we are to have any chance of saving the planet and ourselves we must find ingenious ways to reactivate humanity’s appreciation of experiential values that no market can even recognise, let alone respect”. He advocates placing limits on profit seeking behaviour – in other words, regulation – and asserts that collective responsibility can only be brought about by collective ownership and democratising the management of the planet’s resources. His closing remarks to his daughter, and to us, is that the big argument of our time will be democratise everything vs commodify everything.

The economy is too important to be left to the economists.

yanis varoufakis

I highly recommend this book. I wish I had read it years ago – it would have demystified economics for me and helped me to understand that environmental degradation is not an inevitable consequence of economic activity. I can see that it is a book that I will return to again and again, especially when I need a bit of clarity to cut through the economic fog, which passes for as economic ‘science’, billowing from our economic institutions and ‘think tanks’. As Varoufakis puts it: “the economy is too important to be left to the economists.”