The Global Minotaur – as featured in the New York Times Magazine

Russell Shorto kindly interviewed me for the New York Times Magazine on my Global Minotaur, as part of a long article entitled The Way Greeks Live Now. For the complete article, as it appears on the New York Times website, click here. The piece that concerns my book follows here:

One of the grandest piles of ancient stones in a country full of glorious ruins lies on the island of Crete. It is called Knossos, and it was to Greece what Greece is to Europe: the cradle of its civilization. At the core of its prehistory is the legend of King Minos, who ruled over the Greek islands. Minos maintained his hegemony over Greece by requiring that Athens, the second power in the Aegean world, send him tribute in the form of young men and women, whom Minos fed to the beast he kept in his labyrinth: the Minotaur.

Improbably enough, a Greek economist named Yanis Varoufakis has been drawing attention in many of the hot spots of global finance lately, offering the Minotaur myth as a metaphor for understanding recent macroeconomic events. As Varoufakis writes in his recent book, “The Global Minotaur,” the world in which we have been living until recently functioned thanks to the voracious consumption of a different kind of beast. After World War II, the U.S. built up the infrastructure of its European allies as well as its former enemies, all of whom became trading partners. The U.S., with its great industrial and financial might, became the world’s surplus nation: its profits flowed out to its allies in the form of aid and investments. By the early 1970s, however, other countries had robust economies, and the U.S. was a debtor nation. “At that moment, certain very bright men within the American financial hierarchy made a stunning realization,” Varoufakis told me. The realization was that it didn’t matter if the U.S. was the biggest surplus or biggest debtor nation. What mattered was controlling the world’s primary currency, which would allow the United States to continue to recycle the global economic surplus. The idea was not unlike the thinking behind a casino — whichever gamblers are winning or losing, the house, which sets the terms and takes its cut, always wins.

So a new system came into being, in which a huge part of the world’s capital flows went to service debt originating in the United States. American debt, and the need to feed it, would be the modern Minotaur. The Wall Street financial houses became the handmaidens of the Minotaur. “The massive flow of capital into Wall Street gave it the impetus for financialization,” Varoufakis said, referring to the creation of derivatives and other risky financial vehicles. “And so Wall Street created a great deal of private money, with which it flooded the world and created huge bubbles, in the U.S. housing market and elsewhere.”

When that system came crashing down in 2008, Varoufakis says, “it was then only a matter of time that the euro would come into crisis.” Europe’s powerhouse economies — essentially, the northern countries — no longer had a place to sell their goods.

And where, in this grand picture, does Greece fit? Part of the logic of the eurozone involved the strong economies’ providing loans to the weaker ones, in order to build up their infrastructure so they could then buy products from the stronger countries — a kind of replay of what the U.S. did vis-à-vis Europe with the Marshall Plan. But while Greece took the loans, it didn’t invest wisely, and its own debt kept mounting.

As the weakest link in the eurozone, Greece gives us the clearest picture of what the larger economic downturn portends. And for all the hopefulness of some of the Greeks I met in my travels, others take a dimmer view of their future. Near Thessaloniki — Greece’s second-largest city — I visited a family home. Husband, wife and son were present. The woman is one of the top bankers in Greece. She spoke on condition that I not use her name or the name of her bank. When I asked for her views on the future, she said: “Last week, in the town of Larissa, I was sitting at an outdoor cafe, and a clean, well-dressed Greek man of about 60 passed by and politely asked if he could have the biscuit that came with my coffee. What you say about successful companies is good to hear. But the reality is that man who asked for my biscuit. You can’t see the crisis results fully yet because people have been living off their savings. Soon the savings will end. I believe that by the end of 2012, you will see a different Greece, a different country, with real poverty.”

According to Yanis Varoufakis, the future — for Greece and for much of the rest of the Western world, never mind recent upticks in the U.S. economy — is one of even more upheaval. “The Minotaur died, and that is what held everything together,” he said. “Until a new system is invented, we are in for turmoil.” As anecdotal evidence of the situation in Greece, he told me that all of his top Ph.D. students at the University of Athens were seeking jobs abroad. Then he added that he, too, would soon be leaving, possibly for a position in the United States.

48 thoughts on “The Global Minotaur – as featured in the New York Times Magazine

  1. I’ve been surfing on-line more than 3 hours as of late, yet I by no means discovered any attention-grabbing article like yours. It is lovely worth enough for me. In my view, if all web owners and bloggers made just right content as you did, the web shall be a lot more useful than ever before.

  2. Yannis, congrats for the story-telling in Channel 4. Strong ideas and good background info.

    Myself I got my PhD from UoA, now I am a postdoc in California. I have to say that
    I don’t understand fully the opinion expressed by Mr. Kavathas. Even when young people are highly educated,therefore more qualified, they are not always given a choice to work for more than 300 euros. Usually they are leaving Greece and in my opinion -at least- brain leakage (as they call it) will be an important problem during the next 5 yrs.

    Keep the blog updated with you lecturing calendar in US. Are you going to be on a sabbatical?Maybe I could see you lecturing here! (Any Stanford, Berkeley talks?)

  3. I should not be surprised by your decision to leave …but any way… just hoping Minotaur won’t eat you too! Fare well …Theseus ! ;-)

  4. Well written John.
    And yes, it is sad to see/hear/read that Yanis may leave for greener pastures.
    But we Australians had to endure the same heartache when he left us.
    Good luck Yanis. Keep fighting for what you believe in, like all educators (& maybe you may supervise my PhD – a tax man under the direction of an economist: sounds fun!).

  5. Apologies in advance for this long piece. And my thanks to Yanis, for allowing me to post the following.

    I see many Greek bloggers expressing their sadness to see Yanis go overseas (whether temporary or permanent). While your expressions are testament to Yanis and his work, respectfully, I also wish to disagree with you. Strongly if I may.

    In this globally connected world, you MUST have Greeks to go overseas. And you and your government should be systematically staying in touch with them and making the most of their knowledge and the new social connections they make. But before you even do that, you need to build a social agreement where you TRUST EACH OTHER. Because if you can’t do that, there is no reason for the migrant Greeks, or foreigners for that matter, to trust their money in your country.

    One thing that struck me in the recent crisis, is that when the going got tough for Ireland, they were able to draw upon their global migrant community for practical support. And I don’t just mean sending paypackets back home either. None other than Bill Clinton pitched Ireland as an investment destination to US firms. They have the IDA as an organisation whose brief it is to attract overseas investment.

    Where were the emigrant Greeks supporting Greece? What had the Greek government done in the past 20 years to promote TRUST, TRADE and INVESTMENT between local and migrant Greeks?

    Nothing had been done, so it was a case of ‘save yourselves’. Capital flowing out of the country (which given the current situation is understandable).

    If Greeks don’t back themselves, why the hell should foreigners?

    And here is my disclaimer. I am Australian born of Greek parentage. To the best of my parent’s ability, I grew up with all the usual jingoism about how we introduced Democracy to the world, our fantastic myths, and our painful modern history. I have no doubt the latter has taken its toll on the social compact. 400 years of Ottoman occupation, followed by so many wars. But let’s be clear about this, wringing hands, and asking for sympathy and justice doesn’t get anyone anywhere.

    The Irish are also a small country with a painful history. Regardless of whether you agree with their political decisions re the crisis, I emphasise the key point – their migrant community stood up for them. That says to me that the local and overseas Irish understand the need to stick with each other.

    In Greece, the constant Left vs Right bickering that continues to go on, and on…. The Rousfeti… The tax avoidance, still… (yes, the 1st Greek Prime Minister was killed trying to implement tax over independently minded Mani!)…. The Fakelakia…. What’s it going to take to wake up and realise you’re only cheating yourselves!

    I have been to Greece once, just prior to the Euro. On the one hand many Greeks are hospitable in that old-fashioned, timeless way – priceless, invaluable! But there were also too many Greeks trying to cheat us ‘suckers’. You show a bit of decency or common courtesy, and they pick you from a mile away. You are all paying the price for that, in the seeds of distrust it builds in small everyday interactions. IT’S UP TO YOU TO STOP IT.

    We are supposed to be GUARDIANS of the some of the West’s GREATEST cultural achievements. Yet, as Greeks, we cannot even trust each other. Such an incredible, but squandered, opportunity!

    And I know many Greeks who criticise the British and Americans, with some justification of course. But I will also say this. It is they who have kept that incredible humanistic legacy of The Ancients’ teachings alive through institutions such as Cambridge and Yale. NOT MODERN GREEKS (apart from exceptional individuals such as Kazantzakis).

    I put to you that the challenge is to prove yourselves – or ourselves , if you will – worthy of building a society, that can rediscover its own ancient history, and help build it that incredible knowledge further for future generations. Otherwise we do not have the right to keep reminding everyone that we ‘invented’ it.

  6. Good evening from Australia, Yanis. May I (highly) recommend the book “Exorbitant Privilege” by Barry Eichengreen, as an accompaniment to your book. The Global Minotaur does an excellent job of setting the framework of the GSRM as you describe it, while Eichengreen’s book does a great job of detailing the machinations relating to currency politics esp. in Europe and US. Also has a great chapter on the factors contributing to the financial crisis. A lot of what you describe in TGM, particularly relating to the high level politics, is reinforced and detailed even further in here. I think the 2 books go quite well together (for anyone interested, I recommend you read TGM first).

  7. As a citizen of the debtor nation that has caused all of this commotion, it deeply saddens me to see what our profligate spending and consumption has wrought on the world. What’s worse is that all of the capital flowing through the U.S., does not stay in the U.S. save for a select group. The fiscal irresponsibility you spoke of in Greece is apparent here as well — roads, bridges, public transit systems that are falling apart; schools that are completely unsuitable for modern education. This happens while we here stories of corporate profits going up — where are these corporate profits going?

    One thing that was not mentioned in your article that I think is salient, is there was a dramatic shift in the 1970′s. This shift is what allowed the U.S. to become the debtor of the world, while exporting its financial might — that is the elimination of the gold standard. In my opinion, it is only a matter of time before the world switches to another standard (the renminbi, perhaps) When that happens hyper inflation consume the U.S, and we will follow the long list of nations — Argentina, Brazil, Iceland — that lived beyond their means and to reassess their lifestyle choices. Fortunately, the U.S. has the ability to devalue its currency.

    My wife and I were discussing your article, and this topic at length today. It’s a fairly depressing topic, so she asked me: “tell me something positive about all of this.” My response: I’d rather live in a world of truth, than one of artifice. The Minotaur dying, is much the revealing of Oz — we will have to own up to our actions and reassess our priorities. And in this truth, I think lies some happiness. The NYT article had hints of this. I think all people who are living within a financial bubble, whether they are educated about economics or not, implicitly understand that the music will stop at some point. It has stopped. But that just means that we have an opportunity to change the record.

    • A mesma coisa. The root cause of the problems is the missing exchange rate. PT also has the Euro, so it has the same issues as Greece just a little bit later. If there would be an exchange rate Portugal could devalue and would not run such a high deficit, hence public debt would not be so high. Sound familiar?

  8. Yanis,
    Your book “The Global Minotaur” in English arrived today… I will read with great interest.
    I believe I have a much better and deeper understanding of the current economic situation in Europe and Greece (even beyond) thanks to you and thanks to TVO, which made me know and pay attention to you…

  9. We should be happy that Yanis is going abroad, where there is a chance for his ideas to be adopted. Not to mention that, as he has said, the real “battlefield” lies outside Greece.

    We wish you all the best, Yanis! And don’ t have any doubt that we shall be still here, maybe poorer but also much wiser (I hope), when you come back . . .

    • And come back I will! Not interested in another long spell of migration. I am leaving to breathe a little more freely before I come back. Additionally, I don’t think that anyone (other than my students or family) will notice my absence. It will be as if I am here, in Athens.

    • It’ just hurts to see the best of our scientists to leave. Suddenly you realise that your country is a place poor, harsh, a modern wild west away from any real progress…
      I wish all the best to Yanis too, but i am stil sad,,,

  10. Financial Times this morning reports beginning of push to postpone Greek elections:

    A number of Greek newspaper columnists reacted angrily on Thursday to a suggestion from Wolfgang Schäuble, the German finance minister, that the country could delay its elections, which are due to be held in April, and instead install a technocratic government.

    However, Mr Schäuble’s comments received support from Michalis Chrysohoides, Greek development and competitiveness minister.

    “We could support the extension of the Papademos government. We believe that Greece now needs stability, needs a coalition government with … political support and political will, which serves the biggest percentage of the Greek population”, said Mr Chrysohoides, who was on a trip to Frankfurt. His comments were made on Wednesday evening and released on Thursday.

    • And Kathimerini more or less tells us why the pushback for elections in April – fear of the rise of the Left….

      “there were reports last night that Germany, the Netherlands and Finland had raised the issue of obtaining pledges from Greece’s smaller parties as well. There is concern within the eurozone that should snap elections be held in April, it may result in a coalition government that includes parties that are opposed to the terms of the bailout”.

    • Actually, David: You hit the nail on the head.

      This is what it’s all about. The Greek Left is sporting a nice 40+% at the moment plus it has not signed the Obedience Letters the other parties had to.

      So, the Left looks like a shoe-in during the next election. But this is where the problem begins. Germania Horribilis does not want the Left in the driver seat, especially when Frau Intimidatore’s party is of the opposite ideology. That’s why Germania Superlativa is pushing for the Papademos government which is infested with out of favor and unsuitable ministers (currently their poll rating stands at 8% v. the 44% achieved during the last election).

      So Germania Darth Vaderatis is playing the old divide and conquer game and keeping the democratic process from manifesting itself.

    • I tried posting a more complete comment before I posted the link on its own…

      It seemed to me that you might find it an interesting story

      Thank you for all your fine work and I hope your relocation to America wont inhibit your ability to support Greece in these difficult times.
      Mark.

    • Awesome and very appropriate. Both the Pacific and the Atlantic coasts. Sorry for the Greek climate conducive to such decision. I know we also gave you some grief with various daily obsessions.

      Hope all is forgiven and we promise to behave better from this point on.

  11. I also want to describe the sadness for your decision, even though very understandable, to leave Greece.
    But let me ask you: if you have not decided yet… would you consider coming to Germany? I think, here we need you more than elsewhere… And I don’t think you are afraid of confrontation, right? ;-)

  12. Yanis Have you considered going into politics and running for elections?

    I would as would many thousands of other Greeks vote for you.

    Please consider this notion because it is times like these when a person of great knowledge of the political system and have the ability to steer Greece from self destruction is greatly needed.

    The question every politician need to ask themselves before they enter politics is.
    Are they entering the political seen to benefit themselves or to contribute to improve the country as a whole. Whereby everybody benefits

    Real Patriots!!

    I believe we need real people who can connect with the public to run the country, not these so called Greeks who are running us into the ground. It is as if they are trying to kill the Greek spirit.

    It is therefore time for a new generation to take control of Greek leadership one that has knowledge and know how to change the political landscape of Greece.

    Reform the bureaucratic system to promote business and most importantly to try and convince successful Greeks living overseas to invest in Greece.

    Greece can become a leader in the world again only if we Greeks unite as one..

    • Thanks for the vote (of confidence). But it is not my style. I demand my right to question in public what… I think. Politicians are not allowed to do that. Just by running for office, a sort of lobotomy is effected that stops them from wondering whether they have got it wrong…

  13. It’s really sad to hear that you’re gonna leave Greece..I suppose it was just a matter of time. Too bad they didn’t know how to take advantage of such a brilliant mind. The americans will be very fortunate to have you.
    I wish you all the best, Yanis!

    Iulia

  14. I truly hope your personal confession about leaving our country will not materialize. Expect more similar comments to come… hope to have second thoughts soon!

  15. Having read this piece I just pre-ordered the german version of your book.

    As for your new position, all the very best!

    I hope you will keep this blog up and running.

  16. Yanis, it is impossible to not notice that you are increasingly in much of the world’s media but not very much in Greece. Perhaps, I’ve missed it? More likely your viewpoint is so against the criminals who are running your country that they have taken every opportunity to keep you out of the economic/political discourse. Much like most of the world’s countries, Greece’s govt is an ongoing criminal enterprise, but more so than most. When you say Greece “didn’t invest wisely”, you are too kind.

    Those who argue that financialization of economies, particularly the scaling up of the derivatives trade, caused the 2008 crash, seem to believe that the Minotaur could have been kept alive if only moderation had prevailed in financialized markets.

  17. I have a question : is the french translation of the book on its way ?
    Because you know many french people are too lazy to read in other language… I know it’s sad, anyway…
    The same way there was a german translation, there definitely need be a french one.

  18. I screwed up with the closing italic tag … again. I think I put the forward slash after the “i.” There. I just closed it.

    What was I thinking that got me so distracted? Oh yeah — the thought of Greece’s best leaving Greece :-(

    And I’ll say this: It will be a “net positive” for the lucky countries receiving them … and a net loss for Greece!

  19. Then [Yanis Varoufakis] added that he, too, would soon be leaving, possibly for a position in the United States.

    I must admit that it saddened me to read this, Yani.

    My worst fear on Greece coming true: Her best and smartest leaving. Not good. Not good at all.

  20. Based on my knowledge of 1st and 2nd year micro and macro economics and based on the assumption of widespread tax evasion in Greece as the major problem in addition to over spending.

    Would it have been “technically” feasible to pass one law taking over 50% of the equity of everyone’s home, apartment, building and farm property under the assumption that the correct taxes were not paid. the individuals would then pay back the government as a mortgage. For those who cannot pay, the amount would be added to their mortgage.

    The rich would have to pay their fair share. Everyone (I really mean everyone) would be hit at the same time and a rough fairness would ensue.

    There would have been no need to raise anyone’s taxes, but the unemployed, military and pensioners could have been “drafted” to work at collecting existing taxes.

    A lien on property would ensure that no one could dodge measure and the EU would know where the promised money is coming from.

    “Technically”, is this feasible? Is 50% too low, to high or just right.

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