In a recently released recording of a teleconference between Yanis Varoufakis and a group of hedge fund managers, Mr Varoufakis spoke frankly about the contingency plans he had developed when he was the Finance Minister.
This “plan B” involved thinking outside of the box of the Troika’s game where you fully comply with them or they shut down your banks. Plan B was looking at how to set up a parallel currency mechanism that could be immediately implemented on Grexit so as to save ordinary Greek citizens from having no currency, no money, and no viable banking system.
Whilst avoiding Grexit was Varoufakis’ second to top priority, Syriza’s top priority was to arrive at a socially and economically viable renegotiation of the Memorandum of Understanding (MoU) agreed to by the previous Greek government and the troika. Should no form of genuine negotiation happen, then, if Syriza refused to drop its election platform, the risk of a troika imposed Grexit was very high. Hence, if Syriza was to take its own platform seriously, it was necessary for the Finance Minister to work out some sort of secret plan to save Greece’s financial system under an imposed Grexit. Clearly, these plans must be made in secret or else whatever slim chance Syriza had of realizing their top priority, within the Eurozone, would be voided.
It is very hard to see how anyone could fault Varoufakis’ need to develop a plan B, and it is very hard to fault the intentions of this plan, or its intelligence. The thing that is controversial concerns his description of the manner in which he set a non-actioned emergency parallel payment system up by “hack[ing]” into Greece’s tax register. Philippe Legrain describes the situation like this:
“Perhaps the biggest objection [to Varoufakis’ plan B] is that hacking into the tax system is illegal. I am not an expert on Greek law – and I doubt that all the foreign commentators weighing in are either. But if Tsipras had decided to go ahead with the plan after the Greeks’ oxi (no) vote in the referendum, he could surely have obtained parliamentary approval – or indeed invoked a case of force majeure. After all, national emergencies don’t come much greater than creditors threatening to blow up the banking system and, with it, people’s savings and small businesses’ working capital.” [The Guardian, 29 July 2015]
Given the scale of the financial disaster Grexit without another currency set up to go into would create, the question of what legality means in relation to the world of high finance is worth contemplating. Consider, for example, FATCA.
FATCA is the Foreign Account Tax Compliance Act. This piece of legislation facilitates the global surveillance powers of the Internal Revenue Service (IRS) of the government of the United States of America. This legislation stipulates that if any bank in the globe refuses to comply with the US government’s request to know exactly what goes on in every global account that it wants to know about, that bank will be excluded from trading with the US, and taxed at 30% of its yearly profits, whether anyone who has an account with that bank is an American for taxation purposes or not. The ostensible purpose of this act is so that the IRS can identify and tax American accounts with a balance of more the $50,000 where-ever in the world such accounts might be. That total knowledge of global finance just happens to fall into the hands of the US government is, apparently, an unintended side-effect of this legislation. And, as a bonus, this legislation makes it very easy for the US government to take financial action against anyone in the world that the US determines is a terrorist or a threat to the national interests of the US. Of course, FATCA’s demands violate the privacy laws of probably every nation on earth, so each bank is required to sign privacy wavers with the IRS in order to operate in the global financial theatre, whatever their national laws might say. Unsurprisingly, even the Swiss comply with IRS requests for information.
The IRS has an astonishing ability to elicit the cooperation of foreign banks in divulging the most intimate details of their account holders to the US government. Its persuasive force is derived from nothing but the sheer financial power of the US economy and the US Treasury in the global arena. The exclusion cost of non-compliance is just too high. No-one who is a serious player in global finance tells the US Treasury to butt out, or that they are acting in violation of non-US government’s national sovereignty, or that they are violating the basic principles of privacy and international law, or that they have become global financial dictators … whatever they do is just how things are.
Laws operate in strange ways when it comes to high finance.
In 2007-8 American corporate bankers were using special financial instruments which enabled them to generate huge private profits out of speculative hutzpah and mathematical magic. These creative activities with mortgages were not, apparently, illegal, but they did place the entire global financial system in peril of collapse. So when the US government threw trillions of tax-payer dollars down the throats of five giant private finance corporations, this was seen as a necessary action that could not be avoided. This public bail-out of private institutions may have caused a little soul searching in high finance circles at the time, but essentially, the Wall Street game was being played in the way all the big powers expected it to be played, so no-one with financial power felt that there had been any in-principle wrong doing going on. The game is, global financial power exists for the advancement of global financial power, and nation-states are there to make sure that nothing goes wrong for the risk takers. Everyone played there part and the wheels didn’t fall off, so all is well. For this reason the inventors and users of financial weapons of mass destruction were not prosecuted or held accountable for bleeding public money into private hands in unprecedented quantities.
What we learn from this is that for big financial players and big governments, power is its own justification. This is called financial realism. All the Eurozone troika are doing in relation to Greece is following the American example of financial realism. Here, that which is legal, necessary and right is, in the final analysis, whatever the financial institutions with the most power tell you is legal, necessary and right. That their rules work in their interest is taken for granted. It is also understood that anyone who doesn’t play the game that they control, by their rules, will be punished severely.
Mr Varoufakis’ plan B, including the mode in which he developed this plan, is a function of his rejection of the social and political unaccountability of foreign financial power within the Greek nation. Perhaps it may also be a moral rejection, under extreme circumstances, of the validity of laws that facilitate the destruction of the Greek finance sector by the troika. Given that Varoufakis was given political authority by his Prime Minister to pursue this plan, then perhaps his mode of pursuit should be evaluated in relation to the political agendas he was politically authorized to advance. The salient evaluation questions are then would this plan save, in some form, the personal savings of the Greek people, and would it facilitate an operational finance sector for Greece, after Grexit? I think there can be little doubt that Varoufakis’ plan B would have been the best practical option for the Greeks if they had of been forced out of the Eurozone after June 5 referendum, if Syriza had held fast to its original platform.
In thinking about the rules of finance outside of the box mandated to him by the troika, Varoufakis acts out of a concern to promote the wellbeing of the Greek people. Such free and creative thinking, and such motivations, are an affront to the financial realism of the troika because Greece is a small and indebted player in someone else’s financial game, ridiculously seeking to operate outside of the rules that those in power have set in place to suit themselves. This Greek rule-bending ambition, from a position of weakness, violates the basic principles of financial realism.
It is true, Varoufakis defies the laws of financial realism. However, he does not take this stance up out of naivety. Indeed, Varoufakis is all too aware of how financial realism operates. What makes him such a political anomaly is that he is also aware of three other things. Firstly, as an “erratic Marxist” and a gifted mathematician and political economist, Varoufakis is aware that indeterminacy is a basic feature in all human arenas of belief and action. This gives him a philosophical awareness of the dialectic between necessity and freedom which enables him to believe in politics rather than simply in power. This delineates him from the blind determinacy and complete political indifference of dedicated financial realists, both in Brussels and in the mainstream media. Secondly, he is aware that financial realism violates the basic principles of democratic accountability, national sovereignty and moral responsibility. As he believes in that which financial realism violates, he must reject financial realism. Thirdly, he is aware that the rules of finance do not have to be set up to function in financial realist terms. He is intelligent enough to be able to think outside the box, and morally and philosophically courageous enough to make practical plans on the basis of genuinely creative initiatives. In today’s very conformist world of power, this sort of leader is very hard to find. These three factors make Varoufakis a potentially radical political non-conformist in the Eurozone, who just might upset the whole apple cart of the financial realist status quo.
This is why the likes of Schäuble loathe Varoufakis. Yanis threatens the very philosophical foundations of their power. In order to preserve the power of the financial realists, Varoufakis simply must not be taken seriously. Hence, all this patronising media dribble about his clothes, motorbike and hair. Hence, all these relentless media beat-ups about any action he takes that is not coherent with financial realism. Hence all these red herrings about how undiplomatic he is without comment on how sensible and genuinely interested in constructive outcomes he is. The media loves to analyse his style and manner, but seldom has any serious interest in the substance of what he says.
Financial realism is the enemy of politics. It is the enemy of the common people. It is the set of operational assumptions undergirding a global climate of power where the rich enslave and exploit the poor and organize all the structures of power to advance their own interests. Varoufakis’ plan B was a bold and moral plan which the Syriza election platform always needed to have in reserve if negotiations with the troika failed. The July 5 referendum put the Greek people firmly behind Syriza’s original platform. If Tsipras and the Greek parliament had not caved in to the troika after July 5, plan B could have been actioned, and it could have worked. But then, the ball is still in play. The next few months are going to show us if a third bail-out will actually happen, regardless of the fact that the troika did succeeded in head-locking Syriza into agreeing with their austerity demands.
Paul Tyson
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