“Global Trade & Capital Imbalances imperil Global Stability” – Redaction Politics reviews my Holberg 2020 debate with John Bolton

Redaction Politics published a review of my Holberg 2o2o debate with John Bolton on Global Stability. Their review is reproduced below. To watch the debate click here.

Yanis Varoufakis lamented economic equality and pushed for global co-operation while John Bolton urged diplomatic confrontation as the pair battled over the question of “global stability” last week.

In an intriguing clash at the 2020 Holberg Debate, the former Greek Finance Minister claimed economic inequality was the root cause of global instability.

He cited the post-war Bretton Woods agreement and FDR’s New Deal as prime examples of fixing the imbalance and promoting global cooperation.

His counterpart, predictably, said the solution was military confrontation and dominance.

It was no surprise from Trump’s former National Security Adviser, a hawk who supported regime change in Iran, Syria, Libya, Venezuela, Cuba, Yemen, and North Korea.

Mr Varoufakis said: “There is a tendency during periods of growth, during periods of increasing prosperity, increasing hope and optimism – for existing global divisions between trade-surplus countries and trade-deficit countries to have their surpluses and deficits get larger while GDP grows.

“But then, at some point – courtesy of this global imbalance – something happens, like Wall Street in 1929 or 2008, and the bubbles burst.

“We then have the burden of adjustment falling disproportionately on the trade-deficit parts of our countries and the deficit nations – and that causes raptures, and divergencies.”

As they suffer disproportionately, trade-deficit nations become even more embedded in the surplus-deficit dynamic after recovering.

The Bretton Woods system brought together capitalist nations under the dollar – which currencies were now pegged to – and provided stability within Western nations for decades after World War II.

“You need to expand it globally if stability is going to come out of this system,” Varoufakis added.

“The lynchpin of this was the American surplus – America was the only creditor post-war, and it was the intention of those in command of policy in Washington to recycle some of the American surpluses to Europe and Japan to stabilise the dollarised global system, and therefore allow it to be a source of stability.

“And of course it worked very well – but it was doomed to fail, because by the end of the 1960s, America was no longer in surplus.”

American hegemony continued long after the Bretton Woods era ended in the 1970s, but it was through financialisation, the Fed and China that Washington maintained its dominance, he said.

Mr Bolton, bizarrely dismissing the argument as “Marxist description”, said China maintained an “authoritarian threat” and should be confronted as such.

“It’s not that anybody is seeking confrontation, it’s the fact that others are seeking confrontation with us,” he said.

“The legitimate focus of decision-making in the United States is how to protect American interests and values in the world along with our allies.

“The world will be a dangerous place in the 21st century; but the way that you deal with that threat is not to ignore it and not to say we can find mutually beneficial ways of overcoming it. The way to deal with it is to have adequate structures of deterrents to deal with the threat till it ceases to exist.”

Varoufakis responded: “Global security, just like climate change, are collective, humanity-wide problems that require collective decisions and action.

“The US after 1944 has played a very significant and positive role in helping bring together the nations of the world in a degree of harmony with some efficiency. Europeans must elicit from the US a new readiness to come to terms with a new internationalism that deals with these global threats as a common enemy. If we fail, we will be on a perilous road to a barren future.”