While the ‘enfant terrible’ of the financial media, Greece’s new finance minister Yanis Varoufakis, enters key negotiations with other Eurozone finance ministers on a deal over Greek debt and economic recovery, I have been reading up on Varoufakis’ economics and philosophical ideas.

As a trained economist who has held many academic posts in various universities around the world, YV considers himself a Marxist, but an ‘erratic’ one. As he put it in a post on his blog back in 2013 (http://yanisvaroufakis.eu/2013/12/10/confessions-of-an-erratic-marxist-in-the-midst-of-a-repugnant-european-crisis/#_edn2), “while an unapologetic Marxist, I think it is important to resist him passionately in a variety of ways. To be, in other words, erratic in one’s Marxism.”

In his confessional post, VF explains that, although he considered himself a Marxist, he avoided studying Marxist economics at university because he wanted to understand and take on the basic premises of mainstream bourgeois economics. “When I chose my doctoral thesis, back in 1982, I chose a highly mathematical topic and a theme within which Marx’s thought was irrelevant, by design.” He is apparently an expert on the role of game theory in markets and the economic behaviour of ‘market agents’, being employed at one time by a gaming company for his expertise.

But he recognised that bourgeois economic theory bore little relation to reality. “When called upon to comment on the world we live in, as opposed to the dominant ideology regarding the workings of our world, I had no alternative but to fall back on the Marxist tradition”.

And what were key merits of the Marxist tradition in the eyes of YV? First, it was Marx’s insight that the world was full of contradiction: wealth and poverty; growth and collapse; democracy and the rule of the elite. “This dialectical perspective, where everything is pregnant with its opposite, and the eager eye with which Marx discerned the potential for change in the seemingly most constant and unchanging of social structures, helped me grasp the great contradictions of the capitalist era. It dissolved the paradox of an age that generated the most remarkable wealth and, in the same breath, the most conspicuous poverty.”

It was Marx’s dialectical thinking that enabled him to make his most important discovery about the capitalist mode of production, namely the “binary opposition deeply within human labour. Between labour’s two quite different ‘natures’: (i) labour as a value-creating (“fire breathing”) activity that can never be specified or quantified in advance (and therefore impossible to commodify), and (ii) labour as a quantity (e.g. numbers of hours worked) that is for sale and comes at a price.”

Thus Marx’s “brilliant insight into the essence of capitalist crises was precisely this: the greater capitalism’s success in turning labour into a commodity, the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next nasty recession of the economy as a system.”

Thus VF correctly captures the key law of contradiction under capitalism: the accumulation of capital through the exploitation of labour has a tendency to lower profitability and engender regular and recurrent crises in production. So as YV puts it: “Capital can never win in its struggle to turn labour into an infinitely elastic, mechanised input, without destroying itself. That is what neither the neoliberals nor the Keynesians will ever grasp! “If the whole class of the wage-labourer were to be annihilated by machinery”, wrote Marx “how terrible that would be for capital, which, without wage-labour, ceases to be capital!”

For YV, Marx exposes the ‘false consciousness’ of bourgeois economics that reckons “wealth is privately produced and then appropriated by a quasi-illegitimate state” when the opposite is the reality “wealth is collectively produced and then privately appropriated through social relations of production and property rights”. Moreover, YV also recognises that Marx does argue that what is wrong with capitalism is not inequality (that has existed in all class societies) but that it is wracked with continual crises that are “irrational, as it habitually condemns whole generations to deprivation and unemployment”.

All this would seem to make YV a Marxist by most definitions. But YV goes onto to say that he is really an “erratic” one because, in his view, Marx was wrong in two key areas.

First, he was far too dogmatic and closed in his views. As a result, he bred Marxists after him who adopted authoritarian policies and actions. Marx “failed to give sufficient thought, and kept a judicious silence, over the impact of his own theorising on the world that he was theorising about… He just did not consider the possibility that the creation of a workers’ state would force capitalism to become more civilised while the workers’ state would be infected with the virus of totalitarianism as the hostility of the rest of the (capitalist) world towards it grew and grew.”

Thus YV agrees with the superficial view of the populist right-wing papers and conservative thinkers that there is a straight line from Marx to Stalin and Pol Pot. There is no space here to deal with this ludicrous calumny of Marx and Marxism. I leave the reader to consider how justified YV’s argument is.

That’s because, according to YV, Marx’s other big error is even worse than breeding authoritarian and totalitarian regimes calling themselves Marxist. “It was his assumption that truth about capitalism could be discovered in the mathematics of his models (the so-called ‘schemas of reproduction’). This was the worst disservice Marx could have delivered to his own theoretical system.”

According to YV, Marx was determined in his determinism (my phrase). Marx wanted to find economic models and laws that ‘proved’ capitalism would collapse or be subject to crises, when no such proofs can exist. By “toying around with simplistic algebraic models, in which labour units were, naturally, fully quantified, hoping against hope to evince from these equations some additional insights about capitalism.” As a result, we epigones of Marxist economics have “wasted long careers indulging a similar type of scholastic mechanism…Fully immersed in irrelevant debates on the transformation problem” and thus being ignored by mainstream economics.

YV’s argument smacks of empiricism and opposition to theory. Actually, the ‘scholastic’ debates over the ‘transformation problem’ by Marxists in the 1980s and 1990s eventually culminated in an important advance in Marxist economic theory that successfully defended Marx’s law of profitability against the attempts of mainstream neoclassical and neo-Ricardian economics to rubbish it (see Andrew Kliman’s seminal book, Reclaiming Marx’s Capital, http://akliman.squarespace.com/reclaiming/). That is what theoretical debate is about: to advance our understanding in a rigorous way.

Yet YV goes on “It was this determination to “have the ‘complete’, ‘closed’ story, or model, the ‘final word’, is something I cannot forgive Marx for. It proved, after all, responsible for a great deal of error and, more significantly, of authoritarianism. Errors and authoritarianism that are largely responsible for the Left’s current impotence as a force of good and as a check on the abuses of reason and liberty that the neoliberal crew are overseeing today.” Thus Marx was a closed mind thinker, a determinist who had no room for error and doubt and thus wasted the time of later Marxists in pointless debates and he was so harsh on those who criticised this determinist view that he bred authoritarian attitudes in his followers.

Serious crimes, indeed, if they were true. But YV is talking nonsense. YV criticises Marx’s Volume 2 of Capital for trying to find a mathematical formula to show that capitalist accumulation can grow smoothly, when the real world is indeterminate, full of chance and change. But like many others, YV fails to recognise that Marx’s reproduction schema in Volume 2 are not meant to depict the reality of capitalism with all its warts. They are a model of ‘capital in general’, where capitalism is reduced to the basic forces of value creation and reproduction, excluding competition between capitals, credit, money, the equalisation of the rate of profit between capitals and the differences engendered between values and prices of production, let alone daily market prices.

Marx’s schemes of reproduction in Volume 2 were not a ‘closed model’ of capitalism. What they show is that capitalist accumulation will not stumble because of the ‘lack of effective demand’. Accumulation can take place with demand for capital goods and consumer goods. It is possible for a balance. But in reality that never happens except by accident. It is as indeterminate as YV wants. Marx recognised and argued that the capitalist mode of production was a dynamic and uncertain system, but he delved below the level of uncertainty and appearances to the essence of capital in general and then added back each stage of reality to the level of many capitals (Volume 3) and then to market prices.

As Henryk Grossman explains in his essay on value and prices of production, at the level of many capitals, it is prices of production that move to establish an average rate of profit not values (see here Intro to Grossman Value-price trans and crisis 141101). And this is where the crux of crises rests – in the movement of the average rate of profit (Volume 3), not in the value reproduction schemes (Volume 2). This is a key mistake of Luxemburg and Bauer’s understanding of Marx’s reproduction schemas – and it seems YV as well.

Having convinced himself that Marx had a serious whiff of authoritarian determinism, he contrasts this with his delight in John Maynard Keynes’ eclectic indeterminancy. Yes, Keynes was on the side of the bourgeois and yes he was a snob etc, and he supported the ideas of that arch conservative thinker of classical economic, Rev Thomas Malthus, but “Keynes embraced Malthus’ scepticism regarding (a) the wisdom of seeking a theory of value which is consistent with capitalism’s complexity and dynamics, and (b) Ricardo’s conviction, which Marx later inherited, that persistent depression is incompatible with capitalism.”

You see, YV says, the trouble with Marx’s theory of crises is that it too generous to capitalism. Once sufficient capital values are destroyed and profitability is restored, capitalism can recover into a new cycle of accumulation and growth. But Keynes (and Malthus apparently) saw that this was wrong because capitalism can get locked into Great and Long Depressions that it cannot get out of. “Marx told the story of redemptive recessions occurring due to the twin nature of labour and giving rise to periods of growth that are pregnant with the next downturn which, in turn, begets the next recovery, and so on. However, there was nothing redemptive about the Great Depression. The 1930s slump was just that: a slump that behaved very much like a static equilibrium – a state of the economy that seemed perfectly capable of perpetuating itself, with the anticipated recovery stubbornly refusing to appear over the horizon even after the rate of profit recovered in response to the collapse of wages and interest rates.”

So “Keynes’ gem of a ‘discovery’ about capitalism was twofold: (A) It was an inherently indeterminate system, featuring what economists might refer to today as an infinity of multiple equilibria, some of which were consistent with permanent mass unemployment, and (B) it could fall into one of these terrible equilibria at the drop of a hat, unpredictably, without rhyme or reason, just because a significant portion of capitalists feared that it may do so.”

YV’s view that Marx’s theory of crises under capitalism cannot encompass long and lasting depressions and only explains regular and ‘normal’ recessions is again poppycock. Indeed, this blog has spent loads of words and time on arguing that Marx’s theory of crises provides the best explanation of the Great Depression and the current Long Depression, unlike Keynesian answers (see my posts, https://thenextrecession.wordpress.com/2013/02/10/why-is-there-a-long-depression/). And my upcoming book, due out in June, deals exactly with this issue.

YV exalts Keynes’ notion of ‘animal spirits’, i.e. that what drives capitalist accumulation is not the movement of profitability but the psychological and emotional ‘confidence’ of individual capitalists. According to YV, this is a “deeply radical idea” because it captures “the radical indeterminacy buried inside capitalism’s very DNA.”, a concept that Marx had abandoned “so as to establish his theorems as mathematical, indisputable proofs.” Again I have not the space to deal with the fallacies of Keynesian uncertainty and animal spirits as an explanation of capitalist crises (see my essay on Keynesianism here, APPENDIX TWO).

But most erratic is YV’s views about the current global economic crisis and in particular, the crisis in the Eurozone. He dramatically points out that “Europe’s present crisis is not merely a threat for workers, for the dispossessed, for the bankers, for particular groups, social classes or, indeed, nations. No, Europe’s current posture poses a threat to civilisation as we know it.” Yikes, the end of civilisation: this suggests the need for radical socialist policies before it is too late.

But no. You see, the long depression being experienced in Europe (which I agree is a correct interpretation) “puts radicals in a terrible dilemma.” You see, it is not an environment for radical socialist policies after all. Instead “it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis”.

Thus, YV says, his interventions in the public debate on Greece and Europe (e.g. the Modest Proposal for Resolving the Euro Crisis (see http://yanisvaroufakis.eu/euro-crisis/modest-proposal/), that he, Stuart Holland and James Galbraith (see my post, https://thenextrecession.wordpress.com/2014/10/28/from-establishment-to-anti-establishment/) co-authored and have been campaigning in favour of “does not have a whiff of Marxism in it.” Modest indeed!

YV says he would rather promote socialist policies as an answer to the Euro crisis but that would be unrealistic. Radical policies did not achieve anything against the forces of neoliberalism and Thatcherism in the 1980s: “What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Mrs Thatcher’s neoliberal trap? Precisely none.” Apparently, it was a waste of time advocating socialist policies (assuming we did) in the 1980s because the people of Britain just swallowed Thatcherism hook, line and sinker (just a point, Thatcher never gained more than 40% of the vote in any election and most voters voted against her in all elections). So when will socialist policies be worth advocating, according to YV – after we have saved capitalism? I don’t follow the logic.

This erratic Marxist, now negotiating with the neo-liberal Euro leaders aims “to save European capitalism from itself” so as to “minimise the unnecessary human toll from this crisis; the countless lives whose prospects will be further crushed without any benefit whatsoever for the future generations of Europeans.” Apparently socialism cannot do this. YV says “we are just not ready to plug the chasm that a collapsing European capitalism will open up with a functioning socialist system”.

Instead, according to YV, “a Marxist analysis of both European capitalism and of the Left’s current condition compels us to work towards a broad coalition, even with right-wingers, the purpose of which ought to be the resolution of the Eurozone crisis and the stabilisation of the European Union… Ironically, those of us who loathe the Eurozone have a moral obligation to save it!” Thus YV has campaigned for his Modest Proposal for Europe with “the likes of Bloomberg and New York Times journalists, of Tory members of Parliament, of financiers who are concerned with Europe’s parlous state.”

An erratic Marxist indeed!