WEBVTT

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Democracy.

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In the West,

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we make a colossal mistake
taking it for granted.

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We see democracy

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not as the most fragile
of flowers that it really is,

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but we see it as part
of our society's furniture.

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We tend to think of it
as an intransigent given.

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We mistakenly believe that capitalism
begets inevitably democracy.

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It doesn't.

NOTE Paragraph

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Singapore's Lee Kuan Yew
and his great imitators in Beijing

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have demonstrated beyond reasonable doubt

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that it is perfectly possible
to have a flourishing capitalism,

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spectacular growth,

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while politics remains democracy-free.

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Indeed, democracy is receding
in our neck of the woods,

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here in Europe.

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Earlier this year,
while I was representing Greece --

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the newly elected Greek government --

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in the Eurogroup as its Finance Minister,

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I was told in no uncertain terms
that our nation's democratic process --

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our elections --

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could not be allowed to interfere

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with economic policies
that were being implemented in Greece.

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At that moment,

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I felt that there could be no greater
vindication of Lee Kuan Yew,

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or the Chinese Communist Party,

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indeed of some recalcitrant
friends of mine who kept telling me

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that democracy would be banned
if it ever threatened to change anything.

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Tonight, here, I want to present to you

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an economic case
for an authentic democracy.

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I want to ask you
to join me in believing again

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that Lee Kuan Yew,

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the Chinese Communist Party

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and indeed the Eurogroup

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are wrong in believing
that we can dispense with democracy --

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that we need an authentic,
boisterous democracy.

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And without democracy,

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our societies will be nastier,

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our future bleak

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and our great, new technologies wasted.

NOTE Paragraph

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Speaking of waste,

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allow me to point out
an interesting paradox

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that is threatening
our economies as we speak.

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I call it the twin peaks paradox.

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One peak you understand --

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you know it, you recognize it --

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is the mountain of debts
that has been casting a long shadow

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over the United States,
Europe, the whole world.

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We all recognize the mountain of debts.

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But few people discern its twin.

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A mountain of idle cash

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belonging to rich savers
and to corporations,

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too terrified to invest it

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into the productive activities
that can generate the incomes

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from which you can extinguish
the mountain of debts

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and which can produce all those things
that humanity desperately needs,

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like green energy.

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Now let me give you two numbers.

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Over the last three months,

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in the United States,
in Britain and in the Eurozone,

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we have invested, collectively,
3.4 trillion dollars

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on all the wealth-producing goods --

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things like industrial plants, machinery,

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office blocks, schools,

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roads, railways, machinery,
and so on and so forth.

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$3.4 trillion sounds like a lot of money

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until you compare it to the $5.1 trillion

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that has been slushing around
in the same countries,

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in our financial institutions,

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doing absolutely nothing
during the same period

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except inflating stock exchanges
and bidding up house prices.

NOTE Paragraph

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So a mountain of debt
and a mountain of idle cash

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form twin peaks, 
failing to cancel each other out

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through the normal
operation of the markets.

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The result is stagnant wages,

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more than a quarter of 25- to 54-year-olds
in America, in Japan and in Europe

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out of work.

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And consequently, low aggregate demand,

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which in a never-ending cycle,

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reinforces the pessimism of the investors,

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who, fearing low demand,
reproduce it by not investing --

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exactly like Oedipus' father,

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who, terrified
by the prophecy of the oracle

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that his son would grow up to kill him,

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unwittingly engineered the conditions

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that ensured that Oedipus,
his son, would kill him.

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This is my quarrel with capitalism.

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Its gross wastefulness,

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all this idle cash,

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should be energized to improve lives,

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to develop human talents,

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and indeed to finance
all these technologies,

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green technologies,

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which are absolutely essential
for saving planet Earth.

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Am I right in believing
that democracy might be the answer?

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I believe so,

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but before we move on,

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what do we mean by democracy?

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Aristotle defined democracy

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as the constitution
in which the free and the poor,

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being in the majority, control government.

NOTE Paragraph

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Now, of course Athenian democracy
excluded too many.

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Women, migrants and,
of course, the slaves.

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But it would be a mistake

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to dismiss the significance
of ancient Athenian democracy

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on the basis of whom it excluded.

NOTE Paragraph

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What was more pertinent,

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and continues to be so
about ancient Athenian democracy,

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was the inclusion of the working poor,

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who not only acquired
the right to free speech,

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but more importantly, crucially,

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they acquired the rights
to political judgments

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that were afforded equal weight

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in the decision-making
concerning matters of state.

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Now, of course, Athenian
democracy didn't last long.

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Like a candle that burns brightly,
it burned out quickly.

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And indeed,

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our liberal democracies today
do not have their roots in ancient Athens.

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They have their roots in the Magna Carta,

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in the 1688 Glorious Revolution,

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indeed in the American constitution.

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Whereas Athenian democracy
was focusing on the masterless citizen

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and empowering the working poor,

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our liberal democracies are founded
on the Magna Carta tradition,

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which was, after all,
a charter for masters.

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And indeed, liberal democracy
only surfaced when it was possible

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to separate fully the political sphere
from the economic sphere,

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so as to confine the democratic process
fully in the political sphere,

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leaving the economic sphere --

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the corporate world, if you want --

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as a democracy-free zone.

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Now, in our democracies today,

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this separation of the economic
from the political sphere,

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the moment it started happening,

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it gave rise to an inexorable,
epic struggle between the two,

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with the economic sphere
colonizing the political sphere,

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eating into its power.

NOTE Paragraph

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Have you wondered why politicians
are not what they used to be?

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It's not because their DNA
has degenerated.

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(Laughter)

NOTE Paragraph

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It is rather because one can be
in government today and not in power,

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because power has migrated
from the political to the economic sphere,

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which is separate.

NOTE Paragraph

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Indeed,

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I spoke about my quarrel
with capitalism.

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If you think about it,

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it is a little bit like
a population of predators,

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that are so successful in decimating
the prey that they must feed on,

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that in the end they starve.

NOTE Paragraph

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Similarly,

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the economic sphere has been colonizing
and cannibalizing the political sphere

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to such an extent
that it is undermining itself,

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causing economic crisis.

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Corporate power is increasing,

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political goods are devaluing,

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inequality is rising,

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aggregate demand is falling

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and CEOs of corporations are too scared
to invest the cash of their corporations.

NOTE Paragraph

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So the more capitalism succeeds
in taking the demos out of democracy,

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the taller the twin peaks

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and the greater the waste
of human resources

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and humanity's wealth.

NOTE Paragraph

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Clearly, if this is right,

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we must reunite the political
and economic spheres

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and better do it
with a demos being in control,

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like in ancient Athens
except without the slaves

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or the exclusion of women and migrants.

NOTE Paragraph

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Now, this is not an original idea.

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The Marxist left
had that idea 100 years ago

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and it didn't go very well, did it?

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The lesson that we learned
from the Soviet debacle

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is that only by a miracle
will the working poor be reempowered,

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as they were in ancient Athens,

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without creating new forms
of brutality and waste.

NOTE Paragraph

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But there is a solution:

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eliminate the working poor.

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Capitalism's doing it

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by replacing low-wage workers
with automata, androids, robots.

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The problem is

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that as long as the economic
and the political spheres are separate,

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automation makes the twin peaks taller,

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the waste loftier

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and the social conflicts deeper,

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including --

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soon, I believe --

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in places like China.

NOTE Paragraph

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So we need to reconfigure,

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we need to reunite the economic
and the political spheres,

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but we'd better do it
by democratizing the reunified sphere,

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lest we end up with
a surveillance-mad hyperautocracy

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that makes The Matrix, the movie,
look like a documentary.

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(Laughter)

NOTE Paragraph

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So the question is not
whether capitalism will survive

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the technological innovations
it is spawning.

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The more interesting question

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is whether capitalism will be succeeded
by something resembling a Matrix dystopia

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or something much closer
to a Star Trek-like society,

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where machines serve the humans

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and the humans expend their energies
exploring the universe

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and indulging in long debates
about the meaning of life

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in some ancient, Athenian-like,
high tech agora.

NOTE Paragraph

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I think we can afford to be optimistic.

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But what would it take,

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what would it look like

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to have this Star Trek-like utopia,
instead of the Matrix-like dystopia?

NOTE Paragraph

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In practical terms,

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allow me to share just briefly,

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a couple of examples.

NOTE Paragraph

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At the level of the enterprise,

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imagine a capital market,

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where you earn capital as you work,

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and where your capital follows you
from one job to another,

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from one company to another,

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and the company --

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whichever one you happen
to work at at that time --

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is solely owned by those who happen
to work in it at that moment.

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Then all income stems
from capital, from profits,

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and the very concept
of wage labor becomes obsolete.

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No more separation between those
who own but do not work in the company

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and those who work
but do not own the company;

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no more tug-of-war
between capital and labor;

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no great gap between
investment and saving;

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indeed, no towering twin peaks.

NOTE Paragraph

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At the level of the global
political economy,

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imagine for a moment

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that our national currencies
have a free-floating exchange rate,

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with a universal,
global, digital currency,

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one that is issued
by the International Monetary Fund,

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the G-20,

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on behalf of all humanity.

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And imagine further

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that all international trade
is denominated in this currency --

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let's call it "the cosmos,"

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in units of cosmos --

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with every government agreeing
to be paying into a common fund

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a sum of cosmos units proportional
to the country's trade deficit,

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or indeed to a country's trade surplus.

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And imagine that that fund is utilized
to invest in green technologies,

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especially in parts of the world
where investment funding is scarce.

NOTE Paragraph

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This is not a new idea.

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It's what, effectively,
John Maynard Keynes proposed

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in 1944 at the Bretton Woods Conference.

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The problem is

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that back then, they didn't have
the technology to implement it.

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Now we do,

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especially in the context
of a reunified political-economic sphere.

NOTE Paragraph

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The world that I am describing to you

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is simultaneously libertarian,

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in that it prioritizes
empowered individuals,

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Marxist,

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since it will have confined
to the dustbin of history

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the division between capital and labor,

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and Keynesian,

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global Keynesian.

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But above all else,

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it is a world in which we will be able
to imagine an authentic democracy.

NOTE Paragraph

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Will such a world dawn?

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Or shall we descend
into a Matrix-like dystopia?

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The answer lies in the political choice
that we shall be making collectively.

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It is our choice,

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and we'd better make it democratically.

NOTE Paragraph

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Thank you.

NOTE Paragraph

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(Applause)

NOTE Paragraph

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Bruno Giussani: Yanis ...

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It was you who described yourself
in your bios as a libertarian Marxist.

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What is the relevance
of Marx's analysis today?

NOTE Paragraph

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Yanis Varoufakis: Well, if there was
any relevance in what I just said,

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then Marx is relevant.

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Because the whole point of reunifying
the political and economic is --

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if we don't do it,

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then technological innovation
is going to create

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such a massive fall in aggregate demand,

NOTE Paragraph

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what Larry Summers
refers to as secular stagnation.

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With this crisis migrating
from one part of the world,

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as it is now,

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it will destabilize
not only our democracies,

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but even the emerging world that is not
that keen on liberal democracy.

00:14:32.160 --> 00:14:35.976
So if this analysis holds water,
then Marx is absolutely relevant.

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But so is Hayek,

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that's why I'm a libertarian Marxist,

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and so is Keynes,

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so that's why I'm totally confused.

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(Laughter)

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BG: Indeed, and possibly we are too, now.

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(Laughter)

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(Applause)

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YV: If you are not confused,
you are not thinking, OK?

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BG: That's a very, very Greek
philosopher kind of thing to say --

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YV: That was Einstein, actually --

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BG: During your talk
you mentioned Singapore and China,

00:14:59.640 --> 00:15:01.696
and last night at the speaker dinner,

00:15:01.720 --> 00:15:06.896
you expressed a pretty strong opinion
about how the West looks at China.

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Would you like to share that?

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YV: Well, there's a great
degree of hypocrisy.

00:15:11.400 --> 00:15:15.696
In our liberal democracies,
we have a semblance of democracy.

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It's because we have confined,
as I was saying in my talk,

00:15:18.480 --> 00:15:20.136
democracy to the political sphere,

00:15:20.160 --> 00:15:23.616
while leaving the one sphere
where all the action is --

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the economic sphere --

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a completely democracy-free zone.

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In a sense,

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if I am allowed to be provocative,

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China today is closer to Britain
in the 19th century.

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Because remember,

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we tend to associate
liberalism with democracy --

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that's a mistake, historically.

00:15:41.480 --> 00:15:44.016
Liberalism, liberal,
it's like John Stuart Mill.

00:15:44.040 --> 00:15:48.736
John Stuart Mill was particularly
skeptical about the democratic process.

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So what you are seeing now in China
is a very similar process

00:15:54.160 --> 00:15:57.336
to the one that we had in Britain
during the Industrial Revolution,

00:15:57.360 --> 00:16:00.336
especially the transition
from the first to the second.

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And to be castigating China

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for doing that which the West did
in the 19th century,

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smacks of hypocrisy.

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BG: I am sure that many people here
are wondering about your experience

00:16:13.200 --> 00:16:15.936
as the Finance Minister of Greece
earlier this year.

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YV: I knew this was coming.

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BG: Yes.

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BG: Six months after,

00:16:20.000 --> 00:16:22.400
how do you look back
at the first half of the year?

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YV: Extremely exciting,
from a personal point of view,

00:16:26.560 --> 00:16:27.816
and very disappointing,

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because we had an opportunity
to reboot the Eurozone.

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Not just Greece, the Eurozone.

00:16:33.880 --> 00:16:36.816
To move away from the complacency

00:16:36.840 --> 00:16:39.296
and the constant denial
that there was a massive --

00:16:39.320 --> 00:16:42.176
and there is a massive
architectural fault line

00:16:42.200 --> 00:16:44.376
going through the Eurozone,

00:16:44.400 --> 00:16:48.816
which is threatening, massively,
the whole of the European Union process.

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We had an opportunity
on the basis of the Greek program --

00:16:52.040 --> 00:16:53.376
which by the way,

00:16:53.400 --> 00:16:57.776
was the first program
to manifest that denial --

00:16:57.800 --> 00:16:59.016
to put it right.

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And, unfortunately,

00:17:00.280 --> 00:17:02.096
the powers in the Eurozone,

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in the Eurogroup,

00:17:04.079 --> 00:17:06.056
chose to maintain denial.

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But you know what happens.

00:17:07.359 --> 00:17:09.415
This is the experience
of the Soviet Union.

00:17:09.440 --> 00:17:11.935
When you try to keep alive

00:17:11.960 --> 00:17:15.839
an economic system
that architecturally cannot survive,

00:17:16.520 --> 00:17:19.175
through political will
and through authoritarianism,

00:17:19.200 --> 00:17:20.856
you may succeed in prolonging it,

00:17:20.880 --> 00:17:22.455
but when change happens

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it happens very abruptly
and catastrophically.

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BG: What kind of change
are you foreseeing?

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YV: Well, there's no doubt

00:17:28.309 --> 00:17:30.976
that if we don't change
the architecture of the Eurozone,

00:17:31.001 --> 00:17:32.895
the Eurozone has no future.

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BG: Did you make any mistakes
when you were Finance Minister?

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YV: Every day.

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BG: For example?
YV: Anybody who looks back --

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(Applause)

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00:17:44.120 --> 00:17:45.496
No, but seriously.

00:17:45.520 --> 00:17:49.096
If there's any Minister of Finance,
or of anything else for that matter,

00:17:49.120 --> 00:17:51.336
who tells you after six months in a job,

00:17:51.360 --> 00:17:55.056
especially in such a stressful situation,

00:17:55.080 --> 00:17:57.776
that they have made no mistake,
they're dangerous people.

00:17:57.800 --> 00:17:59.096
Of course I made mistakes.

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The greatest mistake
was to sign the application

00:18:01.960 --> 00:18:04.056
for the extension of a loan agreement

00:18:04.080 --> 00:18:05.696
in the end of February.

00:18:05.720 --> 00:18:06.936
I was imagining

00:18:06.960 --> 00:18:09.936
that there was a genuine interest
on the side of the creditors

00:18:09.960 --> 00:18:11.216
to find common ground.

00:18:11.240 --> 00:18:12.456
And there wasn't.

00:18:12.480 --> 00:18:15.096
They were simply interested
in crushing our government,

00:18:15.120 --> 00:18:16.576
just because they did not want

00:18:16.600 --> 00:18:19.736
to have to deal with
the architectural fault lines

00:18:19.760 --> 00:18:21.776
that were running through the Eurozone.

00:18:21.800 --> 00:18:23.616
And because they didn't want to admit

00:18:23.640 --> 00:18:27.256
that for five years they were implementing
a catastrophic program in Greece.

00:18:27.280 --> 00:18:30.176
We lost one-third of our nominal GDP.

00:18:30.200 --> 00:18:32.136
This is worse than the Great Depression.

00:18:32.160 --> 00:18:33.416
And no one has come clean

00:18:33.440 --> 00:18:36.376
from the troika of lenders
that have been imposing this policy

00:18:36.400 --> 00:18:39.376
to say, "This was a colossal mistake."

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BG: Despite all this,

00:18:40.640 --> 00:18:42.976
and despite the aggressiveness
of the discussion,

00:18:43.000 --> 00:18:45.416
you seem to be remaining
quite pro-European.

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YV: Absolutely.

00:18:46.680 --> 00:18:50.816
Look, my criticism
of the European Union and the Eurozone

00:18:50.840 --> 00:18:54.880
comes from a person
who lives and breathes Europe.

00:18:55.680 --> 00:18:59.256
My greatest fear is that
the Eurozone will not survive.

00:18:59.280 --> 00:19:00.736
Because if it doesn't,

00:19:00.760 --> 00:19:03.616
the centrifugal forces
that will be unleashed

00:19:03.640 --> 00:19:05.336
will be demonic,

00:19:05.360 --> 00:19:07.336
and they will destroy the European Union.

00:19:07.360 --> 00:19:09.776
And that will be catastrophic
not just for Europe

00:19:09.800 --> 00:19:11.416
but for the whole global economy.

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We are probably the largest
economy in the world.

00:19:15.560 --> 00:19:17.296
And if we allow ourselves

00:19:17.320 --> 00:19:20.136
to fall into a route
of the postmodern 1930's,

00:19:20.160 --> 00:19:22.816
which seems to me to be what we are doing,

00:19:22.840 --> 00:19:24.656
then that will be detrimental

00:19:24.680 --> 00:19:28.096
to the future of Europeans
and non-Europeans alike.

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BG: We definitely hope
you are wrong on that point.

00:19:30.560 --> 00:19:32.256
Yanis, thank you for coming to TED.

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YV: Thank you.

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00:19:33.520 --> 00:19:38.343
(Applause)