Yanis Varoufakis for Age of Economics - Full interview

[00:00:00] Speaker 1: on the one hand you've got central banks pumping out huge quantities of state money they give it to the private banks that are all bankrupt after 2008 the private banks you know like zombies survive on the basis of this money that is coming to them from the central bank they lend it on to corporations financial capital is doing magnificently well you have huge rates of capital accumulation wealth accumulation mr bezos is getting is making billions more wealth every day not because of profits amazon is not that profitable look at tesla no profits and yet elon musk is getting richer and richer and richer and richer why this is all central bank money that is being diverted through the commercial banks into the corporations 90 percent of the companies in the new york stock exchange belong to three three companies blackrock state street and vanguard three companies own 90 percent of all companies they own the same airlines this is not a competitive capitalist market can global capitalism survive um i would say it hasn't survived it's already global capitalism is already a thing of the past we already live in post-capitalist times which i describe as techno feudalism everything we do everything we do and everything that is possible within our social media involves questions of dealing with the manner in which we produce our daily lives both individually and collectively all that is the realm of economics so economics matter to the extent that life matters the world of limited resources and in a world where humanity is facing both external and internal constraints so in a sense any attempt to separate the economic from the political from the moral from the the philosophical uh is bound to produce bad politics bad economics bad life and terrible economics so the economic is part and parcel of the human condition and to the extent that the human condition matters our understanding of economic relations is crucial economic science is to begin with not a science in the same way that mathematics is not a science and philosophy is not a science in my understanding um maybe it's an anglo-saxon understanding but nevertheless economics is not a science like physics is like biology in the sense that we do not produce verifiable or falsifiable theories but we do produce logical systems that help sharpen our thinking regarding the economic circumstances that we face the the problem that the problem that the economics faces which in a sense transcends schools of thought this is a problem that pertains to classical economics to keynesian economics even to marxist economics the problem we face is this the moment we try to emulate the natural sciences the hard sciences mathematics by turning the world out there into a mathematical model of economic variables the problem we face is that in order to solve this mathematical model because without a solution you can frame economic dynamics beautifully mathematically but without the solution you cannot answer any questions using that model in the same way that in mathematics if you have a system of n equations in many more unknowns it's a beautiful system but it's irrelevant because you can't solve for it to solve the system of equations that is our eco mathematical economic model we have to make assumptions that move us away from really existing capitalism so we have we face a huge trade-off either we solve the system and then we have something definite to say but what we say is irrelevant to really existing capitalism or we don't solve the system in which case we don't have much to say about even our own model that is a conundrum that is almost a classical tragedy that economists face economists have a tendency to solve the model because you cannot pursue a career without actually publishing something that has some tangible hypothesis that has certain theorems which you can then try to ascertain whether those theorems are supported or falsified by the data by empirical means so careers are made on the basis of forcing solutions upon models by means of usually of hidden assumptions which ensure that your theories are going to be absolutely relevant to really existing capitalism so the more successful we are theoretically the less relevant we are to the economic world that we live in and this is a major explanation of the fact that economic theory has never been able to illuminate the real problems that practitioners of economics face whether you're functioning at the level of government at the level of cooperation of a bank of a central bank OECD you know the IMF in the end policy is driven by politics by vested interests by the profits margins of corporations and then at the end of the day you can come up with any justification using the mathematical models and economic models and economic models and that means that in the end the mathematical economic models of different economic schools of thought doesn't matter which one we're talking about end up as a legitimizing veneer an ideology that appears as a science which it is not therefore because we as economists we can only understand one thing really the how lucrative monopolies and by creating these wonderful mathematical economic models that are exceptionally complicated and aesthetically very pleasing whether we're talking about you know dynamic general equilibrium models or game theory or you know microeconomics and so on those are so complicated that only a handful of people understand them people are there who do not understand the thing that it must be that you know those who do understand them are the experts those who understand them are experts in understanding those models but they have no clue of how the economy works so you have a feedback effect between economics as a legitimizing ideology a little bit like you know theology in the middle ages extremely complicated aesthetically pleasing very interesting discussions between theologists you couldn't have an opinion about matters of state in the middle ages if you didn't know your bible upside down if you couldn't have very complicated conversations about the philioque and various other dogmatic discussions between the catholics and the orthodox and so on and so forth but of course you know this was all a veneer for the fact that a certain power grid was replicating itself using very interesting logical arguments and pseudoscientific constructs in order to legitimize the exclusion of the many from the decisions that affected them and the reproduction of systems of power plays the role of religion plays the role of religion with equations and some statistics in other words just like religion traditionally played the role of legitimizing existing power the power of the emperor the power of the feudal lord and at the same time was utilized by usurpers and rebels in order to oppose the oligarchs feudal lord's rule through some kind of heretical schism that is the role that the economic theory plays the fact that the fact that it uses mathematics gives it the appearance of a scientific non-religious objective role that increases its religious power and especially when you combine that with statistics the power of this religion is turbocharged because there is nothing as powerful as the misuse of statistics and when i say about misuse i'm not talking about so much you know an intentional attempt to defraud people no it's far worse than that most of the economists using empirical data out there are doing their best to come to the truth but and this is something that i had an experience of as a young econometrician statistician if you are taught to emulate physics in the social realm as an economist econometrician statistician then by definition this is you know there's no other way of doing it you start with the mathematical model your theory your theory your theorem you reduce it to a functional form a mathematical form that is consistent with your hypothesis and then you try to find whether the data contradicts that functional form and if it doesn't you say ah see my model my theoretical hypothesis has been confirmed to the extent that it has not been falsified by the data the trouble there is that while the functional form that has been not confirmed but not falsified by the data is consistent with your hypothesis there is no way of knowing how many alternative hypotheses are also consistent with this functional form in other words you have not confirmed your theory uh there are usually an infinity of theories that are consistent with a functional form that the data does not contradict in which case we have proved nothing and the reason why that is not a problem in physics or in you know other natural sciences is the fact that they have the laboratory and we do not have the laboratory i mean we do have economic labs and i've spent 10 years of my life doing economic experiments but we cannot do an economic experiment regarding the euro crisis you cannot rerun the euro crisis and say okay now imagine if you know austerity was not unleashed upon the people of greece of italy and so on what would have happened we cannot do that we cannot we don't have a rewind button go back and do the experiment again right um and you know historical data doesn't help us with that as for the laboratory we fill it with uh humans and we ask them to you know play games with one another we pay them depending on uh that you know how they behave within the parameters of a game this is extremely interesting i mean i spent a decade having enormous amounts of fun doing that and i've learned a lot but in the end right all you can do is you can test hypothesis of how people behave in the lab which does not necessarily throw light on what's going on out there so um this this is the this is the reason why it is impossible even if you try to use economic methods both theoretical and empirical in a manner that approaches any degree of objectivity the problem is worse than this it is not just that economics knows how to deal with the question of efficiency but in the real world it doesn't know how to deal with the world of externalities and climate change and so on and so forth the failure is far more deep-seated i don't think economics can even understand or illuminate questions of efficiency allow me to give a particular example and i hope that it's not too specialized but one of the things that economic students one of the first things they learn in economics 101 or actually i'll mention two things that we learn economics 101 one is demand and supply okay standard stuff the demand the downward sloping demand curve and the upward supply sloping cycle you do that even at high school if you do a bit of economics and the second concept is a concept of efficiency of optimality and here i shall mention the definition that everybody uses in economics regarding efficiency and optimality that of wilfredo pareto the italian economies pareto efficiency pareto optimality let's look at these two because these are supposed to be you know the bread and butter of economic theory they are both highly problematic and i'll explain why take the demand curve the demand curve shows you supposedly the relationship between the price of a commodity and the level of demand for that commodity how many units of it will be purchased at different prices keteris paribus all other things being equal right assume that the amount of money to spend for each consumer are the same the prices of all competing goods are the same substitutes of complements that nothing changes tastes are the same in other words the demand curve is a hypothetical construct it does not exist in real time because in real time the keteris are not paribus as i like to say right all other things are not equal incomes change prices change so in real time the demand curve does not exist it is a hypothetical constant same with the supply curve the upward supply curve now when we teach economics students we say okay here's the demand curve here's the supply curve the equilibrium is in the middle in other words there's a there's one price which is the price at which the demand and the supply curve intersect intersect and the quantity such that if that price and quantity existed and this was the demand curve and the supply curve we would be in equilibrium there would be no reason for the price to shift that's fair enough but it's one thing to say that and it's quite another to say that if the demand curve shifts upwards then price is going to follow uh a path leading from the first point of view to the section to the second second point that you cannot say why do you not can you not say it because remember the whole premise is that keter is paribus so if the price starts shifting the price of tea or coffee that means that the demand and supply curves of all other goods will start moving around which means that their price and quantity is not going to be the same which means that the demand curve that you shifted will now start shifting because it shifted and it is impossible to work out mathematically how it will shift when everybody everything is you know sort of shifting all over the place so it is impossible to talk about how prices change in the context of the demand and supply framework that we teach in economics 101 you see here is a fundamental difference between economics and physics physics 101 is also full of simplifying assumptions to keep the analysis simple beginners physics starts with you know let's say assume there's no gravity assume there is no air resistance assume this under the other things that we know are not true but you say okay let's work out the laws of physics without gravity without dust without all these imperfections so we have very simple relationship between you know mass acceleration velocity you know to have the to create to come up with the simplest versions of the laws of thermodynamics and these are correct given the assumptions right and then you introduce grains of imperfection let's say okay let's now introduce gravity let's introduce air resistance a little bit of dust so the mathematical formula become a bit more complicated right but the relationship between the amount of imperfection complication that we introduce and the complexity of the complexity of the theory is analogous whereas in the demand and supply framework that i just described you just add one speck of realism time you just add time and the whole thing blows up there is no analogy it's not a lot analogous the imperfection that you introduce or the complication you introduce and the complication that you get in the model the model just blows up it's no longer relevant relevant the moment in the demand and supply framework introduce time so that's why all of microeconomics and that's something that most economists do not know even after they finish the university is that all the microeconomics they've learned the equilibrium models rely on the assumption that there's no time the moment you don't use time then it all disappears imagine if you had a physics that only applied as long as there's no gravity anywhere it will be completely useless physics so it's not that you know economics understands prices and quantities demand and supply and so on but then it has problems with things like climate change because of the complications introduced by externalities even if there were no externalities the model is absolutely unrealistic and any attempt to make it more realistic by adding things like time in it or actually space the distance the whole thing collapses because the moment you don't use distance you introduce monopoly or a degree of monopoly power the whole thing collapses efficiency okay let's take the conscious the the concept that i mentioned before of Pareto optimality or Pareto efficiency okay how is it defined it is defined on the basis that if you have let's say two people only two people in the world robertson crusoe and friday that's a standard example in economics and you've got two commodities x and y fish and bread and there is a finite quantity of fish and the finite common quantity of bread of x and y every distribution of x and y between these two people yields a certain level of utility for for each one of them and you define an efficient distribution of x and y between these two people as a distribution such that you cannot improve the well-being the utility of one without reducing the utility of the other now that's a standard and it makes some sense right i mean imagine if you know there were a couple of kids and there was a a certain number of toys and you distribute the toys between the two kids and suppose now that after that you could take one toy from one kid and give it to the other one and take another one from the second kid and give it to the first one and both of them were happier then of course the first distribution was not efficient and as long as you can redistribute the toys between those two two kids and one of them gets happier without the other one getting unhappier you are not in an efficient distribution and when you reach a point where whatever thing you change at least one of them is going to be worse off then you can say ah that is an efficient distribution that's the way that economists understand the efficiency okay but that presumes that these children or people are sociopaths the only way of defining palette efficiency is by assuming that people are sociopaths in other words what do i mean by that i mean being very specific here i'm not uh grandstanding it assumes that each of these individuals doesn't give a damn about the other they only care about how many toys they have how much fish they have how much bread they have themselves so sympathy is not allowed a situation in other words where you know um you take a bit of bread from me and you give it to you and let's say you're starving and i'm not and suddenly i feel oh okay that's nice because you know poor fabio he was starving and now he's starving less that's not allowed and i'll tell you why it's not allowing uh envy is not allowed you know you have all the toys and i have very little toys very few toys and somebody takes a toy away from me and gives it to you i didn't care very much about the toy but but you do you like that one and i think hang on a second he's already much happier than i am right and they're giving him even more happiness and they're not giving me anymore now that's not allowed either why is this not allowed because if envy and sympathy are allowed the whole um construct the mathematical model of efficiency of palette efficiency collapses because the only way of working out what is efficient and what is not is to assume that what you have does not have any impact on my utility either negative envy or positive sympathy because if it does then it is impossible to define a priori which distribution is efficient and which one is not now a world in which time is not allowed space is not allowed and everybody is a sociopath and that must be the case otherwise our basic economic analysis does not hold right it's a world which is interesting but absolutely relevant to the world we live in human beings inhabit so it's not i i i'm contesting the premise of the question uh which is that you know economics is useful when it comes to um practical things like efficiency like optimality like uh working out the relationship between the price and quantity of of commodities but we have a problem when it comes to non-commodities like clean air you know which has no price because nobody owns it and so on the externalities it is true that externalities throw a huge spanner in the works of economic analysis but we don't need externalities for economic analysis to be shown to be absolutely relevant in a world which evolves through time in which there is space distance and in which human beings are not sociopaths absolutely we should but let me let me go a bit further back in history the economic problem the economic problem has always been the central problem of humanity take for instance Homer's Iliad you know it's in its pages you'll find a lot of economics because most of the Iliad is about a war that actually doesn't take place the stalled for most of the Iliad there is no war the Greeks are fighting with one another over the distribution of goods looted from the Trojans and most of the time what they do is they spend cultivating the land in order to eat so in other words they have an economic problem and they have economic solutions and they have management problems it's all economics in the end even in the Latin tradition with Ovid you'll find that the way in which Achilles arms are distributed between his heirs you know this is a distribution problem it's an economic problem you know it's central to the you know to to the founding myths and poems of the classical tradition however they didn't need economists why because you know up until the 18th century all you needed in order to understand the economic problems of life where you needed to understand botany you needed to understand you know farming agriculture to see you know why was the Roman empire for instance constrained when it came to the production of wheat in Egypt and so on and so forth you need to understand military matters because um let's go to another example to understand the rise and fall of the Spanish empire uh you had to understand the manner in which the conquistadores went over to Latin America and looted the gold and brought it to to Spain and that what effect that had on on the price of gold and so on and so forth you didn't need to be you didn't economic models for that you needed to be a good historian political scientist you had to understand military history you had to understand uh you know Machiavelli could do it very very well through his very smart analysis of political power economics was absolutely useless right the age of economics is the age of capitalism because with capitalism you for the first time you have the commodification of land and labor for the first time you have the decoupling of the political sphere from the economic sphere that had never happened before before capitalism if you were the lord you were rich and if you were rich it must be because you were the lord there was no way you could be rich without being a member of the aristocracy uh if you wanted land you conquered it if you didn't inherit it there was no way of buying land and speculating on it right because land was not commodified so economics became possible with adam smith maybe with the physiocrats before him but nevertheless adam smith i think can rightfully be considered the the pioneer of economic theory only because for the very first time society had a real need to understand what the hell was going on how could it be that a dirty lowly socially lowly merchant could suddenly have more power than an aristocrat and you know how was it that decisions were being made that change people's lives that did not pass through the high echelons of political power because suddenly economic power became decoupled for political power and that's where economics emerged but economics had two stages the first was a classical period as we know with people like adam smith david ricardo john stuart mill uh thomas malthus carl marx people who were not economists i mean if you ask them what are you the last thing they would say was economist right adam smith was a philosopher carl marx was um revolutionary john stuart mill was a politician david ricardo was a financier and the landlord he would never answer to your question you know you would never fill in a form saying which is occupation economist never right so that was a the interesting classical period when there was simply a hunger to understand this new world in which economic power was divorced from political power or separated from political power but then there's a second era which um of economics which is what your question pertains to that's the profit the era of professional economists of people who would declare themselves to be economists of people who got positions in universities as economists you know um and and from the moment that economics became embedded in in the academy as a separate science as a separate discipline i would say with its own rituals and journals and ways of accrediting those who had the right to speak for economists for that to take place you had to move into this neoclassical tradition of economics which was a kind of emulation of physics so unlike smith and ricardo and john stuart mill and so on who were discursively attacking the big economic issues and very successfully as well you have the academic economist who has a project as an economist not as an intellectual who wants to understand capitalism and the project is to impress the authorities in the university that they deserve a chair in the university it's not the same thing you know trying to explain capitalism trying to get a chair for yourself it's not the same thing to get a chair to to have to create a department to convince the university of cambridge of pisa of um you know stockholm whatever oops that okay we deserve to have a chair and economics and a new discipline a new department economics the way they did it then it was quite natural because at the time the archetypal science was physics was to emulate physics so how did they do it they said okay how does physics work take newton for instance newtonian physics newton begins with an axiom an assumption which could be wrong or could be right that's why it's an axiom and the axiom was that for instance energy does not disappear it simply changes form right the conservation of energy principle so this could be wrong but he said okay imagine that this is right now what kind of relationship should i expect between force mass and acceleration so he says okay acceleration equals um force divided by mass this must be the case if energy is conserved then he goes to the to the to the laboratory he tries this out he says oh look it works so axiom mathematical theorem empirical evidence that is the structure of science in physics right so economists professional economists unlike the classical economists try to emulate them and this is why we call them neoclassical economists or post-classical economists so they had to come up with an alternative to newton's principle of energy conservation so that it had to be something that applies everywhere the beauty about the energy conservation principle is that it applies in italy in greece on mars and in another galaxy it's not specific to us to a place so how could economies seem like that so some of them thought you know they borrowed a philosophical idea from jeremy bentham and they said okay the principle of utility maximization everybody on the on the on planet earth every human being has a utility function that they try to maximize everybody's utility function is different but the principle of maximum utility which then has as a mathematical manifestation you know said marginal marginal utility equals to marginal this utility or marginal cost you know first of all the derivative equalization this is the mathematical equivalent of you know the mathematical declaration that newton came up with between force mass and acceleration and then you say okay how can we ascertain whether this is true or not you work out that um utility maximization means that if the price of bread goes down you buy more bread and say ah see it works so suddenly from adam smith and ricardo and the classical economists were trying to answer big questions about you know what makes nations wealthy and or poor you know uh why are there economic declines david ricardo why is there a business cycle carl marx who looked at the economy as an organic thing you know with profits and wages and rents and capital accumulation and so on you know all organically connected move to the professional economists the neoclassical economists from the 1840s 1850s 1860s so onwards who suddenly in a bid to emulate physics start talking about demand curves and the relations between the price of wheat and the and the quantity of wheat but everything else is caterers paribus right and suddenly for the reasons i have outlined in answering previous questions of yours suddenly they create a mathematical model which is fantastically beautiful aesthetically pleasing and utterly relevant to existing capitalism or to any possible capitalism and these people at some point these this this tribe or priesthood actually it is a priesthood because then they have rituals about who is going to be the pope who's going to be the bishop who's going to be the cardinal and you know we create journals that everybody is dying to publish in because this is how you become a cardinal uh so this whole shenanigans starts this whole um self-referential process of creating mathematical models which are successful to the extent extent that they misunderstand capitalism so this is not a failure to understand capitalism it's designed baked into our economics not to understand capitalism right and capitalism right and then the more mathematically powerful those models begin become and this is this is i think this is i think if you want this is something i spent a lot of time writing about before i became a politician um here's the tragedy of of economics you have a process within the profession the priesthood for establishing a career as a young man or woman you know phd you need to close your model you need to you know you start with a mathematical description a pseudo physics like description of capitalism and you need to have something you know your um phd committee editors of journals of important journals like econometrica the general political economy and you know the economic journal and so on it will say to you okay so what is your um the the theorem that's coming out of your work that we should pay attention to what is what is it that you're telling us that is new using this beautiful model of yours you have to say something otherwise you don't get promoted you don't get your phd you don't get tenure you don't move on in life right so you really need to produce to squeeze that theorem out of it to squeeze that theorem out of it you need effectively to uh reduce the number of variables because otherwise you have too many variables you cannot produce the solutions like having too many unknowns in a system of equations so you start making assumptions you just things you don't know you assume right and moreover the greatest hidden assumption that you have to make is that there is a solution to this model you assume that the solution exists and then you try to find it but you know and and this this is fascinating because often when you assume that there is a solution you can find it but what you can't prove is that there is a solution but what is interesting to prove is that there is a solution but that you don't try to prove because if you try to prove it you can't so you introduce it as a hidden assumption uh john nash the great mathematician game theory for instance could only find the solution to the so-called bargaining problem by assuming that one existed but the problem with the bargaining problem is that it doesn't have a solution but if you assume that one exists then you can find it and you can find it but it's useless because it has nothing to do with really real bargaining because the real bargaining is indeterminate doesn't have a solution but you know um who understands that that mathematics is so complicated right um it's so beautiful uh that you get nobel prizes and so on and so forth the tragedy however is this the assumptions you make in order to find the solution in economic theory in high-powered mathematical economics is the same assumption that financiers have used since the end of Bretton Woods in order to pinpoint the expected value of financial derivatives the moment you assume that there is an equilibrium you can find what the equilibrium is the problem as we know however in finance is that there is no equilibrium in real life or if it is it's unstable and dynamically unstable which is why the world blew up in 2008 so the same intellectual dishonesty which is essential in order to promote an economist's career the same and precisely the same economic intellectual dishonesty is the intellectual dishonesty perpetrated in the financial sector in order to create the financial derivatives that blew up in 2008 so i'm coming to your question because your question is about moral responsibility of economists yes we have a huge one because by turning a blind eye to the hidden assumption that a solution exists before we can find it we are replicating the intellectual subterfuge and crime that has led to enormous costs being inflicted upon humanity by the financial sector and you know this connection is much closer than one might think the same people who came up with the financial economics theorems that were then used by the financial sector in order to produce the so-called value at risk measures that you know Lehman Brothers CEO had on his desk every every day thinking okay now i know what is the maximum i can lose of course it turned out that it was this was a ridiculously ridiculous underestimate but it's the same trick that academic economists used in order to publish their articles that financial engineers used in order to infect the world with financial instability and fragility that led to 2008 which is our generation's 1929 from which we have not recovered and to from which i do not think we can recover what to begin with economics succeeds only by uh not explaining capitalism um here the the radical point that i'm making is that it is one thing to fail it's quite another to succeed in your own discipline by ensuring that your own discipline is irrelevant vis-a-vis its subject matter which is capitalism it's a very radical claim and i know that and it's one that really annoys most of my colleagues in the economics profession uh you know in medicine for instance you know we know that for many many years centuries doctors were doing more harm than good but that was not because that's what they wanted it's not because they benefited professionally by killing more patients than they cured it was a learning process at some point when was it 1900 1910 doctors started curing more people than they killed and they became useful through accumulated you know knowledge in economics this is impossible because as long as economics or economists are in the business of creating quantitative models which are meant as abstractions of capitalism such that once you have them you convince yourself that you've understood the architecture of capitalism as long as that's what economics do economics would only succeed in building these models if these models are dangerously irrelevant to capitalism so effectively they make themselves blind and deaf to capitalism in order to complete their models as models of capitalism that's my radical denunciation of economics now i love economics because you know it's like the copernican system right it's uh sorry the ptolemaic system the ptolemaic system it was a beautiful system it was wrong but it was still beautiful i'm perfectly capable of understanding the aesthetic value of a general equilibrium theory right uh but if you really want to understand capitals you have to set general equilibrium models aside the same way that the ptolemaic system needs to be ignored if you're going to understand the cosmos uh so the your your question was um uh how do i understand capitalism well capitalism for me is uh defined by two markets the market for labor right and the market for finance for credit it is it is the only economic system in history where the process of work was regulated through a very weird market the labor market the reason why the labor market is weird is because it's the only market in which the buyer doesn't care at all about what he's buying so you know an employer buys time they buy 40 hours a week of your time let's say you know eight hours a day for five days whatever how many however many hours is specified by law right so they buy that time of yours but they don't care about that time what they care about is your work is the amount of value you input into commodities goods and services right but that they cannot buy that is you know a human creativity process which can never be contracted there's no way you can write down in a contract okay um that which comprises the creative power of labor so the employer buys labor time hoping to extract creative labor productive labor during that time and the extent to which the commodity has value depends on how much creative labor has gone into it okay not how much time because you know i can be employed for eight hours a day and do nothing stare at the wall right so unlike every other commodity who's who's buying and selling is fully specified by contract okay uh because you know so many iphones i'm going to buy a thousand iphones for you for this price that's a quantity the moment you sign that contract the exchange is finished and it's no longer economically interesting you know what there is to know so much money so many iphones end of story okay and there is no reason to have a human relationship between the buyer and the seller i mean they may have a human relationship you know you go to a marketplace you say okay how much for the potatoes three euros okay you don't need to have a human relationship beyond that you can have it you're gonna have a discussion about the weather or football or politics right but it is irrelevant to the economic transaction whereas in the labor market the moment you sign the contract that's when the fund begins because then you know once you say okay i will be going to be working for you for 40 hours a week right that's when you enter the business the factory the shop the architectural design studio whatever as an employee and that's when the economically interesting part of the relation begins but that is not a market anymore you exit the market to get into that so this is a very weird market it is a market where what is being sold is not what is being bought and therefore you have this twin nature of labor now that is unique to capitalism it was not the case under feudalism right in feudalism you were a peasant you worked the land at the end of the day or the season you know the lord came around and collected you know 60 percent of the of the produce end of story there was no market you were not selling anything you're not buying anything okay the relationship between the lord and the peasant was a political relationship a military relationship right you know they they would leave you enough so that you do not rebel and cut their heads off but this is not something that economics has anything you know all markets have anything to do with um so the you know the labor bank now there's a second market which is equally weird because the moment you this surplus value the difference between the the creative labor and the value of the creative labor the value of the labor time this different difference is surplus value from which profits rents interest emerges the moment that becomes accumulated and ends up in the financial sphere right then it has to be invested and usually those who own it do not invest it themselves they give it to a financial investor to invest it for them a banker you know an agent a broker and that's when the financial investor will have to write a contract which is again weird because there's no way of specifying in advance how much money the investor will make on behalf of the the owner of the surplus value so the financial market the market for money and the labor market these two weird and strange markets that are the source of all instability and in capitalism and exploitation and bubbles and crisis these two markets are what define capitalism and make it distinct from every other form of social organization socio-economic organization over the last few years i have put forward a proposal a hypothesis which has upset various people because i've already answered this question by saying that we don't live in capitalist times anymore that it's not a question whether capital can survive because capitalism has evolved out of itself into something distinctly different when i was a young man the discussion between supporters of capitalism and socialists opponents of capitalism was based on the difference between you know the primacy of the private sector the free market and the state sector state planning government the supporters of capitalism of free markets were arguing that the market including the labor market and the financial market is a decentralized decision making process which works to the extent that it is separate from government government only provides the rule of law so that people don't steal from each other and enforces contracts between privateers and it is through this decentralized decision making where greed turns into public goods this is if you want also the smithian adam smith point that when everybody is maximizing their own profit or utility without anyone care about the common good the common good is served most optimally you know so that was the pro-capitalism argument and the anti-capitalist argument the socialist argument was that the market generates yes enormous amounts of goods unleashes productive forces but at the same time unleashes huge crisis and destroys life prospects for whole generations and in the end it is inefficient because some of those slumps you cannot get out of and therefore you can have you need either a kind of keynesian state intervention or a central planning of sorts like that of the soviet union or indeed of places like japan which are to a very large extent or those economies even though they were there was private ownership there was a lot of central planning there was a lot of central planning with caretos and so on so then this was an interesting debate in in during which i cut my theoretical uh and empirical teeth but then we had the crisis of 2008 the collapse of 2008 and after the collapse of 2008 um this discussion is no longer relevant why because we no longer have the distinction between the private and the public between the state sector and the private sector since 2008 capitalism has been kept or what we call capitalism has been kept alive by central banks on the one hand you've got central banks pumping out huge quantities of state money they give it to the private banks that are all bankrupt after 2008 the private banks you know like zombies survive on the basis of this money that is coming to them from the central bank they lend it on to corporations the corporations do not invest in it in themselves because their fear they fear that the little people out there don't have enough money the aggregate demand is too low uh to buy what these corporations can produce this is why you have the absurd phenomenon of corporate savings you know you have apple with more than 200 billion dollars of savings i mean why why do corporations need to have savings and you know when i was a student we were being taught that in capitalism households save and corporations borrow to invest when apple and volkswagen are saving you realize that there's a that this is not capitalism as we as well as we knew it right um so you know volkswagen gets a lot of money from deutsche bank which gets it from the european central bank similarly in north america you know with apple and so on they keep getting money from the federal reserve even though they have savings and what do they do with this money they go to the new gold stock exchange or to the frankfurt stock exchange and they buy their own shares so you have this complete decoupling between financial capital and commercial capital financial capital is doing magnificently well you have huge rates of capital accumulation wealth accumulation mr bezos is get is you know making billions more wealth every day not because of profits amazon is not that profitable look at tesla no profits and yet elon musk is getting richer and richer and richer and richer why this is all central bank money that is being diverted through the commercial banks into the corporations now and so that's one thing it's all zombified by central bank money and the other reason why it's not capitalism anymore is because you have a situation where uh competition has died through mergers and acquisitions you know ninety percent of the companies in the new york stock exchange belong to three three companies blackrock state street and vendors three companies own ninety percent of all companies they own the same airlines this is not a competitive capitalist market and and you've got the high-tech sector producing all these wonderful technologies from silicon valley primarily which allow for facebook's the facebook's of the world to move away from capitalism i mean the moment you enter facebook you're not in the market anymore it's like walking imagine if you were going to walk down the you know main street or high street and to realize that every shop belongs to one man all the goods that are sold in these shops are controlled by one man all the advertisements everything you see is controlled by one man the street on which you walk the asphalt the pavement the air you breathe belongs to one man okay that man can decide what you see and what you don't see effectively you know it gets into your brain um and very effectively too right usually the suggestions that come from amazon are very good they're the ones that even my best friends wouldn't have the capacity to inform me of what i really want okay but that's not capitalism that's not the market that's feudalism and this is why i'm saying that i'm calling it you know techno feudalism because it's a technically advanced form of feudalism so to answer your question can global capitalism survive um i would say it hasn't survived it's already global capitalism is already a thing of the past we already live in post-capitalist times which i describe as techno feudalism one of the books that marked me as a young person was voltaire's candide and the character in candide of panglos who used to teach his protege um that we live in the best of all possible worlds now there's no doubt that the very very few who control the fate of everyone out there would love us to believe that panglos is right and that yes this work this world sucks it has lots of problems but it is the best of all possible worlds every ruling class wants us to believe that panglos was right and if for a moment we lose our will to imagine an alternative present an alternative set of circumstances then we become slaves to whoever happens to be in power and that's true today it was true in the roman empire in the byzantine empire and you know any kind of regime so is it possible to imagine a a different system this is a very interesting question you see because i spent all my life as a critic of capitalism avoiding the question because it's so hard such a hard question so no i mean i i wouldn't avoid the question i would say yes yes it is possible to imagine a different world uh but then when someone like you i said to me okay so how would that world work then i would evade because it's too difficult to come up with an answer okay so how should um money work what about land um what about um you know uh corporations how should we structure the ownership of corporations how should decision making take place in corporations and some years ago my wife then i confronted me and said you know i've had enough of you complaining about the world we live in you are not allowed to continue not another word from you until you come up with an answer to these questions so um this is why and you will allow me to do some promotion here this is why i published this September which is my novel in which i described in which i tried to answer your question how can i imagine an alternative now another now [01:04:55] Speaker 2: just a question for you a personal question do you think there is enough people that really wants democracy [01:05:05] Speaker 1: uh yes i do think so i do think so um the problem is i mean you know everybody wants control over their lives now the problem is that when there is more than one of us my control impedes upon your control and the more complicated and complex society becomes the greater the way in which my control impinges upon yours and democracy is the only way of giving to each one of us a degree of control consistent with everybody else controlling their lives also the questions that concern all of us are very difficult questions and none of us are smart enough to have the answers so for me democracy is a system as my friend brian you know the musician says um democrats are people who understand that they don't have the answers and who get together to crowdsource the answers and i think there is a big need out there for that people are fed up with what is presented to them as democracy because it's not democracy it's oligarchy with occasional stupid elections and expensive elections um and and the tragedy is that very often this disappointment at the lack of democracy leads lots of people who want control of their lives to fall prey to fascism because fascists are very good at exploiting this disappointment and the hopelessness and the hopelessness and they say to them like Mussolini did like Salvini does like the vox in spain here they are right wing um i'll make you proud again i'll give you control of your country again you know let's just get rid of the foreigner the jew the arab the romanian the german the italian or whatever right um and so you know fascism is the dark side of the need for democracy [01:07:19] Speaker ?: so so so so you