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‘Talking to My Daughter About the Economy: A Brief History of Capitalism’ – book review

Analytical book review of Yanis Varoufakis’s Talking to My Daughter About the Economy: A Brief History of Capitalism  by Atharva Mehendale

Economics is one subject that most of us (including me) dreaded as school and junior college students. This is usually because most texts in economics are difficult to understand in a single read. The discipline of economics is based on models. Economists often use technical jargon while explaining these models which makes it extremely difficult for a layman to understand. While most of us ended up studying Economics just to score marks and sail through, ironically that is not how it should’ve been done. This is because economics is one discipline that has answers to everything that we see around us. This book comes as a breath of fresh air when bogged down by your usual text on economics. The author of the book, Yanis Varoufakis shares the same emotion as he admits having completed the book in merely 9 days sitting in his island home in Aegina. You should give this book a read if you’re someone like me who’s always been sceptical about picking up a text on economics due to the very fact of it being too technical. If you’re someone who has a degree in economics or who is usually not bogged down by technical jargon, I suggest you still read this book. It would surely be a rather refreshing take on something you already know. Finally, if you’re someone who writes book on economics, this is how it is done!

Varoufakis is a Greek economist and politician. Born in Athens in 1961, he went on to obtain a master’s degree in mathematical statistics at the University of Birmingham and a PhD in Economics at the University of Essex in the United Kingdom. He served as the Minister of Finance for Greece from January 2015 to July 2015. He has also been a professor of economics at the University of Athens and the University of Sydney. He has penned two bestsellers before he went on to write this book. ‘Adults in the Room: My battle with Europe’s Deep Establishment’ recalls his time serving for the Government and ‘And the weaksuffer what they must?: Europe, Austerity and the Threat to Global Stability’ talks about Capitalism in Europe and policies to reform it.

This book came out of the author’s belief about the economy being too important to leave it to the economists. He wanted to explain the seemingly difficult concepts in economics in a language that the young would easily understand. The tone of the book is conversational. He has written it as if he was actually having a conversation with his daughter Xenia about the economy and answering her very basic question ‘Why is there so much inequality?’. This is why he has written it without any odds and ends usually used in case of academic writing; like footnotes and references. The author said he enjoyed writing this book since it was a relatively lighter book after his earlier ‘Adults in the room’ and also because he initially wrote it in Greek, his mother tongue. This is exactly why it makes it a light and easy read for the readers. Any book on economics is incomplete without capitalism since it is something that has grappled society for long; thus, becoming an important element in explaining economics. All major problems in economics find its roots in capitalism. Capitalism forms the central theme of this book. This is also in line with Xenia’s question that Varoufakis seeks to answer. The author has however decided to use the word “market society” instead of capitalism throughout the book. This is a small example of how he has consciously tried to avoid jargon in the book to make it easier to read and understand.

Money as we know is the most fundamental concept in economics. A lot of us know that money eventually replaced the barter system. But what Varoufakis tells us is that money in the form of shells was invented to record debts. The very first accounting records showed how much of the total agricultural produce that was in surplus was owed to the farmers by the landowners.

A number of countries have had a colonial past which made the country at the receiving end of colonialism poor. Something that I (and I’m sure a lot of you) never thought about was why was it that the European countries ended up colonizing countries in the East and not the other way around. The author traces the answer to this to the simple concept of ‘surplus’. Surplus is that extra bit that is accumulated when the production exceeds consumption. This according to the author is the most basic element of an economy. This surplus made traders in Europe set sail in ships in search of other markets which then led to colonialism. People inparts other than Europe did not feel the need to ‘produce’ for a very long time since nature was sufficiently providing for their needs. This meant that there was no ‘surplus’.

Something that makes the book interesting to read and keeps up the readers’ interest in it alive is how the author seamlessly moves from one chapter to another while still talking about the same concept. The concept of surplus that the author previously used to explain the formation of state and colonialism was then used to explain the foundation of Industrial Revolution in Europe. With surplus, ‘economics’ moved out of the confined household. More and more goods started to turn into commodities and gained an ‘exchange value’ rather than a mere ‘experiential value’. Increasing global trade made landowners want to grow cash crops. Serfs who worked on these lands were thus forced to sell their labour for money. This was where the commodification of land and labour began. This gradually led to the establishment of factories where men, women and children worked under inhuman conditions leading to widespread inequality in the economy. There was wealth in the hands of the factory owners and misery, poverty and slavery on the other side. This is what the author calls the ‘great contradiction’ – “the coexistence of unimaginable new wealth and unspeakable suffering”. It is interesting how Varoufakis comes back to the central theme of inequality towards the end of every chapter and explains how different facets of the economy have over time contributed to the inequality that we see around us today.

Examples form a significant part of any book. They play an important role in increasing the author’s ability to reach out to the readers. Varoufakis in this book has given several real life as well as fictional examples to explain complex economic concepts. One example that the author has very aptly incorporated in this book is that of the German prisoners-of-war camp to explain the concept of money and debt. He goes on to explain how the prisoners in the camp received packages from the Red Cross that included all kinds of items like coffee, tea, chocolates and cigarettes. As goods started to be traded across the camp, the need for a ‘currency’ was felt. Cigarettes emerged as the currency in the camps since they were durable, convenient to carry, divisible into smaller portions and could easily be stored. With this, a banking system came up where some “savvy” prisoners started loaning out cigarettes to inmates. The Red Cross acted as a central bank for these banks in the prison as it handed out funds (in the form of cigarettes). The author here makes a point that though the central banks of countries are independent just like the Red Cross was, they are usually forced to adhere tothe whims of national and global politics. The author creates a comparison and explains the concepts central banking, money, debt, interest rates, inflation and deflation.

You don’t usually come across books on economics with references to Hollywood movies. Varoufakis here however seems to be a big fan of movies apart from being an economist. This fandom of his has worked out very well for his readers. He has used examples of movies like The Matrix and Blade Runner to explain the impact that technology has had on the economy. Going back into history, the author talks about how technology has always been met with resistance from the workers. Increasing automation makes the machine and factory owners richer and leads to wide scale unemployment. This is again a stark example of inequality in the economy. Giving the example of Charlie Chaplin’s movie ‘Modern Times’, the author tries to highlight the negative impact technology has had on workers. The author believes that there would come a time when machines would completely take over from human labourers and also it is only a matter of time before technology creates human replicants that are able to do a majority of work. If this ever becomes a reality, Varoufakis envisages a future where everyone would benefit equally from the benefits of automation.

It is not just movies that the author has quoted time and again. If you’re not a fan of movies but someone who enjoys literature references, you would not be disappointed either. To explain the labour market, Varoufakis has used the reference of the story “The stag, the hares and the power of optimism” written by Jean-Jacques Rosseau. The author says, ‘If a goal can only be achieved collectively, success depends not just on every individual pulling together; but primarily on each individual believing that every other individual will do so’. This is how he explained that if workers dropped the wage rates and agreed to work for pennies, there would be even lesser jobs available.

The story of Oedipus Rex who killed his own father and married his mother; all as a result of a prophecy written by Sophocles has been used to explain the labour and money markets. The author says, ‘Prophecies can be self-destructing. The power of prophecy makes the labour and money market and all those people who make up those markets prone to self-destruction. If entrepreneurs see wages and interest rates falling low, the prophesy that economic activity will go down or remain slow and so avoid borrowing money and hiring workers; thus, ensuring wages and interest rates stay low or further fall. Instead of recovering, the economy falls victim to their pessimism, which only perpetuates itself and intensifies.’The author has also introduced some fictional characters in the book who keep recurring throughout in several chapters. It is through their eyes that the readers understand certain key elements. These recurring characters makes the book feel like a fictional novel. In the last chapter of the book, the author expresses his concern about how ‘we have driven plants and animals to mass extinction and destroyed forests’. And this happens because the economy benefits as the environment is degraded. He expresses his concern about the necessity for us to take some concrete steps to conserve the environment and coming up with ways that would ensure that ‘private and planetary interests are wedded’.

In the epilogue of the book, Varoufakis talks to his readers about the reason behind him becoming an economist. It was because he wasn’t ready to leave it to the experts. According to him, the experts and the smartest minds in economics developed economic models. However, the problem with these models was that they could be solved mathematically only if the reality of labour, money and debt were removed from them. This made these models irrelevant in the ‘real’ market societies. The author is against the general notion of only mathematical models being able to explain the functioning of the economy. To change this very notion and to make economics easily accessible to the young is the very reason that he’s written the book; and I’m glad he did.

Atharva Mehendale is a post graduate student of International Relations studying at the School of International Affairs, O.P Jindal Global University, India

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