Varoufakis argues that the post-WWII global economic order created by the United States, a system where the U.S. ran large trade surpluses which it then recycled by investing in its former enemies Germany and Japan, was turned upside down in 1971 when the Nixon administration withdrew the dollar from its gold peg and let the currency float. Trade surpluses had by this time begun to turn into trade deficits twinned with a government spending deficit. The second post-WWII global economic order, where trade surpluses from Germany, Japan and the rest of the world were recycled through Wall Street, maintaining the dollar's global hegemony, Varoufakis names the Global Minotaur, a.k.a., financialization, or neoliberalism.
According to Varoufakis, the financial meltdown of 2008 destroyed the Global Minotaur system of surplus recycling. Since then we've staggered along in an ad hoc fashion that Varoufakis describes as "bankruptocracy": the control of the political system by bankers who are presiding over institutions stuffed with worthless paper and bad loans; the Global Minotaur is dead, but the bankers and their captive governing elites are trying to resuscitate the beast Frankenstein-like.
I think Varoufakis is on the money. The solution to this problem of "bankruptocracy," a.k.a., late-stage post-meltdown neoliberalism, has to be a political awakening.
Varoufakis' Syriza in Greece offered great hope that this awakening was underway, and then its prime minister, Alexis Tsipras, capitulated.
The significance of this setback can be found in two informative stories by Raphael Minder: "Pedro Passos Coelho, Who Led Austerity Plan in Portugal, Nears Re-Election" and "Center-Right Coalition That Applied Austerity Measures Is Re-elected in Portugal." Greece's Syriza was held up as an object lesson as to why not to support the anti-austerity left demanding a reopening of negotiations with the troika. This is from the first piece by Minder:
LISBON — For most of his four years in office, Prime Minister Pedro Passos Coelho has been the unpopular flag-bearer of austerity in Portugal. In the face of street protests and strikes, he stuck rigidly to the spending cuts and tax increases that the country’s creditors demanded.
And on Sunday, he could become the first national leader in Europe to win re-election after overseeing a painful international bailout of his country.
A year ago that outcome seemed highly unlikely, but now it appears within reach: The latest opinion polls show Mr. Passos Coelho’s center-right coalition with a wafer-thin lead over the Socialists and other left-leaning parties.
His chances have improved along with a consumer-driven economic recovery that has finally started to improve the job market in Portugal. The unemployment rate has fallen to 12 percent from a peak of 17.5 percent in early 2013. [!]
The recent turmoil in Greece has also helped Mr. Passos Coelho by raising tensions among Portugal’s already fragmented left. Even if the main opposition party, the Socialists, wins the most votes on Sunday, it could struggle to form a viable governing coalition with the Communists and other left-wing parties, some of which are demanding a restructuring of Portugal’s debt.
Mr. Passos Coelho, 51, has campaigned largely on the argument that the country needs continuity in government to avoid derailing the economic recovery or risking another bruising confrontation with its creditors.
“The images of people queuing to get their money out of Greek banks was used over and over again by the ruling coalition, and it has probably made people here more afraid about not respecting European rules,” said Maria de Belém, a Socialist lawmaker and former minister. “So people are now going to vote with a bit of fear, and a lack of hope.”Passos Coehlo's coalition ended up on top yesterday in national elections but with a reduced number of seats in parliament. This is from Minder's second piece:
LISBON — Portugal’s governing center-right coalition won re-election on Sunday in national elections that were seen as a bellwether for the austerity measures that creditors have imposed on Portugal and other countries during the euro debt crisis.
But even though Prime Minister Pedro Passos Coelho is set to stay in office, he is likely to lead a weaker and less change-minded government after his center-right coalition failed to keep its parliamentary majority.
Mr. Passos Coelho’s two-party coalition won almost 39 percent of the vote, according to preliminary results, ahead of the main opposition Socialist party, which got 32 percent.Though Passos Coelho's win is being trumpeted as a substantial victory, a way forward, a ray of sunshine for the governing elites in service of a bankrupted neoliberalism, it is nothing of the sort. As Minder goes on to explain, turnout was low, like in Greece a few weeks back with Tsipras' post-capitulation reelection, and Passos Coelho will have difficulty continuing his fire sale of state assets:
With the votes of overseas Portuguese still to be counted, the coalition held 104 of the 230 seats in Parliament, down from the 129 seats that it won in 2011 and also short of the 116 seats needed for a majority. The Socialists got 85 seats.
But with a fragmented Portuguese Parliament, “political stability could become a challenge very soon, possibly as early as next year as the government tries to get support in Parliament for the 2017 budget,” said Antonio Barroso, an analyst at Teneo Intelligence, a London think tank, in a note that was based on the preliminary results.
During the campaign, Mr. Passos Coelho argued that this recovery could be jeopardized if voters switched to a left-wing government that would turn its back on fiscal discipline and irk international creditors.
Yet even if the electorate heard his call for government continuity, the turnout of 57 percent also showed a high level of apathy and despondency among voters.
“Our politicians haven’t properly explained or justified austerity, so this election has just come down to a battle between those who are so angry that they want change for change’s sake and those who are now extremely cautious or worried about the cost of making any kind of change,” Amália Silva said after she cast her vote on Sunday in the Lapa neighborhood of Lisbon.
After meeting the different party leaders over the coming days, President Aníbal Cavaco Silva is expected to ask Mr. Passos Coelho to try and form the next government.
Diogo Costa, 28, said he voted for the radical Left Bloc, but without holding any genuine hope that a different government could change tack and unwind austerity.
“I think the rules of Europe don’t give anybody the chance to opt for an alternative, as we have just seen in Greece,” Mr. Costa said.
The recent debt haggling and political turmoil in Greece also helped Mr. Passos Coelho by increasing the friction among Portugal’s already fragmented left, which includes parties that want Portugal to restructure its debt. On Sunday, the Left Bloc emerged as the main party of the radical left, ahead of the Communists, according to preliminary results.
Mr. Passos Coelho took office in 2011, shortly after Portugal requested an international bailout. Going into Sunday’s election, he was already the first prime minister to lead a coalition through a full term in office here since 1974, when a revolution toppled Portugal’s dictatorship.
Sunday’s result was a major turnaround for a prime minister whose popularity plummeted during the first years of his mandate, as his government enforced a bailout program despite street protest and strikes.
Even as the recovery has gathered pace, left-wing parties have also highlighted studies showing that Portugal has one of Europe’s highest levels of income inequality and poverty. Mr. Costa, the Left Bloc voter who is an assistant topographer, said his monthly salary of 600 euros, or about $672, forced him to live with his parents. “I don’t think it’s normal to have a salary that doesn’t even allow you to leave home,” he said.
The Socialists are likely “to harden their stance towards the government,” according to Mr. Barroso, the political analyst, because of pressure from the strengthened Left Bloc and other more radical parties.
On Sunday, Mr. Passos Coelho called on the Socialists to support him in his efforts to make further economic changes.
Without a parliamentary majority, however, the next center-right government will have less room to put privatizations and other controversial measures in place than during its first mandate.
Even as Portugal has won plaudits from creditors, its level of public debt — about 125 percent of gross domestic product — is among the highest in Europe. The country’s deficit was also recently hit by the near-collapse of the Espírito Santo family conglomerate. The cost of rescuing the conglomerate’s bank ballooned the country’s 2014 budget deficit to 7.2 percent of G.D.P., from a projected 4.5 percent.Looking at elections in Europe illuminates the path ahead in the United States. And what do we see? Low turnout, zombified neoliberal elites claiming a loss -- a reduced number of seats in parliament -- as a great victory, while a hard-shell revivified left is on the rise. In other words, bad news for establishment Democrats and Republicans, but not a robust enough radical left to take advantage of the situation. More woe to come.