Book Review – Talking To My Daughter About The Economy: A Brief History Of Capitalism – Yanis Varoufakis

By | August 23, 2019
Talking to my daughter about the economy- A brief history of capitalism - Yanis Varoufakis

“Money makes the world go round!”

An expression we hear almost all the time, which is most certainly very true, and is also used by Yanis Varoufakis in chapter 2 of his book, “Talking to my daughter about the economy: A brief history of capitalism.”

The author Yanis Varoufakis, is a prominent Greek economist and a number one best-selling author which is very evident from the work done by him : Talking to my daughter about the economy: A brief history of capitalism (2013), Adults in the Room: My Battle With Europe’s Deep establishment (2017), The Global Minotaur: America, Europe and the future of the Global Economy (2016), And The Weak Suffer What They Must?: Europe and the Future of the Global Economy (2011) and many more. It is also important to know that he is the former finance minister of Greece and the figurehead of an international grassroots movement, campaigning for the revival of democracy in Europe.

“Talking to my daughter about the economy A brief history of capitalism”, acts sort of a coin because it has 2 sides, however, that doesn’t clearly outline the “positive” “negative” aspects of identical, for either side stand robust on their various read purpose. The author has been able to convey the basic laws of economics to a younger audience in a way that the reader is informed of the basics of economics as well as how a society with markets has been transformed into a market society.

According to the youngster’s point of view, his work has been a success which can be attributed to his simple style of writing, with a lot of examples from the classic literature and pop-culture which makes it all the more fun to read and understand the basic laws of economics.

However, according to post-graduate student analyzing and reviewing this book, this is also where the charm of this book fades away, as although the book is written in a simple language, the examples that have been given are nowhere linked to the term “economics” therefore, yes! It will be only honest to say that the book was written by a mind full of creativity and facts, but the way it has been put together, it could have been better, by using certain laws of economics applicable in today’s world.

He wrote this book to answer a question by his daughter: “Why so much inequality?” he starts with referring to the kind of inequality that defines our world, and although it is not a part of our daily life, people seem to be aware of it from a very young age, but this answer didn’t seem to satisfy Xenia, which is why he discusses ‘British colonizing the Australians, adding another controversial question as to why couldn’t Australians have an upper hand on the Britishers.’ This whole example is very controversial to explain ‘Why so much inequality?’ as it does not completely relate to the economy.

He explains it by going back to the dawn of agriculture. He makes a key distinction between a market and economy, as people just assume that markets and economy are one and the same thing, but the reality is that they are not the same. He also states an example of a supermarket, to give a better understanding to youngsters about the term market (place of exchange), stating that market has always been there, and gives an example of ‘barter exchange’ but explains how this is not true economy (possible only when something is produced using labor).

For a very long time, this barter exchange kept going, but today, 12,000 years after humanity ‘invented’ agriculture, people started producing goods for their own use. This is how agriculture production created the basic elements of a true economy. He talks about the surplus that brought an economy into existence and states that this is the reason how today’s economy is different from the economy of the past in regard to money and debt. He has also explained about geographical inequalities using the example of different countries and different people, which has nothing to do with their DNA or character.

He then talks about “The Birth of Market Society where he explains the difference between a good and a commodity, by giving an example of when they had gone for a holiday, and talks about how people there are two kinds of goods – one which gives you joy, and the other, also known as a commodity which is basically the things that are produced to be sold.

He explains how, the goods that give you joy, which cannot be sold, are the ones which do not have an exchange value, their value could be termed as experiential value. However, the goods known as commodities are the ones which have acquired a market price which reflects their exchange value (what they are worth in the market in exchange for something else).

He also explains about how in today’s world all the goods are termed as commodities as everything has an exchange value by giving an example, about blood donation, ‘as to how there are places where it is voluntary and free of charge and there are some places where people are paid for donating blood, whereas it has come to notice that the places where people are paid to donate blood the quantity of blood collected there is lesser than the place where people are not paid to do so.’

Which also made me reflect upon it, that there is no such thing that can match up to the pleasure that we get out of doing a good deed, and as the author mentions that the reason why people don’t go for the blood donation camps which are paid is that they either prefer the pleasure they get out of it or, the money that they get in return is just not enough. And here he quotes Oscar Wilde “A cynical person is the one who knows the price of everything and value of nothing” and states that our society is turning everyone into cynics.

The author then talks about the commodification of everything in recent times where he talks about market exchanges in sharp contrast of personal exchanges. He defines market exchanges as cold and impersonal by giving an example of ordering from Amazon with a click of a button. Whereas he talks about the personal exchange by giving an example of helping a family during Easter Sunday, or Christmas gifts.

As most of the production of goods took place within the confines of an extended household which gave rise to the term oikonomia oikos (household) and nomoi (laws, rules, constraints) – laws, of running or managing a household. As a household economy mainly produced goods, but only occasionally produced commodities, but off-lately more and more of our products have turned into commodities which are why this commodification refers to the unstoppable victory of exchange value over experiential value.

This brings to a point where the market has extended to such an extent that almost everything has an exchange value. In this process the world economy has become misnomer and economy is now agora(market)-nomics as most of the products produced now are outside the household which is why he talks about the three basic elements under the process of production:

  1. Raw material
  2. Land
  3. Labour

None of them were commodities in past, “Global trade” made them commodities and talks about how “Money makes the world go round!” where he tries to tell that, even if money is the be-all and end-all of life these days, this wasn’t the case always. Although money has always helped people achieve their goal, it wasn’t a goal in and of itself. Profit motive different from greed.

The author explained as to how the rise of profit as a major incentive for people to do things came in hand with a new role for debt by using a very interesting example of a very famous play by Christopher Marlowe. He refers to this play as a ‘dark tale’ unlike the ‘fairy tales’ which have a happy ending. This play is about how Faustus sold his soul to Mephistopheles, where he introduces the concepts of ‘debt’, ‘contract’.

He explains the difference between moral debts and the debts we understand today by using an example of how people have always created debts, when one neighbor helps another, out in the moment of need, an another expresses his thanks, saying ‘I owe you one’ and the reciprocation takes place, this is settling of moral debt. Whereas the debts as we understand today are very different from the moral debts firstly because of contract, second because of something called interest.

A contract turns into a legal obligation with specific terms that take the form of exchange values often, but not always expressed in money. And by interest, he means, that within that contract also known as the loan agreement, in most cases the person who receives the loan will eventually have to pay back with a higher value or by giving something extra. The profit derived from the giving of loans is called ‘interest’.

Just how, Doctor Faustus re-payed by giving away his soul to Mephistopheles for 24 years of omnipotence and bliss.

This example explains the worries of people during the transformation of societies with markets to market societies.

The older order was production to surplus to distribution to credit & debit. With the exchange values known in advance, everything is opposite to the older order. So first debit & credit, then distribution and then production – The great reversal. To explain this the author used the examples of the serfs replaced by the sheep’s and the serfs then became small-scale entrepreneurs, where they rent a piece of land from the landowners and supervised the production of wool and crops that could be sold for profit, so that they could pay rent to the landowners, and wages to the laborer’s they hired. But in order to set this process in motion, the serfs needed some money to pay the wages, get seeds and to pay the rent to the lord. At any rate, the debt came first.

This is how the great reversal took place turning debt into the primary factor. This is also how profit became an end in itself.

“Profit required better technology, less pay to workers, thus driving inequality. Debt (borrowing) not coal is the real fuel that powered the industrial revolution”. (Gilra, 2018)[1].

With the arrival of business enterprises intent on making a profit, a new source of wealth was created. This is also when the author enlightens the readers about how the rich got richer and how debt, not coal was the fuel that powered the engine of the industrial revolution.

And discusses, Faust vs Scrooge. Faust is more in line with the new market economy, if we were all scrooges, the economy would come to a stand- still[2].

The author then talks about “The Black Magic of Banking” as to how bankers create instability in market societies, he also explains about the toxic relationship shared by the state and the bankers, which is actually the truth.

The bankers gain the privilege to act according to their convivence as, they are the ones who provide the instrument for instability in market society – debt.

Varoufakis refers bankers as ‘massive amplifiers’ who are engaged in a process that ‘massively amplifies wealth creation during the good times and the wealth destruction during the bad times’ which alters the distribution of power and money, whereas human labor and money remain the root cause of market society’s fundamental instability.

But Varoufakis also mentions that the root causes of market society’s fundamental instability lie elsewhere, buried deeply in the weird nature of two peculiar commodities: human labor and money, which is when he talks about “Two Oedipal Markets”. He here compares labor and money markets with Jean- Jacques- Rousseau’s of hunting hares vs stag. It is quite similar if one person lowers his/her wage demand. Then the employer may think that times are hard, and sales will be affected due to lower wages and thus may stop hiring. Similarly, if interest rates are lowered by the central bank to boost the market, entrepreneurs may think, that times are hard and stop taking loans.

Both labor time and money may be completely different but if borrowed, they have exchange value and no experiential value. Which is why they have no intrinsic value, being only a means to an end.

Varoufakis talks about how we are in the middle of a transformation to the process of mechanization and automation, He talks about “Haunted Machines”. Where he talks on the influence of machines in human lives is agreeable, although these machines have been of great support to humans for larger production of goods, which makes more profit, these machines could not eliminate poverty, hunger, malnutrition, inequality and other issues faced by humans. He also refers to the negative impact of human dependency on machines through doctor Victor Frankenstein who created life from bits of corpses with a motive of conquering death but it eventually turns against him with tragic results.

Karl Marx predicted the role that machinery would play in the lives of mankind saying that machines are the ‘force we must bow to’. Whereas, Varoufakis suggests a way out before the machines take over completely which results in the abandonment of all human labor from the production of things. The suggested way out was that before machines take over completely, a crisis will be created, the crisis will make us realize that if the machines will strike to unemployment.

Then, Varoufakis talks about the lifeblood of the economy, money through “The dangerous fantasy of Apolitical Money” where he talks about, how during the second world war: POW camp developed their own economy. Coffee and then cigarettes as currency.  As cigarettes as a currency developed more than coffee as cigarettes were more durable, portable, easily divisible and equally appealing to all. The red cross was an independent supplier of cigarettes which is why inflation and deflation used to depend on the red cross sending lesser or more cigarettes. The Red Cross acted like the central bank, as it was the only independent organization providing cigarettes.

The author came up with this vivid comparison between money supply and the market in cigarettes in a German prisoner-of-war camp to explain ‘inflation’ ‘deflation’ and ‘interest rates’ as the younger audience as well as the adults today will understand.

As cigarettes are durable, which have been used as currency – they can be saved, and in time ‘bankers’ emerged in the camp, who would loan cigarettes with interest, ensuring that borrowers would pay back more than they had borrowed. In times of inflation, when the value of the currency was uncertain, interest rates went up, and vice-versa.

For Varoufakis, economics is always politics, which is also why he related Red Cross to the Central Bank. According to him, whoever controls the money has the power.

Varoufakis talks about “stupid viruses” where he is practically summing up the book by talking about the transformation of societies with markets to market societies, as to how to exchange value takes over experiential value and how machinery will take over human labor if nothing is done. But mainly he talks about the lifeline of our species, the environment. He mentions “The economy benefits from our biosphere suffering”[3]. The exchange value of forests is zero, but if they are destroyed and have to be re-built that has an exchange value. Therefore, their destruction is in the interest of the economy.

Later he talks about how the governmental control is still oligarchy, and in the end mentions that the fact that our democracies are imperfect and corrupt doesn’t change the fact that democracy remains our only chance to avoid behaving, collectively.

– Vidisha Arora


[1] Aditya Gilra, Notes on Yanis Varoufakis’s “Talking to my daughter about the economy”, 2018

[2] Aditya Gilra, Notes on Yanis Varoufakis’s “Talking to my daughter about the economy”, 2018

[3]  Yanis Varoufakis, “Talking to My Daughter About the economy” 2013-pg-140

One thought on “Book Review – Talking To My Daughter About The Economy: A Brief History Of Capitalism – Yanis Varoufakis


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