Varoufakis and the Greek-German standoff

http://www.theguardian.com/business/2015/feb/19/marxism-great-greek-german-standoff

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Greek finance minister Yanis Varoufakis’s suggestion that “things could get worse in perpetuity, without getting better” (How I became an erratic Marxist, 18 February) is at odds with a key notion of the business cycle – that after a deflationary clearout of the capitalist system in crisis, states have reformed the system to assist the cyclical recovery in such a way as to improve things in the long-run.

Marx and the neoliberal economists have relied on the wrong sort of mathematical models to solve the problems, hence the continuation of the crisis without end which Yanis alludes to. Marx was not too hot on understanding what businesses could do to avoid crises, but within any value system appropriate accounting techniques need to be allied to economic theory to work on solving the problems over time. But, yes, stability needs to be established first, as Yanis suggests.Jeremy ComerfordChippenham, Wiltshire

• Germany was happy enough to accept massive debt cancellation after the second world war, under the Marshall plan. As the current German government itself seems incapable of even a modicum of humility on this score, surely this is something the world should be reminding it of before it succeeds singlehandedly in plunging Greece into the kind of crisis others helped Germany to avoid. (For an excellent account of the extent of debt cancellation under Marshall, see here.)Professor Naomi EilanDepartment of philosophy, University of Warwick

The poorest in Greece are accumulating debts, not hoarding … this excess saving is taking place in Germany, not Greece

• Economist Joseph Schumpeter observed that “a sharply defined type of social-reform monomaniac sees money, its reform or abolition, as a social panacea”. These words came to mind while reading George Monbiot’s suggestion that the current Greek tragedy can be averted by issuing “stamp scrip” local currencies (A maverick currency scheme from the 1930s could save the Greek economy, 18 February).

Stamp scrip works by causing the value of currency to degrade with time. Much the same effect can be engineered by imposing negative interest rates on bank deposits – or by raising inflation to a high enough level. The point is to prevent people from hoarding cash – to force them to spend their incomes. The problem in Greece is not that people are receiving income they do not spend. It is that their incomes have shrunk so much that they can no longer afford basic necessities. The poorest in Greece are accumulating debts, not hoarding. While there is a problem of hoarding, this excess saving is taking place in Germany, not Greece.

The example given by Monbiot, the Bristol Pound, is trusted – and therefore stable in value – because it is 100% backed by sterling deposits. It is only this explicit backing by the British state that gives the Bristol Pound its value. A Greek drachma with 100% euro backing is neither feasible nor desirable. While a reinstated drachma might count as a new “local currency” it is not, I suspect, what Monbiot has in mind.

Monbiot is wrong about this being a showdown between the public and the banks. The current situation in Europe is a confrontation between states. Whichever side prevails, the state – either the Greek state or the German state – will remain the dominant force in shaping society for the foreseeable future. No amount of monetary tinkering will alter this fact.Dr Jo MichellUniversity of the West of England, Bristol

• Although Yanis Varoufakis’s article was dense and complex, it was the best contemporary analysis by a current politician of why Greece is challenging the neoliberal economic and financial consensus that has dragged the European economies, UK included, down since the credit crunch. Well done the Guardian fro carrying such analysis at length and circumventing the string of soundbites politicians usually pontificate. The Guardian should now invite George Osborne, as the foremost British political advocate of neoliberal economic policy, to set out its fundamentals to the same level of rigorous exegesis as Varoufakis managed in setting out his own Marxist critique of EU economies. We can then compare their comparative merits.Dr David LowryStoneleigh, Surrey

• While it is useful that Yanis Varoufakis is familiar with the works of Marx, something George Osborne is clearly not, you would need to burrow deep into pre-1914 Marxism to find those who were prepared to agree that Marx’s idea was to expose the “inherent failures” of capitalism so that it could be saved for “strategic purposes”. One can understand why Varoufakis as a government minister might think that, but Marx’s idea of the gravediggers of capitalism were not sharply dressed people in high places but ordinary people changing things from below for and by themselves.Keith FlettLondon

• Why do we always refer to a “Grexit”, which is not even a word. We could have a “Grout” and later a “Spout” and a “Pout”, or an unlikely “Gout”.Peter ThomsonBlairgowrie, Perthshire