On the day the far right clashed with police in London, economist Yanis Varoufakis spoke by phone with WikiLeaks founder Julian Assange, currently held in custody in Belmarsh prison. Their conversation was about the prevailing economic crisis resulting from the coronavirus (Covid-19) pandemic and what it could lead to.
Their conclusion is frightening.
Collapse of capitalism as we know it
On Saturday 13 June, former Greek finance minister Varoufakis received a phone call from Assange. It lasted just under 10 minutes. Assange asked: “I want a perspective on world developments out there – I have none in here”.
Varoufakis observed:
We watch in awe as GDP, personal incomes, wages, company revenues, businesses small and large, collapse while the stock market is staying relatively unscathed. The other day, Hertz declared bankruptcy. When a company does this, its share price goes to zero. Not now. In fact, Hertz is about to issue $1 billion worth of new shares. Why would anyone buy shares of an officially bankrupt company?
The answer is: Because central banks print mountain ranges of money and give it for almost free to financiers to buy any piece of junk floating around the stock exchange.
Varoufakis then explained how:
Central bank money printing keeps asset prices very high while the price of ‘stuff’ and wages fall. This disconnect can go on growing. But, when Hertz, British Airways etc. can survive in this manner, they have no reason not to fire half the workforce and to cut the wages of the other half. This creates more deflation/depression in the real economy. Which means that the Central Banks must print more and more to keep asset and share prices high. At some point, the masses out there will rebel and governments will be under pressure to divert some income to them. But this will deflate asset prices. At that point, because these assets are used by corporations as collateral for all the loans they take out to stay afloat, they will lose access to liquidity. A sequence of corporate failures will commence under circumstances of stagnation.
Varoufakis concluded:
I don’t think capitalism can easily survive, at least not without huge social and geopolitical conflicts, this conundrum.
But he was not suggesting a post-capitalist utopia could arise from the ashes. Just the opposite.
The impending danger
Varoufakis says Assange responded by asking:
How important is consumption to capitalism? Also, what percentage of GDP is at stake if consumption does not recover? Do the corporations need workers or customers?
In reply, Varoufakis explained that when people don’t have enough income to live on this will likely lead to widespread discontent.
Assange argued that this kind of crisis would benefit Donald Trump, who could exploit the discontent by blaming the crisis on upper class elites. Or, as Varoufakis puts it:
socialism for the oligarchy and austerity for the many, in the end, feeds the racist ultra-right. That we are experiencing again what happened in the 1920s in Italy with the rise of Mussolini.
It is a shocking but plausible analysis and a wake-up call.
Assange further responded by observing that there is an alliance between the rich and the discontented working class, and he gave the US under Trump as an example.
The phone call then abruptly ended.
Wider implications
But it can be argued that the final observations made by Assange and Varoufakis in that short conservation were not just about Trump and the politics of the US, but can easily apply to the UK. In particular, the ‘populist alliance’ between the current Tory elite, led by the likes of Boris Johnson and Dominic Cummings, and disenchanted workers across the UK, worried that the prevailing economic crisis has no end.
Progressives would likely hope that when an economic crisis reaches its zenith, the dispossessed would seek to overthrow by ballot or other means the government that has helped create that crisis. But it can easily result in a very different scenario – of a push, by stealth, towards authoritarian rule. In effect, a non-militarised version of fascism.
Another warning
Ironically, it’s that same authoritarian tendency that has seen publisher and journalist Assange jailed, to face possibly decades in prison in the US gulag. And with the full cooperation of the UK political and judicial establishment.
That too is a warning. We ignore these warnings at our peril.
Featured image via Mohamed Elmaazi
