Review: Talking to My Daughter

A Brief History of Capitalism

Yanis Varoufakis (2017)

Talking to My Daughter is a critical history of capitalism from the perspective of someone who is acutely aware of its more pernicious effects. Despite being an academic, and deeply sceptical capitalism and of the political deification of the economy, Varoufakis has first-hand experience of macroeconomic policymaking after serving as Finance Minster for Greece towards the end of the government debt crisis in 2015.¹ The book offers a warts-focussed analysis of the roots of capitalism, exploring how each of its components arose and how each has shifted the balance of resources further from the many towards the privileged few.

Markets are the place where the story of capitalism starts. Early markets traded in commodities - goods produced for exchange. It was possible for people to do very well for themselves trading commodities, especially when reliable sea trade routes connected areas with vastly different natural resources where supply-and-demand principles could be harnessed to turn profit into more profit.² While commodities were traded to mutual benefit,³ commodities were a distinct from goods, including raw materials, land, and labour.

The next step is commodification: the extension of the class of commodities to almost all goods. Land and labour are commodified first in Britain through the process of enclosure,⁴ wherein previously-communal (or feudally owned but communally managed) land was portioned into parts and leased to the farmers who farmed it. Now, rather than subsisting on the land they once occupied, peasants had to either take on debt to acquire and manage an enclosure, or sell their labour to someone who had.

Enclosure produced both commodification of labour and the key engines of capitalism: debt and profit. Debts necessitate profit because, interest is needed to make a loan worthwhile for the creditor, meaning the amount to be repaid outweighs the amount borrowed, which in turn means the money borrowed must be used to produce more than its own value so the debt can be paid.⁵

The essential ingredients of capitalism in place, Varoufakis spends the rest of the book examining capitalism’s quirks: bubbles, crashes, automation, politicization, and environmental devastation. The same theme recurs again and again in these chapters: that capitalism is unworkable given human nature.⁶ Banking, particularly the delegation of the ability to create money to private banks, is shown to foster greater wealth creation and opportunity, but also to cause financial crashes through (apparently inevitable) irresponsible lending. Crashes are made deeper and more disastrous by decreasing the ability of consumers to purchase goods, which decreases manufacturers’ ability to pay employees whose wages will be spent on consuming those goods. These effects are magnified by automation: while goods produced through automation are cheaper, the process also pays fewer people meaning there are fewer people earning wages which can be used to purchase those goods. Finally, Varoufakis argues that the inherently political nature of economics should not mean that political decisions are made using economic machinery, arguing strenuously against the market solutions to climate change.

The real strength of Varoufakis’ work is to bring everything back to human conscious experience.⁷ He cares little for the abstract beauty of model economic systems, and sees value only where it eventually translates into experiential value for a conscious mind: a thrill of pleasure or the alleviation of a want. Economic activity, for Varoufakis, is the flow of experiential value through space and time, albeit abstracted into money for much of its journey. A sibiling of this phenomenal-experience-first perspective is the insistence on keeping in view the psychology of the economic actors, especially those with great power. The intimate and cyclic relationship between those with political and those with economic power is blamed for much of the devastation which capitalism produces: banks are left unchecked by government regulation in good times and bailed out by intervention in bad times, supporting an enrichment which pays for political donations and creates seats on directorial boards for retiring government officials.

There are weaknesses to the book, although it should be borne in mind that it is not necessarily intended to be a thorough academic work. There are arguments or examples scattered throughout the book which don’t quite work, and in some places it seems that other explanations are given a shorter shrift than they deserve. It doesn’t really address globalization or the vast improvements in the quality of life which have accrued to the majority of humanity in the last century or so (a phenomenon covered excellently in Factfulness). Finally, the book is almost entirely devoid of proposals for solutions to the catalogue of capitalistic woes it documents, satisfying itself instead with illustrating how things go awry.⁸

Talking to My Daughter is not a balanced book. It is written in a plain and engaging style, and the love and pain of a parent trying to parent from halfway around the globe is palpable. It introduces other (i.e. mainstream economics) ideas, arguments, and perspectives, but more in isolation than as a coherent objection to the framework which the book espouses. If you are going to read one book on capitalism, you’re better off reading something more even-handed, but if you’re going to read a few you can do a lot worse than include Varoufakis’ earnest and cogently argued effort in the mix.

Notes

The book is a retranscription of a Greek version written in 2013, so it is unclear how much the events of 2015 influenced the content. ↩
Buying goods where they are plentiful and selling them where they are rare is a simple but beautiful method of exploiting simple balancing forces for unreasonably impressive advantage. It reminds me of the way kidneys exploit concentration gradients to retain water. ↩
The book is something of a whistle-stop tour, but even so it’s notable that Varoufakis makes little mention of the increases in the quality of life which improved trade produced, albeit mostly for those who were already reasonably well off. One could perhaps even argue that, due to preferentially increasing the quality of life for the already-wealthy, these trade networks increased experiential inequality. ↩
This apparently important event was given precisely zero percent of the curriculum, at least so far as my memory of my history education goes. Perhaps I just didn’t pay much attention to economic niceties in primary school. ↩
The commodification of raw materials follows on from the combination of production-for-profit: as basic products become subject to market forces they can be bought to power secondary industries rather than having to be produced before being adapted on site. ↩
Varoufakis’ critical treatment of capitalism by focusing on the political and psychological contexts in which it is implemented echo the trenchant critiques of communism (and highlight how many of the most fervent treatise in support of capitalism, like those in support of communism, ignore these contextual realities). ↩
It is no coincidence that the epilogue contains a brief philosophical detour into what experiential value is and where it comes from. ↩
If I may quote from my review of Doughnut Economics: ‘the absence of useful solutions isn’t grounds for dismissing a problem.’ ↩