Why Varoufakis’ DiEM2025 is fighting the wrong fight

by Will Denayer, for Fassneck Economics, May 24, 2016


This text deals with strategy, but strategy cannot be seen separate from people and their histories and actions. SYRIZA has always been an uneasy conglomerate of groups of many political persuasions, but ever since it came to power in January 2015, until its capitulation seven months later, two main fractions fought a fierce fight. On one side, there was the heterogeneous left, which wanted to make good on the electoral promise (the Thessaloniki program): there was going to be no austerity any longer, Greece would negotiate a debt write off and if the Troika pushed the country to the brink, the group advocated leaving the euro zone. The leadership, on the other side, also wanted to end austerity. But under no condition was it willing to exit the euro zone.
As Lapavitsas explains, the Syriza leadership convinced itself that if it rejected a new bailout, European lenders would buckle in the face of financial and political unrest. The mastermind of this strategy was Yanis Varoufakis. He negotiated with the lenders for more than six months. But Greece could not negotiate effectively without an alternative plan, including the possibility of exiting the euro zone. Creating its own liquidity was the only way to avoid the Troika’s headlock. That would be far from easy, of course, but at least it would have offered the option of standing up to the catastrophic bailout strategies. The Syriza leadership would have none of it (see here).
‘SYRIZA failed,’ writes Lapavitsas, ‘not because austerity is invincible, nor because radical change is impossible, but because, disastrously, it was unwilling and unprepared to put up a direct challenge to the euro. Radical change and the abandonment of austerity in Europe require direct confrontation with the monetary union itself. For smaller countries this means preparing to exit, for core countries it means accepting decisive changes to dysfunctional monetary arrangements’ (see here and also here for his views about a Grexit).
Today Varoufakis is back as the initiator of DiEM2025 (Democracy in Europe). The former Greek minister of finance enjoys a lot of credibility with the European left. Much of this credibility is based on the urban myth that the SYRIZA government put up a heroic fight with the undemocratic powers in Europe that showed no economic insight, no consideration to the fate of the Greek people and blatant disrespect for democracy.
The same discourse now is being propagated again. In 2015, there was ultimately ‘no choice’ for the Greek government than to accept the Troika’s conditions. Today, DiEM2025 wants to reform the EU institutions. There is, again, ‘no choice.’ A fight at the national level is impossible, the left has to unite all over Europe and fight the EU institutions head on. DiEM2025’s aim is ‘to democratise the EU in the knowledge that it will otherwise disintegrate at a terrible cost to all’ (see here). Only two other ‘dreadful options’ remain: a retreat into the assumed antiquated ‘cocoon of the nation-state’ or ‘surrender’ to the European oligarchy. DiEM2025’s goal is ‘to convene a constitutional assembly’ where Europeans will deliberate on how to bring forward, by 2025, a fully fledged European democracy, featuring a ‘sovereign parliament’ that ‘respects national self-determination and shares power with national parliaments, regional assemblies and municipal councils’ (see here). This is, as Varoufakis admits in The Independent, indeed ‘utopian.’ But, he continues, it is ‘a lot more realistic than trying to maintain the system as it is’ or ‘trying to leave.’ Whether you’re Greek or British, ‘escape’ is impossible (see here and here). Does this ring a bell?

Which reforms?

DiEM2025’s ‘supra-national democracy’ system should rest on ‘a significantly empowered European parliament, which should be the sole initiator of European legislation’, alongside ‘a completely reformed executive branch, including a directly elected European president.’ This system would guarantee that the Commission would implement policies that are based on the will of the people. Everything must rest on the electoral results of new and truly transnational European parties (here and here).
Some problems have to be noted here. To start with, the proposal assumes, bizarrely, that there is a causal link between empowerment of the parliament and political and ideological change. But why would this be the case? Will Europeans elect a more left leaning parliament once the  powers of this institution increase? How will this empowerment of the EP come about? The EP cannot do it itself, so much more is needed. Why concentrate upon the EP to begin with? Such a change can only come about when the power relations within the Commission and the two Councils change. Indeed, what is needed is a near complete overhaul of the European political institutions in globo. And this can only happen as a result of changes at the national level. Why then concentrate upon the supra-national level to start with?
DiEM2025 has a strategy (if you like) to achieve political change. The new European supra-national democracy needs to go in hand with the creation of a ‘post-national or supranational electorate’. But how would this work? As Thomas Fazi rightly notes, it is evident that for the great majority of ordinary European citizens linguistic barriers and cultural differences impair the opportunity for political participation at a supranational level (see here). This may be obvious, but it is a real concern. Why do we need such parties? What can they achieve that others cannot? There is no shred of evidence that this would advance matters.
The contrary is true. Further integration, even if accompanied by a strengthening of the parliament, is not equivalent to more popular control. Varoufakis naively assumes that an enhanced version of the European parliament would suffice for proper democratic control over the Union’s decisions. As Fazi rightly argues, this completely ignores the question of oligarchic capture (see here). Research consistently shows that problems relating to lobbying are exacerbated at the supranational level. Transfers of sovereignty to international loci contribute to the weakening of popular control. These loci are, in general, physically, culturally and linguistically more distant from the general public than nationals one. And this leads to more oligarchic capture (see here).
In the European Union, there are two sources of democratic legitimacy: the European Parliament, directly elected by the people of the European Union and the Council of the European Union (the council of ministers), together with the European Council (the heads of national governments).  The European Commission is appointed by the two bodies. Much negative can be said about the EP and with ample reason, but the truth is also that the EP is hardly different from national parliaments. In theory, the members of national parliaments have the power to propose legislation. In the EP this is not the case, it can only make amendments that the Commission subsequently can accept or refuse. However, in national parliaments on average less than 15% of legislative initiatives from individual members of parliament become law (see here). Very few members of parliament (or none at all) will ever propose legislation that has not been approved beforehand by their party and/or which is not the product of negotiations with coalition partners. Certainly, the EP is not working as a full parliament should function, but neither do most of the national parliaments. This also means that the struggle for ‘Democracy in Europe’ has to be taken up at the national level. It is not only a disease at the level of the European institutions, it a disease all over Europe.
The EU institutions are an empty box if the national governments are not backing up European policy-making. Voting in the Council happens either by qualified majority voting or by unanimity. All these decisions are made by national politicians or national representatives. The same is true for the executive board of the European Central Bank. There is a president, a vice-president and four other members. All of these members are appointed by the European Council. The decisions of the ECB are made by these six members plus the governors of the national banks of the 19 euro zone countries. The link with the national level is always clear.
The situation within the Commission is worse. The Commission has a president who is being elected by the EP. This means very little, because the last (and the first) time this happened Juncker’s name was the only on the ballot. The other 27 commissioners are un-elected, meaning that their position is a result of negotiations between national governments. Over the years, it became custom to adopt legislation in a single reading.  Crucial new economic governance packages, such as the Fiscal Treaty, the Six-Pack, the Two-pack and the European Semester were adopted in ways that are fundamentally undemocratic. This is indeed very bad and it certainly needs to change, but how is it different from legislation in most national parliaments in Europe? Austerity and reforms are being debated in parliaments until the minority votes against it and the majority approves it, perhaps with a lonely defector here and there. No national government in Europe fell as a consequence of the introduction of austerity measures. This shows that the problem is not exclusively located at the European level. Indeed, without the macabre obsession with ordoliberalism, monetarism, competitiveness, mercantilism and ‘structural reforms’ at the national level, the EU would be powerless to push this agenda.
At the same time, as Wolfgang Kowalsky writes, social policy ambitions have been substantially lowered towards ILO standards that are well below current European minimum standards (see here). This is, again, very bad. But look at what is happening at the national level. It is not different from what happens in France, the UK or Belgium or many countries where conservative governments (of whatever stripe or colour) implement (or try to implement) a plethora of anti-social laws.
Instead of this ‘façadism,’ as Kowalsky calls it (organising a ‘year of the EU citizen,’ etc.), there are a lot of initiatives that the EU could promote if it would be interested in democracy. It could, for example, make EU democracy real at the workplace and work towards industrial democracy – terms which are never to be found in any European policy document (the EP included). Instead, the institutions (the EP included) are now trying to intrude into national collective bargaining territory by setting limits on wage evolution – a clear strategy to destroy the autonomy of social partners (see here). But this, again, is also taking place, in some form or another, in most European countries and so, again, this is a fight that has to be fought at the national level, not by transnational parties, but by social-democratic and democratic leftist parties.

The TINA (There is no alternative) of the left

DiEM’s TINA is much worse than its fallacious analysis of European institutions and their neglect of national power relations. There is nothing accidental about it. It is the logical result of their underlying diagnosis of what is wrong with the world: if nations have become powerless in the face of globalization, then it is indeed nonsensical to initiate a political fight at the level of the nation state. That is DiEM’s thesis. But the nation state has not become powerless in the face of globalization.
The thinking that DiEM2025 and many others promote is that the model of politics based on the nation state is ‘finished’ (Varoufakis). In Europe, nation-states gained ‘responsibility without power,’ while the supra-national level gained ‘power without responsibility.’ The sovereignty of national parliaments has been dissolved. Today, national electoral mandates are by design impossible to fulfill. Hence, reform of the European institutions (or more precisely, the EP), is the only remaining option. Varoufakis is far from the only one who sees it like this. According to Slavoj Zizek, the lesson that the left has to learn from the ‘Syriza episode’ is that it is impossible to fight global capitalism in one country.  According to Zizek, the ‘new Neo-Keynesian social democratic temptation’ that is momentarily in vogue in some quarters and that aims at putting up a fight at the level of the nation-state is but a smoke screen of the confused pseudo-left falling for nationalism and populism, entertaining the population with the illusion that they can make a difference (see here). That is well put, but it is not true.
How do they know this and why are they so sure? A couple of years ago, Dani Rodrik introduced what he calls ‘the political trilemma of the world economy’ (see here). Under the conditions of ‘true international economic integration,’ democracy, national sovereignty and global economic integration become mutually incompatible. It is possible to combine any two of the three, but never all three simultaneously and in full. If you want more globalization, you must give up some democracy or national sovereignty. For example, if a nation chooses to peg its currency and allow capital flows to enter and exit without restriction, it cannot also, independently set its own interest rate. In this context, the political aspect of the nation-state shrinks.
Rodrik’s trilemma is of course famous. As Bill Mitchell rightly writes, it has been skillfully sold by all political forces everywhere. The doctrine is incredibly convenient. Tell the population that the nation-state is ‘finished,’ that it is unable to guarantee full employment (or to work towards it) and you free yourself of the responsibility of even trying. The same goes for austerity or anything else. If the nation state is ‘finished,’ it is futile to oppose it. The question whether this is true is of course almost never asked – ‘everybody’ seems to know the answer. But it is not what Rodrik meant. The title of his article ‘How far will economic integration go?’ should provide a hint (see here). Contrary to conventional ‘wisdom,’ Rodrik wrote that international economic integration is not ‘true,’ i.e. it remains remarkably limited, even if our supposedly globalised world. It is true that Rodrik’s paper dates from 2000, but the world did not change that terribly much in the meantime. As Mitchell notes, there are still national borders. There is exchange rate uncertainty despite increased deregulation. There are major cultural and linguistic differences that preclude a full mobilisation of resources across national borders. There is ‘home bias’ in investment portfolios. There is a high correlation between national investment rates and national saving rates. Capital flows between rich and poor national fall considerably short of what theoretical models predict. There are still severe restrictions to the international mobility of labour (see here). The truth is that we do not live in a completely globalised world, far from it. Ergo, nation-states can pursue their own policies. This conclusion is reached by all those who look into it (see here for a study of Godar, Paetz and Truger on the scope for redistribution and growth policies at national level in the EU and here for a literature overview).
There is no evidence for DiEM’s TINA. Their thesis that capital became completely supra-national and that ‘we,’ in order to fight it and stand a chance, need to follow and bring the fight to the same supra-national level is incorrect. The ‘footloose’ character of capital will be fought at the national level which will in turn lead to international cooperation or it will not be fought. If capital did become completely footloose and the nation-state is ‘finished,’ why does Goldman-Sachs and others pay Hillary Clinton millions of dollars for speeches that have to remain secret? Why does the corporate lobby pumps billions into the regulatory institutions of countries, why are think thanks and marketing agencies that have no other goal than to skew the opinion of voters blossoming everywhere, why is the corporate sector so eager to buy up the media so that its ideological boundaries can be closely safeguarded? Is that because the nation state is ‘finished’?
As Bill Mitchell wrote on his blog a while ago, ‘(t)he actual reality (is) that politicians still have legislative capacity to restrict economic activity across borders (…) The actual challenge is not to cede national sovereignty to some mythical state of international economic integration, but to resist the corruption of the national policy-making process by shifts to technocracies and to ensure that the voting systems are not corrupted by lobbyists working in the interests of specific capital elites’ (see here).
And why is this not happening? One can accuse the right of many things, but not that they are right wing. They are what they are. But the same is not true for the left. As Bill Mitchell writes:

The problem is that the stupidity of the Left politicians has bought the myth that international economic integration is so advanced and inevitable that they had to abandon the traditional progressive goals and, instead, serve the interests of capital. Their differentiating narrative is the implausible claim that they somehow will maintain that policy position to deliver fairer outcomes.

This, in a nutshell, is what happened during the last thirty or so years. It is not financialisation that broke social democracy’s back (as Varoufakis recently declared on Dutch television), but the fallacious ideology that nothing much can be done at all, that structural change is impossible, that the political struggle on the level of the nation state is over and that the only thing left to do is to manage the state in neoliberal vein, with some ‘social corrections’ here and there, corrections that prove completely insufficient, that is, at least, in so far that social democracy, as New Labour in the UK under Blair, did not completely accept the neoliberal ideology about welfare scroungers etc. and made everything even worse for the unemployed and the poor than it already was.
The fact remains that it is possible for currency-issuing countries to follow their own economic policies – policies that have, among others, full employment as a goal. This is the real issue. It is not about the democratisation of institutions. It is not about the need for transnational European politics. It is not about anything that floats in the air, such a societal model which, as Varoufakis explains, is ‘at the same time libertarian, Marxist and Keynesian’ (see here and here). What we need are leftist parties that are capable of winning national elections.

Why give priority to the national level?

If DiEM2025 wants to fight for ‘more democratic EU institutions,’ let them. But the more important fight will take place at the national level. Nothing can harm the European oligarchy more than countries dropping out of the EMU (or threaten to do so), re-adjusting, returning to growth and doing better than the dysfunctional, ultra-neoliberal euro zone. Everywhere in Europe, capital is setting up divides among fictitious ethnic and cultural fault lines to pursue a divide and conquer strategy vis-à-vis labour. The left has to fight this struggle on every possible scale. Internationalism never meant giving up on the national struggle. The contrary is true. This has absolutely nothing to do with nationalism. This is not about what the English or the Germans can do because they are English or German, but because most progress can be made on these levels. The Irish defeated the privatisation of water. That did not take a European struggle. The privatisation of water is probably impossible to defeat on this level. But the Irish did it in their country. It is, simply, a strategy to make progress where most progress can be made. This does not exclude international solidarity. On the contrary, it is a condition for such solidarity to exist. We need authentic social democratic parties that win elections nationally, send left-wing representatives to the European parliament, left-wing representatives to the Council and the Commission and Keynesians to the ECB. The fight for investment, recovery and against austerity and corporate lobbying has be to taken to the inside of these institutions. How will transnational political parties achieve this? It is on the national (and local) level that people relate to politics. It is there that the major strengths lie.
This is, of course, not how Varoufakis sees it. As he explained in the Independent, almost eight years after the outbreak of the financial crisis, unemployment in the EU is still at crisis levels, it is twice as high as in the US and the UK – ‘which are now reaching what economists consider ‘full employment.’’ To begin with, no one believes these statistics. There are millions of unemployed people in these countries. ‘If unemployment was still 10-11% in the UK or the US, the administration would have collapsed,’ Varoufakis tells the Independent (see here, see also here and here for critique). How does he know? Did Spain’s government, where unemployment is still over 20%, collapse? Did the Irish government collapse? Ireland’s main’s austerity party got re-elected and the old prime minister is back in power. No transnational party will change this. But decent, authentic and principled social democratic parties can, if they stand up.


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Will Denayer
Will Denayer
Sep 9, 2016 2:20 AM

Good evening. I am Will Denayer and I would like to make a request. I did not write up this article for Fassneck, but Flassbeck-economics (www.flassbeck-economics.com). Would it be possible to correct this mistake please? Best regards, Will

Eurasia News Online
Eurasia News Online
Jul 8, 2016 2:07 PM

Reblogged this on Eurasia News Online.

Jerry "Peacemaker"
Jerry "Peacemaker"
Jul 5, 2016 5:44 PM

Nations using the euro have given their sovereignty over to people outside their nations. The only way to restore sovereignty is abandonment of the euro, returning to the particular nation’s original currency, and taking back control over monetary affairs. The phrase “follow the money” pertains, as long as money is the primary economic power. Private central banks are the problem around the Earth as their owners act in their personal interest, and only national central banks owned by everyone operated as public utilities can reverse record wealth inequality present in all regions where private bankers control the money power. Monetary reform is THE most important issue for humanity.

Jul 4, 2016 1:57 PM

For me, this article is easily the most important of many important articles this site has published for it crystalizes the key issues which run like a common thread through so much in our contemporary politics.

It presents that rare thing : a clear picture of essential faults in commonly-accepted reasoning and puts them all into the context which other commentary does not trouble to address.
I think it would be hard to overestimate the importance of what we're offered in this article.   Brilliant!   And <i> thank you! </i>

Other readers : please help bring this to wider attention wherever you can.

Seamus Padraig
Seamus Padraig
Jul 4, 2016 1:14 PM

Syriza was a controlled opposition movement intended to lure the masses away from Grexit. Varoufakis and Tsipras can therefore not be taken seriously as ‘tribunes of masses’. Varoufakis himself was for a long time a resident scholar at the Institute for New Economic Thinking (INET) in New York, another Soros-funded think-tank. That should tell you everything you need to know about Mr. Game-Theory.

Richard Le Sarcophage
Richard Le Sarcophage
Jul 5, 2016 4:38 AM
Reply to  Seamus Padraig

Absolutely Seamus. Varoufakis is a phony, like his mate Tsipras. Funny how it was Goldman Sachs who lured Greece into the trap, and now Tsipras is sucking up to Israel, even allowing them to establish a base on Greek territory. ‘Spooky synchronicity’, as they say.

Dirk Janssen
Dirk Janssen
Jul 4, 2016 11:35 AM

I don’t think the nation state is completely finished. But in order to be able to withstand the enormous economic power from institutions as Goldman Sachs, you need your population to be of sufficient weight to matter as a consumer block, not just as a few cheap labourers. Goldman Sachs bought Hilary Clinton because the population of the US represents such a critical mass. Goldman Sachs completely ransacked Greece because a few million Greeks don’t matter at all on their balance sheets. I guess that is why Varoufakis wants a larger population to withstand big finance.

Jul 4, 2016 4:40 AM

Great article. I have been trying to get my head around the fact that Varoufakis and others on the Great article. I have been trying to get my head around the fact that Varoufakis and others on the left ended up campaigning for Remain. From being an eloquent and trenchant critic of EU machinations against Greece Varoufakis and his Diem 25 make a good case for building trans European grass roots organisations and for mobilising a pan european project to challenge the undemocratic institutions of the EU. But I found the rhetoric to be short on the practical HOW this could be achieved given the bureaucratic and inaccessable nature of the forces holding the power in the EU. It seems once having committed to their pan-European position they then went further to exclude even the possibility of struggle for democracy and an exit strategy within the national and sovereign constituent… Read more »

Jul 4, 2016 3:04 AM

Unemployment in the USA is around 23%. The government figures are, notoriously, fiddled and exclude most of the unemployed.
As to the article itself it is absolutely right.
I would add that the final reason why the “left” refuses to see that there are many alternatives is that they require mass mobiilisation, which, in turn requires the “left” either getting out of its bubbles and returning to local communities or giving up pretending to be involved in popular politics at all.