187. Yanis Varoufakis: How The 2008 Crisis Revived Far-Right Populism

Summary

Podcast Summary: The Rest Is Politics: Leading

Episode 187: Yanis Varoufakis – How The 2008 Crisis Revived Far-Right Populism
Release Date: May 3, 2026
Hosts: Alastair Campbell & Rory Stewart
Guest: Yanis Varoufakis

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Overview

In this episode, Alastair Campbell and Rory Stewart meet former Greek Finance Minister, economist, and pan-European activist Yanis Varoufakis. The conversation spans Varoufakis’s personal backstory, the roots and fallout of the 2008 financial crisis, reflections on populism and the far right, the evolution of economics and political leadership, the Eurozone crisis, and the current dangers and hopes for progressive politics. With characteristic candour and wit, Varoufakis shares not only his economic analysis but also insights into what drives him and the establishment’s failures that, he argues, have fueled today’s instability.

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Key Discussion Points & Insights

1. Origins, Family, and Early Influences

[04:05–15:25]

• Varoufakis reflects on his multicultural upbringing, with a Greek-Egyptian father and politically driven mother.
  • His father was born in Cairo to a Greek family; his mother, a political mentor, was from a petty bourgeois Greek background.
  • The family’s experiences as exiles and political prisoners gave him a nuanced and skeptical attitude toward political authority.
  • His mother was abducted by communist partisans and later forced to spy—profoundly shaping his sense of political ambiguity.
• On class and leftism:
  • “[Revolutions] never happen without some of the privileged siding with the underprivileged… It’s only the right that attack me, for instance, for being a bourgeois socialist, champagne leftist.” (Yanis Varoufakis, 14:12)

Memorable Moment:

• “My friendship [with Jeremy Corbyn] sustained his leadership of the Labour Party – it was not due to it.” (Yanis Varoufakis, 05:02)

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2. Academic Trajectory & Critique of Economics

[15:39–25:41]

• Varoufakis discusses his academic journey, disillusionment with mainstream economics ("religion with equations"), and move into mathematics and game theory.
  • A pivotal moment: disproving an MIT professor’s mathematical model showing trade unions as ‘mechanistic idiots’ by using the same methodology to produce the opposite result.
• On the limitations of academic economics:
  • “The economics we teach the best of the best students in the best universities… cannot sustain time, space, externalities, or actually money and debt… So what good is an economic theory which cannot sustain [these things]?” (Yanis Varoufakis, 21:18)
• The importance of judgment over calculation in economic decision-making, echoing John Maynard Keynes.

Notable Quote:

• “If we could have an AI machine that could find all the right answers to all the right questions, why do we need democracy?” (Yanis Varoufakis, 25:31)

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3. Political Exile & Observations on the UK and Australia

[25:41–33:30]

• Varoufakis explains how the political climate under Margaret Thatcher in the UK drove him to Australia, and how he later left Australia due to a political turn to the right.
  • He praises elements of Australian multiculturalism and cultural policy (film, public broadcasting), and criticizes the rise of managerialism and xenophobia.
• On academic life: “Backward can be very good… The university was the way universities used to be before Thatcher.”

Memorable Moment:

• "[In Australia], the first five years... were just a joy." (Yanis Varoufakis, 32:02)

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4. Transition from Academic to Politician: The Greek Crisis

[33:30–44:50]

• Rory Stewart probes whether Varoufakis romanticizes pre-crisis Greece, leading to a candid account of the country’s bureaucracy and corruption.
• Varoufakis argues the Euro was the catalyst that transformed manageable dysfunction into systemic crisis:
  • Rich Greeks wanted hard currency; banks and government manufactured eligibility, with external aid from Goldman Sachs.
  • The entry into the Euro flooded Greece with cheap credit, setting the stage for collapse.
• Shock revelation:
  • “Once we entered the Euro, it was game over… My grandfather, that is my father's father... was a bit of a rascal..." (Yanis Varoufakis, 36:53–37:19)

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5. Who Was the Greek Bailout For?

[44:50–48:54]

• The first bailout was primarily structured to save German and French banks, with 91% of funds going directly back through Greek accounts to repay creditors—not to benefit the Greek people.
  • “Out of that huge round of €120 billion, 91% went through the Greek treasury straight back to the German and the French bank. … For the bank, it was 91%.” (Yanis Varoufakis, 44:50)

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6. Serving as Greek Finance Minister: Debt, Austerity, and Populism

[46:25–52:24]

• Varoufakis recounts his tenure:
  • His main goal: stop “kicking the can down the road” by taking on new unrepayable debts.
  • Opposes both simplistic left-populist and right-populist promises, stressing honesty about hard tradeoffs.
  • Defends his resignation: “The Greek people agreed with me and my prime minister overthrew the Greek people."
• On the lack of easy political solutions and the prevalence of “populist” (left and right) narratives.

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7. Wealth Taxes, Housing, and Economic Solutions

[52:24–56:03]

• Varoufakis is wary of wealth taxes as a panacea, arguing that symbolic policies aren’t enough to repair systemic problems.
  • Honest leftist leadership means communicating painful realities—e.g., that housing markets need correction, even at the cost of negative equity for some.

Notable Quote:

• “If you tell the truth to the people, you can’t get elected.” (Yanis Varoufakis, 54:16)

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8. The Euro, Europe's Decline, and the Roots of Populism

[56:03–59:36]

• Varoufakis blames the structure of the European economic union—federal money without a federal treasury—for much of Europe’s current malaise.
• The combination of “socialism for bankers and austerity for everyone” undermined trust and solidarity, fueling the far right, Brexit, and Trumpism.

Notable Quote:

• “2008 was our generation’s 1929… It’s our failure and the liberal establishment’s failure that led to the fascists rising up through the woodwork.” (Yanis Varoufakis, 59:03)

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9. Politics, Betrayal, and Disillusionment

[59:36–61:28]

• Reflecting on his political career, Varoufakis is most saddened by how quickly political “comrades” are corrupted by power, even among those with idealistic pasts.
  • “The worst aspect… was the speed with which good comrades… can become lured by power and… trash their own principles.” (Yanis Varoufakis, 61:28)

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10. Techno-Feudalism and Structural Economic Change

[61:28–64:37]

• Discussion of Varoufakis’s latest book, "Techno Feudalism," which argues we are witnessing a transition as profound as the shift from feudalism to capitalism.
  • Data platform owners (e.g., Amazon, Google) increasingly extract “cloud rent” rather than generate traditional capitalist profit.
  • “Welcome to techno-feudalism.” (Yanis Varoufakis, 64:37)

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11. On Trump, Tariffs, and the Iran War

[64:46–67:29]

• Varoufakis downplays the long-term impact of Trump’s tariffs relative to previous economic shocks.
• He is more worried about the economic consequences of the Iran war: cost-push inflation, energy shocks, and a reversal of AI investment could trigger stagflation and unemployment.
  • "With this Iran war, I think [Trump]'s going to lose everything because he has unleashed a stagflationary wave..." (Yanis Varoufakis, 66:10)

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12. Closing Reflections and the Limits of Leadership

[67:37–77:42]

• Post-interview, Rory and Alastair reflect on Varoufakis’s honesty about the lack of easy answers, his clarity, and his outsider status.
• Brief discussion of Varoufakis's recent legal troubles in Greece and Germany; commentary on how his public voice draws targeted attacks.
• Both hosts agree he’s a “great communicator” with a knack for explaining complicated economic ideas simply, even if his politics are too radical for some.

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Notable Quotes

• On the Euro and European failure:
  “You do this if you want to destroy a continent.” (Yanis Varoufakis, 56:12)

• On populism and political failure:
  “It’s our failure and the liberal establishment’s failure that led to the fascists rising up through the woodwork.” (Yanis Varoufakis, 59:18)

• On techno-feudalism:
  “What lives in our tablets… isn’t a means of production. They are produced means of behavioral modification.” (Yanis Varoufakis, 62:03)

• On honest leadership:
  “If you tell the truth to the people, you can’t get elected.” (Yanis Varoufakis, 54:16)

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Timestamps for Key Segments

• Introduction & Family Background: 04:05–15:25
• Critique of Economics & Game Theory: 15:39–25:41
• Political Exile & Australia: 25:41–33:30
• Greek Crisis & Eurozone: 33:30–44:50
• Who Did the Bailout Serve?: 44:50–48:54
• Finance Ministry & Political Populism: 46:25–52:24
• Wealth Tax & Systemic Issues: 52:24–56:03
• Euro Crisis & Populism’s Rise: 56:03–59:36
• Disillusionment in Politics: 59:36–61:28
• Techno-Feudalism: 61:28–64:37
• Trump, Tariffs & Iran War: 64:46–67:29
• Hosts’ Reflections: 67:37–77:42

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Tone

Warm, candid, and intellectually sharp, with moments of biting critique, wry humor, and reflective melancholy. Varoufakis blends personal storytelling with scathing systemic analysis, while Campbell and Stewart challenge and probe but ultimately show deep respect for their guest’s honesty and expertise.

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This summary captures the major themes, arguments, and notable moments from the episode, offering a comprehensive guide for new listeners or those seeking key insights from Yanis Varoufakis’s economic and political philosophy.

Transcript

[Alistair Campbell]

Thanks for listening to the Rest is Politics. Sign up to the Rest is Politics plus to enjoy ad free listening, receive a weekly newsletter, join our members chat room and gain early access to live show tickets. Just go to therestispolitics.com that's therestispolitics.com 2008

[Yanis Varoufakis]

was our generation's 1929.

[Alistair Campbell]

You're basically saying that that is what has in part led to the kind of global mess that we're in now. That is what gave us Trump. It's what gave us Brexit. It's what's giving us the rise of the far right in Europe.

[Yanis Varoufakis]

Absolutely. Absolutely. You have a situation where the left fail and the liberal establishments failed that led to the fascists rising up through the woodwork.

[Alistair Campbell]

You said the reason why Europe is going down the drain is Europe going down the drain.

[Yanis Varoufakis]

Oh yeah, it's gone.

[Alistair Campbell]

Finished because of what you call socialism for the banks and austerity for the people.

[Yanis Varoufakis]

You do this if you want to destroy a continent. This is what we did. This was a crime against Europe.

[Rory Stewart]

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[Rory Stewart]

Welcome to the rest of Politics.

[Alistair Campbell]

Leading with me, Rory Stewart and with me Alistair Campbell. And I think I'm right that the first and only Greek we've had on the podcast was Kyriakos Mitsotakis, who's the current center right Prime Minister. Today's guest, Yanis Varoufakis, is someone with a very different politics, a very different view of the economy and how it should work. He's had a lifetime studying, teaching and writing about economics. But he became a prominent political figure well beyond Greece when he was their finance minister during the financial crisis which pitted him against the giants of France, Germany, the global banks, the IMF and more. He resigned after win an anti austerity referendum. He's returned to writing and since established a party in Greece and the Pan European Movement and is a regular contributor to political debate around the world. So it's a pleasure to have him here. So we normally start by asking our guests about their childhood. But you Yesterday celebrated your 65th birthday and you were telling me before we started recording, you did it with an amazing event which sounds like with some very interesting guests. And I'm going to spring a bit of surprise on you, Roy, including the owner of your favorite ears on the planet. Oh, no, I'll tell you what that means in a minute.

[Yanis Varoufakis]

Well, let me first put it in context. Right, okay. Ten years ago we had booked one of the most wonderful theaters in Berlin, the Volksbury Theatre, where we inaugurated DiEM25, our movement, democracy in Europe movement, together with people who were there last night like Brian Eno and quite a few others. And last night we celebrated the 10th anniversary of that movement, that failed movement, but very, you know, I think still significant movement at the Toxic Theatre in the East End of London and you know, 2,000 people. But I suspect what you want me to talk to worry about is the fact that I've managed, we've managed the M25 to put on stage together Zach Polanski and Jeremy Corbyn.

[Rory Stewart]

Very good.

[Alistair Campbell]

Just to give you the context, Zach Polanski, who, Rory had a really interesting spiky spat in this very studio when Zach Polanski was sitting here. And Jeremy Corbyn, who Rory described in his book on politics as a man with beautiful ears, well, that was the

[Yanis Varoufakis]

last kind of compliment I would have expected Look, Jeremy's a great friend. He's been a friend for many, many years. So we did lots of things together, which I'm very proud of, including protesting against Saddam Hussein when Saddam Hussein was the blue eyed boy of the west, protesting against Vladimir Putin, when Vladimir Putin was highly liked by the British establishment, by the United States. So, you know, we have a long history of common defeats.

[Alistair Campbell]

Did you help him expel me from the Labour Party?

[Yanis Varoufakis]

Absolutely not, because I never had anything to do with the Labour Party. Even when Jeremy. So our friendship sustained his leadership of the Labour Party, it was not due to it.

[Rory Stewart]

We'll get back to Jeremy Corbyn and Zach Polanski and your position in politics, but I wanted maybe to begin, you've written a rather wonderful book, which I've been enjoying, which is a great deal about your father, and I wonder whether you tell us a little bit about that origin story. One of the surprising things is that your father was originally from Cairo. Could you tell us a little bit about your father and mother and then we'll come back to the modern you.

[Yanis Varoufakis]

Sure, Ronnie. I suspect you're referring to my penultimate book, which was a long letter to my dad, because, you know, as a recovering academic, I need to write books as if I'm pretending that I'm writing, I'm addressing a human being in order to stop being an academic.

[Alistair Campbell]

You once addressed your daughter.

[Yanis Varoufakis]

That's right. So that I use my family and my beloved ones, even if they don't want it. Especially if they don't want to ask my daughter. She never forgave me for doing that. Anyway, my dad. My dad was born and raised in Cairo as part of the Greek community, the expat community, but also intimately linked to the British and to the French expat community. So his father was the director of Thomas Cook in Egypt. He was organizing these death on denial cruises for British aristocrats. And his mother was French. French born, but also raised in Egypt. So they were part of the colonial, you know, the white settlers of colonial Egypt. And you know, my grandmother, to whom I have devoted a chapter in my latest book, she was totally caught up between two worlds. The European expat community, who were effectively the ruling class of Egypt and who were having a wonderful time, you know, traveling first class to the various wonderful parts of Egypt and living a life of grandeur with servants and all that. But at the same time, I discovered, more recently, she was a member, a paid up member, of the Egyptian Feminist Union, working with Egyptian women against the expat community. Against their employers, organizing strikes in textile factories and so on. So. And that was always a sort of civil war happening within the family. And she raised my dad as a French Enlightenment figure. So, you know, since he was 5, he had to listen to stories about Voltaire, about Jean Jacques Crusoe, about Montesquieu, about all that. And, you know, so he grew up as a French Enlightenment person in Cairo, Egypt, within a Greek community. So it's just complete madness.

[Rory Stewart]

Develop this a little bit more because there was also, of course, very famously, a big Greek community in Alexandria. And we think about Greeks in Egypt in terms of cafafy and poetry and literature. But your father's family was different to that. It wasn't the same culture.

[Yanis Varoufakis]

Well, the Greek Egyptian community was quite multifaceted. I mean, originally it harks back to the Hellenistic era, to the Greek Macedonians who were there since Alexander the Great. Then different waves of Greeks arrived. A significant wave arrived after 1922 when the Greeks lost to the Turks in Asia Minor. And a lot of them sort of traveled all over, you know, migrated a lot of them to Egypt. But my grandfather, that is my father's father, yes, he was quite different in the sense that he was. He was a bit of a rascal who had been given the tar and feathers treatment by his father on the Ganesian island for having been sent to Los Angeles to study law. He didn't study anything because he had too much of fun time there. And he came back pretending that he had graduated. And when it was discovered that he had never graduated, he was put on a boat to anywhere. He ended up in Egypt. So there he met my grandmother, who was a French orphan who had been put through a French school. But somehow, you know, they blended into this Greek community, British community, Italian community, Jewish community, this multi ethnic white community of Egypt.

[Alistair Campbell]

Your politics, were they coming more. I get the sense they were coming more from your mother's side than your father's side. Was she very political?

[Yanis Varoufakis]

Absolutely. My mother was my political mentor, even though my father spent four years in a consultation camp for leftists.

[Alistair Campbell]

And that was because he wouldn't condemn communism, though he wasn't a communist.

[Yanis Varoufakis]

My father had a Greek culture from his dad and from having gone to a Greek school in Cairo. So in 1945, he was 20, 21, he was working for a bank in Cairo. He was really very well off. He didn't have to do what he did, but he decided he wanted to be a scientist and he decided he's going to study in Athens because his way of finding his Greek roots. And that was the interregnum between the first civil war which ended and you remember the Winston Churchill inspired clash between the left and the right in the end of 1944. Because it's important really to mention that, you know, the Cold War began in Greece. It did not begin in Berlin, it began in, you know, all terrible things begin in Greece, like the Euro crisis much later, for some reason which I am not familiar with. And so he arrived at this interregnum and he comes to Athens and enrolls at the chemistry department and the physics department of the University of Athens. And it was at a time when the British had directed the to going to bed with the left as part of this rapprochement, Le tante between them. And the Communist Party had given instructions to the Communist students also to go along with that. So one day a representative of the ultra right and the communists came to him and they said to him, look, we decided you're going to be the president of the Students Union. Why? Because he was a ufo, he had come from Cairo, nobody knew him, he was anodyne to both. So he accepts that a couple of weeks later, at the time of famine, including famished students, the situation was awful. The authorities double student fees and he thought it was his job as the president of the Student union to go to the lecture and complain very politely in his usual French way. I mean, his first language was French, his Greek was not that good. So he goes there, he does that. On the way out, he's grabbed by secret police, he's taken to a cell, he's beaten up. Then the officer in charge apologizes and says, oh, this was just brutes doing horrible things. Very sorry, sign this and you're out. And he looked at the document, said it was a denunciation of communism. And he said, sir, I'm not Buddhist, I'm not Muslim, but if you asked me to denounce Islam or Buddhism, I wouldn't do it because it's none of your business. Similarly, I'm not a communist, but I'm not going to denounce communists. So they beat him up a bit more and threw him into a prison cell. And then he got really peeved with this and he was refusing to sign until in the end he became a communist because they put him in a concentration camp with Commun. But he was there for four years, didn't sign.

[Alistair Campbell]

And tell me where your mother's politics came from.

[Yanis Varoufakis]

So my mother came from petty bourgeois Greek family. Her father was a cobbler he was a typical centrist Venizelist in Greek terms. And she had a deep sympathy towards the left because at some point she was abducted totally at random by communist partisans. And she walked into the university, you know, with this anti communist disposition. But then very soon after that, when the right approached her and started asking her to spy on former communists on their behalf, they gave her her first mission to be protected. She had to accept that mission in order to be protected as the only woman in the school of chemistry. And her first mission was to keep tabs on a certain gentleman who had just come out of a concentration camp, who looked like death, warmed up. As you can imagine, you know, he was something less than 50 kg after that experience, who happened to be my dad.

[Rory Stewart]

One of the themes that is, I guess, goes through left wing and radical politics in the 20th century is the question of class. So there are people in left wing movements who come from very poor, underprivileged backgrounds. There are people in left wing movements who, like your father, came from quite comfortable financial circumstances. How does that play out? I sometimes worry if I would to suddenly announce that I was a leftist, people would mock me for being an old Etonian. As you've grown up in these circles over 45 years, is that a narrative? People saying you don't understand, you come from too much privilege, or people having to use their backstories to legitimize themselves when they're talking about economics.

[Yanis Varoufakis]

Well, Rory, speaking from personal experience, it's only the right that attack me, for instance, for being a bourgeois socialist, champagne leftist. That criticism doesn't come to me from the left, from the working class. If you look at history, no rebellion, no deep transformation of society took place without some of the privileged classes or members of the privileged classes siding with the underprivileged from, you know, from the Christian Revolution under the Roman Empire, you know, all the way to, you know, the anti slavery movement. It wasn't the slaves that led the anti slavery movement. It was haute bourgeois people. And similarly, I mean, if you look at the stalwarts of radical left, people like Engels, I mean, he was an industrialist in Manchester and he was using surplus value extracted from the textile factories, whatever it was, that he had inherited, in order to fund Marx in the British Library. So there's a long tradition of that. And as I said, it's the right that use one's upper class upbringing in order to bring one down when one happens to be of a leftist disposition.

[Alistair Campbell]

You've described for both of your parents quite Extraordinary punishment for existing and punishment for their views at various stages. So at one point Greece was kind of such a mess, they decided you should be, you should come to England to be educated.

[Yanis Varoufakis]

That's correct. My father decided that.

[Alistair Campbell]

Your dad decided that. Okay. And he went to University of Essex. And I know that you are both, you studied economics and taught economics all your life, but you've also, you decided that actually economics there wasn't very good, the teaching wasn't very good and you went into maths.

[Yanis Varoufakis]

Oh, no, no, it wasn't there that it wasn't. Actually, it was pretty good. I decided economics is a religion with equations, whether it's taught at Essex, LSE or Harvard for that matter.

[Alistair Campbell]

Okay.

[Yanis Varoufakis]

And this is why I decided that, you know, I'm going to study mathematics because if I'm going to study mathematics, I might as well study first class mathematics other than the third class mathematics, which is what economics is, what economics had become by the time I went to university. It wasn't like that under Keynes. Under, you know, economics went through a huge transformation which is actually quite detrimental to the capacity of economists to understand capitalism. So I thought I had escaped economics until my years as a master's student of mathematics, of mathematical statistics. This is a cute story. I was looking for a thesis to complete my master's degree at the University of Birmingham, which was on mathematical statistics. And one night I made a mistake. It was too late at night and I went to the wrong floor of the Birmingham University Library library. I was looking for mathematical papers in order to be inspired to find something to write my thesis on. And I was on the floor where the economics journals were. So I picked up randomly in the middle of the night a copy of the American Economic Review and I opened it and lo and behold, I fell on an article written by an MIT economics professor which was highly mathematical, which was of interest to me and which purported to prove mathematically and statistically that in negotiations between employers and trade un unions, employers are super rational and trade unions are mechanistic idiots who resist, you know, stupidly until at some point they no longer exist and the mathematics was splendid.

[Alistair Campbell]

I'm guessing you didn't agree with that.

[Yanis Varoufakis]

No. Well, you know what? I. But I didn't know why I didn't agree on this because the mathematics looked really good and the statistics was splendid. So I thought, okay, I will look into it. So I studied it for a couple of weeks, three weeks, and then I rewrote the mathematical model model. So I turned it on its head in other Words, I took the model, I reversed it, I inversed it, and I had the trade unions acting hyper rationally and the employer acting stupidly. And then I took the data. The professor was very kind enough to send me a huge tape with the data that he had used. And so I spent three or four months writing this up and showing that, you know what, our science can't answer the question because he has proven that the unions are stupid. I've proven that the employers are stupid using the same data and the same mathematics. In other words, economics can't answer this question. And then you know what happened? I started getting job offers from economics departments and then I was stuck.

[Rory Stewart]

Yeah, one of the things that you then went into was game theory. So I came across you because you edited a very good section of essays on game theory. So before we get back to politics, tell us a little bit about game theory and why game theory is something that people should take seriously and be interested in, maybe even in geostrategy in Iran as much as in economics.

[Yanis Varoufakis]

Well, let me just go right to the end of what I'm going to answer you with. Don't use game theory in real life. It is dangerous. It should be avoided. It's like trying to appoint as a field marshal somebody who's an excellent chess player. Chess is good for training our mind to think logically, but it's not a substitute for actually knowing how to conduct a war. Right. The story starts with that master's thesis of mine. So in that master's thesis, there was no actual game being played because one side was optimizing, the other was resisting, whether it's the employers. And then, of course, clearly my critique of what I had done and what that professor from MIT had done is that, look, both are smart and both are rational and both are trying to undermine the other, knowing that the other knows that they know that the other knows that they know that the other knows that everybody's trying to undermine everyone. And that's a game. So that got me into game theory, and I was astonished by the aesthetic beauty of the mathematics of game theory.

[Alistair Campbell]

Why doesn't it apply to real life?

[Yanis Varoufakis]

Well, I'll tell you why it doesn't apply to real life. The mathematics is so complex that in order to solve the problem, you need to make assumptions which take you away from anything, like real life. So, for instance, you need to assume that the player's beliefs are consistently aligned. In other words, that nobody expects that it is possible for anyone to think that it is possible that my beliefs and Your beliefs are not aligned. Now, take the Ayatollah and Trump. Is there any chance that that axiom can ever hold? None whatsoever. So you have a mathematical model that cannot be solved under realistic conditions and can only be solved under conditions which are very interesting philosophically, but which are completely useless in the real world.

[Rory Stewart]

And yet, Yanis, you dedicated quite a lot of your life to this. So is the part of the story that you're anticipating that that at some level you decided some aspects of academic economics, although intellectually fascinating, were not as relevant to the real world as you hoped, and that that's part of the reason why you then went on a journey from being a pure academic to something more like a politician or a public intellectual?

[Yanis Varoufakis]

Probably that is a major understatement. A major. It's not that it is not that relevant. It is. That is utterly and constitutionally irrelevant and cannot be anything other if it is going to be solved mathematically. So let me put it simply. The economics, we teach the best of the best students in the best universities. Some of you may have heard of the general equilibrium theories that have delivered the great Nobel Prizes to people like Kenneth Arrow, Gerard Debreu, my mentor at Cambridge, Frank Hann never got a Nobel Prize because he was an obnoxious person. Nobody liked him, except. But he deserved it for his work. Now, all those great mathematical theories that are also called the great theorems of welfare economics, they are predicated on a certain absence. So in these models, you're not allowed to have time, because the moment you have time, the mathematics cannot be solved. You can't have space, because the moment you have space, you have local monopolies, and that throws. It's like putting sand in a petrol engine. And you can't have externalities. So, in other words, nothing that I do can influence you except through the market system, which is, of course rubbish, because, you know, if I pollute your environment, this affects you outside the market system. So what good is an economic theory which cannot sustain time, space, externalities, or actually money and debt? Because if. Rory, let me put it this way. If you are trying to mathematize the economy, you have to solve it in a deliberate tradition, in the neoclassical tradition, even in the Adam Smith tradition. Imagine you have N markets, you have N goods, you have N prices, P1 to PN. So you have N equations, you have N unknowns, maybe you can solve it, but if you add an N +1 unknown, which is money, then you really cannot solve it in some way. If you have two equations in Three unknowns. It cannot be solved. It doesn't matter how good you are. It's like squaring the circle. It just can't be done. It's not just difficult. So the question is, why did I spend decades with this kind of economics? And the answer is because it was aesthetically fascinating and also it was ideologically and historically politically interesting to see how those models are being used by politicians, bankers and opinion makers and policymakers in order to justify whatever it is that they want to be justified by means of manipulating and actually distorting the meaning of these models.

[Rory Stewart]

I suppose the final question is, given all that you've said, how is it that, that policymakers should make decisions if it's not on the basis of studying some beautiful formula from Kenneth Arrow in the real world, how do you make decisions if your game theory or your amazing mathematical economic models can't really tell you what to do?

[Yanis Varoufakis]

Well, the answer must be judgment, which is foundationally different from calculation. The whole point about judgment is that there is no formula to tell you what you should do. You should take all sorts of different types of information under consideration. You should talk to many different people. And then, you know, it's actually. Keynes had a very good answer to that. He said that the, the economist has a duty to combine a philosophical predisposition, the analytical powers of a mathematician, the diplomatic skills of a foreign minister or an ambassador, the. And so on and so on, so for forth, and then come to a conclusion. You see, I believe that all students of economics have to learn all these models, reject them, train their mind through understanding all the models and not just the neoclassical neoliberal models. I can say this as a, as a left wing about Marxist economics too, because that also hits a wall of analytical power that it can't get. And then, you know, you set all this aside and at some point you use your judgment to make the call. And there is no way in which this call can be reduced to a scientific process. This is the beauty of democracy and of humanity. And of humanity. Because, you know, if, if we could have an AI machine that could find all the right answers to all the right questions, why do we need democracy?

[Alistair Campbell]

We'd be redundant.

[Yanis Varoufakis]

Yeah, just let the matrix do it.

[Alistair Campbell]

That's what they're trying to do.

[Yanis Varoufakis]

Well, that's what they're trying to do. But thankfully, human nature is inimical to that and it will always find a way of resisting.

[Alistair Campbell]

I hope you're right. Right, I'm going to say something now which is going to really endear you to our more left leaning listeners and viewers, of which we have a fair few. Is it right that basically you, you left Britain in the end because Margaret Thatcher won a third term and you couldn't face the idea of her still being here, so you went to Australia and then you left Australia because they then started to turn to the right. Is that so? Are you, are you sort of driven around the world by, by politics?

[Yanis Varoufakis]

I am a permanent refugee, yes. But let me be a bit more nuanced about this. Look, I'm not that fanatical. It's not that somebody I didn't like, Margaret Thatcher won a third time and I left. No, it was the steady deterioration of the academic environment in Britain under Thatcherism, which was the result of the cuts because, you know, I cut my teeth in. I started my undergraduate degree in 1978, then she comes in 1979. By the time I was a lecturer, I was a despised figure in the department in which I was. Not because of my nastiness, but because I was a very young lecturer. I was very cheap because of being very low down in the rankings. The older professors and lecturers, people whom I looked up to, saw me as a threat because it was a time when, remember back then we had 10% cash every year, which meant that vice chancellors and deans had to get rid of people. And because they had tenure back then, they had to lean on them and actually make their life a misery until forced to quit psychological terrorism. So when we crossed each other in the corridor, they looked at me as a cheap young laborer that was about to replace them. And you know, even if independently of the actual personal relations, that's very dark environment in which it be. And you know, so I was teaching at the University of Vistanglia and then I shifted to Cambridge and I thought that that was the pinnacle of my life until then, until I realized that the circumstances there were actually quite dire as well. And then Thatcher wins the third term and the bleakness all around me. I mean, I was part of the 1984 miners strike, the 19867 whopping dispute and so on. And you know, I had this. I'm not your conventional lefty. I mean, I knew we were fighting the wrong war. I mean I was an ecologist back then and you know, we were fighting to preserve the coal communities by preserving a polluting industry.

[Alistair Campbell]

So what was the right war back then?

[Yanis Varoufakis]

You know what I mean? I thought that I was solidaristic to the communities that were being wrecked by Thatcher. I was solitaristic to the workers who worked for the print unions without actually liking the print unions. I considered them to be male chauvinist, rightist, you know, pseudo left unions. So I was constantly fighting a war which I was losing without actually believing in the leadership of my own side. So when Thatcher won the third time, I thought, oh, goodness gracious me, and what, what's going to happen now? And I made a sub, not a semi subconscious decision that if I find a way of getting out of here, I shall, because I just can't face up to this anymore. I couldn't face up even to the Labor Party party at the time. Right. I mean, it wasn't just Tory versus Labor, my own side of politics. I've always been very suspicious of even my hard, hard left, as you would call it. You know, my father taught me to beware of the Communist Party, and he taught me this as a member of the Communist Party. So, you know, for me, being nuanced was always fun. And anyway, look, at some point I got out of the blue an offer to go to Sydney and I said no. And then they wrote back to me saying, don't be stupid. This is. We have the summer here. We'll give you three times the salary, six months. If you don't like it, you go back to Cambridge. And so I said, okay, all right, fine. It was a summer. It was 1988 when, you know, they had the bicentennial celebrations. And I thought, okay, I'll escape British winter for six months. I went there and it was actually quite lovely. Because it was very backward. No, no, but backward can be very good.

[Rory Stewart]

Can I interrupt Yanis for a second? We have a lot of Australian listeners and Alistair and I have a lot of affection for Australia. Tell us a little bit about, about your sense of Australia as a political culture, as an environment. You spent nearly 12 years there. What was your sense of Australia?

[Yanis Varoufakis]

And I am a proud carrier of an Australian passport. And I have an Australian daughter, by the way.

[Alistair Campbell]

Right, the one who was angry with you for writing a book to her.

[Yanis Varoufakis]

Indeed, yeah. Without getting permission.

[Alistair Campbell]

Without the permission, yeah.

[Yanis Varoufakis]

Yeah. Look, when I arrived, this was the butt end, the almost conclusion of the Hawke era, Bob Hawke's government with Paul Keating being the treasurer Time. And even though they were too right wing for me, it was a breath of fresh air to be.

[Alistair Campbell]

They were bang on for me.

[Yanis Varoufakis]

Yeah, I can imagine that.

[Alistair Campbell]

Absolutely. In my politics.

[Yanis Varoufakis]

Well, where we can agree, I mean, we can have this discussion, but I can tell you from, you know, from my heart that arriving in Australia at that time, after Thatcher was, as I said, I could breathe again because there was multiculturalism that was being celebrated. There was a, you know, SBS television and radio, which is a mini United Nations. If you go to the SPS building in North London, you have 130 language departments within it. Even Yiddish is being practiced. And this is all public service. The university was the way universities used to be before Thatcher. In other words, you know, we didn't have that culture of writing everything down and accounting and, you know, research assessment exercises where all. Everybody is just crazily writing down little Brownie points that everybody else has won or not won. And you know, the culture, the film industry. The film industry was having a renaissance in Australia at the time because of public money that was going into developing local culture. The pubs were replete with wonderful bands, you know, ramshaku bands. You would go on the same night to three pubs, have three pints of beer and listen to three different bands. The weather also helps between you?

[Alistair Campbell]

No, he's a great guy. I love, I love.

[Yanis Varoufakis]

So the first five years of my being in Australia, I was just a joy.

[Alistair Campbell]

Yeah. And then you left. Was it because of the political turn again?

[Yanis Varoufakis]

Well, yes. Then even before John Howard, a third rate version of Thatcher was elected, I could sense that, you know, it's just like here. You can sense the change of the environment through the rise of xenophobia. I mean, when I arrived, there was no inkling of xenophobia. By 1993, because of the recession in 1991, this is what recessions do. They create discontent. Discontent can easily morph into xenophobia, into misogyny, into this kind of malignancy. And I could sense, you know, I could hear the first voices against the aborigines, that they were scroungers, that they. They were exploiting the white population as if.

[Alistair Campbell]

Which was always a sub and under. There was always a subcurrent to that.

[Yanis Varoufakis]

Fascism is always there in the background. And occasionally a good obsession gives the way a win. So I could sense that. And then John Hart wins and. And the university starts going down the drain of this managerialism. I realized that the first time, Rory. I realized that the university was turning into a place I didn't want to be in was when the good parking spots next to my office were reserved for managers who were employed to manage us, even though they had no academic credentials whatsoever. I thought, well, okay, now this is the beginning of the end.

[Rory Stewart]

I think I going to fast forward you to the extraordinary moment where you shift from this amazing academic life into political life, and you eventually end up as the Minister of Finance of Greece at the height of the European financial crisis, particularly the Greek financial crisis. But my route into this is to try to connect the two, because you create what, for me, who is more on the right sometimes maybe seems a little bit a overly romantic picture of the old world of the 1970s. And I guess if I was to be provocative, a lot of what you said in Greece I agreed with on Debt. But I would be interested in whether there's another thing you don't talk about so much, which is whether it's possible that bureaucracies can become a bit bloated, that universities can become a bit useless, that producer interest takes over, that. That there were many things about the Greek state which were not that terrific. Maybe that's a bad transition for you. Maybe it's just going to make you defensive.

[Yanis Varoufakis]

Oh, it won't at all, Rory. When I arrived in Greece in 2000, the year 2000, you have to remember, I left Greece in 1978 and arrived almost 40 year old in Greece in the year 2000. And I first encountered the Greek bureaucracy. You know, how dogs, you know, sort of do this, that when they simply do not comprehend what's happening to listeners,

[Alistair Campbell]

some people listen rather than watch. Yanis was there moving his head in a rightward fashion, so looking perplexed.

[Yanis Varoufakis]

I can not only agree with you, but I can, you know, raise it to the end. The Greek bureaucracy was astonishingly, mind bogglingly, disgustingly, not only inefficient, but also corrupt. I had no doubt about that for a moment. But the problem is, is the Greek state did not fall flat on its face because of our bureaucracy. I wanted to see the Greek bureaucracy cut down in size, you know, be rendered efficient, being forced to actually, you know, move from a situation where out of 10 public servants, two worked and the other eight scrounged on the work of the two. So, look, you know, I can agree entirely on that. But the reason why we're talking about Greece now and the reason why I became Finance minister is because of that crisis. Now, why did that crisis happen? Suppose, Rory, that in the year 1999, the year 2000, when our social Democrats ushered us into the euro, they had decided that, no, it's not a good idea, let's not do that. If they had kept us out of the euro, the Greek crisis would never have taken place. The Euro is responsible for it. Why? Because up until the year 2000, Greece was a meddling Quasi corruption, quasi inefficient state country, political economy. The Greek drachma was constantly falling, but gradually vis a vis the Deutsche mark, the British pound, reflecting the lack of competitiveness of the Greek economy. But these gradual devaluations restored the competitiveness of Greek tourism, of Greek olive oil, and so on and so forth. So it was manageable. It was a kind of steady state equilibrium of relative backwardness.

[Alistair Campbell]

So who wanted Greece inside the euro?

[Yanis Varoufakis]

Oh, this is a big story because there are many different kinds of interests that were in favor of that. It wasn't just one force. But let me complete what happened was the moment we entered the Euro, it was game over. And I'll tell you when I realized that. I realized it's 1998. I was in an airplane flying from Frankfurt to New York, York, and I was sat next to a gentleman from Deutsche bank who was he. He found out I'm Greek and he

[Alistair Campbell]

said, oh, you're obviously flying business then.

[Yanis Varoufakis]

I was, because I was flown over to by the Soros foundation to give it defensive. No, not defensive. I'm explaining. Yeah, yeah, I couldn't have afforded to fly business class back then. I was just a mere lecturer.

[Alistair Campbell]

Anyway,

[Yanis Varoufakis]

okay, so he was enthusiastic about Greece going into, into the Euro. And I was. So I said to him, why are you enthusiastic? He said, you know, because you Greeks are our wet dream. I said, you know, go on. He said, well, look, we are a wash with money. Yeah, German banks, reflecting the trade surpluses of the German economy. When you have a trade surplus, a lot of money is coming into your banks. The Germans didn't want to borrow that. So what is the nightmare of a banker, Deutsche bank having money and nobody to borrow it from you? But he said, you guys, you know, you have two things that we really love. Firstly, you own your own homes. No Greeks had mortgages back then. 80% were fully owned by Greek. I mean, they were very expensive houses, but they were fully owned. And the second thing you have is a thirst for cash, for, you know, credit, because credit was very severely circumscribed in Greece. And up until now we couldn't give you the loans because you had a drachma which was falling. So you, your incomes could be falling vis a vis the Deutsche mark. But now you are going to have the Deutsche mark. So you are our favorite clients. We are going to give you lots of money. And I said, yeah, but what happens when this creates huge bubbles and then they burst and indebtedness ensures that the Greeks won't be able to repay you back. He said, well, then we'll take your houses. Which is exactly what is happening today. One and a half million homes in a country of 10 million people are being repossessed by foreign wealth.

[Alistair Campbell]

So hold on, let me get this right. You've got the bankers there, but were the big governments, the French, the Germans, did they want Greece inside the euro? And if so, what were their reasons? Or were they brought into the euro on conditions that they never met and probably never could meet? And then when you became the finance minister and the bailout is happening, is the bailout happening to help Greece or is the bailout happening to help the same banks that got you into the euro in the first place?

[Rory Stewart]

Let's just remind people, people something that for Alastair and I is absolutely central is now, quite a long time ago, basically the Greek government borrowed an enormous amount of money that it couldn't repay. And Yanis was then right in the heart of the question which we all face when we borrow a lot of money that we can't repay. Where the responsibility lies. Do you put all the pain on the person who's borrowed the money or do you put some of the pain on the people who quite recklessly lent them the money money? And this is not just a moral question, this is a very, very political question that as Greece went into bankruptcy, tore Europe apart.

[Yanis Varoufakis]

Let's take it from the beginning. Well, to begin with, Greece was not on their radar. It was a pipsqueak country in the side. They didn't care, but they cared about Italy. Because if you were Volkswagen, you were really peeved every time your car gained competitiveness vis a vis a fifth. Get an Italian car and the central bank of Italy would devalue the Italian currency, the lira, and suddenly you would lose that competitive advantage. So they really, you know, German industry really wanted Italy in the deutsche mark zone in the eurozone, so they wanted to get them in. The Italians had a debt to GDP ratio which was much, much above what the Buddhist bank, the central bank of Germany, considered to be the maximum that should be allowed. But Volkswagen industry against the Buddhist bank wanted Italy for the reasons I explained. So they found a way of manipulating the debt to GDP ratio of Italy using Goldman Sachs. So effectively, Goldman Sachs, who know how to do these things, disguised part of the debt. How did they do it? One example is you securitize the various receipts of the state for the next 30 years. So for, you know, tolls, moderate halls, you say, okay, the next 30 years we're going to receive all this money. So let's securitize this now, sell it to the markets for a much smaller amount and subtract that from the debt. So this is the Goldman Sachs helped the industry of Germany and the state of Italy, you know, bring it in. And then what the Greeks did in government. And I know that because they were telling me that some of these people were friends of mine in the Greek government. The same. They simply copied what the Italians did and produced in the same way, in the same inventive way.

[Alistair Campbell]

Is that because they wanted to be in?

[Yanis Varoufakis]

They wanted to be in? The Greek bourgeoisie wanted to be in. Why? Because if you own a mansion in the leafy suburbs of Nor Athens, you don't want it to be denominated in a currency that is dividing. You prefer it to be in the hard currency. Right? So if you're rich, you want to go into the hard currency zone. At the same time, the people who had a lot to win to gain by entering the common currency managed to persuade organized labor to go along with them. Why? Because trade unions would go on strike when we had the drachma to catch up with inflation, as happened here in the 1970s during your inflationary years under labor, and they would win a pay rise of 10%, then the next day inflation would eat it up. So the lie that was sold to the labor unions was if we get into the euro, whatever you gain through industrial disputes and so on is yours to keep because there will be no inflation or very low inflation. So the labor unions agreed, the establishment labor unions. So there were many different forces at this. And now to your question. Once those bubbles built up, which I explained in answering in relation to the Deutsche bank bank guy, and everything blew up. You have to remember that the main issue at the time was that the French and German banks had gone completely and utterly bankrupt. Deutsche bank had a black hole in the spring of 2009, Rory and Alistair, which was 12 times the GDP of Germany because of the bets on bets on bets on bets, remember Margin Call and all that. And Merkel, Chancellor Merkel in April of 2009 was effectively told that within 24 hours she would have to give them 600 billion euros. You know, she was the Iron Chancellor who was not giving a million to her health service because she was trying to keep her budget in the black. And suddenly she was told she didn't understand why 5,600 billion had to be given overnight to the bankers. And she did that. And she thought that she had drunk the conium and then she could move on. And a few months later she was told she needs another 500 billion for the same bankers because Greece is going under the Greek state, and if the Greek state had gone under the Irish state would have gone under the Portuguese state and then they would need 2 trillion for their bankers. So they had to bail out the Greek state with the largest loan in the history of the world in absolute terms, not relative terms. And out of that huge round of 120 billion, 91% went through the Greek treasury, straight back to the German and the French bank. So that's for the bank, it was 91%. I can give you the numbers.

[Alistair Campbell]

Okay, Yanis, Rory, quick break and then back for more.

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[Rory Stewart]

Just fast forward so you come in. As the finance minister, tell us about two things. One is you're dealing with this question, I guess which in baby terms is how much of the pain of this massive debt problem is going to be taken by Greeks and how much the pain is going to be taken by the people who lent the Greeks the money that's one question. And the second question is the whole emergence of Syriza, the populous left, which goes a long way beyond quite a simple or quite an old fashioned conversation about how you balance the pain between the person who lent the money and the person who borrowed it.

[Yanis Varoufakis]

Rory, you've got to remember that Greece went under in May of 2010. We took this huge loan that went to the French and German banks. It's like getting a credit card from which to draw money to repay a mortgage that you can't repay. That's complete madness, right? The banks were made whole by this first bailout, but the first credit card of the Greek state ran out very quickly. And now what happened was, and this was a crime against Europe, if you think about it. It's a French and German banks, right? And you have the French and German governments that don't want to bail out their own banks. Greece could not repay this money. If you're bankrupt, you're bankrupt. There's nothing you can do about that. You can pretend that you're not bankrupt by borrowing from the same people, except that it's not exactly the same people. People now the Slovenes, the Portuguese, the Irish, the Spaniards, who had nothing to do with that. I have no problem admitting that it's a Greek state and therefore the Greek people who voted for our governments and it is the French and German bankers who are responsible for it. The Slovenes, the Slovakians, the Dutch, the Spaniards, the Portuguese, they were totally innocent and they were made to fork out the majority of them money so that Greece would take it in order to make hold the French and the German banks. This is what you do if you want to destroy European solidarity. So one of the reasons why Europe is going down the drain is because of those shenanigans. My decision to accept the position on the Finance ministry was of course a very difficult one, as you can imagine. Rory, I'm a lefty. I didn't see this as a mandate to bring in socialism. I saw it as a mandate to do one really simple thing that any neoliberal should want to do, which is to stop kicking the can down the road, to stop taking one credit card to pretend you're. That you're repaying the other credit card. This is why I even had support from, in this country, Norman Lamont, the Adam Smith Institute. You know, I had my.

[Alistair Campbell]

Were you not, were you not ashamed of this?

[Yanis Varoufakis]

I'm not at all ashamed of it because it was right thing, the right thing to do. The right thing to do was to Say, look, we are sinful, you know, not all of the Greeks, right, But the Greeks already together, we've already suffered by. Because you have to remember already that by the time I entered government in 2015, Greek wages had gone down by 44%, pensions by 42%, my university budget had gone down from. I'm not going to give you the full number, from 52 to 3, so effectively couldn't even afford toilet paper. Hospitals were shutting down. So it's not a question of who should take the pain. The Greek people had taken the pain already. What I was mandated to do is to stop causing more damage, not just to the Greeks, but to the Europeans as well. Because these credit cards were being paid by the working classes in Germany, in Slovakia, in Slovenia. And these people were getting really very angry because they were paying. They didn't know what they were paying for. And one final thing, Rory, you mentioned the populist Syriza government. Look, I was never a member of that party. Why? Because I didn't believe in them. Because in September of 2014, that is four months before I became their finance minister, they came out with their economic manifesto and I wrote an op ed the next day in which I invoked your own Churchill, saying that the only thing we have the right to offer the Greek people is blood, sweat and tears, not populist promises that we are going to painlessly solve all their problems. And I thought that my relationship with that party was finished because I was invoked, that article was invoked by the center right government at the time. Oh, they said to the Tsipras, the opposition leader at the time, oh, even your own Varoufakis is piling up on your economic manifesto. But it was only two, three months later that I was summoned and I was told that I was right and we will write the economic policy from scratch. And the only promise I went into that election with was that we will end this constant folly of taking more credit cards to repay unpayable debts.

[Alistair Campbell]

But then you also had this big moment with the referendum, essentially where the Greek people said, no, no more austerity, we can't take any more.

[Yanis Varoufakis]

It wasn't exactly that. What the Greek people said is, we're rejecting the new credit card. So they was, they were, under conditions of what?

[Alistair Campbell]

They were. They were rejecting what the Europeans were insisting that you did.

[Yanis Varoufakis]

That's right.

[Alistair Campbell]

But then you resigned.

[Yanis Varoufakis]

Of course I resigned because the Greek people agreed with me and my prime minister overthrew the Greek people.

[Rory Stewart]

Let's now fast forward. So you said something very interesting about your disagreement with Syriza in that op ed. And I suppose that is a possible criticism which is sometimes levelled against a lot of economists and thinkers and public intellectuals on the populist left, which is that they identify a problem which is that there are people who are really suffering. People's economic conditions are bad, they can't afford housing, the job market is not working for them. But the solution they offer sometimes sounds like they have a magic solution which doesn't require any pain, any compromise, any trade offs, that there's some easy way to fix things. How do you articulate a more leftist position which doesn't sound like populist promises, which are not realistic to begin with?

[Yanis Varoufakis]

I agree entirely with your depiction. This is what we do, but this is what also the right does. I mean, the right and the left and the outer right, they are all populists in the end, you know, I mean, you know, Farage says, elect me, I will get rid of the foreigners and all your problems will be fixed. Which is a tragedy, tragic statement. The radical center used to say that, you know, as long as we deregulate and privatize, everything is going to be great. And the left comes up with simplistic solutions like syriza did in 2014. I'm not terribly popular with any of these political groupings, including on the left, because I keep saying things like, for instance, you know, I'm all for wealth taxes for symbolic reasons. They are not going to solve the problem problem. I'm all for rent controls, but they are not going to solve the problem. If you look at our societies since the end of Bretton woods, the neoliberal era, I mean, look at your country, okay? For better or for worse, it doesn't matter whether it should be done or should not be done. Manufacturing was decimated in this country. It was replaced by shopping malls. That meant you have a gigantic trade deficit which is financed through to money that comes in not to be invested but for speculative purposes. And therefore you have a whole middle class that has put so much money into housing. So housing has become a casino and it absorbs all the economic energies. So when you're talking about a growth plan and so on, there are no taxes or tax reductions, tax increases and so on that can sort out this mess on their own. You need something equivalent to what Roosevelt did in 1933, which, with a New Deal.

[Rory Stewart]

This is a really important point. Maybe people don't fully understand. Why is it in simple terms that taxes on their own wouldn't sort this out? And Link this to your point about housing and speculation and deficits.

[Yanis Varoufakis]

Let's start with wealth taxes. Why am I not enthusiastic about wealth taxes? I believe that they're symbolically important. You know, it's social justice that, you know, if, if you have gigantic assets that are the result of rent, export extraction, then you know, you should pay. But I don't think that any government in the present set of circumstances, with institutions that we have, can seize enough of the wealth of the wealthy, however ill gotten it was, in order to fund the NHS and in order to bring back some kind of income distribution which is palatable. On the question of housing, you know, I have all these people that have borrowed through the nose and you have what I need to tell them. What I would have to tell them to be true to my own understanding of the problem, is that, you know what, house prices have to come down, some of you will have to have negative equity. That will be extremely painful. But the alternative to that is to keep inflating house prices in a way which is unsustainable and which is eating into the capacity of Britain to invest in industry. Unfortunately, politics is structured in such a way that if you tell the truth to the people, you can't get elected. And I have a lot of problem getting elected these days because I tell the Greeks that there are no simple solutions and, and things along those lines. But I do believe that progressives have to be honest to the public and we have to, on the one hand, say things that bring out a sense of social justice, like wealth taxes, but at the same time to say, look, there's going to be pain, we are going to have to invest into unpopular things in order to be able to produce the technologies that will make the difference between sustainability, both social sustainability and environmental sustainability and unsustainability.

[Alistair Campbell]

Can I just pick up on something you said earlier? You said the reason why Europe is going down the drain. Yes. Is Europe going down the drain?

[Yanis Varoufakis]

Oh, yeah, it's gone, finished.

[Alistair Campbell]

Why?

[Yanis Varoufakis]

Well, because in our infinite wisdom, should I say, we created federal money, we have federated our money, we've created through the euro, common currency. So we have a huge central bank, a very significant central bank, and we have no treasury to have its back. And then we have 20 treasuries without the central bank to have their back, and each one of those Treasuries has to look after banking systems and bail them out if needs be, without having a central bank. You do this if you want to destroy a continent. This is what we did. And they know that they know that

[Alistair Campbell]

Alistair, they being, being, you know, the

[Yanis Varoufakis]

smart people like Christine Lagarde, right? I mean, people journalists in 2015 and beyond, whenever they interviewed me, they said, Mr. Varoufakis, now how could it be that everybody's wrong and you're right? And the answer I gave them is, look, folks, if I went into these rooms with Christine Lagarde, Mario Draghin, Scheibel Merkel and so on, and they said to me that I was wrong, you know, I would look at myself in the mirror and start worrying, you know, why am I wrong? Where am I wrong? I would be utterly, utterly unconfident, the opposite of confident about my position. But Alistair, none of them told me I'm wrong. You know, Christine Lagarde said I was completely right. Mario Draghi believes also that it was a mistake to have a common currency without a common treasury. He's come up with a Draghi report which is now saying things I was saying 10 years ago, almost to the last number, there's still no business. Well, because now he's, you know, it's. Everyone who leaves office can then become a social Democrat and a New Dealer, right? But not while they're in office. So the result is that, you know, with this socialism for bankers and austerity for everyone, without having a surplus recycling mechanism within Europe to do that, which Roosevelt did, imagine if in Britain, imagine if in Britain, every county, or let's say, you know, Scotland, Wales, North England, South England and London were separate states, states, and you had no fiscal union, you had no common fiscal policy, but you had the pound. And each one of these jurisdictions looked after its own banks and had to borrow in the international markets to save those banks, what would have happened after 2008 in this country? And if they had to get together as heads of these sub parts of Britain to negotiate amongst each other how to bail each other out, it could be a complete disaster.

[Alistair Campbell]

But the crash that you, the crisis that you dealt with, dealt with and the global financial crisis alongside it, am I right that you're basically saying that that is what has in part led to the kind of global mess that we're in now, that is partly what gave us Trump, it's partly what gave us Brexit, it's partly what's giving us the rise of the far right in Europe.

[Yanis Varoufakis]

I've written extensively along those lines. For me, 2008 was our generation's 1929. In the same way, you cannot understand the world after 1929 if you don't start with the collapse of Wall street, the way that this percolated.

[Alistair Campbell]

And it's because. It's because of what you call socialism and austerity of the people.

[Yanis Varoufakis]

Absolutely, absolutely. It's also because, you know, you have a situation where the left failed to come up with comprehensive plan that could inspire confidence in people. It's our failure and the liberal establishment's failure that led to the fascists rising up through the woodwork.

[Rory Stewart]

Yanis, bring me back to politics and your experience being a politician. You're very, very unusual amongst your academic colleagues, colleagues at actually having been the finance minister of a country at a time of incredible crisis. What did you learn about the reality of being a politician that you didn't expect before you became a politician? And what do you find difficult to explain to people after the event about what it's like being a politician? What do you think people don't really understand about the interior experience of this kind of job?

[Yanis Varoufakis]

I think people have a pretty good understanding of how soul destroying it is to be simultaneously sincere and a politician. You know, as an academic, I was used to being around the table and, you know, attacking ideas and trying to learn from other people's attack of my ideas. But the moment you are on a television panel as a politician, you know, I realized that, you know, this guy who's sitting opposite me, if I convince him about something, then he loses his job, or if he convinces me and I say this on air, then, you know, my part is going to be up in arms against me. And that is so, so crashing. But I think everybody understands that. But I'll tell you what, the one insight I got, how easy it is, and I'm going to talk about the left now because I'm a leftist, I don't know what it means to be a rightist. It's beyond my comprehension. But I can tell you as a leftist that the worst aspect of that experience was the speed with which good comrades, you know, people that I thought the world of, who have done, done, who had done a lot, sacrificed a lot, how quickly they can become lured by power and, you know, just to completely trash their own principles. That is the greatest source of sorrow, and I'll carry it with me to my grave.

[Alistair Campbell]

Rory mentioned a couple of your books, and your book, Techno Feudalism speaks to something that we talk about a lot on the podcast, which essentially is the way that our politics and economies are changing without most people even understanding the pace of change and the scale of change. And what you've written in Techno Feudalism is essentially, I don't know how to put this, but you're essentially saying our politics is broken, our economy is broken, and a very, very small number of people are benefiting massively from it and the rest of us are just slaves.

[Yanis Varoufakis]

Well, I think that is what I'm saying. But this is a simple symptom of the main point I'm making, not the cause. The point I'm making is in the book is that we are experiencing a major transformation which can only be compared to what was happening in this country in the 1770s and 1780s, the transition from feudalism to capitalism. At that time, power shifted from those who owned land and that ownership equip them with the power to extract ground rent to capitalism. As Adam Smith explained, as David Ricardo explained, as Karl Marx explained, where it's ownership of the machinery that gives you an opportunity to orchestrate production and to extract surplus value from labor that ushered in the world as we know it. Similarly, today we have. And you see, I don't want to get immersed in discussions about AI, about algorithms, surveillance, capitalism, that's all important. Important. But what I think is important, that's why I wrote this book, is to say something more than that. We have a new form of capital, brand new form of capital. All forms of capital since the inception of humanity, as humanity were produced means of production. Whether it's a fishing rod or a plow or an industrial robot. It's a machine, a tool that you produce not because you want it, but to produce something else with it. Produce the means of production. But what lives in our tablets, in our phones and so on, you know, Amazon.com and uber and so on, they're not means of production. They are produced means of behavioral modification. So you know what Google does and what Uber does and so on, it doesn't produce anything. When you go into Amazon and you buy an electric bicycle, Amazon didn't produce it. It operates like supposedly a marketplace, but it's not a market because the moment you enter Amazon, you exit the marketplace, you enter something resembling a Soviet planning system where an algorithm matches you with some of sort seller. You have no capacity to talk to anyone. It's the, the gospel system of the Soviet Union. Except it's owned by Jeff Bezos. And what does he get? 40% of everything you pay. So he's getting not ground rent, but cloud rent. So if I'm right that this is a new form of capital which is destroying markets and replacing them with these cloud thiefs like Amazon, Alibaba T and so on, and then profit shrinks shrinks because you, if you're the producer of the electric bicycle, your profit goes away and it becomes, becomes a form of rent. You're going. Yeah. So to conclude, welcome to techno feudalism.

[Alistair Campbell]

And my final question then relates to stuff that's happening today. I mean, Trump. I'm glad to say we haven't talked that much about Trump, but I think we have to a little bit.

[Yanis Varoufakis]

Yes, thank goodness.

[Alistair Campbell]

Well, I think we have to a little bit. He has been the author of two enormous shocks, tariffs and now Iran. And I'd just be interested in your take about what you think, think the consequence of each is going to be for the long term.

[Yanis Varoufakis]

Well, last year, after Liberation Day and the tariffs going through the roof and the market panic and so on, I was writing my op ed saying that, look, let's not make a big deal out of it. It's going to be far less significant than other things that have happened. So the Nixon shock was far more important than the Trump shock.

[Alistair Campbell]

And you still think that?

[Yanis Varoufakis]

I still think that in the sense that you also saw that a lot of these tariffs were absorbed, at least when it comes to basic goods, because demand for those basic goods is quite elastic. So it simply shrunk the profit margins of the vendors. And yes, there was a recessionary wave that these dives caused, but then you had a splurge in AI investment that cancelled it out and even overtook it. That's why the markets recovered very quickly. You had central banks reducing interest rates. That was also ameliorating for the Liberation Day shock. So on. But now with the war in Iran, by the way, I think that this is to my detriment, my psychological detriment. But I, I thought that up until the war in Iran, Trump was winning everything. He won the tariff war with the European Union, he was decimating the democrats in the United States. He created a praetorian guard turning federal government to a fascistic instrument. He was winning. Unfortunately. Unfortunately. Now, with this Iran war, I think he's going to lose everything because he has unleashed a stagflationary wave that is going to substantially damage the west, if not the whole of the world, which will continue even if the war ends tomorrow morning. Why? Because on the one hand, cost push inflation, as we know from the 1970s, is much more toxic than the tariffs. Secondly, because the AI splurge is now reversing. Why? Because AI AI is very energy intensive. So the increase in the price of electricity is seriously affecting investment in AI, especially in Europe, in Britain and elsewhere. Thirdly, because central banks are already on the way, if not of stop, of increasing interest rates. Some of them are thinking about this. They will stop reducing interest rates. And because unemployment was on the way up, unlike last year already before the Iranian war. And I really do hope the bank of England, the European Central bank, do not increase interest rates, because when you have cost push inflation, interest rate rises are not going to contain that, except by destroying the economy and creating a massive depression.

[Alistair Campbell]

Well, there we are. Thank you for your time. It's been really interesting talking to you. I hope we were as engaging as Zach Polanski and Jeremy Corbyn on stage last night.

[Yanis Varoufakis]

I'm glad you've been incredibly engaging. Thank you so much. And you know what? I prefer talking to people that I disagree with than people that I agree with.

[Alistair Campbell]

Okay. I mean, I think we agreed more than we expected to.

[Yanis Varoufakis]

Isn't that great?

[Alistair Campbell]

Yeah. Anyway, thank you.

[Yanis Varoufakis]

Thank you.

[Rory Stewart]

Thank you very much, Yanis. That's very kind of you to join us.

[Alistair Campbell]

I thought, Rory, you might be kicking off with him, a la Zach Polanski, a la Gary Stevenson. But I got the feeling you were quite impressed.

[Rory Stewart]

Yes, I mean, he's a much. I mean, look, I don't. When I got this whole thing running again by insulting other people, but of the figures on the left talking about economics, he has a very, very deep academic credibility. He's a serious mathematician. He's done serious stuff on game theory. He knows the stuff very well. And it's also really striking that he's not actually selling an idea that there's some magic wealth tax that's going to sort everything out, or there's some brand new fortune form of monetary theory which can make the world operate in a different way. I like the fact that he's very honest about the downsides of all these models. I mean, of course, he's brutal about the neoliberal model and all the problems that are being caused by that. But he's definitely not somebody who seems to be trying to sell an idea that some new tax or some new tinkering or some new form of borrowing is suddenly going to sort out all the problems of the economy that any route has pain.

[Alistair Campbell]

The only worry that leaves you with is given that, you know, as you and I keep saying, our political systems need refreshing and reviving, our economies are struggling. This Iran war that we talked about towards the end there is going to make the economic challenges even greater and inequality is growing. The whole time is. It's sort of hard to know where the next. The next Great ism is going to come. Come from.

[Rory Stewart]

We might get him back at some point, but I think there are things that our leaders in Europe could do which they're not doing. So one big example he gave is they could choose. It's got big downsides, but definitely one option would be to create a much more centralized European economic system, now massively controversial. It would create a much more federal Europe. But that's definitely a solution and it's a logical solution to the problem that he's talking about in terms of the way in which people don't have full responsibility for their debt. A second thing, in Brisbane, you could go for a policy where you were going to drive much, much more towards us manufacturing, our end stuff, having more control of our energy, having more control of our cloud computing and AI, more sovereignty, more independence from the US and others. But that would cost a lot of money and there would be a period of real pain and there would be things that you couldn't spend money on. You wouldn't be able to spend the money we currently spend on welfare, you wouldn't be able to spend the money we currently spe on the nhs. So I think he's talking about a world in which there are radically different models. You could pursue radically different models, but what you'd have to do is give up on the idea that in the short term, you'd be able to do it without a lot of people experiencing a lot of economic pain.

[Alistair Campbell]

Yeah, and he was honest about that. The other thing we didn't really. It was a very long interview and I enjoyed it. There were a few things we didn't get into. I didn't get into any. We didn't really get into what it must be like. I mean, I was involved in. In some pretty big, kind of sometimes scary positions and situations and things going wrong, but to be plucked out of being a kind of academic economist and you're suddenly sitting in the middle of what must have felt like kind of existential threat to your whole country. It must have been an incredible roller coaster. I mean, and the thing about him having the referendum and winning and then getting out because Cyprus was so pressured into doing something that they'd fought against. I mean, God, what a journey that must have been.

[Rory Stewart]

Yeah. And other things. I mean, he's sort of surprisingly, not very. He doesn't sort of push for sympathy. I mean, there's another bit of his life which I think you've mentioned, but he suddenly found himself under huge pressure from liberal governments in Germany and Greece.

[Alistair Campbell]

Greece, yeah.

[Rory Stewart]

So in Germany, he was part of a pro Palestinian rally, which the German government basically decided was an anti Semitic, violent thing. And he, a former finance minister of Greece, found himself, I think, banned from entering Germany, banned from speaking.

[Alistair Campbell]

So he then took them on, though. He then took them on through the courts. And I think, one. I don't know what sort of compensation he got. He won. But the other thing that's happening to him now, before you came on, Rory, we were chatting about the fact. Again, we didn't have time to go into this, but we're chatting about the fact that he's. He did an interview with some young ravers, as he called them, and they asked him, and he said it's the first time he'd ever been asked it, whether he'd ever taken drugs. And he said, well, he smoked pot when he was a student, and then when he was in Australia, he was once out at some. It was a Kylie Minogue concert and somebody gave him an Ecstasy pill and he took it and it meant he could dance for 16 hours. He's now been charged sort of decades later, and he said, this was announced. I mean, this makes you worry. We had the interview with Mitsutakis. I think we both found Mitsutaki's very impressive modern European leader. But this was like ministers were going out on television saying that he had to be charged for promoting drug use and he has now been indicted. Yeah.

[Rory Stewart]

I mean, so to put that in context, I said during the. When I was running for the Tory leadership, that I had smoked opium in Iran. And you could imagine exactly the same thing, which is that I would find myself suddenly being prosecuted by a government that disagreed with me on the grounds that I was promoting drugs. I mean, it's really, really weird, and it is a bit worrying because generally we're quite supportive of centrist governments in places like Greece and Germany. And it is a bit of a reminder that that what the right complain about, the far right complain that their freedom of speech is being interfered with and there's unfair legal procedures. I guess if you were him as well, you'd also be saying, well, well, well, this is pretty worrying. Look, I'm a relatively senior, respected former cabinet minister, and these guys are trying to take me down in very weird ways. Put me in jail, banned me from entering countries, banned me from speaking.

[Alistair Campbell]

And also he. I mean, he said that. He described the current government. He said, what Mr. Takis is done, essentially, is it's like Badenoch basically hoovering up reform. He says Mitsotakis has Given some of his far right positions in the Cabinet, including some of the positions, some of these guys that have gone out and said he should be prosecuted. So I said to him, well, look, do you think if Badenoch or another Tory leader and Farage ended up running a coalition government after the next election here, do you think this kind of thing would happen? He's an absolute. And he said, look, look at America.

[Rory Stewart]

And remember, what's happening here is that why are they going after him? They're going after him because he is a big public voice. They wouldn't go after some other ex cabinet minister who said that 30 years ago they'd taken an ecstasy pill or smoking pot. No, this is deliberately about trying to silence somebody who is trying to expose them.

[Alistair Campbell]

Anyway, there we are. I think he's a very interesting guy. I last saw him in. We were at the same event in Australia and he has got a bit of a kind of. He's got a global following now, partly because his books are genuinely interesting. His Techno Feudalism book is genuinely interesting. And I think these books that he's written, writing to his daughter, apparently is really pissed off that he styled the whole book as a letter to her without actually telling her he was doing it, and then one to his father, as you said. And he's written a book also about the five most important women in his life and what he learned from them. So he's got an interesting kind of quirky, academic, economic mind. I think also he is, you know, I wouldn't necessarily agree with everything he says, certainly not about the Labour government in the uk, of which I was such a proud part. But I think he's somebody who does have this capacity to explain really quite complicated stuff in a simple way. And I love the fact that he said, gabe, you must. Is your first question. Pretty much one of the first serious questions we did was, was, you know, how do you use game theory in political and real life? He basically said, do not touch it with a barge pole.

[Rory Stewart]

You're right. He's a great communicator. He's very, very smart. He thinks clearly and that allows him to explain ideas simply. And I'd give his father a bit of credit here. There's a lovely moment which you remember in the beginning of Techno Feudalism, where his father, who's working in a metals factory, brings back raw bronze, iron, tin and melts it in the family fire for the young Yiannis, who I think is a small child and encourages him to see how the metal changes and bangs it and I think there's something he's really inherited from his father and maybe also from his mother about how to bring ideas to life and explain them very simply. What do you think, Vernon, as a politician? Just to finish with, I mean, what's your sense of his strength and weaknesses as a political campaigner or a leading political figure?

[Alistair Campbell]

But it was interesting how he said that he clearly feels a lot of people that he knew who went into politics lost their bearings, lost their moral compass. I think because he was there for such a short time, it was a few months that he was a high profile politician. I mean, he's still in politics, but the party he created, I think they got eight MPs, nine MPs, first time around, and then they got nine, none. I think he's an outsider. I think. I think he's better as an outsider, but he's a very, very. He's a charismatic guy and he's a clever guy and he's, he's a. He's a clear communicator. But yeah, I think he's, I think he's more comfortable being outside than inside politics. Bit like yourself, Rory.

[Rory Stewart]

If only I was as tall and good looking, but at least I'm younger than him. That's, that's the thing.

[Alistair Campbell]

I have. And you always will be. You always will be. And I will always be always older than him. Forever.

[Rory Stewart]

Exactly. Thank you. Bye, bye.

[Alistair Campbell]

See you soon.

[Norman Smith]

Hello, it's Norman Peston from the Rest Is Money. I've just had the most gripping conversation with an economist, Nick Bloom from Stanford, who's published a very influential paper on the costs of leaving the European Union. He and his colleagues calculated that leaving the EU has cost us 8% of our national income, our GDP. That's 240 billion more than we spend on the NHS every single year. What's really striking is that his numbers are now the numbers being used by the Chancellor, Rachel Reeves, when she talks about the advantages of getting closer to the eu. So if you want to know how damaged, damaging Brexit has been and whether that 8% number is robust, whether it's real, join me for the latest episode of the Rest Is Money.