Yanis Varoufakis: We leftists are not necessarily pro public sector '“ Marx was anti state

Ben Lowry: What about the selfishness of societies that have very high public sectors, where people go into jobs, there is not a lot of performance management, and so on, it costs a huge amount of money that has to be extracted from taxes on tobacco and stuff and actually a lot of poor people end up subsidising large public sectors. Northern Ireland’s economy is totally dependent on Britain, I’m not suggesting Greece has a benefactor like that, I’m not saying they are entirely comparable. Is there not a left wing critique that is critical of large public sectors?

Yanis Varoufakis: Of course. Remember that Marx was anti state. The libertarian streak of Marx, his idea of society would be one in which the state withers so you can’t be a genuine left winger and believe in the state (Varoufakis laughs at this observation).

You need to use the state as an instrument in order to wean yourself off the state and in order to bring about a kind of mode of production and distribution whereby we can be independent of the state and independent of capital.

• First part of interview: Varoufakis – the EU might be doomed but I opposed Brexit even so

BL: But has any society ever done that?

YV: No but then again if we were having this discussion in the 19th century about slavery and the anti-slavery movement you would say to me: well, there has never been a society without slavery, so why are you against slavery?

Just the fact that we have never done it before doesn’t mean we cannot do it.

Greece famously has a large public sector, high levels of idleness, enforced idleness, underemployment, unemployment and so on and high debt, public debt.

The Greece I grew up in was not like that. We had one of the smallest states in Europe, and we had next to no debt, our state had miniscule debt and the private sector had none, none, I mean the Greece I grew up in didn’t know about credit cards, personal loans or even mortgages.

My parents would never imagine to get a mortgage to buy a house. They worked, and when they had enough money in the bank they would buy a house. That’s it.

And if they were going to get a loan they would get it from their aunt, their sister.

... [In the 1950s and 60s] the place was miserable, authoritarian, corrupt, but nevertheless it was growing and there was no debt. The state was small.

[Varoufakis explains that this all changed due to the oil crisis of the 1970s and the collapse of a right wing regime, which had become increasingly authoritarian and so increasingly unpopular until it lost power. There was a huge rise in prices. But the new democratic government was trying to enter he European Economic Community (later to become the EU) and had to scarp tariffs on industry.]

YV: All the factories closed down. Every single one of them almost closed down in a country where there was no welfare state.

The private sector collapsed and therefore the government was put under a lot of pressure, it doesn’t matter who was in government, to shift people from the private sector, that couldn’t support them, to the public sector, because there was no social, there was no safety net.

So suddenly the state began either taking over bankrupt companies and keeping them alive with public borrowing or employing them directly so suddenly you had a public debt problem in Greece and a large public sector.

BL : So Greece has had it ever since?

YV: That’s right ... So what I am saying here is, yes of course, this is a left wing critique of the large public sector in Greece but it is not one on principle, it is one on the history and how it happened.

We have a failure of capitalism. The public sector increase is not because of socialism but because of a failure of capitalism.

BL: Are you one of those people, like the US economist Paul Krugman, who does not think high government debt is necessarily a problem anyway?

YV: Yes, high debt is not the problem, the problem is the inability to roll it over.

BL: Last year I got the train to Thessaloniki. I’d been to Greece a few years before. This is anecdotal, so bear with me, but it has the feel of a wealthy country. When I stopped in Serbia, it doesn’t – run-down trains, like in the 1950s, poor infrastructure, roads, cars, shops that didn’t sell anything, the clothes people wore. It is not like that in Greece – first world, cars, people in cafes, it is not cheap,and not just the tourist spots. Obviously Greece has horrendous youth unemployment, serious problems. But if one was to play devil’s advocate and say this is a culture that likes to live well but doesn’t want to pay taxes?

YV: That misses the point. Well, no-one likes paying taxes. A certain gentleman won president of the United States by advocating that he’s very smart because he doesn’t pay income tax.

Remember that? It happens in the best of families.

The fact of the matter now is that if look at some basic numbers in Greece they reveal a humanitarian crisis behind the facade of a well-off society.

One in two families has no-one working in it and they only survive on the basis of a very small and shrinking pension – 35% of paid labour is undeclared, not because the workers don’t want to declare it but because if the employer is forced to declare it they will go bust.

Because they are already bust. Half a million people today have not been paid for more than eight months while still working.

So we have a failed economy.

We have a bankrupt state in the sense that it has debts that it cannot rollover, we have bankrupt banks, we have bankrupt companies, and we have bankrupt families.

The state is in arrears to its citizens of serious amounts, you know tax returns and VAT returns and payments to suppliers for drugs to hospitals and materials for schools and to developers for roads that were built some time ago, the state is not paying, so it is in arrears with society, and society is in arrears with the state to the tune of 60% of GDP – 60% of Greece’s GDP is owed by citizens to the state and it is not because they don’t want to pay their taxes, they just can’t.

Let me, allow me to put it succinctly, everyone owes to everyone and no-one can pay.

BL: What is happening globally. Why this turbulence, these extraordinary things – Brexit, Trump, Syriza?

YV: It is a big question but an easy one to answer epigrammatically – 2008 was our generation’s 1929 and just like then the establishment was clueless before and clueless after the financial sector collapse and spearheaded a process very, very similar to back then.

• In the final part of our interview with Yanis Varoufakis, soon to be put online, he gives his thoughts on the IRA

Ben Lowry (@BenLowry2) is News Letter deputy editor

First part of interview: Varoufakis – the EU might be doomed but I opposed Brexit even so