Transcript: Interview with Yanis Varoufakis

YANIS VAROUFAKIS is a Greek economist who served as finance minister in his country's Syriza government from January to September last year. After this approved the third bailout package, which he described as a surrender, he declined to stand in fresh elections and set about founding DiEM25, an international "movement" committed to overhauling the European Union's institutions and agenda. Recently he gave a wide-ranging interview to The Economist at his flat in Athens. This concentrated primarily on the poor state of social democratic parties across the continent (the subject of a briefing in this week’s issue) but also ranged across events in Greece last year, DiEM25 and politics in Spain, Germany and Britain, where it was recently revealed that he is advising Jeremy Corbyn, the Labour Party leader.

The Economist: We’ve gone through a crisis in which the limitations of untrammelled capitalism were made clear. Back in 2008-09 the social democrats thought they were living through a social democratic moment. But here we are a few years later and they have tanked. What’s your explanation for that?
Yanis Varoufakis: A few years ago I was invited to Vienna to address the Kreisky Forum [a social democratic Austrian think-tank]. That’s where I first articulated what I am going to tell you now. Social democracy is the result of the split of the Second International, between the traditional Marxist-Communist line that capitalism could not be civilised and the social democratic path of proposing change through the ballot box and some accommodation—the mixed economy. When I was a young man the dominant theme was pretty social democratic (even the Tories had accepted it). It was the idea of a mixed economy, i.e. that certain areas of the economy need to be left to the market and others that have to be dominated by the state. Behind that was this notion that started in Germany with Kautsky and the social democratic tradition that began in the 1910s, -20s, -30s with the SPD, which spread out and influenced the Labour Party and so forth. The main idea was that yes, there is class conflict, there is a tug of war between profit and the wage bill, but the role of the state is to regulate this, to forge a social contract, to press capital to deliver part of its return to the state so the state can provide the welfare net and some redistribution of profits towards wages. That was the social democratic project. During the Bretton Woods era, the post-1950 period, it was put in practice. It was dominant. You had the government mediating between trades unions and employers (primarily the industrial sector) to effect this transfer, and to convince industrialists to give up a percentage of their profits to the state to fund welfare institutions. Harold Wilson did it in Britain. Willy Brandt did it in Germany. Bruno Kreisky did it in Austria.