With the coronavirus pandemic wreaking havoc on the global economy, Reich explains how massive corporations are shafting the rest of us in order to secure billions of dollars of taxpayer-funded bailouts.

In the early nineties, the economist Jeffrey Sachs was known as a “shock therapist,” for advising the Soviet Union on its controversial transition to a free-market economy. Since then, Sachs has shifted his focus to poverty alleviation and international development, becoming one of the most visible academics in the world. His book “The End of Poverty,” from 2005, imagined a globe free of the worst forms of destitution; Sachs also attributed misgovernment in much of Africa to poverty, rather than the other way around. (This thesis was much debated by other economists and development experts who were more skeptical about the impact of foreign aid.)

From 2002 to 2016, Sachs was the director of Columbia University’s Earth Institute; he is currently a professor at the university and an adviser to the United Nations. He endorsed Bernie Sanders for President in January and has occasionally advised the senator.

I recently spoke by phone with Sachs about the coronavirus and the challenges that the crisis poses to international coöperation and the world economy. His upcoming book is “The Ages of Globalization.” In our conversation, which has been edited for length and clarity, we also discussed the root causes of American decline, why some poorer countries have so far avoided large outbreaks, and how Donald Trump has failed to meet even the low expectations that internationalists have for the United States.

One dominant theme in the coverage of the coronavirus has been the supposed trade-off between the economy and our health. In a short-term or a long-term sense, do you accept that premise?
The only way to have a viable economy and society is to control this epidemic. So it’s not really a trade-off. The question is how to be effective in controlling the epidemic and driving the transmission of the disease to very low levels. Simply letting the virus run through the society would be unacceptably costly, and that’s why essentially no country in the world is doing that. The real issue is to be effective in the response, and unfortunately the United States has not been effective so far.

Did any lessons you learned working in countries around the world inform your opinion of how to deal with this latest crisis?
There are many aspects of any major crisis that are similar in character, in that they require governments to assess the situation with sophistication, to identify options, to come up with strategies, and to implement them. Crisis management has a lot of common points. The nature of the crisis could be geopolitical. It could be a climate-related shock or a disease.

I would say the core issues are the capacity of political leaders and their inner team, and the capacity of the institutions of governance—agencies, departments, and ministries—to be able to process information in a timely way and to be able to harness expert advice and evidence in a timely way. We live in a complicated world. If you try to wing it, as Trump does, you end up with more than forty thousand deaths. If you want to solve a problem, you have to be systematic about it, and know whom to turn to and how to listen and amass evidence. For politicians, that doesn’t necessarily come naturally, and for our President it doesn’t come at all.

Is there some leader Trump reminds you of whom you’ve worked with?
Trump is the worst political leader I have experienced in all of my professional life, which is forty years of working with governments at a high level. I’ve never seen anything like the narcissism of this man, and here we are, a country so rich in expertise, in resources, in capacities, and yet we’re watching a complete failure of a political response—with a massive loss of life—in real time. It’s quite shocking, because Trump not only does not know how to approach this issue but he blocks those who do.

Something you’ve become known for is this idea that one of the reasons there are bad governments in the world is because of poverty, rather than looking at poverty as the result of bad governance. Is that a fair summary?
Yeah. That certainly is one part of it, absolutely. Politics comes in many shapes and forms, and I was arguing that in many poor places you have potentially high capacity to address problems, except that the resources aren’t there for that. So the argument was that helping poor countries could actually accomplish something, because what they most fundamentally lacked was resources.

You have just finished saying that Trump is the worst leader you’ve ever seen. And we are seeing leaders all around the world, even in rich countries, handling this pandemic disastrously. These are countries with immense wealth, with immense scientific knowledge, and immense resources, and the governance is still in many cases atrocious. So does that make you think at all differently about your theory?
Well, my point was that the quality of governance is not intrinsically linked to one’s G.D.P. per capita, and that a poor place, if it had more resources, could often accomplish a lot. And I’d say the converse is that a rich place that’s badly governed accomplishes very little. So it’s consistent with that idea that you don’t simply say rich means good governance and poor means bad governance. That actually was my point fifteen years ago. It remains my point today—that here we have rich countries but their political systems are failing the people.

Poor countries could have good responses, in fact, but often lack the means to carry them out. We don’t lack the means to carry out good responses in the United States; we lack the leadership to do so, and there are reasons for that. Basically, American politics has become deeply corrupt over decades, and it became so corrupt that normal governance already collapsed many years ago. And people with resources and knowledge know it, but they haven’t cared, because things have more or less gone on O.K., and the stock market has been booming, and even though in almost any private conversation Trump is viewed as a complete dolt and a complete incompetent, that was more or less laughed off as manageable because he wasn’t doing too much damage, either.

That’s the real situation. Nobody here has viewed government as actually very functional for a long time, and not because it couldn’t be. It has been increasingly designed to fail. Specifically, it’s been designed to respond to powerful lobbies that want deregulation or tax cuts or some special privileges rather than to function in a normal way. And powerful people shrug their shoulders at that, because for the élites that’s been O.K., but it obviously hasn’t really been O.K. for a long time. We’ve had rising death rates. We’ve had the deaths of despair. We’ve had the failure to come to grips with climate change. We’ve had widening inequalities and massive suffering. But it hasn’t mattered in such a visible way.

So what you were saying before was that these countries don’t have the resources to have good governance, but you’re saying now that if you do have the resources you still need all these other things that, in America, we either once had and don’t have anymore or have let go because of the way our ruling class has behaved?
Yeah. Let me explain, just to clarify. Maybe there’s some confusion about what the real debate was. I was explaining in 2005 that it was possible, for example, to treat AIDS or to control malaria. And my critics were saying, No, it’s not possible. Those countries are just corrupt, and they’ll steal whatever you give them. And that’s why they’re poor. And I was saying that’s silly. That’s not why they’re poor, and just because they’re poor you can’t say that they couldn’t carry out such programs. And there are reasons to believe that such programs could be carried out effectively, and, indeed, since 2005, have been carried out effectively. Malaria deaths have come down. People were put on AIDS drugs. The things I recommended actually were done, and they proved themselves to be feasible. So my argument then was to not equate poverty with incompetence of governments. What we’re talking about today is a converse—don’t equate wealth with competence of governments. You can be wealthy and miserably corrupt and miserably ineffective, just like you can be poor and effective in governance. There are two different dimensions.

How important is it for richer countries to maintain a focus on international development and aid despite what they themselves are going through right now?
The most important thing right now is that each country take the actions necessary to stop the spread of the epidemic and, at the same time, that the international institutions that we have created are sufficiently resourced and empowered to carry out the job of providing emergency financing, supplies, and advice on best practices to governments that don’t have the means to carry out actions on their own.

So, let me be specific. The United States is completely failing at the federal level to control this epidemic. It’s a tragedy. We’re losing tens of thousands of lives unnecessarily because of the shambolic failure of Trump and his team to mobilize the vast resources of our country, both human and material. At the same time, there are poor countries that are doing much, much better at controlling the epidemic. Take a country like Vietnam, which is a low-income country in East Asia, and close to China, but for a variety of reasons they acted very quickly to stop the transmission of the virus, to a much greater extent than we did. They also don’t have the means for mass testing and so on. At least to date, they have been able to keep the epidemic more under control through public-health means, which is identifying potentially sick people, helping them to isolate, tracing their contacts, helping those people to isolate, and so on.

The rich countries got the wave of the epidemic first, mainly because of the high extent of travel between China and Europe, and between China and the United States, and Europe and the United States. And the epidemic went out of control in this country basically because Trump did nothing and called upon the federal system almost not at all between early January and mid-March. And epidemics grow at exponential rates. The poorer countries by and large did not receive the intense seeding of the epidemic as early, because they have fewer flights, they have fewer visitors and tourists. So in Africa, South Asia, and Latin America, the number of cases was lower. That’s why we’re seeing, at least for the moment, some greater measure of control.

These countries do not have test equipment. They do not have personal protective equipment. They do not have ventilators, and so on. And what I am recommending is that the International Monetary Fund provide emergency financing at essentially zero conditionality, other than that it be used responsibly. And that the World Health Organization work with governments that have the potential to supply additional equipment—that’s China, Korea, Japan, and a few others—and use the emergency financing and the availability of this urgently needed equipment to get it to these countries in need.

Where does the United States stand in this?
Well, the United States has done the unimaginable, and that is to try to cut the functioning of the W.H.O. in the middle of the pandemic. So I’m not looking for American heroism. I’m looking for the United States not to be among the most destructive forces on the planet right now.

We are seeing all throughout the Western world the rise of populist and authoritarian forces. We’re seeing the closing of borders. We’re seeing a movement from, let’s say, hypocrisy and insufficient care for people on Earth who don’t have enough resources to open contempt for them.

How does that make you think about your work, and international development and aid, and its future?
I’ve been a critic of the United States over the past quarter century for inaction, complacency, and overmilitarization. This is not new for me, but Trump is the worst American leader in our history, and he is a contemptible figure, so he’s creating more damage. But the fact of the lack of American leadership has been true, by and large, for the last twenty years, with a couple of notable exceptions. I recommended first to the [George W.] Bush Administration both having an America-based program for AIDS, which became PEPFAR [the President’s Emergency Plan for AIDS Relief], and having a U.S.-based program for malaria, which became the President’s Malaria Initiative, and for having a Global Fund to Fight AIDS, T.B. and Malaria. And the United States rallied under George W. Bush for those things.

During the Obama period, I recommended many things to the Obama Administration, on development assistance for health or for other areas, none of which took hold. And I very much regretted that we had a smart, decent, sane President but, for whatever political calculations and reasons, he did not pursue any of those areas—with one exception, and that was pursuing the climate agenda, which I very much thank President Obama for.

Why do you think it was that he didn’t pursue these things?
Well, they came in and inherited a domestic financial crisis, and that was paramount in their thinking. I don’t have to surmise. I spoke with the President about it, and I spoke with his advisers repeatedly about these issues, so I know they did not want to take on these issues in that context. And I had arguments with O.M.B. [the Office of Management and Budget] and others in the White House about this.

The funding for the Global Fund to Fight AIDS, T.B. and Malaria was essentially frozen at a time when it was important for that funding to increase. This is very modest levels of funding. It’s hundreds of millions or low billions of dollars. We speak in trillions in general, so I was not pleased and not impressed by that response. I thought it was shortsighted and harmful, which I still do to this day. Of course, it’s nothing like the malevolence of the current government, which is quite a different thing.

And my point has been also that the politics of these issues is really poorly understood. I recommended to President [George W.] Bush, at the beginning of his Administration, having an AIDS program, and I recommended three billion dollars a year, and I was told that it was politically impossible. It turned out it was not politically impossible. It in fact happened in 2003, with PEPFAR, and it is regarded by President Bush, rightly, as one of his proudest achievements. He deserves a lot of credit for championing that cause, and it did a lot of good, and it was widely praised, and it had bipartisan support. So the question of what’s politically possible and not politically possible, in my opinion and experience, is a lot more interesting and subtle than the typical views.

So I think that President Obama judged wrongly. He did not believe it was politically feasible to do certain things. That’s how I interpret his remarks to me and to others. I disagreed with that at the time, and regret the lack of movement on those things. Now we’re battling something much, much worse.

We’re probably going to be dealing with a huge financial and economic crisis now. Does that also concern you in terms of what it will mean for the future of aid to poor countries?
I think one point to emphasize about aid, which maybe is not understood, and the reason I’m not so interested in talking about it in this context, is the following: aid from the U.S. to developing countries is 0.16 percent of G.D.P. It’s tiny. It’s a shocking level of ignorance and nastiness that it’s not higher. We’re talking about tiny amounts compared with all the other numbers that we are using these days. So think about the 350 billion for the small-business program that quickly got exhausted and will now be another 300 billion. The total cost of controlling malaria in the world per year is probably about 3-5 billion maximum, only a small fraction of which comes from the United States. We’re talking about incommensurate quantities in general. The aid is limited, not because we can’t afford it but primarily because our political system pays no attention to these issues.

So this is not fundamentally about resource constraints. It’s about caring, attention, philosophy of life, and politics, a sense of ethics and morality, a question of whether it’s really America First and everyone else be damned or whether it’s a question of trying to make a world that works more effectively. There are other things that are bigger, more expensive issues, like decarbonizing the energy system. But it’s also not a consequential number compared with the stakes of our lives, and it’s also neglected. Why?

Our political system for forty years now, since Ronald Reagan, has basically been dedicated to tax cuts, especially for rich people and corporations, and both parties—of course with the complete obsession of the Republican Party and maybe the semi-reluctance of the Democratic Party—have given tax cuts every two or three years since 1981. So now you’re coming to me and saying, Well, after this crisis, we’re going to have the fiscal crisis. We will, absolutely. We’re going to have a budget deficit this year of ten to twenty percent of G.D.P., but at some point we’re going to say, What is important for our country? What do we really want to pay for?

Many economists have their explanations about where inequality comes from. In this interview, Vavoufakis talks about the role of financialization since the 1970s as the main driver of income inequality.

Many economists have their explanations about where inequality comes from, such as financialization, credit, globalization, technology, and bad policy. When thinking about the causes of inequality in the last thirty years, are there specific areas you think we ought to devote our attention to?
Well, there’s one word that answers your question: financialization. Financialization came on the back of the post-Bretton-Woods drive for completing a surplus society loop, where the United States operated like the world vacuum cleaner, sucking into its territory the net exports of the world on the basis of pushing down wages, lowering inflation, and, of course, Wall Street and the exorbitant power of the dollar. But the tsunami of capital that was going into Wall Street every day to close this loop and to pay for the increasing trade of the US was what shifted the center of gravity of power from industry to finance.

Private credit played a big role in that?
Of course. It’s all private credit. You know, financialization is 99.9 percent private money lending. Consider the financialization of blue-collar workers, in which their homes became the only way of catching up and competing with the Jones’, and since their average earnings were stuck at 1973 levels in real terms, it was only the appreciation of house prices that allowed them to continue the American Dream of rising standards and consumption. And in 2008 that came crashing down, and ever since then, you have a process leading to Trump.

So today’s extreme inequality is due to a very significant class war against the American working class that started at the end of Bretton Woods. And Paul Volker, who recently passed, was central to this. All of this created a new phase in global history: financialized globalization. It pushed inequality back to 1920s levels, financialization collapsed, and then central banks and governments like that of President Obama’s refloated finance, creating socialism for the very few and permanent austerity for everybody else. That’s the answer in a nutshell. That’s my narrative. But, I have to tell you, since your focus is on inequality, I’m one of the very few left-wingers that doesn’t much care about inequality or so much about equality. I don’t consider equality to be such a well-defined term. Equality of what? How do you define it?

What about income inequality?
Inequality is a terrible thing, but it’s a symptom. For me, it’s not the issue. The issue is exploitation. If we have huge levels of exploitation it is because we live in an extractionary economy in which the very few extract value from humans and from nature. Deep down, I’m a liberal, who thinks that liberalism has not served the cause of liberty.

You’re a liberal who thinks that liberalism has not fulfilled its promises.
No, it’s gone completely against its mission, like the Marxism of the Communist Party in the Soviet Union led to a regime that violated every principle of Karl Marx. Similarly, what passes as liberalism has created remarkable illiberties and spread them globally. So what matters to me is freedom from the extractive power of others over you and over nature. Capitalism, through its ever-expanding power, destroys the planet and the air that we need to breathe.

People like Harry Frankfurt argue that what we should care about is not the gap between the rich and the poor, but rather how well off the worst off are doing.
That’s rubbish. This willfully and purposefully neglects the source of the riches of the rich. It is as if it’s a random distribution based on DNA, on ability, and on god-given talents. In the standard debate between John Rawls and Robert Nozick, I was always far more impressed by Nozick than by Rawls because the Rawlsian veil of ignorance is lovely, but the critique of it by Nozick is devastating. He says ‘ok, let’s say we agree with Rawls and we work out what the uniquely just and therefore rational income distribution is. Let’s say we agree, so everybody gets slotted into the income distribution we agreed is uniquely just.’ And then suddenly he’s got this example from basketball, in which one of us becomes very famous for a particular kind of basketballing technique, and people are prepared to pay a lot of money to watch us. Do we ban ourselves from doing this and receiving the money that people are willing to give? Illiberal. Or do we allow ourselves to receive that higher income, in which case we have just proven that the income distribution we decided is uniquely just is not uniquely just?

So in the end, what really matters is not what you have, it’s what you do in order to have it. That is perfectly Marxist to me. And, as a leftist Marxist, the point where I disagree entirely with Nozick is on his definition of entitlement. In his entitlement theory of justice, he says anything people agree to give you under any circumstances means you have it justly and that you are entitled to it. I say this is nonsense. So if you’re starving and I have some food to give you and your kids, and then I make you become my slave voluntarily, that is as coercive as it would be to point a gun at you. So, the distribution of basic goods according to Rawls is important because, without the minimum basic goods, you volunteer to give me things that I’m extracting from you coercively. That’s the Marxist critique. I’m neither Rawlsian or Nozickian, but the process that Nozick brings into the conversation, as well as Hayek, is crucial. But where we disagree with the right-wing is on what qualifies as, firstly, sustainable process and, secondly, just process.

Would it be fair to say the distinction also comes down to the difference between positive liberty—the capacity to act—and negative liberty— the right to act?
Here I think the theories of the Canadian philosopher CB Macpherson are helpful. He criticized the Isaiah Berlin distinction between positive and negative liberty by asking, very correctly, that if negative liberty is freedom from interference, how do you define interference? If you and I meet in the desert and you are dying of thirst and I have a glass of water and say ‘if you want this, you have to sign a contract saying you pass along all your belongs—your house, your car, and everything’. If you say yes because you are dying of thirst, is this interference? Is this a voluntary transaction? Am I impeding your negative liberty? According to Berlin, I’m not because I’m not forcing you to do anything. You are choosing to give me things for a thing.

In my view, the inequality of access to basic goods like water allows me to exercise extractive exploitation over you and therefore to impede your basic freedom. If you accept the distinction between positive liberty and negative liberty, you end up saying, in the end, ‘we’re only going to accept negative liberty because who gives a damn about positive liberty—it’s too dangerous because it legitimizes all sorts of violations of negative liberty. My model is the following: if instead of negative liberty, you have freedom from extractive power, and instead of positive liberty, you replace it with the notion of developmental freedom—the freedom to develop as a character.

Would you say part of the reason it’s so important to object to high levels of inequality comes down to the fact that, in highly unequal societies, you have very different abilities to participate (e.g. unequal baskets of basic goods)?
When so much of one side doesn’t have enough to live on, then you have exploitative power and extractive power that functions to deny every liberty to the party that doesn’t have access to that basket of basic goods. This is, of course, the original argument by Karl Marx.

Do you think a big component of that comes down to education and access to education?
No, it comes to ownership. As long as we have shareholders, we’re going to live in an illiberal society. What do I mean by shareholders? As long as you have tradable shares and anyone can buy a share in a company in which they don’t work, then you create this situation where the majority of the shares of any company are going to be owned by people who have nothing to do with the company. And once you enter that process, you create an alliance with finance because finance creates the capacity to buy shares and fictitious capital minted out of thin air that allows the oligarchy the right to extract the value of others.

Yet imagine a situation in which we have shares, but it’s one share and one vote for one person. So anybody working in our business has one vote. I think of it as similar to a library card. When you’re enrolled in a university you get a library. Everyone gets one. You can’t trade it. It would be similar, in this model I am proposing. As long as you work, you have your share. And then you have one vote. Imagine if corporations operated along those lines. There would be inequality because we would all vote on bonuses, and not everybody would get the same bonuses because we would collectively decide that a certain person is of high value to us and so this person deserves more of a bonus. But the differences would be much smaller. And that has to do with the way in which property rights are distributed.

Doesn’t this create an incentive for companies to hire fewer people because it would require cutting the company up into thinner slices?
I don’t think that holds water because if you and I create a startup and we add a third person to expand, and the growth rate is higher than the basic wage in our company, then we would do it because it’s in our interests to do it. And the fact that companies would be small and not have more than 300 or 400 people —because you can’t scale this up—is a fantastic thing. We need small companies. The whole point about competition is that you have many small companies competing. Now, we have no competitive markets. So one of my criticisms of capitalism is that it is completely anti-competitive. It’s monopolistic.

So on some level, it’s almost this Polanyi Esque argument about liberalism undermining itself and actually requiring government state intervention in order for it to even continue as liberalism.
Yeah, the Polanyi argument and also the Marx argument. Any attempt to set the state against the market or the market against the state is historically pathetic because the market was created by states. Even the enclosures in Britain that created the circumstances for capital to emerge in Britain would not have happened without the king’s army. To pit the state against the market is historical nonsense.

The only reason capitalism happened in Britain and not in France is that there was a powerful central government in the former but not the latter. And the central government dispatched the army in support of the lords that pushed the peasants off the land and replaced them with sheep. The sheep had the capacity to produce wool which was internationally traded, and suddenly the land had value. Without the king’s army, it wouldn’t have happened.

Your focus is on financialization when explaining inequality since the 1970s, but do you think that technological innovations played a role in that as well? In the Industrial Revolution, you saw rising inequality because of increased productivity but stagnant wages. Today, researchers talk about how modern inequality seems at least partially a consequence of the hollowing out of middle-skill/middle-wage work because innovations automated work in that middle sector.
I don’t think we have seen this yet. I think we probably will see it. The hollowing out of the middle class is evident, but I don’t think it’s because of automation. I think it’s simply a situation whereby two things coalesced. On the one hand, it was the introduction of two billion workers in capitalistic markets after 1991 through the Soviet Union satellite states and the rise of China. Two billion workers came from those countries. There were huge shifts of factories to those countries, whether it was Poland or China. But the proletarianization of former peasants is a standard process that has nothing to do with technology per se. That’s the first dimension. The second dimension is the increasing role and capacity of the financial sector in turbocharging private money minting. Through all the financial derivatives and fast trading, without having to press a button, I can transfer billions at lightning speeds. That technological innovation made a huge difference in shifting and increasing power from the industrial scene into the sphere of finance.

How did that work? I would imagine a lot of the competition would be between investing firms and companies with better algorithms and better technology.
Yes, but between 1980 and 2008, in 1980 dollars there was an average inflow of money into Wall Street every day of between five and six billion, on average. Now, if you give a banker five billion every day, even for ten minutes, they will find ways of multiplying it. It’s called derivatives, options, financialization. Computers helped them create really complicated instruments that totally blew up the multiplier. So from that five billion, they could create a hundred or two hundred trillion in securities, which very soon started to operate like money to the extent that they were mediums of exchange and a source of value. So effectively they created as much value as they wanted. And immediately, political power shifts to Goldman Sachs, and General Motors becomes a hedge fund that produces a few cars that nobody cares about. So that’s what I mean by financialization. And that creates huge inequality because just think of all the bonuses.

And very few people have a stake in the stock market.
Most of this was not in the stock market. The derivatives were traded under the table. And so you have a huge new body of the proletariat coming, factories shifting to china. The Chinese people were coming up very slowly in terms of per capita income, but of course, they lose a lot of the old values—community values, environmental values, cultural identity. And fifteen boys living in one room today might make 15 dollars a day, which in the world bank statistics is a fantastic improvement for them. But maybe their life is far worse than it was when they were in their village milking a cow.

Yuval Noah Harari makes the point that, for many people, even the shift to agriculture from hunter-gatherers resulted in a dramatic decline in standards of living. And the same was certainly true of people in the Industrial Revolution. So how do you reconcile that argument with the notion that all of those innovations resulted in improvements in the standard of living that were eventually felt by everyone?
I simply reject it as uninteresting nonsense. When people say to me, ‘look at the last 200 hundred years and the massive decrease in poverty’, I ask ‘how do you measure poverty?’ Take the Australian Aborigines. When Captain Cook arrived in what is now New South Wales. These people had zero income, but they lived very full and fulfilling lives. Today, an Aborigines person gets a hundred Australian dollars a week from some kind of social security fund, and they are obese, they have diabetes, and they are dying from a number of diseases, if not from police brutality. So you consider that to be an improvement because they went from zero to a hundred dollars?

But going back to what you were saying—the hollowing out of the middle class—we should come to that. Given that financialization was based on this exponential growth in fictitious capital that made the very rich exceptionally rich, and at the same time, to have this money coming into Wall Street, you had to have American wages kept very low and below American standards. And this means prices must rise against the home so that people can afford to buy stuff and fill up their garage with rubbish. And then, of course, in 2008 this house of cards comes crashing down. With jobs moving to China and, at the same time, financialization collapsing under the weight of its own hubris, that’s what explains the hollowing out of the middle class. These people initially turned to Barack Obama. He betrayed them. And now they turn to Donald Trump. But AI and automation are going to hit us when we’re down already. I don’t think the hollowing out has to do with automation, but now that the hollowing out has taken place for reasons that don’t have to do with automation, automation will be the second part of the double whammy.

A lot of people are very happy about automation because they believe in its potential to improve productivity. However, if you believe technological change results in significant short-run damages to certain people’s livelihoods, is it worth trying to stop automation?
Automation would be catastrophic. But why would it be catastrophic? It’s a question of nationalizing it and of socializing it. It’s a question of who owns it. Because if the machines are owned by the very few like they are, then those who own them will look at them as a source of personal enrichment, which means there will be a serious crisis by which those machines will be replacing workers who have no access to the returns of that capital. And so they will not be able to buy stuff. So we’re going to have a collapse. But if we all benefit and we all own the robots collectively, we would not have that problem. This is why I keep coming back to questions of ownership. And this is where I find some commonality with the extreme libertarians, because they also put a great deal of emphasis, not so much on income distributions, but on property rights, and I do too. They want to defend the property rights of oligarchy. I want to socialize property so that everybody has equal access to it.

When you think about the recent UK elections and the failure of Jeremy Corbyn and the British left to challenge more traditional and conservative leadership, what do you think about the prospects for a US presidential candidate like Bernie Sanders?
Privilege has a remarkable capacity to reproduce itself and kill any challenge to its reproduction. If the challenger is Bernie, Jeremy, you or me, they will crush us. There’s no doubt about that. When I was elected, I never expected for a moment that I would not be vilified. If I wasn’t, then I would be worried, ‘why are they not vilifying me? Am I doing something wrong? Have I sold out already?’ What I find astonishing is that, in 2016, Bernie Sanders came so close. And he would have won it had he not been robbed by Hilary Clinton. This is what happened yesterday with the Labour Party, which was effectively defeated from within by the extreme center—the Blairites and the hard “remainers” that did everything they could for two years to undermine their own party and to undermine Jeremy Corbyn. Why? Because they were in concert with the privileged classes.

Tactically, what do you make of the primacy of emphasizing cultural issues over economic ones? Do you think the left makes a mistake when it focuses on the culture wars instead of socio-economic challenges?
Yes, the left has been catastrophic. Look, I’m an old Marxist. The economics is always at the base of it. It’s at the base of Brexit. Why did Brexit happen? Because you had a financial sector collapse and you had the rubbish assets of the banks put on the shoulders of taxpayers. But at the same time, the European Central Bank was contracting the money supply and the Bank of England was expanding. And that meant three million continental Europeans went to Britain. And for the country, this was substantial and some people felt they were being pushed out of their own country. So their grievances are economic, even if they don’t consider it clearly as an issue of economics. Whenever we have this kind of economic recession, it’s easy for a fascist to jump on the soapbox and say, ‘I’ll make you proud again by getting rid of foreigners.’ You see this with Salvini or Farage. Why did Trump get elected? He didn’t get elected because of the culture wars. He got elected because half of Americans, for the first time since 1923, could not afford the cheapest car on the market. These people felt betrayed, and here comes a guy who says ‘I’m not the worst person on earth, but there’s a good reason to vote for me: it will annoy the shit out of everybody you hate.’ Of course, the fascists take advantage of these economic grievances and build a narrative by saying that they will make you proud and look after you.

One huge question about the stimulus package that nobody seems to be asking is: Where does the money come from to pay for it?

The bill is the largest fiscal stimulus program in US history, with a budget totaling roughly $2 trillion, equal to about 10 percent of the gross domestic product—the market value of all goods and services the country produces. The reason nobody seems to be asking where the money will come from is that the correct answer is evident: The federal government will borrow it by issuing US Treasury bonds.

Unlike any other government or private entity in the world, the US government has the capacity to borrow at will over the course of the recession. The government will also be able to manage the enormous increase in its debt load that will result from this borrowing without serious difficulties. This is, first, because US Treasury bonds are recognized as the safest assets available on the global financial market. Financial market players, therefore, clamor to own US Treasury bonds exactly in situations such as now, with the world economy rapidly becoming very uncertain and dangerous. Most global trade is also still conducted in US dollars, which creates a built-in demand for dollars that no other currency can match.

Even with the gigantic financial commitments that the government has made with the stimulus bill, congressional Democrats and the White House have already begun discussions on passing a follow-up measure, probably with an additional $2 trillion price tag. This follow-up bill would address the evident major gaps in the current bill, particularly in its support for hospitals, health care workers, and Covid-19 patients. It would also provide a broader range of stimulus support, through investments focused on public infrastructure, to boost the economy out of the recession and onto a long-term recovery path.

Total federal government borrowing could reach 20 percent of GDP or more. The total figure gets elevated because, before the pandemic hit, the deficit was already at a record high for an economic expansion period, at 4.6 percent of GDP, due to Trump’s 2017 tax cuts for corporations and the rich. Adding everything up, the only comparable figures come from World War II, when the US deficit averaged 23 percent of GDP from 1943–45.

The absence of alarm bells ringing over these colossal deficit figures stands in dramatic contrast with the experience of only 11 years ago, during the Great Recession. At that time, a loud chorus of “deficit hawks,” including many of the leading mainstream macroeconomists in the country, insisted that the 2009 stimulus program that passed under President Obama—the American Recovery and Reinvestment Act (ARRA)—would be ruinous. Implementation of the ARRA led to government deficits over 2009–11 that averaged 9 percent of GDP, which at the time were the largest peacetime deficits in US history. The response of John Taylor, a senior macroeconomist at Stanford and a top economist in the George W. Bush administration, was representative of the deficit-hawk position among leading academics. Taylor offered that the upward trend for US government debt “portends America’s ending.” What has changed over the past 11 years?

Certainly crass self-interest is playing some role. The benefits from the deficits that resulted from the 2017 Trump tax cuts skewed heavily to big business and the rich. Such deficits are somehow far less worrisome to Republican politicians and their academic supporters than those that would support egalitarian social programs like Social Security, Medicaid, or low-income housing. In that spirit, the current stimulus program funnels its biggest rewards by far to big corporations that are in line for at least $500 billion worth of credit with virtually no strings attached. Still more, these funds from the Treasury will be matched by trillions more in bailout lending support from the Federal Reserve.

Beyond this, the deficit hawks advanced a series of claims as to why the Obama deficits would be disastrous. These claims were then tested against reality as the recession and recovery unfolded. They all proved to be wrong. Understanding how they were wrong enables us to understand why the forthcoming huge increases in government deficits and debt will be manageable.

First, the deficit hawks maintained that the big deficits during the Great Recession would set off an intense inflationary spiral. Prices would rise rapidly, as the saying goes, because “too much money would be chasing too few goods.’” However, during a deep recession such as occurred over 2007–09, the dominant pressures push prices downward, not upward. To begin with, people have less money to spend during a recession, so market demand goes soft relative to businesses’ supplies of goods and services. Businesses lay off workers as their markets weaken, which in turn mean that workers’ bargaining power declines, and wages thereby fall. Business costs also fall as a result, with falling costs leading to lower consumer prices.

The deficit hawks also claimed during the Great Recession that government borrowing on this scale would cause interest rates to spike, because the government would be competing for funds against the demands of private-sector borrowers. The resulting high interest rates would discourage private businesses from undertaking new investments or expanding their existing operations. In fact, during the Great Recession, because US government bonds were recognized as the safest assets available on the global financial market, demand for these bonds surged. This will also be true again in the current crisis. Interest rates on US government bonds will, therefore, fall relative to every other credit instrument on the global market.

The interest rate on US Treasury Bonds with a five-year maturity this past March 31 was 0.4 percent, with no hint of any upward movement forthcoming. When the US government can borrow at 0.4 percent, the burden of paying interest on the debt will also be modest, even if the amounts being borrowed are gigantic. For example, at a 0.4 percent interest rate, the government’s annual interest payments on $2 trillion in debt will be $8 billion (0.04 percent of GDP). This is hardly a ruinous debt-servicing burden. However, if the interest rate were, instead, at the 10 percent average level that prevailed in the 1980s under Ronald Reagan’s presidency, the annual interest payments would be 25 times higher, at $200 billion.

Even if the government debt-servicing burden became a drag on the economy, the Federal Reserve has the capacity, as needed, to buy up and effectively retire a share of the outstanding debt. The technical term for this policy measure is “debt monetization.” Through practicing debt monetization, the US government can effectively create money as needed in order to counteract the economic crisis (without having to literally run a printing press). The Fed can also buy up corporate bonds that are now held by private banks and other finance companies, just as it did during the Great Recession. This will provide Wall Street firms with piles of cash to get through the crisis. Over the course of the Great Recession, the total Fed bailout of Wall Street amounted to $12 trillion, dwarfing the $800 billion Obama stimulus program conducted through the US Treasury. As the current recession unfolds, we should expect Fed operations in support of Wall Street to exceed even those Great Recession figures.

While the deficit hawks were badly wrong, no other country could have claimed anything like the privileged financial status enjoyed by the US government during the Great Recession. The same is true now. The United States needs to accept the responsibilities that come with this privileged status to spend what is necessary to control the pandemic and fight the recession, both at home and throughout the world.

The United States should therefore be willing to support emergency public health initiatives on a global scale, especially in low-income countries in Africa, Asia, Latin America, and the Caribbean. So far, the spread of the pandemic appears to be modest in these regions, but that is likely to change. When it does, the strain on public health budgets is likely to be catastrophic. Right now, the United States is the least generous high-income country, spending only about 0.2 percent of GDP overall on development assistance programs. During this crisis period, the United States could easily raise its support to the levels that, say, Sweden or Norway already spend, at around 1 percent of their GDP. That would release roughly $200 billion in support for low-income countries to fight the pandemic and recession.

Within the United States itself, while the current stimulus program does help pay for free testing as well as vaccine development, no additional funds have yet been provided for treating people who are infected. Until we have an equitable Medicare for All health care system in place, we need to at least establish free coverage for all Covid-19 patients on public health grounds. Giving potentially infectious people a financial motive to avoid seeking medical care endangers us all. The additional funding for this will need to come from the government’s borrowing in the next round of stimulus spending, as is being advocated now by congressional Democrats.

Discussions around the next stimulus bill are also focusing on infrastructure investments as an economic recovery driver. Specific spending targets being discussed include expanding rural broadband capacity, rebuilding aging hospitals and community health centers, and upgrading water infrastructure. All of these are worthy projects. They also have the benefit of being the types of initiatives that Republicans could realistically support.

That said, progressive activists have been fighting to also include Green New Deal investments in the next round of stimulus spending. It is critical to keep pushing these initiatives forward until they succeed. Even under current pandemic conditions, we cannot forget that we have a severely limited amount of time to take decisive action around climate change. The Intergovernmental Panel on Climate Change concluded in October 2018 that the world must reduce carbon dioxide emissions by 45 percent as of 2030—just 10 years from now—and reach net zero emissions by 2050, in order to retain a reasonable chance of moving onto a viable climate stabilization path. This means that, within the next 30 years, we must totally supplant our current fossil-fuel dominant energy system with one based on the combination of high efficiency and clean renewable energy sources, especially solar and wind power.

Investments in energy efficiency and renewable energy will also provide a strong foundation for long-term economic recovery. Such investments would generate roughly 3 times the number of jobs per million dollars of spending relative to maintaining our existing fossil-fuel-dominant energy infrastructure. Jobs will then open up throughout the US labor market, including for, among others, carpenters, machinists, environmental scientists, secretaries, accountants, truck drivers, roofers, and agricultural laborers. Investment spending at about 2 percent of GDP would generate about 6 million jobs in the first year of full activity alone. Such a program would also deliver lower energy costs for consumers. This is because energy-efficiency investments enable consumers to spend less for a given amount of energy services, and the costs of renewable energy are already competitive with those for fossil fuels and nuclear power, even with the recent plunge in global oil prices.

In short, the US government today possesses the unique financial capacity to mount an effective fight at the historically unprecedented scale required against both the pandemic and the economic collapse. It also has the wherewithal to move the economy onto an ecologically sustainable recovery path, with Green New Deal investments generating jobs and new opportunities throughout the country. Whether the government embraces these challenges, or, instead, continues to squander its resources on giveaways to giant corporations and Wall Street, will depend on the balance of political forces in the months ahead. Effective political mobilization will therefore be imperative for pushing this balance in the direction that it so badly needs to go.

Yanis Varoufakis is used to controversy. Since stepping down as Greece’s finance minister in 2015, the self-described “erratic Marxist” has become the leading spokesperson for DiEM25, a European-wide party that seeks to restructure the European Union’s institutions in the interests of the majority.

In March, Varoufakis made news for dropping what he dubs the “EuroLeaks” — his secret recordings of the closed meetings where eurozone finance ministers decided Greece’s fate back in 2015. The recordings confirm many of our worst suspicions about such opaque bodies — and provide fascinating insights into how neoliberal technocrats really work.

Europe’s institutions are again in the spotlight today, due to their weak reaction to the coronavirus pandemic and the resulting economic shutdown. As another round of rescue packages loom, Varoufakis spoke to Jacobin’s Loren Balhorn about the European Union’s response, what lessons elites have learned from the last crisis, and what different paths are today open to the Left.

You released the “EuroLeaks” a few weeks ago. Are you satisfied with the reaction so far?
Absolutely. We wanted to empower anyone who cares to understand how power abuses not itself, but those who have created it — that is, voters and the demos more generally. We’ve been overwhelmed by the positive response, even by those who disagree with us. They say, “At last, somebody has let us in, given us a front-row seat into what is happening behind closed doors, on our behalf without our knowledge.”

What has the response been like in Greece?
The same. On the one hand, there are those who make a living serving the interests of the oligarchy. They consider the EuroLeaks to be a major enemy and an affront and do everything in their power to discredit it. But even they cannot help but listen to the leaks and hopefully feel a bit embarrassed.

It seems like one of the reasons you released the recordings now is that you are being blamed by both the current Greek government as well as the Syriza leadership for the very tough conditions Brussels imposed on the country. How much of this is about settling scores against your political enemies, who are trying to discredit you?
Let me tell you where I’m coming from. Greece is a country whose population was on the floor even before the coronavirus hit. We have watched a new neoliberal/ultra-rightist, nationalist, and xenophobic government introduce legislation that will, with mathematical precision, seriously increase discontent and misery.

In December they passed a bill selling most nonperforming loans and mortgages to vulture funds, mainly from the United States and some from Europe. A sequence of evictions is also about to begin. When you hear the finance minister introduce that bill, trying to defend it on the basis of distortions of what was going on in those Eurogroup meetings — in which I was representing Greece — at that point I think, if you were in my place, you would also do it. Not to settle scores, but exactly the opposite: to reveal the lies and fake news that were coming out of those meetings. To prevent new policies from being legislated against the interests of weak, innocent people who are still being targeted for liquidation.

Turning to the European Union, the pan-European party you helped to found, DiEM25, arguably puts forward the clearest critiques of how the European Union functions and what kinds of policy measures could be taken to make it less institutionally neoliberal and technocratic. Nevertheless, you have made little progress electorally, and failed to enter the European Parliament last year. How do you evaluate your performance so far? Why do you think it is so difficult to gain a hearing for your argument and win over large numbers of people to a platform like yours?
We came together in February 2016 in Berlin to restart the process of thinking about progressive transnational politics. In the middle of a defeat — because 2015 was a defeat, not only for us here in Greece but for the whole Left across Europe. At a time of rising xenophobia, we made the assessment that our collective defeat was going to be the first step towards the strengthening of what you’d call the “nationalist International,” which finds itself in a loop of positive reinforcement with the liberal establishment. Because let’s face it, the Merkels and Macrons of Europe need people like [Marine] Le Pen and the Alternative für Deutschland (AfD) in order to convince the rest to vote for them. At the same time, the Le Pens and the AfDs need the austerity policies of Macron and Merkel in order to create the discontent that feeds them.

We always knew that we would be caught up between these forces, which antagonized one another and fed off each other. We had no organization and we had no money, and we always knew it was going to be tough. In the end, every single progressive force in Europe, including DiEM25, lost out in the May 2019 European Parliament elections. We all suffered from the success of the liberal establishment, who continue to do business as usual when business cannot be continued as usual. They are feeding the nationalist international, which then feeds back and reinforces the liberal establishment.

We have 120,000 members, but that’s not that many across Europe. We managed to secure 1.5 million votes on a total budget of €60,000. Not great, I was expecting us to do better, but it’s not catastrophic either. This was only a small first step. Are we going to succeed? I have no idea. What I do know is that what DiEM25 tried to do is the way to go.

Eleven years since the global economic crisis and five years since the Troika imposed austerity on Greece, Europe is facing what looks to be a twin crisis of both a pandemic and, caused by it, a massive economic downturn. Do you have any hope that European technocrats learned from the last crisis and will adopt a different approach this time?
There is a spectacular coincidence of errors by the European Union today and in 2010. They’re making the same category error: in 2010 they decided to paint the crisis as a crisis of public debt and lack of liquidity, meaning the solution must certainly be loans. So, the Greek state was loaned the largest amount in history, on condition of austerity. Mistaking a bankruptcy for a liquidity problem is what effectively incarcerated a very large section of Europe — a vast majority of Europeans — into permanent stagnation.

When the coronavirus hit, the eurozone economy was already very significantly damaged by the inane handling of the Euro-crisis due to that category error of purposefully mistaking a bankruptcy for a liquidity crisis. And they are doing exactly the same thing now. If you look at the communiqué of the Eurogroup, if you look at [German finance minister] Olaf Scholz’s pronouncements, his policies, they sound rather large — with huge sums like €500 billion in Germany alone. But if you look at the detail of what they are proposing, both in Germany and in the Euro-group for the European Union as a whole, you will find exactly the same category error — they are proposing large sums in the form of credit lines, loans, or tax deferments. Again, they’re treating what is crucially a sequence of bankruptcies as a lack of liquidity, as something that can be dealt with by means of loans. They’re doing exactly the same thing

So, no, they haven’t learned. They are determined to continue with the same error. But let’s not be naive. This is not a failure of the faculties, it is not a failure of rationality. The Euro-group and the European Union have been hardwired never to be able to make any decisions that utilize public finance in favor of the majority. The whole point about creating the eurozone was to eradicate the possibility of fiscal policy. And why was that? Because a particular configuration of European capital decided that the best way to maximize capital accumulation in Europe was to fix monetary policy and never give parliaments the opportunity to compensate for capitalist crises by means of fiscal stimuli.

They are absolutely determined. They would much rather see half of the continent sink then do away with that principle, which is a class-war principle from their perspective. We saw that in 2010, and we can see it with the coronavirus today.

So, the bankers and the institutions will not change anything, but does it open a window for our side?
Yes. Every crisis is an opportunity for the peoples of Europe to unite. But until and unless we form a genuinely transnational progressive movement — not a confederacy of nation state–based left-wing parties, but a genuinely pan-European transnational movement against the transnational bankers and oligarchs — we will not be able to utilize that window of opportunity. That is the lesson of 2015 — at least the lesson I drew here in Greece.