Yanis Varoufakis: Why Europe Needs More Leaders Like Bruno Kreisky, Who Navigated 1970s Upheaval and Stagflation Well

By Yanis Varoufakis, a professor of economics at the University of Athens. Cross posted from his blog

In yesterday’s post, I asked the question: Why has European social democracy abandoned the legacy of leaders like Kreisky, falling in line with a toxic economics and politics that thinkers like Kreisky would have dismissed in their sleep as pathetic claptrap? My allusion to, and explicit endorsement of, Bruno Kreisky (the late Austrian social democratic chancellor) brought on the following critical response from Klaus Kastner, who obviously thinks that Kreisky is not as much of a shining example as I am making him out to be. I quote his comment in its entirety, and then provide a rejoinder to it.

Klaus Kastner: As an Austrian, and being somewhat familiar with your thinking and value structures, I am surprised that you would think/speak so highly of Kreisky. After all, the man could only come to power because he agreed to form a coalition with a 5%-party (FPÖ) which was then (correctly) considered to be the refuge for former Nazis. The head of that party, Kreisky’s Vice-Chancellor, had been an SS-Obersturmführer assigned to units which had shot hundreds of thousands of Jews in Eastern Europe (n. b.: he never denied being there but insisted that he was always off-duty when massacres occurred). Five ministers in Kreisky’s first cabinet had a Nazi-past, one of them even a neo-Nazi record.

When mad at Simon Wiesenthal for revealing the above, Kreisky had the nerve to insinuate publicly that Wiesenthal could only survive the Holocoust because he had been a Nazi-collaborator. In an interview with a Dutch journalist, Kreisky stated that “the Jews are no people, and if they are, they are a lousy people”. Incidentally, he didn’t have that problem with Palestinians and, most notably, Arafat.

When the representative (a mature lady) of hundreds of thousands Austrians who opposed a nuclear power plant called on Kreisky, he sent her off saying in front of running cameras: “I don’t need to have this where a bunch of rascals treat me like this!”

When Niki Lauda (by whom Kreisky loved to be driven around) got entangled in a tax-evasion situation, Kreisky said publicly that the authorities should back off. After all, Lauda had done so much for the prestige of the country.

And last but not least, Kreisky managed to increase Austria’s debt from near-zero to over 50% of GDP. Experts, like I believe you also, insinuate these days that 120% is about the maximum sustainable debt. So Kreisky managed during a dozen years of government to eat up almost half of Austria’s debt capacity. He provided a Golden Age to this generation, something which the children of this generation will never ever see because of what Kreisky had started (and others of his party diligently continued).

Having said all this, Kreisky was an enormously charismatic leader who caught the fantasies of many, many people. He certainly caught my fantasy at the time. It seems to me that he had something like a counterpart in Greece during his time. Similar political orientation and also very charismatic. And also a waster of the country’s debt capacity.

Yanis Varoufakis: As a Greek, let me first state for the record (as I did in my talk at the Kreisky Forum the other day), that Kreisky was a pillar for strength during our neofascist dictatorship, providing substantial support to Greeks on the run from that awful regime. (At the very same time, he provided similar refuge for Checks on the run after the Prague Spring, evidence of his commitment to supporting all victims of authoritarianism.) For this reason alone, my family and I owe him a debt of gratitude.

Beyond personal ‘bias’, I welcome Klaus’ response as an opportunity to re-investigate Kreisky’s legacy. Let me break down our ‘exchange’ to its three main parts: Kreisky’s economic and social policies, Kreisky on the Jewish Question, and Kreisky at large.

Economic and Social Policies

Kreisky will go down in history as the social democrat who exposed the fallacy behind the assumption that government can only combat social inequality at the expense of inefficiencies, waste and cronyism. Moreover, his period in office revealed that it is perfectly possible to combine a large state sector (including the nationalisation of key industries) with a buoyant private sector. His government built up a stupendously successful educational system that gave equal opportunities in life to Austria’s working class. At once, Austria not only became world famous for its low levels of inequality but also, remarkably, for its substantial increase in wealth. The notion that equality is to be bought at the expense of lower aggregate living standards was well and truly buried by the Kreisky administration.

As for the increase in debt to GDP ratio, it helps to bear in mind that the 1970s (Kreisky was Chancellor from 1970 to 1983) was a tumultuous period, following the collapse of the Bretton Woods system) during which world capitalism was buffeted by high unemployment, high inflation and increasing debt (due, to a large extent, to the energy/oil crisis). By comparison to all other European and non-European industrial societies, Kreisky’s Austria did magnificently well at weathering the storm and at protecting its citizens from a major global crisis. As a man who had experienced the awfulness of the 1930s in his bones, Kreisky rightly loathed unemployment and, famously, stated that “hundreds of thousands unemployed matter more than a few billion schillings of debt”. Hear, hear, I say. If only Europe today had the same prescience and wisdom we would have had less unemployment and less… debt. Regarding the charge that debt to GDP rose to 50% under his reign, thus “exhausting Austria’s debt potential”, my view is that it was a tiny price to pay for having managed to weather the 1970s crises with minimal social costs and with an Austrian working class which, unlike others, did not need to turn to private debt (i.e. credit cards) in the 1980s in order to finance life. The result was a total (private + public) debt that was and remains very, very manageable.

In short, Austria was and remains better off as a result of Kreisky’s policy choices. Indeed, if his vision had been alive today, Austria would have helped the Eurozone, and itself, much more effectively in our collective struggle against our present Crisis.

Kreisky on the Jewish Question

There is one fact about Bruno Kreisky that is conspicuously missing from Klaus Kastner’s tirade against him, especially in relation to his attitude to former members of the Nazi regime: that Kreisky was himself a Jew! As a Jew and a socialist, persecuted by the Nazis both for being a Jew and for being a socialist (nb. he had fled to Sweden during the war), Kreisky felt he had the capacity to heal divisions in a post-war Austria that had to come to terms with the fact that the vast majority of both its elites and its population at large had either actively collaborated or had at least tolerated the Nazis. The fact that he did not dismiss members of his government for having had a Nazi past was, of course, highly controversial. But Kreisky thought, to his credit I think, that barring selected individuals for the errors that they had committed in their youth (within a country that, in its crushing majority, had embraced the Nazis), was silly and hypocritical (provided they had not committed actual crimes). It was his duty as a Jew to address this hypocrisy and to help Austria deal with its historical reality.

Klaus mentioned the spat between two men that I admire immensely: Simon Wiesenthal, the celebrated Nazi hunter, and Bruno Kreisky. I wish the two of them had not exchanged such virulent phrases and insults. Wiesenthal kept us all on our toes, unearthing the way that Nazis were managing to slip into normal life in a bid to escape punishment and to render Nazism innocuous. Kreisky gave himself the task, mentioned in the previous paragraph, of using his Jewishness in order to heal Austrian society and to ensure that Nazism would never return (e.g. by eliminating mass unemployment). I believe that the clash between the two men stemmed from (a) the great difference in these roles that each had adopted, and, importantly, (b) another, deeper and more violent clash that was brewing in the postwar period amongst Europe’s Jews; namely, the clash between Zionist and anti-Zionist Jews.

This is, of course, not the place to delve deeply into the Zionist issue. Suffice to say that Wiesenthal was a Zionist and Kreisky was not. Unlike the Zionist movement, Kreisky believed strongly that European Jews should not seek refuge in the creation of a nation-state in Palestine, by treating its Arab population as a non-people to be expelled violently, but that they should seek safety and their rightful place within their own European societies. In this sense, Kreisky belonged to a group of internationalist, non-Zionist or even anti-Zionist Jews, which included Albert Einstein and Hanna Arendt. Their view of themselves, as Jews, was that Jewishness is not a racially based identity (of blood and land) but a cultural and spiritual one that does not need the full panoply of a state, with borders, armies etc., in order to preserve itself. So, when he sometimes said that Jews are not a nation, or even a well defined race of people, he was proclaiming his Jewishness as a cultural notion, in sharp contrast to the Nazi-leaning view of a people as constituted by blood and soil.

In short, the conflict between Wiesenthal and Kreisky had many of the hallmarks of a family feud. It reminds me of the clashes I have with fellow Greeks when I argue that it really matters not at all whether we modern Greeks are the true, blood descendants on Plato and Aristotle. That what makes me Greek is my language, culture and sense of self, identity etc. I can also imagine myself saying that we Greeks are not a race and that if we are we are a pretty lousy one. Only a fool would take this to mean that I am anti-Greek or racist toward Greeks!

Lastly, since Klaus mentions Arafat, his support for the Palestinian cause (on the grounds of fairness and justice) was exceptionally meaningful given his status as Austria’s first Jewish Chancellor. For that he will go down in history as a virtuous pioneer. I only wish we had more of them in our sad day and age.

Kreisky at Large

Above all else, Bruno Kreisky was an internationalist. Even before the Third World debt crisis hit, he was advocating a Marshall Plan for Africa and Asia. His support for liberation movements, in the West, in the South and in the East, was steadfast and unswerving. His judgment was not always perfect (e.g. in response to the oil crisis, which was threatening to choke Austria’s economy, he embraced nuclear power) but he was a man known for his capacity to listen to the opposing arguments and change his mind. Moreover, unlike today’s politicians, he was not afraid to oppose majority opinion if he thought it right.

In conclusion, I stand by my enthusiasm for the man and by my claim that Europe is much the poorer for not having politicians like Bruno Kreisky in positions of power today.