The school of hard knocks

Varoufakis finds economics PhD gives little wisdom

Yanis Varoufakis may not be thinking about his next job yet. But the former economics professor and current Greek finance minister will no longer lead the country's debt negotiating team. Whenever he leaves, he might want to consider contributing a chapter for a book on what an economic doctorate isn't good for.

Varoufakis has been unable to translate his imaginative scholarly critiques of financial capitalism into policies which win over European leaders and lenders, not to mention Greek politicians and lobby groups. The same self-confidence and glamour which turned this University of Texas professor into a celebrity global academic seem to have worked against him in gritty negotiations.

Other academic economists have been more successful. Eugen von Böhm-Bawerk, one of the fathers of modern interest theories, helped stabilise Austria-Hungary's troubled finances at the end of the 19th century, and Nikolai Bunge, an expert of the credit system, supported economic reforms in pre-revolutionary Russia.

More recently, planning economist Manmohan Singh helped reverse planning restrictions in India in the 1990s. In the same decade, Mahbub ul Haq, a professor at the University of Karachi, had some success in reforming the corrupt Pakistani economy. In the 2000s, another former professor, Boediono, was a stabilising influence in troubled Indonesia.

Perhaps the detailed study needed for a PhD and an academic mindset are poorly suited for the increasingly political job of finance minister in developed economies. These days, most of the thinking on economic policies comes from central banks and outside advisors. In the US, the treasury secretary is not even guaranteed the top spot on the president's economic team.

So, it should not be surprising Varoufakis has company in finding that personality can get in the way. Dominique Strauss-Kahn, a French politician and ex-professor, was undone by a sex scandal. And a reputation for arrogance may have cost Larry Summers the top job at the Federal Reserve, despite his fame as a brilliant professor and a fairly successful record as US treasury secretary.

An advanced degree in economics undoubtedly provides insight. But no amount of academic excellence can create the right sort of character for political success.