The free market is an impossible
utopia
Polanyi
argues that the attempt to create amarket society is fundamentally threatening to human society and the common good. When these public goods and social
necessities (what Polanyi calls “fictitious commodities”) are treated as if they are commodities produced for sale on the
market, rather than protected rights, our social world is endangered and major
crises will ensue.
Polanyi
makes it clear that today’s vexing economic problems are almost entirely political problems.Taking Polanyi seriously
means rejecting the illusion of a “deregulated” economy. What happened in the name of
“deregulation” has actually been “reregulation,” this time by rules and
policies that are radically different from those of the New Deal and Great
Society decades help giant corporate and financial institutions maximize their
returns through revised anti-trust laws
(Courtesy: Harvard University Press)
Fred Block (research professor of sociology at University of
California at Davis) and Margaret Somers (professor of sociology and history at the University
of Michigan) have a new book, “The Power of Market Fundamentalism: Karl Polanyi’s
Critique” (Harvard University Press, 2014). The
book argues that the ideas of Karl Polanyi, the author of “The Great
Transformation,” a classic of 20th century political economy, are crucial if you
want to understand the recession and its aftermath. I asked the authors a
series of questions.
HF
- Your book argues for the continued relevance of Karl Polanyi’s work,
especially “The Great Transformation.” What are the ideas at the core of
Polanyi’s thought?
FB & MS – Polanyi’s core thesis is that there is
no such thing as a free market; there never has been, nor can there ever be.
Indeed he calls the very idea of an economy independent of government and
political institutions a “stark utopia”—utopian because it is unrealizable, and
the effort to bring it into being is doomed to fail and will inevitably produce
dystopian consequences. While markets are necessary for any functioning
economy, Polanyi argues that
the attempt to create amarket society is fundamentally threatening to human society and the common good. In the first instance the market is simply one of many different
social institutions; the second represents the effort to subject not just real
commodities (computers and widgets) to market principles but virtually all of what makes
social life possible, including clean air and water, education, health care,
personal, legal, and social security, and the right to earn a livelihood. When these public goods and social
necessities (what Polanyi calls “fictitious commodities”) are treated as if they are commodities produced for sale on the
market, rather than protected rights, our social world is endangered and major
crises will ensue.
Free market doctrine aims to liberate the economy from
government “interference”, but Polanyi challenges the very idea that markets
and governments are separate and autonomous entities. Government action is not
some kind of “interference” in the autonomous sphere of economic activity;
there simply is no economy without government rules and institutions. It is not
just that society depends on roads, schools, a justice system, and other public
goods that only government can provide. It is that all of the key inputs into the economy—land,
labor, and money—are only created and sustained through continuous government
action. The employment system,
the arrangements forbuying and selling real estate, and the supplies of money and credit are
organized and maintained through
the exercise of government’s rules, regulations, and powers.
By claiming it is free-market advocates who are the
true utopians,Polanyi
helps explain the free market’s otherwise puzzlingly tenacious appeal: It
embodies a perfectionist ideal of a world without “coercive” constraints on
economic activities while
it fiercely represses the fact that power and coercion are the unacknowledged
features of all market participation.
HF
- How do those ideas help us understand the vexing economic problems
we still face today?
FB & MS – By putting government and politics into
the center of economic analysis, Polanyi makes it clear that today’s
vexing economic problems are almost entirely political problems. This can effectively change the terms of modern political
debate: Both left and right today focus on “deregulation”—for the right it is a
rallying cry against the impediments of government; for the left it is the
scourge behind our current economic inequities. While they differ
dramatically on its desirability, both positions assume the possibility of a
“non-regulated” or “non-political” market. Taking Polanyi seriously means rejecting the
illusion of a “deregulated” economy. What happened in the name of
“deregulation” has actually been “reregulation,” this time by rules and
policies that are radically different from those of the New Deal and Great
Society decades. Although compromised
by racism, those older regulations laid the groundwork for greater equality and
a flourishing middle class. Government continues to regulate, but instead
of acting to protect workers, consumers, and citizens, it devised new policies
aimed to help giant corporate and financial
institutions maximize their returns through revised anti-trust laws, seemingly bottomless bank bailouts, and increased
impediments to unionization.
The implications for political discourse are
critically important: If regulations are always necessary components of
markets, we must not discuss regulation
versus deregulation but rather what kinds of regulations we prefer: Those designed to
benefit wealth and capital? Or those that benefit the public and common
good? Similarly, since the
rights or lack of rights that employees have at the workplace are always
defined by the legal system, we must not ask whether the law should organize the labor
market but rather what kinds of rules and rights should be entailed
in these laws—those that recognize that it is the skills and talents of
employees that make firms productive, or those that rig the game in favor of
employers and private profits?
HF – Polanyi argued against a line of thought that you
describe as “market fundamentalism,” which perhaps has its beginnings in
Malthus’s arguments two centuries ago. Why does Malthus’s way of thinking still
resonate in U.S. political debates over welfare and economic ‘reform?’
FB & MS – Malthus’s enduring contribution to
social policy was to make scarcity the virtuous disciplinary
necessity upon which rests the very possibility of a productive workforce. Polanyi explains how the original invention of a
market economy that could function independently of the state depended entirely
on a new body of ideas that began in earnest not with the liberalisms of
Hobbes, Locke or even Adam Smith, but with the new political economy of Malthus
and Ricardo. This way of thinking, which we call
social naturalism, conceived of society as governed by the same laws that
operate in nature—a conceit
that is necessary to make the idea of a
self-regulating market even
plausible. Social naturalism displaced
rationality and morality as the essence of humanity, and imposed biological instincts in their place,
making human motivations no different from those of the rest of the animal
kingdom: We are incentivized to labor (and earn wages) only because of our
primary biological drive to eat; and we are likewise content to rest once the
drive of hunger is satisfied.
From this perspective, it is the “natural” condition
of scarcity alone that disciplines the unemployed into voluntarily taking up
the bitter task of paid labor. If one removes that scarcity by “artificial”
means—by providing food stamps, unemployment benefits, an adequate minimum
wage—so too the incentive to work disappears. Hence the refrain made famous
during the 2012 election that 47 percent of Americans are “takers;” that
poverty relief will inevitably turn the safety net into a “hammock;” and that
food stamps and other hunger-relieving interventions have turned the “inner
city” into a “culture of dependence.” One would be hard pressed to draw any substantive distinctions
between the current conservative rhetoric, and that which flourished in the
early 19th century when Malthus led the campaign against social insurance and
the safety net. The reality, of course, then as now, is the poor have always
struggled to make do in the face of structural forces that they cannot control.
HF – You suggest that Polanyi’s arguments about the
“double movement” help explain the tea party movement among conservatives. What is the “double movement” and what forces is it
giving rise to in U.S. politics today?
FB & MS – Polanyi argued that the devastating
effects on society’s most vulnerable brought on by market crises (such as the
Great Depression in the 1930s) tends to generate counter movements as people
struggle to defend their livelihoods, their neighborhoods, and their cultures
from the destructive forces of marketization. The play of these opposing dynamics is the
double movement, and it always involves the effort to remobilize political
power to tame the apparent over-extension of market forces. The great
danger Polanyi alerts us to, however, is that mobilizing politics to protect
against markets run wild is just as likely to be reactionary and conservative,
as it is to be progressive and democratic. Whereas the American New Deal was
Polanyi’s example of a democratic counter movement, fascism was the classic
instance of a reactionary counter-movement; it provided protection to some while utterly destroying democratic
institutions.
This helps us to understand the tea party as a
response to the uncertainties and disruptions that free market globalization
has brought to many white Americans, particularly in the South and Midwest.
When people demonstrate against Obamacare with signs saying “Keep Your
Government Hands off My Medicare,” they are trying to protect their own health
care benefits from changes that they see as threatening what they have. When they express deep hostility to immigrants
and immigration reform, they are responding to a perceived threat to
their own resources—now considerably diminished from outsourcing and
deindustrialization. Polanyi teaches us that in the face
of market failures and instabilities we must be relentlessly vigilant to the
threats to democracy that are often not immediately apparent in the political
mobilizations of the double movement.
HF – The
European Union’s single currency creates many of the same tensions between
international rules and domestic society as the gold standard did a century
ago. What are the political consequences of these tensions?
FB & MS – We just saw in the European elections that right-wing, seemingly
fringe parties, came in first in France and the U.K. This is a response
to the continuing austerity policies of the European Community that have kept
unemployment rates high and blocked national efforts to stimulate stronger
growth. It might still be largely a
protest vote—a signal to the major parties that they need to abandon austerity,
create jobs, and reverse the cuts in public spending. But unless
there are some serious initiatives at the European Community and the global
level to chart a new course, we can expect that the threat from the nationalist
and xenophobic right will only grow stronger.
Henry Farrell is associate professor of political science and
international affairs at George Washington University. He works on a variety of
topics, including trust, the politics of the Internet and international and
comparative political economy.
Living in the End Times by Slavoj Žižek
