Long Dead Economist’s Theories Proven Right – Free Market Advocates The New Utopians

In 1944, Karl Polanyi published what became his most notable work, The Great Transformation. Now, 50 years after his death, his work is being reanalysed by modern economists, with the result being that his claims and arguments are proving not only correct, but predictive of the current crisis we are under. Fred Block and Margaret Somers released a new book covering Polanyi’s work last year, titled “The Power of Market Fundamentalism: Karl Polanyi’s Critique,” which does a solid job in explaining not only what his criticisms were, but moving his analysis forward and applying them to the current crisis.

In Polanyi’s piece, the underlying principle is that many of the points presented by free market adherents are little more than politics being disguised as economics. The market, in his analysis, is but one force of many found in society, and attempting to use it for all of societal needs is not only utopian, that is an unreachable goal, but is actually detrimental to society itself. And the idea of using “the free market” for societies needs, that is for what in olden times would be called “The Commons,” is dystopian itself. Today, we call this movement to move The Commons to the Free Market “Privatization.”

Let us adapt one of his analytical points. In the last part of the 19th century, a large number of nations switched to the gold standard for currency. This resulted in an eventual liquidity crunch, and collapse, resulting in the economic and political turmoil in the lead up to World War I. When we then take his models, and carry them forward, the result is chilling, for it accurately describes the situation today.

He described the fallacy of the free market before the very term free market existed as we know it today. He called those who adhered to this idea utopians, that is ones who only could see the utopia promised. And like all utopian visionaries, those who adhere to the free market are blind to the dystopia and human cost of their vision.

What stands out with Polanyi’s work is that he correctly identifies that there is no line between politics and economics, that economic activity is political through alternate means. He found that economic problems were properly political problems. Deregulation, privatization, bailouts, all of these economic elements are political issues, not economic at all. By failing to appreciate this, we are dismantling the foundation of our nation. As Block and Sommers explain in an interview with the Washington Post last year, this change in thinking is key to solving the problems of society itself.

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?

Even more interesting is Polanyi’s discussion of reactionary movements to moments of crisis. His examples use the New Deal as a democratic counter-movement with Nazism in Germany as a reactionary counter-movement to the crisis of the Great Depression. Applying his models forward, the Tea Party would then be a prime example of an Objectivist counter-movement, with its radical anti-federal message.

The idea of this counter-movement, double movement, is itself radical, but once understood as a political, and not an economic issue, it brings new focus to the issues we have today. From the gold standard to austerity, the problems we find in our economy now are political topics, and not big scary economic issues. We might find that Polanyi is now having the last laugh after all.


Featured image via ocw.unican.es/openipub.com