Capitalism and Its Discontents

The American Prospect has a fascinating (long form) article about Karl Polanyi and his insights into capitalism which, to my mind, shed interesting light on the economic problems we face today. A few key passages:

Looking backward from 1944 to the 18th century, Polanyi saw the catastrophe of the interwar period, the Great Depression, fascism, and World War II as the logical culmination of laissez-faire taken to an extreme. “The origins of the cataclysm,” he wrote, “lay in the Utopian endeavor of economic liberalism to set up a self-regulating market system.” Others, such as John Maynard Keynes, had linked the policy mistakes of the interwar period to fascism and a second war. No one had connected the dots all the way back to the industrial revolution.


Half a century later, the world looks more Marxian. The middle class is beleaguered. A global reserve army of the unemployed batters wages and marginalizes labor’s political power. Even elite professions are becoming proletarianized. Ideologically, the view that markets are good and states are bad is close to hegemonic. With finance still supreme despite the 2008 collapse, it is no longer risible to use “capital” as a collective noun. The two leading treasury secretaries during the run-up to the 2008 financial crash, Democrat Robert Rubin and Republican Henry Paulson, were both former CEOs of Goldman Sachs. If the state is not quite the executive committee of the ruling class, it is doing a pretty fair imitation.

Yet Marx, for all of his stubbornly apt insights about capitalism, is an unreliable guide to its remediation. Polanyi, with the benefit of nearly a century’s worth more evidence, has a surer sense of how markets interact with society. More humanist than materialist, Polanyi did not believe in iron laws. His hope was that democratic leaders might learn from history and not repeat the calamitous mistakes of the 19th and early 20th centuries. Polanyi lived long enough to see his wish fulfilled for a few decades. In hindsight, however, the brief period between the book’s publication and Polanyi’s demise is looking like a respite in the socially destructive tendencies of rampant markets. In seeking to understand the dynamics of our own time, we can do no better than to revisit Polanyi.

The problem lies in the rise of neo-liberal econonics which pretend a self-regulating market can not only exist it can thrive and take care of people.

His key criticisms:

Contrary to libertarian economists from Adam Smith to Hayek, Polanyi argued, there was nothing “natural” about the free market. Primitive economies were built on social obligations. Modern commercial society depended on “deliberate State action” by and for elites. “Laissez-faire” he writes, savoring the oxymoron, “was planned.”

Libertarian economists, who treat the market as universal—disengaged from local cultures and historic time—are fanatics whose ideas end in tragedy. Their prescription means “no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system.”

  1. #1 by Richard Warnick on May 8, 2014 - 2:32 pm

    When writers like Friedrich Hayek and Milton Friedman talk about “freedom,” they mean freedom for capital – not people. Took me a long time to understand that.

  2. #2 by brewski on May 8, 2014 - 4:25 pm

    You are the one who constantly argues against the freedom of people. You are the Stadtist.

    • #3 by Richard Warnick on May 8, 2014 - 4:58 pm

      I don’t see it that way.

      • #4 by brewski on May 9, 2014 - 8:49 am

        I know you don’t.

  3. #5 by Larry Bergan on May 10, 2014 - 1:29 am

    Freedom and liberty had to be redefined in favor of the richest of the rich.

    The NEW American way.

    To hell with Elvis and the music he and all the black people popuarized!

  4. #6 by Larry Bergan on May 10, 2014 - 1:47 am

    The triumphant rise of the “conservatives” is a farce within a farce.

    I’m sorry, but when we vote on machines manufactured by banks and Republicans steal elections out in the open by every other method imaginable…

    I become skeptical.

    Kill me.

  5. #7 by brewski on May 10, 2014 - 9:57 am

    The problem with these sorts of articles is that the writers don’t even know what capitalism is. So if you have a complete misunderstanding of what you are talking about, then your critique of it is going to be pretty far off. This article is Exhibit A.

  6. #8 by Larry Bergan on May 10, 2014 - 11:51 am

    What about the stolen elections, brewski.

    Let me speak for you; no comment. 🙁

    • #9 by brewski on May 10, 2014 - 9:37 pm

      Stolen elections are not capitalism.

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