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The Great Transformation

News Corporatism Recommended books Recommended Links Casino Capitalism Two Party System as polyarchy Ayn Rand and Objectivism Cult
Financial Crisis of 2008 as the Crisis of Neoliberalism Gangster Capitalism The Great Transformation Psychological Warfare and the New World Order Jeremy Grantham On The Fall Of Civilizations Alternatives to Neo-liberalism Globalization of Corporatism
Super Capitalism as Imperialism Neocolonialism as Financial Imperialism America’s Financial Oligarchy Inverted Totalitarism Disaster capitalism Neoliberalism as a Cause of Structural Unemployment in the USA Neoliberalism and inequality
Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime Harvard Mafia Friedman --founder of Chicago school of deification of market Republican Economic Policy Monetarism fiasco Small government smoke screen The Decline of the Middle Class
Libertarian Philosophy Media domination strategy Neoliberalism Bookshelf John Kenneth Galbraith Globalization of Financial Flows Humor Etc

From the preface to the book The Great Transformation The Political and Economic Origins of Our Time by Karl Polanyi

The IMF's inconsistencies—while professing belief in the free market system, it is a public organization that regularly intervenes in exchange rate markets, providing funds to bail out foreign creditors while pushing for usurious interest rates that bankrupt domestic firms—were foreshadowed in the ideological debates of the nineteenth century. Truly free markets for labor or goods have never existed. The irony is that today few even advocate the free flow of labor, and while the advanced industrial countries lecture the less developed countries on the vices of protectionism and government subsidies, they have been more adamant in opening up markets in developing countries than in opening their own markets to the goods and services that represent the developing world's comparative advantage.

Today, however, the battle lines are drawn at a far different place than when Polanyi was writing. As I observed earlier, only diehards would argue for the self-regulating economy, at the one extreme, or for a government run economy, at the other. Everyone is aware of the power of markets, all pay obeisance to its limitations. But with that said, there are important differences among economists' views. Some are easy to dispense with: ideology and special interests masquerading as economic science and good policy. The recent push for financial and capital market liberalization in developing countries (spearheaded by the IMF and the U.S. Treasury) is a case in point. Again, there was little disagreement that many countries had regulations that neither strengthened their financial system nor promoted economic growth, and it was clear that these should be stripped away. But the "free marketeers" went further, with disastrous consequences for countries that followed their advice, as evidenced in the recent global financial crisis. But even before these most recent episodes there was ample evidence that such liberalization could impose enormous risks on a country, and that those risks were borne disproportionately by the poor, while the evidence that such liberalization promoted growth was scanty at best. But there are other issues where the conclusions are far from clear. Free international trade allows a country to take advantage of its comparative advantage, increasing incomes on average, though it may cost some individuals their jobs. But in developing countries with high levels of unemployment, the job destruction that results from trade liberalization may be more evident than the job creation, and this is especially the case in IMF "reform" packages that combine trade liberalization with high interest rates, making job and enterprise creation virtually impossible. No one should have claimed that moving workers from low-productivity jobs to unemployment would either reduce poverty or increase national incomes. Believers in self-regulating markets implicitly believed in a kind of Say's law, that the supply of labor would create its own demand.

For capitalists who thrive off of low wages, the high unemployment may even be a benefit, as it puts downward pressure on workers' wage demands. But for economists, the unemployed workers demonstrate a malfunctioning economy, and in all too many countries we see overwhelming evidence of this and other malfunctions. Some advocates of the selfregulating economy put part of the blame for these malfunctions on government itself; but whether this is true or not, the point is that the myth of the self-regulating economy is, today, virtually dead.

But Polanyi stresses a particular defect in the self-regulating economy that only recently has been brought back into discussions. It involves the relationship between the economy and society, with how economic systems, or reforms, can affect how individuals relate to one another. Again, as the importance of social relations has increasingly become recognized, the vocabulary has changed. We now talk, for instance, about social capital. We recognize that the extended periods of unemployment, the persistent high levels of inequality, and the pervasive poverty and squalor in much of Latin America has had a disastrous effect on social cohesion, and been a contributing force to the high and rising levels of violence there. We recognize that the manner in which and the speed with which reforms were put into place in Russia eroded social relations, destroyed social capital, and led to the creation and perhaps the dominance of the Russian Mafia. We recognize that the IMF's elimination of food subsidies in Indonesia, just as wages were plummeting and unemployment rates were soaring, led to predictable (and predicted) political and social turmoil, a possibility that should have been especially apparent given the country's history. In each of these cases, not only did economic policies contribute to a breakdown in long-standing (albeit in some cases, fragile) social relations: the breakdown in social relations itself had very adverse economic effects. Investors were wary about putting their money into countries where social tensions seemed so high, and many within those countries took their money out, thereby creating a negative dynamic.

Most societies have evolved ways of caring for their poor, for their disadvantaged. The industrial age made it increasingly difficult for individuals to take full responsibility for themselves. To be sure, a farmer might lose his crop, and a subsistence farmer has a hard time putting aside money for a rainy day (or more accurately a drought season). But he never lacks for gainful employment. In the modern industrial age, individuals are buffeted by forces beyond their control. If unemployment is high, as it was in the Great Depression, and as it is today in many developing countries, there is little individuals can do. They may or may not buy into lectures from free marketeers about the importance of wage flexibility (code words for accepting being laid off without compensation, or accepting with alacrity a lowering of wages), but they themselves can do little to promote such reforms, even if they had the desired promised effects of full employment. And it is simply not the case that individuals could, by offering to work for a lower wage, immediately obtain employment. Efficiency wage theories, insider-outsider theories, and a host of other theories have provided cogent explanations of why labor markets do not work in the manner that advocates of the self-regulating market suggested. But whatever the explanation, the fact of the matter is that unemployment is not a phantasm, modern societies need ways of dealing with it, and the self-regulating market economy has not done so, at least in ways that are socially acceptable. (There are even explanations for this, but this would draw me too far away from my main themes.) Rapid transformation destroys old coping mechanisms, old safety nets, while it creates a new set of demands, before new coping mechanisms are developed.

This lesson from the nineteenth century has, unfortunately, all too often been forgotten by the advocates of the Washington consensus, the modern-day version of the [neo]liberal orthodoxy.

The failure of these social coping mechanisms has, in turn, contributed to the erosion of what I referred to earlier as social capital. The last decade has seen two dramatic instances. I already referred to the disaster in Indonesia, part of the East Asia crisis. During that crisis, the IMF, the U.S. Treasury, and other advocates of the neoliberal doctrines resisted what should have been an important part of the solution: default. The loans were, for the most part, private sector loans to private borrowers; there is a standard way of dealing with situations where borrowers cannot pay what is due: bankruptcy. Bankruptcy is a central part of modern capitalism. But the IMF said no, that bankruptcy would be a violation of the sanctity of contracts. But they had no qualms at all about violating an even more important contract, the social contract. They preferred to provide funds to governments to bail out foreign creditors, who had failed to engage in due diligence in lending. At the same time, the IMF pushed policies with huge costs on innocent bystanders, the workers and small businesses who had no role in the advent of the crisis in the first place.

Even more dramatic were the failures in Russia. The country that had already been the victim of one experiment—communism—was made the subject of a new experiment, that of putting into place the notion of a self-regulating market economy, before government had had a chance to put into place the necessary legal and institutional infrastructure. Just as some seventy years earlier, the Bolsheviks had forced a rapid transformation of society, the neoliberals now forced another rapid transformation, with disastrous results. The people of the country had been promised that once market forces were unleashed, the economy would boom: the inefficient system of central planning, that distorted resource allocation, with its absence of incentives from social ownership, would be replaced with decentralization, liberalization, and privatization.

There was no boom. The economy shrank by almost half, and the fraction of those in poverty (on a four-dollar-a-day standard) increased from 2 percent to close to 50 percent. While privatization led a few oligarchs to become billionaires, the government did not even have the money to pay poor pensioners their due—all this in a country rich with natural resources. Capital market liberalization was supposed to signal to the world that this was an attractive place to invest; but it was a one-way door. Capital left in droves, and not surprisingly. Given the illegitimacy of the privatization process, there was no social consensus behind it. Those who left their money in Russia had every right to fear that they might lose it once a new government was installed. Even apart from these political problems, it is obvious why a rational investor would put his money in the booming U.S. stock market instead of a country in a veritable depression.

The doctrines of capital market liberalization provided an open invitation for the oligarchs to take their ill-begotten wealth out of the country. Now, albeit too late, the consequences of those mistaken policies are being realized; but it will be all but impossible to entice the capital that has fled back into the country, except by providing assurances that, regardless of how the wealth is acquired, it can be retained, and doing so would imply, indeed necessitate, the preservation of the oligarchy itself. Economic science and economic history have come to recognize the validity of Polanyi's key contentions.

 

The Great Transformation The Political and Economic Origins of Our Time by Karl Polanyi

Amazon.com

Chairman Luedtke, Old School Political Science January 26, 2001

Polanyi's "The Great Transformation" is a broad, sweeping work that encompasses history, sociology, economics and political science. MacIver writes that the book's particular relevance for a political scientist is that "it will help him to restate old issues and to evaluate old doctrines" (xi). However, with the recent renaissance of liberal/classical economic doctrines (what Polanyi would scornfully call the utopia of the "self-adjusting market") it seems that the issues restated and the doctrines evaluated by Polanyi are not so "old" after all.

For this reason, the book has even more relevance now than it did for past readers, even just twenty years after its publication, when the heyday of planned economics appeared to be carrying out Polanyi's proposed remedies for the excesses of free marketism, and blunting the force of his critique as applied to post-transformation society.

But in the era of WTO and NAFTA, a strong case can be made that his critique has attained newfound relevance beyond even its original application. This critique can be phrased into a causal historical argument as follows: The Great Depression and two World Wars are Polanyi's dependent variable (the outcome to be explained). For Polanyi, this turmoil of 1917-1945 was a catastrophic indicator that 19th Century civilization had collapsed.

And since 19th Century civilization rested upon the "classical" economic liberal doctrine of a self-regulating market, (with accompanying balance-of-power system, gold standard, and laissez-faire liberal state that defended property rights above all else and viewed human labor as no more than a commodity) it is this doctrine that is Polanyi's independent, explanatory variable. For him, the "utopian" and unattainable ideal of the self-regulating market was in reality a destructive force that robbed humanity of its freedom, by causing one hundred years of relative peace (the veritable calm before the storm) and then unleashing heretofore unheard of levels of economic dislocation and political repression. The "Great Transformation" itself is merely the mechanism by which this causal relationship unfolded. It is the process by which the ideal of the self-regulating market utopia brought about the destruction of the old world and the dawning of a new, more dangerous world.

Polanyi's evidence for this process is both deductive and inductive. Most of the book masquerades as a straightforward historical account of the Great Transformation and its exact social processes, but at times Polanyi reads less like an empiricist and more like a deductive rationalist. For instance, he proposes a general covering law of historical causality whereby countries that are apparently "opposed to the status quo would be quick to discover the weakness of the existing institutional order and to anticipate the creation of institutions better adapted to their interests" (28). He then gives Germany in the 1930s as an example of such a process, Germany for him being one of the "catalyst" states that sped up the Great Transformation by abandoning market liberalism in favor of fascism. While the example is fascinating and has obvious historical merit, it's not clear how Polanyi arrived at the general law of which Germany is an example, not to mention whether he truly believes that such a law applies consistently throughout history, or whether he merely means to inductively show the importance of Germany's opposition to the status quo for the particular historical causal mechanism of the Great Transformation.

Polanyi's work obviously runs counter to a great deal of conventional wisdom on the topic of economic and political doctrines and their relationship to social change in the 19th Century.

For instance, the 19th century is often called the "age of nationalism," but Polanyi's Great Transformation, like the work of Marx, minimizes the role of the nation-state in shaping the lives of its own citizens, by arguing that state governments were merely pawns for the ideal of the self-regulating market and its stooges in power, both financial and political. Indeed, as a remedy to the negative effects of the Great Transformation, Polanyi seems to advocate a rise in the power of the nation-state, through the active securing of freedom and rights by its citizens in opposition to the stateless self-regulating market. One could brand Polanyi a collectivist for this reason, although he would resist such a charge precisely because of his defense of individual freedom against the market and his warnings about the dangers of erring on the other side: the potential loss of human freedom that would come from free individuals attempting to subjugate and regulate markets through government. "Regulation both extends and restricts freedom; only the balance of the freedoms lost and won is significant" (254).

In other words, Polanyi is certainly not a Marxist, because of his lack of both economic determinism and any clear theory of class conflict and revolution, but neither can he be an apologist for capitalism since he seeks to shatter the myth of the self-regulating market as being a "natural" ideal independent of social moorings and above general social welfare. Therefore, instead of these two extremes, he strikes a middle ground that is as paradoxically complex as it is eloquently defended.

Robert Moore,

A masterpiece of economic history that is as relevant as ever sixty years on June 12, 2006

Although this book was published in 1944, the same year as Hayek's THE ROAD TO SERFDOM, it remains as relevant as ever. Some say that it is dated and it is true that many of the historical references are not the ones that would spring to mind today, but the critique of the myth of the self-regulating free market remains as relevant and to-the-point as ever. One of the main targets of his book was the Vienna school of economics, the central figures of which were Ludwig von Mises and F. A. Hayek. What Polanyi does is help one to see how hopelessly naïve and ahistorical many of their central assumptions are. Though one might question some of the details of Polanyi's thesis, especially regarding the gold standard the causes of the two world wars, he makes two incredibly powerful arguments about the myth of the self-regulating market to which proponents of that theory have offered no convincing reply. More of this is a second.

Polanyi's method is multi-disciplinary. He wants to show by a multitude of ways that the central historical contentions of those advocates of the self-regulating market are simply false. These people have argued, for instance, that by nature humans engage in market trade and that these markets by nature are self-regulating. If this were, as they insist, true, then wherever one would look in human history one would find markets that were by their nature self-regulating. Remember, Adam Smith's Austrian heirs were making arguments not just about what ought to be, but what naturally is in a state of nature. They are making claims about what is the case if government and others will just get out of the way of the workings of nature. So to this end Polanyi looks at the results of anthropological and historical studies to see what the evidence shows. Overwhelmingly, he finds no evidence that things have been in the course of human history as the self-regulators have claimed. In fact, Polanyi finds little or no evidence of the worldwide prevalence of markets at all. He finds little historical evidence for the kinds of claims about the state of nature that self-regulating free marketers posit. Instead, he finds a world of evidence that free markets were human artifacts, created and maintained entirely by government intervention. The chapters that detail Polanyi's argument can be a bit heavy going, but they are crucial to his overall argument.

Polanyi makes two central claims about the myth of the self-regulating free market. The first is that in its essential nature it is utopian and nonhistorical. It is utopian in that it describes not the world as it ever has been or ever could be, but a fantasy that exists only in the minds of its adherents. It is a powerful myth because whenever one points to the failures and shortcomings of attempts to promote free market principles, its adherents reply by insisting that the market hasn't yet been made pure enough. If only we decrease government involvement, further reduce regulation, remove restrictions on the kinds of compacts companies can form with one another, further gut the power of trade unions, and so forth, we will see the birth of a glorious new economic world in which all will be right in the world and God will be on his throne. But as Polanyi argues, not only has such a creature as a self-regulating free market economy never existed, it never could. In fact, what has passed for self-regulating markets has in fact been the result of drastic and pervasive government intervention. Additional interventions take place to protect society as a whole from the damage that a self-regulating economy inflicts on the citizenry as a whole.

The second major point that Polanyi makes is that of embeddedness: any economic system is embedded in society as a whole, with a host of moral, political, and religious values that are not primarily economic in nature. The self-regulating free marketers would somehow wish for an economic system that is distinct from and separated from those values; that is, an economic system that is not embedded. But such a thing, Polanyi argues, is impossible. This is another reason why belief in a self-regulating free market is a sheer fantasy: it is predicated on a host of impossible situations being possible. As the effects of a self-regulating free market occur, society intervenes to counteract the harmful effects of that economy. For instance, workers compensation is neither required nor desirable by pure free market principles. The same is true for unemployment insurance or anti-trust legislation. Or pollution standards. There is no question that keeping a plant from polluting is an interference with the market, but this is an example of noneconomic values trumping economic ones.

The basic dilemma of free market capitalism has always been this: is an economic system that generates a great deal of wealth for a society as a whole but concentrates most of that wealth in the hands of a few people, leaving most with less than they would have in a different economic system, a good economic system? Most of us would say no. Even free marketers would have to concede this, which is why they have had to concoct articles of faith (though not of fact) such as the trickle down theory. "Trickle down" has been debunked repeatedly over the years, both in theory and reality, but perhaps never so eloquently as by Will Rogers. Some people, he said, thought gold water like water: put it at the top and it will trickle down to everyone below. But, he went on, gold wasn't like water at all; put it at the top and it just stays there. Polanyi's book gives meat to the question of whether one would prefer a society where a very large amount of profit were concentrated in the hands of a very small number of people (essentially the situation in the United States today) or a somewhat smaller overall amount distributed more equitably among al the people. Yes, the few who profited under the former would have less, but the vast majority would have more.

I want to question one reviewer below who says that Polanyi doesn't understand the essential nature of the free market. I find that an amazing statement. The reason that the myth of the self-regulating free market has spread so easily and widely is that it is so incredibly easy to understand. What one can question is whether this easy-to-understand, perhaps simplistic, theory is right. We have no examples of self-regulating economies from history even though in the utopian fantasy one of the tenets is that it is the "natural" course of things. Of course Polanyi understands the theory he is criticizing. He just finds it naïve and silly. My only hope is that more people in the United States come to realize this. Ever since the election of Reagan in 1980, though in fact the tendency began under Jimmy Carter (most Americans don't seem to remember how conservative he was on economic matters, far more conservative than either Ford or Nixon), America has toyed with ideas promulgated by the free marketers. The result? Vast accumulation of wealth, especially in the financial markets despite the progressive decay in the industrial base, concentrated almost exclusively in the top 2% of the population. In fact, real wages for the vast majority of Americans has fallen since 1980, the percentage of the population to live below the poverty line has increased, and America has become the industrial nation with the greatest economic inequality.

My own fantasy is that more people would read Polanyi and fewer Hayek. I can understand why they don't. Hayek is easy to read and understand and feeds the fantasy that one can pursue economic advantage with no thought of the damage it might do; the invisible hand will take care of everything. Polanyi is difficult and complex and subtle and pricks a hole in the fantasy. Polanyi reminds us that economics has to be tempered by our values as a whole, that we cannot be reduced to economic animals. My fantasy--or is it a hope?--is that we as a society will come to care more for the welfare of the majority more than the welfare of the few. I would love to see a world in which our highest values did not have a price put upon them. 8 Comments |

A Kid's Review

 Absolutely Brilliant January 23, 2005

Polanyi's The Great Transformation is truly a masterpiece of historical analysis and social theory. Polanyi deftly uses his extensive knowledge of economic history, anthropology, and political theory to demonstrate the failure of "market society" and the myopia of those who believe that the "free" market is the answer to all social ills. He's at his best when he combines his historical analysis of 18th and 19th century capitalism -- an experiment with a free market economy that resulted in the Great Depression and world war -- with anthropological data showing that there is no innate human propensity to engage in trade or accumulate wealth at the expense of others.

Conservatives and libertarians hate this book because it thoroughly undermines their claims that markets are natural, spontaneous, and reflect the uncoerced interaction of free agents; the reviewer below who gave it 1 star is a case in point (he argues that "Polanyi fails to understand the essential nature of a free market, voluntary trade for mutual benefit," but the problem isn't that Polanyi doesn't understand such a concept, but rather that he shows it isn't true). Other critics like to misrepresent Polanyi's arguments and paint him as a Marxist, a romantic, or an opponent of modernity; in reality, he was merely pointing out how devastating it is when every aspect of human life is left up to the market, with its cold logic of efficiency.

The Great Transformation is an exceptionally lucid and well-researched study that should be required reading for anyone interested in economics, social theory, political history, or international relations. Some reviewers have suggested that the book is outdated, but anyone interested in the current debates surrounding free trade, the IMF/World Bank, or Social Security privatization would be wise to pick up a copy of this fascinating book.

[Bill Neal on Neoliberalism Karl Polanyi and the Coming U.S. Election Corrente by William R. Neal]

It’s hard not to notice, during the American Presidential election drama, that despite all the debates and speeches, and multiple candidates, the terms “Neoliberalism” and “austerity” have yet to be employed, much less explained, these being the two necessary words to describe the dominant economic “regime” of the past 35 years. And this despite the fact that most observers recognize that a “populist revolt” driven by economic unhappiness is underway via the campaigns of Donald Trump and Bernie Sanders. With Trump, of course, we are getting much more, the uglier side of American populism: racism, xenophobia and misogyny, at least; the culture wars at a higher pitch.

Yet when Trump commented on the violence which canceled his Chicago rally on the evening of March 11th, he stated that the underlying driver of his supporters’ anger is economic distress, not the ugly cultural prejudices. The diagnoses for the root cause of this anger thus lie at the heart of the proposed solutions. For students of the Great Depression, this will sound very familiar. That is because, despite many diversions and sub-currents, we are really arguing about a renewed New Deal versus an ever more purified laissez-faire, the nineteenth century term for keeping government out of markets – once those markets had been constructed. “Interventions,” however, as we will see, are still required, because no one, left or right, can live with the brutalities of the workings of “free markets” except as they exist in the fantasyland of the American Right.

... ... ...

By Neoliberalism it is meant the revival of “classical economics” which first arose in the late 18th and early 19th centuries in England, with the founders’ famous names living on into our own time: Smith, Ricardo, Townsend, Malthus, Mill and Bentham and a few others. Early economic writers tended to reach into the world of biology, of Nature, for their metaphors and analogies, and these excursions had two main tendencies: to cite nature’s cooperative features, or alternatively, its tooth and claw brutalities, which was Malthus’ grim legacy, one which we have not fully shaken to this day. Continuing this tradition, classical economics later flirted seriously with Social Darwinism (see the influence of William Graham Sumner in the U.S. and Herbert Spencer in England), almost becoming engaged to it, and then underwent the “micro” revolution of marginal costs in the late 19th century as the profession strained for its “scientific” laurels.

David Harvey, the prolific, polymath Marxist writer, links the term Neoliberal to the later Victorian economists – Alfred Marshall, William Jevons and Leon Walras - who succeeded their earlier classical colleagues from the first decades of the 19th century. But the realities of the past 30 years in America leads one back to the primal cruelties described by Karl Polanyi in those early industrial days, in his masterpiece The Great Transformation, and the religious intensity of the first classicals, not the later Victorian ones, those who worked in an era when life for workers was supposed to have gotten much better, although the London of those better days still horrified savvy American observers like Jane Addams of the Settlement House movement.

Neoliberalism was later greatly influenced by the conservative work - the defense of markets against governmental interventions - of Friedrich von Hayek and Ludwig von Mises (The preference here is to keep the “von” in the names: it makes them sound more sinister…) in the 1920’s and 1930’s, and Milton Friedman in the 1970’s, thinking which eventually eclipsed the Keynesian “revolution” of the 1930’s, and its demand-labor focused “macro” policies and accompanying federal fiscal interventions. Friedman’s great debates with John Kenneth Galbraith in the 1970’s usefully date the decline of Keynesianism for the general public, and the rise of “supply-side” economics: keeping entrepreneurs happy (and hopefully, inventive) through tax breaks without end. Many of us recall the linking of justice in-the-law with justice in-the- economy, courtesy of the old Smith Barney television advertisements from the 1980’s, starring John Houseman from the movie The Paper Chase: these noble stock brokers “make money the old fashioned way, they earn it.” Decided British accent too, he had.

The “liberalism” part of Neoliberalism is confusing to the average citizen thinking about the modern political spectrum, since Neoliberalism is most certainly a conservative doctrine aimed at undermining every intellectual pillar of Keynesian true “liberals,” Social Democrats, and Socialists of all stripes. In its formative years of 1790-1840, liberalism and its liberal economists were hell bent on overturning the last vestiges of late feudalism, then mercantilism, which guided the treatment of the agricultural workforce in rural England. That workforce was about to be “conscripted,” under threat of starvation, as labor in the new industrial mills of the English Midlands, the infamous “Satanic Mills.” In this sense these economists were “liberal” reformers, urging dramatic individualism and heroic entrepreneurship upon society, to free economic activity from the last ethical restraints which Judeo-Christian morality had insisted upon. Ironically for the secular left of the 21st century, those biblical strictures, against usury, for example, are looking better and better as credit card interest rates soar between 18-25%, the rates being even higher for the notorious “pay day loans,” the last borrowing resort for the poorest in the workforce. However, the words “freedom” and economic “liberty” do not explain much in the “abstract”: historical eras and context text tell us much more about what they meant, the impacts for different parts of society.

And this is where the term “Market Fundamentalism” or Market Utopianism comes in. Karl Polanyi (1886-1964), in his magisterial work from 1944, The Great Transformation, explains that the English economy of those years, 1790-1840, was the landscape for the first great attempt in human history to consciously construct all-embracing markets for land, labor and money, to turn these many-faceted features of traditional human economic life into pure commodities, thus yanking them from their more organic historical connections to other, older governing values in traditional societies.

Polanyi, just to confuse the over-simplifications of today’s Republican Right, and the broader Neoliberal worldview, was a socialist but not a Marxist. Yet his biography offers the Right these tantalizing facts: The Great Transformation, although begun and finished in England, and fittingly so given its subject matter, was mainly written at Bennington College in Vermont with a two-year grant from the Rockefeller Foundation, in 1941-1943.

Polanyi argued that what the classical economists claimed were universal laws, aiming to bring all nations into one giant market via “free trade” governed by the gold standard - and the guns of the British navy - were actually the very peculiar human constructs of a particular time and place. Polanyi also is the only economist who has satisfactorily explained where the market fanaticism of today’s Right comes from: the original gambit of the early 19th century was so sweeping, so revolutionary, that it could only succeed in its Promethean mission with intensity equal to its impossible task. To paraphrase Polanyi, laissez-faire had to be planned, then legislated – then its horrors mitigated. Polanyi makes the proper connection: this movement closely resembles religious fanaticism, and perhaps that is a clue to the rise of the economic Right’s religious allies within the Republican coalition: religious fundamentalism arose in the United States in the 1970’s almost simultaneously with Market “fundamentalism.” Here’s how he puts it his second chapter: “The mechanism which the motive of gain set in motion was comparable in effectiveness only to the most violent outbursts of religious fervor in history. Within a generation the whole human world was subjected to its undiluted influence.”

What is more, Polanyi says that the imposition of these terrible abstractions created such a shock in their initial manifestations that it set off an immediate reaction, the start of the “double movement,” with neither labor nor capital able to live with the stark horrors presented by the social realities of the 1840’s. This is when society first looked into the mirror of a “pure” market transformation and saw not progress but a social Frankenstein staring back instead: children broken on the looms, workers in their improvised, inadequate tenements, prostitutes roaming the streets if not starving in the gutters. In short, people no longer displaying human faces but the features of cornered animals. Had economic, social, and legal justice arrived? This was not justice; it was the very rape of that term.

Polanyi stresses the social disruptions as much as the degree of economic exploitation at the heart of the long running wage argument, which continues to this day, comparing the cultural shock of a whole new way of life for the formerly agricultural workers to the encounter between primitive cultures with more advanced European civilizations, documented in North American Indian tribes in their 16th and 17th century experiences, and African cultures under late 19th Century imperialism. This anthropological approach has doubtless made Polanyi a troublesome writer for many doctrinaire Marxists, and it was notable to see David Harvey quote from him in his fine book, A Brief History of Neoliberalism.

American voters in 2016 have been re-introduced to democratic Socialism, which has no better advocate than Polanyi. It has its origins, Socialism does, the parent plant, the late George Lichtheim (1912-1973) explained, in two great revolutions: the French and the Industrial. The struggle to win the right to vote in France and England was inseparable from that dual history. Eventually, well after 1850, wages did rise, along with the expanding franchise for the vote; whether that was due to the latent virtues of the system initially set up or the reforms engendered by its horrors is a debate which has not ceased. Today’s Neoliberalism had nearly silenced serious left dissent by the late 1990’s, or successfully isolated it in remote academic corners. Bill Clinton’s two terms in the 1990’s are proof of that. And there is the continuing tension between Neoliberal economics and democracy: notice the desperate, barely concealed attempt by the Republican Right to shrink the franchise, using as one of its main levers the racial stigmas from “The Great Incarceration” and the yet to be proven accusations of voter fraud.

This political “shunning” of the left happens even in the supposedly liberal Ivy League. The late political theorist Sheldon Wolin (1922-2015), shortly before his death, in an interview with Chris Hedges, spoke of the silent treatment he was given by the faculty at Princeton University when he placed a copy of his new magazine “Democracy” on the faculty lounge coffee table. He was shunned. Perhaps they did not like where he was going with his last book, or could see it coming much earlier: Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism (2008). Here is that interview, Segment Seven from a nine part series at the RealNewsNetwork

Modern economic thought, and practice, since the 1970’s, has witnessed a growing crescendo of Market Utopianism – the “purer the better” - is still the rallying cry of the Republican Right, even in the wake of the sobering events of 2008-2009 and despite some professional economists making substantial dents in the pretentions. And if you had any doubts about that, then you haven’t been watching the Republican Presidential Primary debates of 2015-2016, or the sheer destructive obstructionism of its behavior towards President Obama as shamefully displayed in Congress. In its deliberate jamming of the democratic process itself, the Republican Right echoes the behavior, if not the ideas, of the Fascist parties in the Parliaments of Italy and Germany in the early 1920’s and 1930’s, before they became outright dictatorships. Republican words do not mock the democratic process itself, but that is their effect, and it is clear that the intent is to de-legitimize the fairly elected President of the United States. Therefore it is very important for American readers to be clear about where Karl Polanyi thought the original Market Utopianism of the early 19th century would lead, and the connections he drew between the origins of classical economics and the collapse of the “long” 19th century in the 1930’s: “In order to comprehend German fascism, we must revert to Ricardian England.”

Polanyi was far more broadly educated than most economists, perhaps an equal to Keynes. He was employed in Vienna in the 1920’s as the “senior editor for the premier economic and financial weekly of Central Europe”– the Financial Times of its day and region. On the very first page of the opening chapter of The Great Transformation, Polanyi delivers his judgment on where the logic of mandating free markets as the dominant force in society would lead if not tempered with countervailing power:

Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.

That dilemma, the struggle over the nature of allowable interventions into the private market system to cope with its seemingly inevitable imbalances, gyrations, recessions and depressions, is still with us. There were prominent claims, however, in the late 1990’s, that recessions were gone forever, the perpetual growth machine having been overseen by Alan Greenspan, and he was confident that the new financial derivatives would spread the risk to those who could best bear it. Greenspan was one of the members of Bill Clinton’s “Committee to Save the World” along with Robert Rubin and Larry Summers. During that time they were Utopians and would be Prometheans.

The nature of these interventions was at the heart of the struggle to cope with the collapse of capitalism, 1929-1932, centered on currency issues (the gold standard and balanced budgets) and labor markets (public spending/public job creation vs tax increases/ budgets cuts – “austerity”). In the near collapse of 2008-2009, when financial markets froze around the world, the same basic arguments from the 1930’s and indeed, the second half of the 19th century, could be heard swirling around President Obama’s stimulus program. The main issues are still unresolved, and the now ancient stalemate that Polanyi so forcefully describes is a growing worry to some of the better economists in Washington, DC, who wonder what tools, if any, will be available to meet the next financial collapse. They worry as well, if they could ever be politically deployed.

Some would maintain, as Alan S. Blinder did in his review of Jeff Madrick’s Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World, that the “mainstream” of the profession is still neo-Keynesian (some would say only “emergency room” Keynesian) and not Market Utopian at all, but that remains to be proven in the realm of policy application via the political process. The attack of four well known “liberal” mainstreamers in a very public February, 2016 letter, upon a fellow professional for projecting high growth rates for candidate Sanders’ policy proposals, and James Galbraith’s stinging reply to them, casts some doubt as to just which channels the “mainstream” flows in.

Just in case his readers might have missed “our thesis” which Polanyi declared on the first page of his first chapter, he reiterated it with a bit more detail, seventy- five pages later:

To allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demolition of society. For the alleged commodity ‘labor power’ cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological , and moral entity ‘man’ attached to that tag. Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organization was protected against the ravages of this satanic mill.

These are powerful indictments, secular jeremiads hurled against the Market Utopianism of the 19th century, and now applicable again to Neoliberalism and its present day program of austerity. Perhaps the main reason Polanyi’s work has been kept on the margins of America economic life for so long – that is changing now, however slowly – is that the American economy of 1945-1971 stood so successfully upon the foundations of the New Deal, which Polanyi supported, without major panics and depressions, and with Wall Street curbed and Main Street employed, a far more egalitarian society than the one which surrounds us in 2016. There were significant exceptions, of course, delineated best by Michael Harrington’s (1928-1989) The Other America (1962).

Were Polanyi’s indictments too harsh? No, they were not, if one remembers the human wreckage strewn about the Western world in the wake of the events of 1929-1932 – and what followed politically in the 1930’s, which plunged civilization into World War II, what the historian Max Hastings has recently called “the greatest event in human history.” And they weren’t too harsh if one understands the “previews” to the Great Depression - the financial panics and the recessions/depressions which usually followed in their wakes in the United States in the 19th century: 1837, 1857, 1873, and 1893, and that broader, but shallower depression-price deflation, what some have called the first “Great Depression,” 1873-1896, which helped fuel the migration from rural Eastern Europe to the United States. These convulsions grew in scope, intensity and scale of human suffering so that the acute periods of social pain stretched four years, then more than a half a decade. And the comparisons are not too harsh if one remembers that public job creation and all the other counter-cyclical tools which the New Deal inaugurated on a large scale were absolutely forbidden by economic and political orthodoxy prior to that Great Depression/New Deal watershed.

Thus when successful businessman Jacob Coxey led his dissenting “army” on a long march from Ohio to a protest on the Capitol’s steps in Washington, DC, in the spring of 1894, driven by the terrible conditions from the 1893 panic, he petitioned for the creation of public jobs building and repairing roads - and was promptly arrested for his efforts. Just another example, alas, of the ancient clash between democracy and economic orthodoxy, the theme being pursued today, in Europe, with intensity, by Yanis Varoufakis and the DiEm25 movement, as well as the Sanders campaign in the United States.

And we must face the facts of daily life for those who lived on the Lower East Side of New York, 1890-1910, or Hell’s Kitchen at mid-town, the forties, on the West Side, the Irish Hell…and their equivalents in all the other major industrial cities, and then, much later in the 20th century, the “rise” of the black ghettoes in the Northeast and Mid-West, and parts of “sunny” California, where American racism joined in “solidarity” with the worst features of the lowest rungs of industrial life, the most dangerous jobs, the last hired-first fired syndrome, leading to the formation of a true American “Lumpenproletariet.”

The ultimate cruelty for black citizens turned out to be that the later years of “The Great Migration” from the rural South, between 1917-1970, ran headlong into the beginnings of another “Great Migration”: the flight of industry, of capital, fleeing first to the nearby union-free suburbs, then to the rural Midwest, and eventually to the American South and the U.S. Mexican border region, then on to Puerto Rico and finally, Asia. It was in these desperate but widespread pockets of underclass American life, and in the 13 states of Appalachia, that the poorer people of America lived out their own version of Polanyi’s awful England of the 1840’s.

Two more important points need to be made in addition to Polanyi’s stark warnings about the dangers of pure free market-driven societies. One comes on the very first page of his masterpiece, that there were four pillars to that long nineteenth century, the one that began in the late 18th century and stretched, in reality and foundational principles, to the collapse of 1929-1932. And those pillars formed an interlocking nexus of the social/military with economic life. The first was the balance of power between nations that began with the Congress of Vienna in 1815; the second was the international gold standard, which required balanced budgets domestically and in trading accounts as well, or else the British navy would appear on the errant nation’s horizon – a form of militarily enforced “austerity”; third, the “self-regulating market,” the one that was built in England first…then held up as a model for the whole world, and fourth, the “liberal” state, with that word having a meaning somewhat closer to the Tories of the second half of the 19th century in Britain than to the New Deal liberals of the second half of the 20th century in America. Polanyi supplies an immediate qualifier to that liberal state, which he says was a creation of the market ideas and mechanisms, or more precisely, those whom imposed it. And therefore, he must logically say that the free market was the key element which underlay all the other institutions.

Let us now shift to the modern day neoliberal equivalents of this interwoven nexus that was crucial to that long 19th century, to those ideas which have ruled the Republican Right since at least 1980, and to which the Democratic Party, chiefly in economic and foreign policy matters, has deferred since the rise of Bill Clinton, although the outlines were clear to attentive observers during the tarnished one term presidency of Jimmy Carter, 1976-1980.

The contemporary cognitive scientist and linguist George Lakoff has given us a very useful and compact version of the Republican Right’s moral and policy synthesis, a ten word summary of the pillars of Neoliberalism in our era, and they do echo very closely what Polanyi sketched out for us as the core of 19th century civilization in Europe. Lakoff put it this way: the Republican Right stands for “free markets; smaller government; lower taxes; family values; strong defense.” He also took a stab at what a ten word equivalent would be for Progressives, but it does not resonate with the same clarity and if one understands the many diverse movements composing the Democratic Party, it is not difficult to see why. One might count seven, if one includes corporate America and the professionals who serve them, the upper 20% of the income demographic that the 1% vs the 99% glides over. Revealingly, Lakoff’s formulation did not include the word “equality.” One attempt at a unifying summary might be: universal healthcare, full employment, greater equality, economic security and environmental protection, to which the corporate wing would likely object for every value. Yet one can also hear Feminists, Black Lives Matter, the Hispanic Caucus and LGBT activists complaining that their issues are being submerged – or ignored, or subsumed, under these oppressive “universals.” And unions? They have lost their independent voice, as demonstrated most vividly by their lack of stirring Labor Day national addresses. And they were perhaps the preeminent “countervailing” domestic power during the post World War II “golden decades.”

As tight as Lakoff’s ten words seem to be in describing the Republican Right’s 20th century recreation of the 19th century’s core values, they fail to capture the razor sharp cutting blades the movement uses to carve up what’s left of liberalism, the faint vestiges of the New Deal which hung on through the Reagan era. To do the Right full justice, we have to see how President Bill Clinton’s famous declaration fit in so seamlessly with their program, which was to dismantle the New Deal and shrink the size of government to the point where it could be “drowned in a bath tub”: anti-tax activist Grover Norquist’s death threat for “liberalism.”

When President Bill Clinton declared the “Era of Big Government Over” in his 1996 State of the Union Address, he was signaling far more than what those words literally stated. The year and unstated context are as important as the declaration itself. Market Utopianism was at its zenith, economic downturns banished, or so many thought: all the right Washington players and a probably a majority of the economics profession. The crucial unstated premise in Clinton’s declaration was that big problems stemming from the private sector economy were over as well. It was a major premise already on the way to be disproved: by the collapse of the Mexican peso in 1994-1995, trying to swim in the immediate wake of NAFTA; the Asian crisis of 1997; the Russian bond disaster of 1997-1998; and the collapse of the Promethean hedge fund Long Term Capital Management in 1998, the fund put together by the “best minds” in mathematical economics. But of course, since the Committee to Save the World and the Federal Reserve were there as an emergency room crew, who needed legislation and federal programs? This was the late 20th century’s equivalent of the rescue operations of financier J.P. Morgan in the wake of the 1907 panic.

The Clinton pronouncement did a good job of hiding the numerous policy implications that flowed from his premise (and wish?). The government was no longer going to be an ally of progressive movements outside of government, because there would be no big programs to promote, a mutually reinforcing dynamic of lowered expectations that is still playing out today in 2016 between the campaigns of Bernie Sanders and Hillary Clinton. And there were no powerful movements either, least of all from the economic left, none pushing a coherent program; the greater force on that side of the political spectrum had become the “ecological left.” The de-regulatory movement that went hand-in-hand as the enabler of the financialization of the economy and further political empowerment of Wall Street accelerated under Clinton, with near catastrophic consequences in 2007-2008.

Closely related to the de-regulatory push which the Democrats facilitated in alliance with the Republican Right was the growing movement for “privatization” of all formerly public functions: military, diplomatic, educational, social services, the prison and criminal justice system, even entire probation systems. Perhaps most publicly prominent in this trend was the move towards Charter Schools, the attacks upon teacher unions, and overthrowing the seniority system for teachers. Hedge fund leaders and high tech-social media champions like Mark Zuckerberg played a major role in this movement as principal funders, with a large dose of accommodation from the Obama Administration and Democratic urban mayors like Cory Booker in Newark, now a U.S. Senator.

The Clinton pronouncement of 1996 does a very good job at keeping the discussion of taxation off the policy table, which the Republican Right has dominated ever since Proposition 13 passed in California in 1978. This policy direction goes hand-in-hand with the neglect of American infrastructure, the inability to raise the gas tax, or raise the funds for any major left proposal for national health insurance, proper family leave programs or pre-school programs.

It also meshes nicely with the declaration of various leaders of the Republican Right in Congress, which may also be actively shared, or silently accommodated to, by almost the entire Democratic Party short of Senator Sanders and a few members of the Progressive Caucus: that “only the private sector can create jobs.” In order to believe this fiction, one does indeed have to bury the history of the New Deal, which is the still barely breathing historical legacy which refutes it (along with the domestic production record during World War II), the Civilian Conservation Corps and the WPA’s public work projects now nearly erased from citizen memory. If citizens all need jobs and only the private sector can create them, and it refuses do so unless the public gives it an even greater share of GDP, then have we not created a powerful dynamic to further imbalance the distribution of power in society, reinforced now by Supreme Court decisions putting the wealthy in the drivers’ seats of the political system?

The logical questions following upon Bill Clinton’s dramatic pronouncement are these: what will replace big government in an era of growing private sector economic crises? What will stop the spiral of America’s decline from world economic leadership (disputed, as we will see by the Clinton campaign) which is driven in good part by inadequate tax revenue despite the money leaving labor’s hands and congealing in the accounts of the 1% - here and abroad, given the rise of tax havens? Are not average citizens, the political parties and the public good itself now at the mercy of the economic powers of the private sector? Acquiescence in all of these dynamics was signaled in that 1996 declaration of Bill Clinton’s that the era of “Big Government” was over.

As one proof that Clinton’s declaration had turned into Neoliberal catechism, we have CNN host Chris Cuomo’s grilling of Senator Sanders at one of the televised town halls in early 2016, trying to get him to confess that his policy proposals violate this major commandment dominating the political sphere in the name of economic reality, the additional fitting irony being that Chris is the son of one of the last embers still glowing from the old New Deal’s ideals, of the late Governor Mario Cuomo of New York. It wasn’t a question; it was more of a secular Inquisition, a mini-McCarthy hearing on the potential violations of the boundaries drawn around political economy.

And what about that other major term of our neoliberal era, austerity, which is so cruel sounding, as if it came from the mouth of a Dickens villain from the mid-Nineteenth century? It is such an ingrained assumption that the word was never uttered during the American presidential debates. Mark Blyth, who has written a passionate, readable book about it, subtitled “The History of a Dangerous Idea,” defines it as “a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state’s budget, debts and deficits” which will “inspire ‘business confidence.’” Blyth considers it very dangerous because it was the failed “classical” response to the Great Depression, 180 degrees in opposition to the Keynesian prescriptions, and also exactly what Germany has been prescribing today for Greece with predictably disastrous results, as Yanis Varoufakis had predicted and then resigned over in 2015.

Another way to look at austerity is that it functions as the policy “operating system” of Neoliberalism. Yet in America, it has some particularly sadistic policy edges meant to bleed the remains of the New Deal federal government until it expires, what has been called the “starve the beast” direction. If “sadistic” sounds too strong for your middle class sensibilities, please follow closely the tale of the lead in the water for Flint, Michigan, where the poor got lead to drink and General Motors got the science driven clean-up, a story which even tops the cruelty of Wall Street banks selling very complex “interest rate swap” deals as budget deficit stop-gap measures to rural school boards in Pennsylvania – and local and state governments around the world. In both cases, this was the Austerity reality show, and the little people weren’t just “fired,” they were crucified on a cross of austerity. You can still find Bruce Bartlett’s informative article, Starve the Beast, online.

It has been noted that the Republican Right is gripped with a near religious intensity about their policy goals, and this registers its highest pitch in their anti-tax commandments and the pledge that Grover Norquist requires of their candidates, which is enforced via primary election challenges by groups like the Club for Growth. It has become particularly effective since the 1970’s as middle class/working class wages and incomes have stagnated or declined, so that these segments of society look for any financial relief within their grasp, and the Republican Right is only too happy to offer the anti-tax pledge to them as an emblem of its fidelity. It is usually accompanied by a not very well disguised Greek Chorus singing gently offstage, reminding them that most of their tax money was going to lazy minorities anyhow, not “hardworking families” like themselves, a phrase which carries within its unspoken terms the old 19th Century distinction between the deserving and undeserving poor. Hillary Clinton has sung this song as well, a milder tune, to the middle class in 2016, pledging her own version of “no new taxes.”

In the United States, the “no new taxes” declaration has particular saliency, and cruelty, because almost all state and local governments must balance their budgets by law, even in times of recession and financial crisis, and if the Republican Right is successful in applying this reasoning to the federal government, it means that the Keynesian fiscal response to economic crisis has been entirely taken off the table, except for tax cuts. If the left proposes increased spending for a jobs program, via infrastructure spending or, heaven forbid, direct public job creation like the old Civilian Conservation Corps, then budget balancing is thrust forward as the Commandment, no matter how much the Right ignored it in their own administrations since 1980.

The “Starve the Beast” direction is also reinforced by one of the great “common sense” myths of American political life, the “kitchen table” wisdom that governments must balance their budgets just like families, thus assuring that all sectors, public and private, will be “contracting” during times of economic stress – just like the Great Depression. Disbelief accompanied my own online survey in 2010 in Maryland, at what state- wide candidates were saying on these matters. Democrats were indistinguishable from Republicans, even in this post Great Financial Crisis mood, most repeating verbatim the kitchen table wisdom equating family and governmental budgets, with no mention that the federal government, with the powers delegated to the Federal Reserve, was an entirely different institution with specially designed powers…the crucial difference which can mean life or death for citizens and local governments in a severe economic crisis. Thus the family’s “kitchen table” common sense supplies the butcher’s knife to cut the umbilical cord of federal stimulus spending, the result being millions of families foreclosed upon.

And thus sadly the intellectual fulcrum point of American political economy is no different in 2016 than it was in 1929-1932, Modern Monetary Theory and the life of Keynes be damned. In terms of economic ideas we are still in the late 19th century, and as Karl Rove has declared, that’s just where he and the Right want us to be, secure in the embrace of William McKinley, not listening to William Jennings Bryan’s sermons about being “crucified on a cross of gold (or fiscal austerity).”

And what a world that long 19th Century was. If Mr. Rove wants us to remember it for its spectacular economic growth, lack of a federal regulatory state and the illegality of unions, he certainly will not dwell upon, or perhaps even mention, the growing intensity of its economic crises, with even the king of the trusts, Mr. Morgan himself, realizing after 1907, that the slumps of the age would have to mitigated by a hybrid institution, the Federal Reserve. Karl Polanyi was correct: no one, not even the kings of the private sector, could live with the effects of a “pure” free market.

Someone exploring the evolution of political economy in America is more than likely to come across a very powerful sentence uttered by President Woodrow Wilson, usually placed as an epigraph introducing an important chapter of larger works. Wilson said, in a bold, direct way, what no modern president or candidate except perhaps Bernie Sanders could even be imagined as saying in public, the words being heresy to the illusions of our age, which shares much in common with the one Wilson was addressing: “‘The Truth is, we are all caught in a great economic system which is heartless.’”

Wilson was a progressive Conservative or conservative Progressive. Richard Hofstadter, whose classic The American Political Tradition appeared in 1948, entitled his forty-four page chapter about him “The Conservative as Liberal.” Wilson’s powerful, compact judgement about our economic system is taken from the collection of his campaign speeches from 1911-12, published in book form as The New Freedom, and upon rereading it in 2016 it is remarkable how similar Wilson sounds to the Democratic candidates, sometimes leaning towards Sanders, sometimes sounding closer to the more cautious Clinton.

In private correspondence, according to Hofstadter, Wilson seemed to be evolving into a Social Democrat, especially in matters of energy and natural resource ownership; in public, on economic reforms, he was caught in that whirlpool which spins so many progressive reformers round and round: he brandished anti-trust rhetoric and thought jailing even just one prominent corporate lawbreaker would be sufficient shock to restore the “common good.” In fact and policy, though, he longed to restore the past, the economy of Lincoln’s antebellum boyhood, of many small competing firms. In reality, from his Progressive Era to the New Deal, and into our own times, America has never put a vigorous, sustained anti-trust policy into action. The reason for the failure to do so, most likely, is because such a program would mean accepting what those further to the left have always said about capitalism itself: left to its own inclinations, it tends towards oligopoly if not monopoly.

Wilson was a Southerner at heart, raised by parents with deep roots in the Protestant ministry, and it is not unfair to say he was, at his worst, a moralistic, racist Victorian, linking him even more to the feel of the 2016 campaign, as black activists at Princeton University seek to rename buildings and schools for someone better, and those at Yale do the same for John C. Calhoun. Wilson’s name today evokes a string of epithets from even the most refined on the academic left, like Corey Robin. Yet in re-reading his book, it is hard not to see a better side to him, someone who grasped that the private powers, the interlocking trusts of the late Gilded Age, were deeply impairing if not destroying democracy.

The New Freedom reminds us that we have now had three great Gilded Ages in America: the original, 1880-1916; then “the frenzy” of 1922-1929; and 1980 through to the present, with the high-water mark coming in the “Roaring” late 1990’s, with the crash of 2008-2009 still not marking the end of “Part III” because we have nowhere come close to dealing with the loss of industrial jobs overseas, wage stagnation or the great maldistribution of wealth. In other words, we still don’t have a new green New Deal, one that will have to come up with freshly invented countervailing forces to keep private economic power from strangling democracy. Hofstadter says that was also Wilson’s great failing: he called for a revitalization of American democracy, but not for economic democracy. The American state he envisioned was going to be a neutral arbiter among competing interests rather than a champion of the middle and working classes. His intervention into World War I, left stranded, for a generation, the moderate reforms his administration did pass, and gave us an all too realistic preview of how powerful and reactionary the American state can be when embarked upon one of its “crusades” against evil “others.” Even when these directed enthusiasms, or orchestrated hatreds, did not start out that way, they have usually ended up being aimed at the American left.

For now, however, consider these brief passages for the connection of President Wilson to our own times and troubles, the better similarities, from the pre-war Wilson. All are taken from the early chapters of The New Freedom:

Since I have entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know there is a power somewhere, so organized, so subtle, so watchful, so interlocked, so complete, so pervasive that they had better not speak above their breath when they speak in condemnation of it…if he enters certain fields, there are organizations which will use means against him that will prevent his building up a business which they do not want to have built up…Why? Because the laws of this country do not prevent the strong from crushing the weak…

All over the union people are coming to feel they have no control over the course of affairs…until two years ago we had witnessed with increasing concern the growth in New Jersey of a spirit of almost cynical despair. Men said: ‘We vote; we are offered the platform we want; we elect the men who stand on that platform, and we get absolutely nothing.’ So they began to ask: ‘What is the use of voting? We know that the machines of both parties are subsidized by the same persons, and therefore it is useless to turn in either direction.’…

We are in a temper to reconstruct economic society, as we were once in a temper to reconstruct political society…We stand in the presence of a revolution, not a bloody revolution; America is not given to the spilling of blood, but a silent revolution, whereby America will insist upon recovering in practice those ideas which she has always professed, upon securing a government devoted to the general interest and not to special interests…

The law is still living in the dead past which we have left behind…We have not adjusted the law to the facts of the new order. (Editor’s Note: the emphases are mine, not Wilson’s.)

In early May, 2016, the American Presidential Primary looks as if it has clarified the choices: it will likely be Donald Trump versus Hillary Clinton, barring a Black Swan legal event against Secretary Clinton. Senator Bernie Sanders has had a powerful impact in pushing her further to the left than her natural political inclinations would probably lead - which is to the moderate side of Neoliberalism. It remains to be seen if Sanders has founded a movement with life beyond his candidacy. It is appropriate to ask, then, if Karl Polanyi’s insights, his framework for understanding capitalism, can help us make sense of these political dynamics in the world’s most hyper-capitalist developed economy.

In the campaign so far, it is clear that citizen unhappiness with the economic status quo has driven both Trump and Sanders’ supporters, with cultural grievances, and worse, making the Trump phenomenon more difficult to explain, although those familiar with all that is meant by the dynamics of “Weimar Culture” will have less trouble. Alternatively, President Obama and Secretary Clinton have been emphasizing the success of the American recovery since the 2008-2009 financial crisis, especially the drop in the formal unemployment rate to 5%. This focus has its evasions.

Within the space of just five months, there have been two important studies released, the first from a pair of Princeton University economists, documenting increased pain – increased suicide rates - especially among working class citizens, 45-54 years old – and another showing increases in suicide for all categories but the elderly and black men, the overall rate now the highest for the nation in 30 years. The cheerful official facade also evades the more telling statistics of how low the labor force participation rate has fallen, and how high the unemployment rates for non-college young black people are, between 30 and 51 percent, depending on the measuring tools. It is the young, both in and out of the workforce, including college graduates, who have most deeply embraced Senator Sanders’ narrative about the acute economic distress. And it is Senator Sanders who has explained his democratic socialist roots by linking them to FDR’s Second Bill of Rights, the “Second Bill” serving as the outline for an American version of social democracy, given in his State of the Union address from 1944, with Sanders repeating its ringing declaration that “necessitous men are not free men.” This framing is very close to where Polanyi leads us in his concluding chapter’s discussion in The Great Transformation, entitled “Freedom in a Complex Society,” and published in the same year as FDR’s speech.

And what about Polanyi’s dramatic assertions about where free market fundamentalism might lead, if not mitigated by various “interventions,” his dramatic opening page declaration about the “stark utopia” in store, that would end up “annihilating the human and natural substance of society?” If one adds the Trump vote to the Sanders vote, it is clear that a majority of the American voting public believes something dramatic has happened, that the economy is vastly underperforming, even as the solutions from the two camps have few points of intersection. The suicide findings add another dimension to the overall sense in the nation that something has gone terribly wrong.

If citizens have the inclination to look a bit further, there are indeed two recent works which place the reality at the bottom of American society close to Polanyi’s bleak warning. They are Michelle Alexander’s The New Jim Crow: Mass Incarceration in the Age of Colorblindness and the Harvard Law Review’s study of Policing and Profit from April of 2015. This is where the realities of America’s long and ugly history of racial dynamics meet the mechanisms of austerity, Neoliberalism’s drive for lower taxes and the privatization of prisons and the probation systems – and much else. The results are perhaps the more jarring in that they have reached a culmination under the nation’s first black President, who has continued the policies which drive the trends, especially the War on Drugs. And yet, in step with the Zeitgeist, which their factual revelations challenge directly, neither of these startling works actually invokes the term Neoliberal, and both emphasize racial over economic forces.

All through late 2015 and early 2016, observers of American politics have struggled to explain the phenomenon of Donald Trump, but none have tried to do so with the assistance of Polanyi’s “double movement,” which is the pattern, often denied on the Right, of interventions into the market mechanisms to ease the suffering and social disruption, for both businesses and workers, and to protect the environment. Chapters Eleven, Twelve and Thirteen of The Great Transformation, which present the “double movement” in considerable detail - and documentation - for the second half of the 19th Century and on into the 1930’s, contain some of the best fine-grained judgements and most distinguished writing about political economy in modern history.

We should remember that Polanyi states that the double movement ends in legislative turmoil and eventually, Parliamentary paralysis. This set the stage, in the 1930’s, for the triumph of fascism. The contemporary manifestation, “the gridlock in Washington, DC” is so familiar it needs no additional emphasis here.

Let us not be shy: many serious observers, from all parts of the spectrum, have issued warnings about Mr. Trump’s tendencies in this direction, towards a homegrown U. S. fascism without the organized Brown and Black shirts. Trump has clearly, by choosing to run as a Republican in this era, placed himself on the Right side of the ideological spectrum, even as he has brought down the wrath of the Republican Right “establishment” by making explicit what in previous years had only been hinted at. Most observers agree he has succeeded by splitting off the working and lower middle class segments of the Right from the more affluent constituencies in the Republican coalition, partly by his ugly cultural framing, and partly by turning against “free trade” as practiced by both parties. Yet his tax proposals do not at all square with his populist job creation rhetoric, in fact are anti-egalitarian, and most of his other economic policy pronouncements are no more substantive than blustery promises and wishes. His emblazoned slogan – Make America Great Again! - is a way of hiding, by assertive nationalism, the bitterness of his anti-modernist supporters and denying the claims of progress made by both President Obama and Secretary Clinton. Yet, still, the race offers a billionaire running against a mere multi-millionaire who insists that America has never lost its greatness. And then there is author Thomas Frank, in Listen Liberal, reminding us that a good portion of the top 20% income demographic has moved, since the 1960’s, from the Republican party into the Democratic camp, further alienating the crucial white working class voter, especially the men, because it is this new Democratic demographic that has authored the “political correctness” catechism.

Trumpism arises at this late moment after each of the major party’s efforts to mitigate the fallout from the unleashed markets of the late 1990’s have failed: the Right’s efforts to militarily bring democracy to the Middle East (and a clearly Neoliberal constitution to Iraq), after the opening provided by the tragedy of 9/11 and a vast intervention to bail out the collapsed airline industry. Whatever the multi-causal motivation, including the logical extension of Neoliberal Globalization’s burdens, it became a multi-trillion dollar exercise in military Keynesianism, and futility, with even more now being promised by the man who says Iraq was a terrible mistake but that he will smite ISIS in one grand stroke, meanwhile expanding the military to even greater magnitudes of world supremacy. In addition to their complicity with military Keynesianism, there was also the Democratic Centrist attempt to mitigate the Great Financial Crisis of 2008-2009 through Federal Reserve monetary gymnastics and emergency room Keynesianism. It was New Deal lite, with no CCC or WPA, no public job creation or any reference to FDR’s Second Bill of Rights until Senator Sanders’ heretical speech at Georgetown University in November of 2015. These efforts were crowned by a willingness to increase the public debt to save Wall Street, but not to save millions of evicted homeowners, leaving many citizens with a very bitter aftertaste that has lingered into the election year.

Who can say where Trumpism leads, or if it can win in November of 2016? In many ways, openly expressed by Trump himself, his movement can be seen as the climax of the Republican Right’s attempt to maintain Victorian moral values in the sexual and cultural realm against the waves of Creative cultural Destruction unleashed by its own championed Free Market Forces in the economic realm, ever since the 1960’s. Hence the attack upon Political Correctness. When this framing is used against President Obama, it hurls the accusation of American economic and military decline - due to “liberal” weakness. “True Conservatives” to Trump’s Right bristle at the notion that this New York real estate tycoon is the defender of their “traditional” values.

It is not an exaggeration to see in these themes a milder version of Weimar dynamics. The opposing candidate, the first major woman contender for the Presidency, will, by her symbolism alone, raise these three aspects to a fever pitch, even as her own diplomatic history will be deployed defensively to show how tough she can be in foreign policy. We will also hear many references to the high-tide wonders of Market Utopianism in the late Roaring 1990’s, under her husband’s policies.

The sophistication of Polanyi’s handling of the double movement, how cross-class alliances of a surprising and counter-intuitive nature affected policy struggles in the political arena, means that his insights can inform us about the most ominous year in American politics since 1896. Unfortunately, even the best insights cannot predict the outcome.

In the broadest terms, the contest still, with all due respect to Sanders’ achievements, is between the Neoliberal Right, now in its populist phase, and the Neoliberal Center, trying to move left, some would say “fake left” - but not too far. If the Democratic Party background papers of the primary season, of Larry Summers and Joseph Stiglitz from early 2015, are the intellectual source springs for Clinton’s policies, then structural interventions into the labor markets remain beyond the pale. This despite the low labor participation rate, infrastructure and global warming crises all making the obvious case for public jobs and a new Civilian Conservation Corps. This shows the power still of Neoliberalism in economics, our modern day version of the four pillars which Polanyi explained were the mainstays of the 19th Century’s “classical” economy, the one that ended in disaster in 1929-1932. If Trump wins in November, we simply don’t know what form his governance will take, especially its economic policies. But Polanyi has made the outline of the possibilities remarkably clear. In Germany in the 1930’s, the worst case, those four pillars were demolished and something new and terrifying put in their place. Brace yourself.

SOURCES

Magazines, Periodicals and Videos

Bartlett, Bruce. “Starve the Beast: Origins and Development of a Budgetary Metaphor.” The Independent Review, V. XII, Number 1, (Summer, 2007): Pages 5-26.

Blinder, Alan S. “What’s the Matter with Economics?” New York Review of Books, December 18, 2015, Volume LXI, Number 20, Pages 55-57.

Blinder, Alan S.; Madrick, Jeff; Packer, Arnold, “What’s the Matter with Economics?” An Exchange. New York Review of Books, January 8, 2015, Volume LXII, Number 1, Page 40.

Edsall, Thomas Byrne. The Great Trump Reshuffle.” New York Times, May 4, 2016.

Frank, Thomas. “What’s the Matter with the Democrats,” Address at the Commonwealth Club, San Francisco, CA, March, 29, 2016.

Hastings, Max. “What’s New About the War?” New York Review of Books, March 10, 2016, Volume LXIII, Number 4, Pages 28-30.

Jacobson, Louis. “In debate, Bernie Sanders says African-American youth unemployment rate is 51%, and 36% for Hispanics.” Politifact, October 13, 2015.

Hedges, Chris. “Hedges & Wolin: Can Capitalism and Democracy Coexist?” Interview at the RealNewsNetwork, November 6, 2014.

Kolata, Gina. “Death Rates Rising for Middle-Aged White Americans, Study Finds.” New York Times, November 2, 2015.

Marshall, Stephen. “Does Naomi Klein Oversimplify the Connection Between Globalization and War?” Alternet, September 21, 2007.

McKibben, Bill. “Bernie Sanders Refuses to Melt.” The Huffington Post, January 26, 2016. http://www.huffingtonpost.com/bill-mckibben/bernie-sanders-town-hall_b_9077552.html

Neil, William. (billofrights) “Citizens: If James Galbraith and Bill Black don’t have any ‘standing,’ where does that leave you?” Daily Kos, February 23, 2016. http://www.dailykos.com/story/2016/02/23/1489977/-Citizens-If-James-Galbraith-and-Bill-Black-don-t-have-any-standing-where-does-that-leave-you

“Policing and Profit,” Harvard Law Review, Volume 128, No. 6, April 10, 2015. http://harvardlawreview.org/2015/04/policing-and-profit/

Ravitch, Diane. “Solving the Mystery of Schools.” The New York Review of Books, March 24, 2016, Volume LXIII, Number 5, Pages 34-36.

Sanders, Senator Bernie. “Democratic Socialism,” address at Georgetown University, November 19, 2015. http://www.c-span.org/video/?400961-1/senator-bernie-sanders-address-democratic-socialism

Summers, Lawrence H., Ball, Ed. “Report of the Commission on Inclusive Prosperity.” Center for American Progress, January 15, 2015. https://www.americanprogress.org/issues/economy/report/2015/01/15/104266/report-of-the-commission-on-inclusive-prosperity/

Stiglitz, Joseph. “Rewriting the Rules of the American Economy.” Roosevelt Institute, May 12, 2015. http://rooseveltinstitute.org/rewriting-rules-report/

Tavernise, Sabrina. “U.S. Suicide Rate Surges to a 30-Year High.” New York Times, April 22, 2016. http://www.nytimes.com/2016/04/22/health/us-suicide-rate-surges-to-a-30-year-high.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

Varoufakis, Yanis. “Can the Internet Democratize Capitalism?” Naked Capitalism, February 22, 2014. http://www.nakedcapitalism.com/2014/02/yanis-varoufakis-can-internet-democratize-capitalism.html

Books

Alexander, Benjamin F. Coxey’s Army: Popular Protest in the Gilded Age. Baltimore, MD.: Johns Hopkins University Press, 2015.

Alexander, Michelle. The New Jim Crow: Mass Incarceration in the Age of Colorblindness. New York: The New Press, 2012.

Blyth, Mark. Austerity: The History of a Dangerous Idea. New York: Oxford University Press, 2015.

Cowie, Jefferson. Capital Moves: RCA’s Seventy-Year Quest for Cheap Labor. New York: The New Press, 2001.

Edsall, Thomas Byrne. The Age of Austerity: How Scarcity Will Remake American

Politics. New York: Doubleday, 2012.

Fritzsche, Peter. Rehearsals for Fascism: Populism and Political Mobilization in Weimar Germany. New York: Oxford University Press, 1990.

Gay, Peter. Weimar Culture: The Outsider as Insider. New York: Harper & Row, 1970.

Harrington, Michael. The Other America: Poverty in the United States. New York: Scribner, 2012 Edition of the original 1962 version.

Harvey, David. A Brief History of Neoliberalism. New York: Oxford University Press, 2005.

Hofstadter, Richard. The American Political Tradition and the Men Who Made It. New York: Vintage Books, 1948.

Social Darwinism in American Thought. Boston: Beacon Press, 1967. Originally published 1944.

Katznelson, Ira. Fear Itself: The New Deal and the Origins of Our Time. New York: Liveright Publishing Company, 2013.

Lakoff, George. Don’t Think of an Elephant. White River Junction, Vt.: Chelsea Green Publishing Corporation, 2004.

Moral Politics: How Liberals and Conservatives Think. Chicago: University of Chicago Press, 2002.

Lane, Roger. Roots of Violence in Black Philadelphia, 1860-1900. Cambridge, Mass.: Harvard University Press, 1986.

Lemann, Nicholas. The Promised Land: The Great Black Migration and How It Changed America. New York: Vintage Books, 1992.

Lichtheim, George. The Origins of Socialism. New York: Frederick A. Praeger, 1969.

A Short History of Socialism. New York: Frederick A. Praeger, 1970.

Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press, 2001. First published: 1944.

Smith, Page. The Rise of Industrial America: A People’s History of the Post-Reconstruction Era, Volume 6. New York: Penguin Books, 1984.

Sunstein, Cass R. The Second Bill of Rights: FDR’s Unfinished Revolution and Why We Need It More Than Ever. New York: Basic Books, 2004.

Wilson, Woodrow. The New Freedom. http://www.readcentral.com/book/Woodrow-Wilson/Read-The-New-Freedom-A-Call-For-the-Emancipation-of-the-Generous-Energies-of-a-People-Online

Wolin, Sheldon S. Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism. Princeton, NJ: Princeton University Press, 2008.

Worster, Donald. Nature’s Economy: A History of Ecological Ideas. New York: Cambridge University Press, 1977.


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[Mar 09, 2017] Neoliberalism as cancer of economics

Mar 09, 2017 | economistsview.typepad.com

libezkova -> RGC... March 09, 2017 at 10:39 AM , 2017 at 10:39 AM
That's good thank you. I am thinking along the same lines:

In some way unregulated finance acts as cancer cells in human body (while this analogy is definitely superficial it might be stimulating for thinking about neoliberalism):

1. Uncontrollable growth detached from real economics ("casino capitalism" with its proliferation of hedge funds, private equity firms, derivatives, credit default swaps and similar instruments).

2. Suppression of immune system so that this uncontrollable growth should not be checked (aka deregulation, capture of economics departments, an army of neoliberal think tanks)

3. Like cancel creates a blood network to stimulate its own growth, finance also diverts lion share of resource in the economy for its own consumption -- casino consumption.

4. Very difficult to fight and can reoccur if treatment was insufficient or ineffective.

[Mar 09, 2017] Our Obsolete Market Mentality

Mar 09, 2017 | economistsview.typepad.com
anne : March 08, 2017 at 11:23 AM , 2017 at 11:23 AM
http://billtotten.blogspot.co.il/2005/06/our-obsolete-market-mentality.html

1947

Our Obsolete Market Mentality
Civilization Must Find a New Thought Pattern
By Karl Polanyi

The first century of the Machine Age is drawing to a close amid fear and trepidation. Its fabulous material success was due to the willing, indeed the enthusiastic, subordination of man to the needs of the machine.

Liberal capitalism was in effect man's initial response to the challenge of the Industrial Revolution. In order to allow scope to the use of elaborate, powerful machinery, we transformed human economy into a self-adjusting system of markets, and cast our thoughts and values in the mold of this unique innovation.

Today, we begin to doubt the truth of some of these thoughts and the validity of some of these values. Outside the United States, liberal capitalism can hardly be said to exist any more. How to organize human life in a machine society is a question that confronts us anew. Behind the fading fabric of competitive capitalism there looms the portent of an industrial civilization, with its paralyzing division of labor, standardization of life, supremacy of mechanism over organism, and organization over spontaneity. Science itself is haunted by insanity. This is the abiding concern.

No mere reversion to the ideals of a past century can show us the way. We must brave the future, though this may involve us in an attempt to shift the place of industry in society so that the extraneous fact of the machine can be absorbed. The search for industrial democracy is not merely the search for a solution to the problems of capitalism, as most people imagine. It is a search for an answer to industry itself. Here lies the concrete problem of our civilization.

Such a new dispensation requires an inner freedom for which we are but ill equipped. We find ourselves stultified by the legacy of a market-economy which bequeathed us oversimplified views of the function and role of the economic system in society. If the crisis is to be overcome, we must recapture a more realistic vision of the human world and shape our common purpose in the light of that recognition. Industrialism is a precariously grafted scion upon man's age-long existence. The outcome of the experiment is still hanging in the balance. But man is not a simple being and can die in more than one way.

The question of individual freedom, so passionately raised in our generation, is only one aspect of this anxious problem. In truth, it forms part of a much wider and deeper need - the need for a new response to the total challenge of the machine.


The Fundamental Heresy

Our condition can be described in these terms:

Industrial civilization may yet undo man. But since the venture of a progressively artificial environment cannot, will not, and indeed, should not, be voluntarily discarded, the task of adapting life in such a surrounding to the requirements of human existence must be resolved if man is to continue on earth. No one can foretell whether such an adjustment is possible, or whether man must perish in the attempt. Hence the dark undertone of concern.

Meanwhile, the first phase of the Machine Age has run its course. It involved an organization of society that derived its name from its central institution, the market. This system is on the downgrade. Yet our practical philosophy was overwhelmingly shaped by this spectacular episode. Novel notions about man and society became current and gained the status of axioms. Here they are:

As regards man, we were made to accept the heresy that his motives can be described as "material" and "ideal", and that the incentives on which everyday life is organized spring from the "material" motives. Both utilitarian liberalism and popular Marxism favored such views.

As regards society, the kindred doctrine was propounded that its institutions were "determined" by the economic system. This opinion was even more popular with Marxists than with liberals.

Under a market-economy both assertions were, of course, true. Butonly under such an economy. In regard to the past, such a view was no more than an anachronism. In regard to the future, it was a mere prejudice. Yet under the influence of current schools of thought, reinforced by the authority of science and religion, politics and business, these strictly time-bound phenomena came to be regarded as timeless, as transcending the age of the market.

To overcome such doctrines, which constrict our minds and souls and greatly enhance the difficulty of the life-saving adjustment, may require no less than a reform of our consciousness.


The Market Trauma ....

anne -> anne... , March 08, 2017 at 12:37 PM
https://en.wikipedia.org/wiki/The_Great_Transformation_(book)

"The Great Transformation" * is a book by Karl Polanyi, a Hungarian-American political economist. First published in 1944, it deals with the social and political upheavals that took place in England during the rise of the market economy. Polanyi contends that the modern market economy and the modern nation-state should be understood not as discrete elements but as the single human invention he calls the "Market Society".

A distinguishing characteristic of the "Market Society" is that humanity's economic mentalities were changed. Prior to the great transformation, people based their economies on reciprocity and redistribution and were not rational utility maximizers. After the great transformation, people became more economically rational, behaving as neoclassical economic theory would predict. The creation of capitalist institutions not only changed laws but also fundamentally altered humankind's economic mentalities, such that prior to the great transformation, markets played a very minor role in human affairs and were not even capable of setting prices because of their diminutive size. It was only after the creation of new market institutions and industrialization that the myth of humanity's propensity to barter and trade became widespread in an effort to mold human nature to fit the new market based economic institutions. Polanyi thus proposes an alternative ethnographic approach called "substantivism", in opposition to "formalism", both terms coined by Polanyi.

* http://inctpped.ie.ufrj.br/spiderweb/pdf_4/Great_Transformation.pdf

Mr. Bill -> DrDick ... , March 08, 2017 at 12:33 PM
"I found myself coming back to the central arguments of the book: the embeddedness of a market economy in a broader set of social arrangements, the rejection of an autonomous economic sphere, the folly of treating markets as self-stabilizing. ..." Wow.

What the heck was the great transformation ? In as few of words as possible.

RC AKA Darryl, Ron -> Mr. Bill... , March 08, 2017 at 12:47 PM
[Other than her dad's magnum opus?]

https://en.wikipedia.org/wiki/The_Great_Transformation_(book)

General argument

Polanyi argued that the development of the modern state went hand in hand with the development of modern market economies and that these two changes were inextricably linked in history. Essential to the change from a premodern economy to a market economy was the altering of human economic mentalities away from a non-utility maximizing mindset to one more recognizable to modern economists.[5] Prior to the great transformation, markets had a very limited role in society and were confined almost entirely to long distance trade.[6] As Polanyi wrote, "the same bias which made Adam Smith's generation view primeval man as bent on barter and truck induced their successors to disavow all interest in early man, as he was now known not to have indulged in those laudable passions."[7]

The great transformation was begun by the powerful modern state, which was needed to push changes in social structure and human nature that allowed for a competitive capitalist economy. For Polanyi, these changes implied the destruction of the basic social order that had reigned because of pre-modern human nature and that had existed throughout all earlier history. Central to the change was that factors of production like land and labor would now be sold on the market at market determined prices instead of allocated according to tradition, redistribution, or reciprocity.[8] He emphasized the greatness of the transformation because it was both a change of human institutions and human nature.

His empirical case in large part relied upon analysis of the Speenhamland laws, which he saw not only as the last attempt of the squirearchy to preserve the traditional system of production and social order but also a self-defensive measure on the part of society that mitigated the disruption of the most violent period of economic change. Polanyi also remarks that the pre-modern economies of China, the Incan Empire, the Indian Empires, Babylon, Greece, and the various kingdoms of Africa operated on principles of reciprocity and redistribution with a very limited role for markets, especially in settling prices or allocating the factors of production.[9] The book also presented his belief that market society is unsustainable because it is fatally destructive to human nature and the natural contexts it inhabits.

Polanyi attempted to turn the tables on the orthodox liberal account of the rise of capitalism by arguing that "laissez-faire was planned", whereas social protectionism was a spontaneous reaction to the social dislocation imposed by an unrestrained free market. He argues that the construction of a "self-regulating" market necessitates the separation of society into economic and political realms. Polanyi does not deny that the self-regulating market has brought "unheard of material wealth", but he suggests that this is too narrow a focus. The market, once it considers land, labor and money as "fictitious commodities" (fictitious because each possesses qualities that are not expressed in the formal rationality of the market), and including them "means to subordinate the substance of society itself to the laws of the market."[10]

This, he argues, results in massive social dislocation, and spontaneous moves by society to protect itself. In effect, Polanyi argues that once the free market attempts to separate itself from the fabric of society, social protectionism is society's natural response, which he calls the "double movement." Polanyi did not see economics as a subject closed off from other fields of enquiry, indeed he saw economic and social problems as inherently linked. He ended his work with a prediction of a socialist society, noting, "after a century of blind 'improvement', man is restoring his 'habitation.'"

[Mar 09, 2017] Levitt is prophetic in portraying the hubris and triumphalism of neoliberalisms advocates and the risks that their experiments took

Notable quotes:
"... the attempt to impose on the rest of the world a radical Anglo-American vision of the autonomy of market forces, backed by sanctions to subordinate nations, peoples and communities to the rights of property, is a Utopian project which threatens to unleash uncontrollable reactionary political forces" (p. 52). It is "incompatible with democratic governance, cultural diversity and pluralism ..."
"... The vast majority of Sanders's supporters are not Marxists clamoring for a dictatorship of the proletariat or the nationalization of industry. Most are, probably without knowing it, secret followers of Karl Polanyi. Polanyi's classic, The Great Transformation, was published in 1944-the same year that FDR promised a "Second Bill of Rights" guaranteeing employment, housing, social security, medical care, and education to all Americans. Today, Polanyian arguments are once again in the air. Since his ideas seem to be everywhere but he is rarely mentioned, a (re-)introduction to his thinking, and its relevance to politics in 2016, is in order. ..."
Mar 09, 2017 | economistsview.typepad.com
Peter K. : March 08, 2017 at 01:02 PM , 2017 at 01:02 PM
"Many of these essays were written years ago, yet Levitt is prophetic in portraying the hubris and triumphalism of neoliberalism's advocates and the risks that their experiments took. As she writes, "the attempt to impose on the rest of the world a radical Anglo-American vision of the autonomy of market forces, backed by sanctions to subordinate nations, peoples and communities to the rights of property, is a Utopian project which threatens to unleash uncontrollable reactionary political forces" (p. 52). It is "incompatible with democratic governance, cultural diversity and pluralism" (52)."

...

Peter K. : , March 08, 2017 at 01:08 PM
https://www.dissentmagazine.org/online_articles/karl-polanyi-explainer-great-transformation-bernie-sanders

Karl Polanyi for President

Patrick Iber and Mike Konczal ▪ May 23, 2016

Should health care and education be rights, or products that those with enough money can purchase in markets? About seventy-five years ago, in response to the Great Depression, Franklin D. Roosevelt offered, through the programs of the New Deal, an expanded definition of freedom founded on economic security-immortalized as "freedom from want" in his famous speech of 1941. In our own time, severe inequality and the most serious economic crisis since the Great Depression have once again brought the issue of what should count as a right to the surface of political debate.

One candidate, Bernie Sanders, has argued explicitly that health care and education-two things that the New Deal mostly left alone-should be rights and therefore accessible to all. While public policy pundits fight over the specifics, they miss that Sanders, by discussing these things as rights instead of just policies, has changed the nature of the debate. This key distinction helps explain why tens of thousands have turned out to Sanders rallies across the country-not to mention the millions who have supported him online and at the polls-demonstrating enthusiasm for a politics that he explicitly identifies as "democratic socialism." But what kind of socialism?

The vast majority of Sanders's supporters are not Marxists clamoring for a dictatorship of the proletariat or the nationalization of industry. Most are, probably without knowing it, secret followers of Karl Polanyi. Polanyi's classic, The Great Transformation, was published in 1944-the same year that FDR promised a "Second Bill of Rights" guaranteeing employment, housing, social security, medical care, and education to all Americans. Today, Polanyian arguments are once again in the air. Since his ideas seem to be everywhere but he is rarely mentioned, a (re-)introduction to his thinking, and its relevance to politics in 2016, is in order.

So wait: Karl who?

Karl Polanyi was born in 1886 in Vienna and educated in Budapest, twin capitals of what was then the Austro-Hungarian Empire. A soldier during World War I, he supported an anti-aristocratic revolution in 1918 in Hungary known as the Aster Revolution, but fled the short-lived Communist government headed by Bela Kún in 1919. Arriving in Vienna, he lived out its years as a "socialist municipality," governed by Social Democrats, which featured workers' cooperatives, public housing, free health care, and a flourishing municipal culture. That formative experience came to an end with the rise of fascism; Polanyi fled to England in 1933, where he taught adult education through the Workers' Educational Association. In the early 1940s, he spent time in Vermont, and a two-year grant from the Rockefeller Foundation allowed him to complete The Great Transformation. He taught at Columbia University before retiring to Canada in 1953, where he died in 1964.

The Great Transformation? What is that? A book about magic?

It's a book about political economy. It's one of the most important books on the topic, in fact, and should be viewed as part of the canon of left thought.

Here's a story that we hear all the time. The free market is the most effective way of ensuring prosperity. We can ensure that the market is free by getting the government to simply get out of the way, or, at most, fix a few market failures here or provide some economic security. The more parts of life that become like markets, the better. That's not just because markets are the best for ensuring the good life-it's that free markets are also a foundation for liberty itself, because economic freedom is political freedom.

Polanyi's work dismantles this argument in two important ways. The first is to show that markets are planned everywhere they exist. Economic organization is always the result of the state. "Laissez-faire," he writes, "was planned. . . . [The] laissez-faire economy was the product of deliberate state action."

Polanyi says that the economy is "embedded" in society-part of social relations-not apart from them. He believes that a pure free market society is a utopian project, and impossible to realize, because people will resist the process of being turned into commodities. In fact, he calls labor a "fictitious commodity," along with land and money. And this process of turning fictitious commodities into market commodities can only be carried out by the state.

...

Peter K. : , March 08, 2017 at 01:11 PM
"Should health care and education be rights, or products that those with enough money can purchase in markets? About seventy-five years ago, in response to the Great Depression, Franklin D. Roosevelt offered, through the programs of the New Deal, an expanded definition of freedom founded on economic security-immortalized as "freedom from want" in his famous speech of 1941. In our own time, severe inequality and the most serious economic crisis since the Great Depression have once again brought the issue of what should count as a right to the surface of political debate."

Think about how Chavitz (sp?) the Republican congresscritter was going on about how the working poor need to give up their Iphones in order to get health care.

"One candidate, Bernie Sanders, has argued explicitly that health care and education-two things that the New Deal mostly left alone-should be rights and therefore accessible to all."

That's why he was attacked by the likes of Hillary and PGL and why his surrogate Keith Ellison was prevented from winning the DNC election. The Democrats still want to be the party of business.

Sanjait -> Peter K.... , March 08, 2017 at 01:41 PM
Don't forget to ware your mittens when you go to stand outside the tent pissing in. Wouldn't want your pink hands to get cold.
RC AKA Darryl, Ron -> Sanjait... , March 08, 2017 at 01:50 PM
Don't you work in finance? If so then you are no one to go on talking about pink hands. That would place you in the elite do-nothing watering trough up to your elbows.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 08, 2017 at 01:51 PM
Ya don't have to be white to be privileged.
Sanjait -> RC AKA Darryl, Ron... , March 08, 2017 at 01:55 PM
Nope.

You know what they say about assumptions?

That's you right now.

Sanjait -> RC AKA Darryl, Ron... , March 08, 2017 at 01:56 PM
Plus, bonus points to you for the vapid populist claim that everyone in finance does nothing. On an economics blog even ... that's just asinine. You should be better than that.
Sanjait : , March 08, 2017 at 01:53 PM
I wonder about pieces like the Great Transformation, that seem to idealize pre-modern societies as a way of critiquing modern societies.

I'm no historian but my intuition and moderate knowledge of the third world tells me that premodern societies should be viewed more as Hobbesian State's of Nature than ones where traditions and pastoral goodness results in what modern liberalism would view as ideal.

There's also the fact that market economies have existed since forever. I can buy that a Great Transformation has occurred in how we perceive our individual roles in society wrt market economics, but still, all of recorded human history, and much history before that, is of rich people lording over poorer ones.

That problem still exists, but are we to believe it actually got worse over the course of the Industrial Age? That seems dubious.

Lastly, to the fanboys who decry "capitalism", meaning market economics generally, there is the huge problem of lacking any plausible alternative. They typically shift freely from decrying the very concept of capitalism to making specific assertions about how our capitalism isn't European style enough, seemingly without realizing how this shift massively alters the scope of the conversation.

[Mar 08, 2017] How long obscure and definitely unscientific and quasi-religious theory of free markets will remain so dominant ?

Notable quotes:
"... Lastly, to the fanboys who decry "capitalism", meaning market economics generally, there is the huge problem of lacking any plausible alternative. They typically shift freely from decrying the very concept of capitalism to making specific assertions about how our capitalism isn't European style enough, seemingly without realizing how this shift massively alters the scope of the conversation. ..."
"... the attempt to reimpose the liberal economic order after the fall of the soviet camp produced the present world economic crisis and the potential demise of democracy in The OECD ..."
"... You are trying to act as a propagandist, a fanboy of neoliberalism. And after 2008 you are in a very bad, almost Zugzwang position in this chess party, as you have no real arguments to counteract claims that you are just a neoliberal Jesuit trying to defend yet another Flat Earth theory for personal benefit. ..."
"... There are alternatives to neoliberalism (aka "free market fundamentalism") -- both the New Deal capitalism and Scandinavian model are the alternatives. They were tried, they are not perfect, but they do work and they can last. Neoliberalism can't -- it is a self-destructive social system because like colony of bacteria on squirrel carcass redistribution of wealth up at some point stops because there is nobody to rob anymore. ..."
"... And Trump is the first robin in this respect -- a clear sign of both crisis of neoliberalism and the crisis of the US society, as a society governed by neoliberal ideology. ..."
"... I suspect that the mechanism used to achieve such a longevity are the same mechanisms that are used in a typical high demand sects, amplified by Wall Street financial resources, which allow recruiting and lavishly paying propagandists, capturing economic departments at the universities, financing neoliberal think tank, corrupting the regulators, etc. ..."
"... I know that Mont Pelerin Society consciously adopted Bolshevism methods to spread their ideology, so to a certain extent this is Bolshevism (or more correctly Trotskiysm) 2.0. As Marx noted "history repeats ... " ..."
"... And like Bolsheviks neoliberals act as occupiers of the host country using its resources to spread their messianic ideology and impoverish people, which they view as pure instruments for achieving their globalist goals. Exactly like Bolsheviks viewed Russian people. As Stalin quipped "Gratitude is a sickness suffered by dogs." This is the real motto of neoliberalism. ..."
"... The first is that in its essential nature it is utopian and nonhistorical. It is utopian in that it describes not the world as it ever has been or ever could be, but a fantasy that exists only in the minds of its adherents. It is a powerful myth because whenever one points to the failures and shortcomings of attempts to promote free market principles, its adherents reply by insisting that the market hasn't yet been made pure enough. If only we decrease government involvement, further reduce regulation, remove restrictions on the kinds of compacts companies can form with one another, further gut the power of trade unions, and so forth, we will see the birth of a glorious new economic world in which all will be right in the world and God will be on his throne. But as Polanyi argues, not only has such a creature as a self-regulating free market economy never existed, it never could. In fact, what has passed for self-regulating markets has in fact been the result of drastic and pervasive government intervention. Additional interventions take place to protect society as a whole from the damage that a self-regulating economy inflicts on the citizenry as a whole. ..."
"... This is another reason why belief in a self-regulating free market is a sheer fantasy: it is predicated on a host of impossible situations being possible. As the effects of a self-regulating free market occur, society intervenes to counteract the harmful effects of that economy. For instance, workers compensation is neither required nor desirable by pure free market principles. The same is true for unemployment insurance or anti-trust legislation. Or pollution standards. ..."
Mar 08, 2017 | economistsview.typepad.com
Sanjait : March 08, 2017 at 01:53 PM
I wonder about pieces like the Great Transformation, that seem to idealize pre-modern societies as a way of critiquing modern societies.

I'm no historian but my intuition and moderate knowledge of the third world tells me that premodern societies should be viewed more as Hobbesian State's of Nature than ones where traditions and pastoral goodness results in what modern liberalism would view as ideal.

There's also the fact that market economies have existed since forever. I can buy that a Great Transformation has occurred in how we perceive our individual roles in society wrt market economics, but still, all of recorded human history, and much history before that, is of rich people lording over poorer ones.

That problem still exists, but are we to believe it actually got worse over the course of the Industrial Age? That seems dubious.

Lastly, to the fanboys who decry "capitalism", meaning market economics generally, there is the huge problem of lacking any plausible alternative. They typically shift freely from decrying the very concept of capitalism to making specific assertions about how our capitalism isn't European style enough, seemingly without realizing how this shift massively alters the scope of the conversation.

DrDick -> Sanjait... , March 08, 2017 at 04:49 PM
"I'm no historian but my intuition and moderate knowledge of the third world tells me that premodern societies should be viewed more as Hobbesian State's of Nature than ones where traditions and pastoral goodness results in what modern liberalism would view as ideal."

You mean like 19th century Britain? Your complete ignorance of both history and anthropology is duly noted, as well as your lack of reading comprehension in regard to what Polanyi wrote. I do not agree with everything he had to say, but he has some important insights ignored by many modern American economists.

Paine : , March 08, 2017 at 02:52 PM
Paraphrase: "the attempt to reimpose the liberal economic order after the fall of the soviet camp produced the present world economic crisis and the potential demise of democracy in The OECD "
libezkova : , March 08, 2017 at 03:02 PM
"Lastly, to the fanboys who decry "capitalism", meaning market economics generally, there is the huge problem of lacking any plausible alternative."

You are trying to act as a propagandist, a fanboy of neoliberalism. And after 2008 you are in a very bad, almost Zugzwang position in this chess party, as you have no real arguments to counteract claims that you are just a neoliberal Jesuit trying to defend yet another Flat Earth theory for personal benefit.

There are alternatives to neoliberalism (aka "free market fundamentalism") -- both the New Deal capitalism and Scandinavian model are the alternatives. They were tried, they are not perfect, but they do work and they can last. Neoliberalism can't -- it is a self-destructive social system because like colony of bacteria on squirrel carcass redistribution of wealth up at some point stops because there is nobody to rob anymore.

As simple as that.

And Trump is the first robin in this respect -- a clear sign of both crisis of neoliberalism and the crisis of the US society, as a society governed by neoliberal ideology.

The question that should be asked is: how long obscure and definitely unscientific and quasi-religious theory will remain so dominant, as neoliberalism was from 1980 till, say, 2008 (28 years). Actually it was quite influential before that (say from late 50th) and remains quite influential after the Great Crash of 2008 (so a decade from 2008 till now).

I suspect that the mechanism used to achieve such a longevity are the same mechanisms that are used in a typical high demand sects, amplified by Wall Street financial resources, which allow recruiting and lavishly paying propagandists, capturing economic departments at the universities, financing neoliberal think tank, corrupting the regulators, etc.

I know that Mont Pelerin Society consciously adopted Bolshevism methods to spread their ideology, so to a certain extent this is Bolshevism (or more correctly Trotskiysm) 2.0. As Marx noted "history repeats ... "

And like Bolsheviks neoliberals act as occupiers of the host country using its resources to spread their messianic ideology and impoverish people, which they view as pure instruments for achieving their globalist goals. Exactly like Bolsheviks viewed Russian people. As Stalin quipped "Gratitude is a sickness suffered by dogs." This is the real motto of neoliberalism.

If somebody clams that free markets are self-sustained and are not just human artifacts, created and maintained entirely by government intervention (after neoliberals obtained political power via "quite coup" mechanisms) he/she is either an idiot, or a stooge of financial oligarchy (the major beneficiary of neoliberalism as in "cue bono").

Long before Reagan ascendance Polanyi dispelled two central claims about the myth of the self-regulating free market.

== quote ==

The first is that in its essential nature it is utopian and nonhistorical. It is utopian in that it describes not the world as it ever has been or ever could be, but a fantasy that exists only in the minds of its adherents. It is a powerful myth because whenever one points to the failures and shortcomings of attempts to promote free market principles, its adherents reply by insisting that the market hasn't yet been made pure enough. If only we decrease government involvement, further reduce regulation, remove restrictions on the kinds of compacts companies can form with one another, further gut the power of trade unions, and so forth, we will see the birth of a glorious new economic world in which all will be right in the world and God will be on his throne. But as Polanyi argues, not only has such a creature as a self-regulating free market economy never existed, it never could. In fact, what has passed for self-regulating markets has in fact been the result of drastic and pervasive government intervention. Additional interventions take place to protect society as a whole from the damage that a self-regulating economy inflicts on the citizenry as a whole.

The second major point that Polanyi makes is that of embeddedness: any economic system is embedded in society as a whole, with a host of moral, political, and religious values that are not primarily economic in nature. The self-regulating free marketers would somehow wish for an economic system that is distinct from and separated from those values; that is, an economic system that is not embedded. But such a thing, Polanyi argues, is impossible.

This is another reason why belief in a self-regulating free market is a sheer fantasy: it is predicated on a host of impossible situations being possible. As the effects of a self-regulating free market occur, society intervenes to counteract the harmful effects of that economy. For instance, workers compensation is neither required nor desirable by pure free market principles. The same is true for unemployment insurance or anti-trust legislation. Or pollution standards.

There is no question that keeping a plant from polluting is an interference with the market, but this is an example of noneconomic values trumping economic ones.

[Mar 08, 2017] From the Great Transformation to the Great Financialization On Karl Polanyi and Other Essays

www.amazon.com

Four years into the unfolding of the most serious crisis since the 1930s, Karl Polanyi's prediction of the fateful consequences of unleashing the destructive power of unregulated market capitalism on peoples, nations and the natural environment have assumed new urgency and relevance. It was reported that the ghost of Karl Polanyi was haunting the annual conclave of the rich and the powerful at Davos in 2012. In these essays we shed the light of Polanyi's fundamental critique of self-regulating market capitalism on a world in transition from economic dependence of non-European countries on the purchasing power of North American and European consumers. With only a few exceptions, they were written since 1998 and have not been previously published.

They should be read against the background of the accelerating accumulation of global finance, which created serious financial crises in Latin .America and .Asia in the 1990s and eventually engulfed the heartlands of capitalism in a multifaceted political, social and economic crisis that cannot be resolved by Keynesian macro-economic policies alone. Financial and cor- porate capital has captured governments and has subverted the democratic political process in North America and Europe. Socialism has been devalued by authoritarian Soviet communism, post-modern identity politics and the pervasive influence of neoliberal ideology.

We locate Iiayek and Polanyi in the Vienna of the 1920s, and contrast Hayek's ideal of liberty as free enterprise with Polanyi's vision of socialism, which has extraordinary resonance with the contemporary search for bottom-up institutions of democratic self-reliant governance. Another theme in Polanyi's writing is the conflict between capitalism and democracy, treated in the essay on Keynes and Polanyi.

[Feb 28, 2017] Fred Block The Tenacity of the Free Market Ideology

Sep 24, 2014 | www.youtube.com

Fred Block discusses his book "The Power of Market Fundamentalism," which extends the work of the great political economist Karl Polanyi to explain why free market dogma recovered from disrepute after the Great Depression and World War II to become the dominant economic ideology of our time.

[Feb 28, 2017] The Power of Market Fundamentalism Karl Polanyi's Critique Fred Block, Margaret R. Somers

Claudio Dionigi on January 6, 2015

The best analysis and summation of Polanyi's thought to date!!!

and articles about his work (including Gareth Dale's text), and while doing so I have tried to keep in mind what the spirit of Polanyi's work is. I believe that Fred Block and Margaret Somers have captured that spirit in this text.

This book is an excellent summation and update to Polanyi's critique of free-market fundamentalism, highlighting the reasons for the resurgence of his ideas in recent years. It is a must read for anyone who is interested in Polanyi's work or is at all concerned about the current state of affairs in political-economy.

It draws on a wide variety of other texts to pull the threads of Polanyi's thoughts together and contextualise them within a broader discourse. It relates Polanyi's work nicely to the crises induced by neoliberalism in recent years (more to come, no doubt). It is well laid out, in accessible language and a pleasant style. Whether you are from the left or the right, do yourself a favour and read this book.

[Aug 07, 2016] Bill Neal on Neoliberalism Karl Polanyi and the Coming U.S. Election Corrente by William R. Neal

"... Friedman’s great debates with John Kenneth Galbraith in the 1970’s usefully date the decline of Keynesianism for the general public, and the rise of “supply-side” economics: keeping entrepreneurs happy (and hopefully, inventive) through tax breaks without end. ..."
"... The “liberalism” part of Neoliberalism is confusing to the average citizen thinking about the modern political spectrum, since Neoliberalism is most certainly a conservative doctrine aimed at undermining every intellectual pillar of Keynesian true “liberals,” Social Democrats, and Socialists of all stripes. ..."
"... Polanyi argued that what the classical economists claimed were universal laws, aiming to bring all nations into one giant market via “free trade” governed by the gold standard - and the guns of the British navy - were actually the very peculiar human constructs of a particular time and place. Polanyi also is the only economist who has satisfactorily explained where the market fanaticism of today’s Right comes from: the original gambit of the early 19th century was so sweeping, so revolutionary, that it could only succeed in its Promethean mission with intensity equal to its impossible task. To paraphrase Polanyi, laissez-faire had to be planned, then legislated – then its horrors mitigated. Polanyi makes the proper connection: this movement closely resembles religious fanaticism, and perhaps that is a clue to the rise of the economic Right’s religious allies within the Republican coalition: religious fundamentalism arose in the United States in the 1970’s almost simultaneously with Market “fundamentalism.” Here’s how he puts it his second chapter: “The mechanism which the motive of gain set in motion was comparable in effectiveness only to the most violent outbursts of religious fervor in history. Within a generation the whole human world was subjected to its undiluted influence.” ..."
"... The late political theorist Sheldon Wolin (1922-2015), shortly before his death, in an interview with Chris Hedges, spoke of the silent treatment he was given by the faculty at Princeton University when he placed a copy of his new magazine “Democracy” on the faculty lounge coffee table. He was shunned. Perhaps they did not like where he was going with his last book, or could see it coming much earlier: Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism (2008). Here is that interview, Segment Seven from a nine part series at the RealNewsNetwork ..."
correntewire.com

It’s hard not to notice, during the American Presidential election drama, that despite all the debates and speeches, and multiple candidates, the terms “Neoliberalism” and “austerity” have yet to be employed, much less explained, these being the two necessary words to describe the dominant economic “regime” of the past 35 years. And this despite the fact that most observers recognize that a “populist revolt” driven by economic unhappiness is underway via the campaigns of Donald Trump and Bernie Sanders. With Trump, of course, we are getting much more, the uglier side of American populism: racism, xenophobia and misogyny, at least; the culture wars at a higher pitch.

Yet when Trump commented on the violence which canceled his Chicago rally on the evening of March 11th, he stated that the underlying driver of his supporters’ anger is economic distress, not the ugly cultural prejudices. The diagnoses for the root cause of this anger thus lie at the heart of the proposed solutions. For students of the Great Depression, this will sound very familiar. That is because, despite many diversions and sub-currents, we are really arguing about a renewed New Deal versus an ever more purified laissez-faire, the nineteenth century term for keeping government out of markets – once those markets had been constructed. “Interventions,” however, as we will see, are still required, because no one, left or right, can live with the brutalities of the workings of “free markets” except as they exist in the fantasyland of the American Right.

... ... ...

By Neoliberalism it is meant the revival of “classical economics” which first arose in the late 18th and early 19th centuries in England, with the founders’ famous names living on into our own time: Smith, Ricardo, Townsend, Malthus, Mill and Bentham and a few others. Early economic writers tended to reach into the world of biology, of Nature, for their metaphors and analogies, and these excursions had two main tendencies: to cite nature’s cooperative features, or alternatively, its tooth and claw brutalities, which was Malthus’ grim legacy, one which we have not fully shaken to this day. Continuing this tradition, classical economics later flirted seriously with Social Darwinism (see the influence of William Graham Sumner in the U.S. and Herbert Spencer in England), almost becoming engaged to it, and then underwent the “micro” revolution of marginal costs in the late 19th century as the profession strained for its “scientific” laurels.

David Harvey, the prolific, polymath Marxist writer, links the term Neoliberal to the later Victorian economists – Alfred Marshall, William Jevons and Leon Walras - who succeeded their earlier classical colleagues from the first decades of the 19th century. But the realities of the past 30 years in America leads one back to the primal cruelties described by Karl Polanyi in those early industrial days, in his masterpiece The Great Transformation, and the religious intensity of the first classicals, not the later Victorian ones, those who worked in an era when life for workers was supposed to have gotten much better, although the London of those better days still horrified savvy American observers like Jane Addams of the Settlement House movement.

Neoliberalism was later greatly influenced by the conservative work - the defense of markets against governmental interventions - of Friedrich von Hayek and Ludwig von Mises (The preference here is to keep the “von” in the names: it makes them sound more sinister…) in the 1920’s and 1930’s, and Milton Friedman in the 1970’s, thinking which eventually eclipsed the Keynesian “revolution” of the 1930’s, and its demand-labor focused “macro” policies and accompanying federal fiscal interventions. Friedman’s great debates with John Kenneth Galbraith in the 1970’s usefully date the decline of Keynesianism for the general public, and the rise of “supply-side” economics: keeping entrepreneurs happy (and hopefully, inventive) through tax breaks without end. Many of us recall the linking of justice in-the-law with justice in-the- economy, courtesy of the old Smith Barney television advertisements from the 1980’s, starring John Houseman from the movie The Paper Chase: these noble stock brokers “make money the old fashioned way, they earn it.” Decided British accent too, he had.

The “liberalism” part of Neoliberalism is confusing to the average citizen thinking about the modern political spectrum, since Neoliberalism is most certainly a conservative doctrine aimed at undermining every intellectual pillar of Keynesian true “liberals,” Social Democrats, and Socialists of all stripes. In its formative years of 1790-1840, liberalism and its liberal economists were hell bent on overturning the last vestiges of late feudalism, then mercantilism, which guided the treatment of the agricultural workforce in rural England. That workforce was about to be “conscripted,” under threat of starvation, as labor in the new industrial mills of the English Midlands, the infamous “Satanic Mills.” In this sense these economists were “liberal” reformers, urging dramatic individualism and heroic entrepreneurship upon society, to free economic activity from the last ethical restraints which Judeo-Christian morality had insisted upon. Ironically for the secular left of the 21st century, those biblical strictures, against usury, for example, are looking better and better as credit card interest rates soar between 18-25%, the rates being even higher for the notorious “pay day loans,” the last borrowing resort for the poorest in the workforce. However, the words “freedom” and economic “liberty” do not explain much in the “abstract”: historical eras and context text tell us much more about what they meant, the impacts for different parts of society.

And this is where the term “Market Fundamentalism” or Market Utopianism comes in. Karl Polanyi (1886-1964), in his magisterial work from 1944, The Great Transformation, explains that the English economy of those years, 1790-1840, was the landscape for the first great attempt in human history to consciously construct all-embracing markets for land, labor and money, to turn these many-faceted features of traditional human economic life into pure commodities, thus yanking them from their more organic historical connections to other, older governing values in traditional societies.

Polanyi, just to confuse the over-simplifications of today’s Republican Right, and the broader Neoliberal worldview, was a socialist but not a Marxist. Yet his biography offers the Right these tantalizing facts: The Great Transformation, although begun and finished in England, and fittingly so given its subject matter, was mainly written at Bennington College in Vermont with a two-year grant from the Rockefeller Foundation, in 1941-1943.

Polanyi argued that what the classical economists claimed were universal laws, aiming to bring all nations into one giant market via “free trade” governed by the gold standard - and the guns of the British navy - were actually the very peculiar human constructs of a particular time and place. Polanyi also is the only economist who has satisfactorily explained where the market fanaticism of today’s Right comes from: the original gambit of the early 19th century was so sweeping, so revolutionary, that it could only succeed in its Promethean mission with intensity equal to its impossible task. To paraphrase Polanyi, laissez-faire had to be planned, then legislated – then its horrors mitigated. Polanyi makes the proper connection: this movement closely resembles religious fanaticism, and perhaps that is a clue to the rise of the economic Right’s religious allies within the Republican coalition: religious fundamentalism arose in the United States in the 1970’s almost simultaneously with Market “fundamentalism.” Here’s how he puts it his second chapter: “The mechanism which the motive of gain set in motion was comparable in effectiveness only to the most violent outbursts of religious fervor in history. Within a generation the whole human world was subjected to its undiluted influence.”

What is more, Polanyi says that the imposition of these terrible abstractions created such a shock in their initial manifestations that it set off an immediate reaction, the start of the “double movement,” with neither labor nor capital able to live with the stark horrors presented by the social realities of the 1840’s. This is when society first looked into the mirror of a “pure” market transformation and saw not progress but a social Frankenstein staring back instead: children broken on the looms, workers in their improvised, inadequate tenements, prostitutes roaming the streets if not starving in the gutters. In short, people no longer displaying human faces but the features of cornered animals. Had economic, social, and legal justice arrived? This was not justice; it was the very rape of that term.

Polanyi stresses the social disruptions as much as the degree of economic exploitation at the heart of the long running wage argument, which continues to this day, comparing the cultural shock of a whole new way of life for the formerly agricultural workers to the encounter between primitive cultures with more advanced European civilizations, documented in North American Indian tribes in their 16th and 17th century experiences, and African cultures under late 19th Century imperialism. This anthropological approach has doubtless made Polanyi a troublesome writer for many doctrinaire Marxists, and it was notable to see David Harvey quote from him in his fine book, A Brief History of Neoliberalism.

American voters in 2016 have been re-introduced to democratic Socialism, which has no better advocate than Polanyi. It has its origins, Socialism does, the parent plant, the late George Lichtheim (1912-1973) explained, in two great revolutions: the French and the Industrial. The struggle to win the right to vote in France and England was inseparable from that dual history. Eventually, well after 1850, wages did rise, along with the expanding franchise for the vote; whether that was due to the latent virtues of the system initially set up or the reforms engendered by its horrors is a debate which has not ceased. Today’s Neoliberalism had nearly silenced serious left dissent by the late 1990’s, or successfully isolated it in remote academic corners. Bill Clinton’s two terms in the 1990’s are proof of that. And there is the continuing tension between Neoliberal economics and democracy: notice the desperate, barely concealed attempt by the Republican Right to shrink the franchise, using as one of its main levers the racial stigmas from “The Great Incarceration” and the yet to be proven accusations of voter fraud.

This political “shunning” of the left happens even in the supposedly liberal Ivy League. The late political theorist Sheldon Wolin (1922-2015), shortly before his death, in an interview with Chris Hedges, spoke of the silent treatment he was given by the faculty at Princeton University when he placed a copy of his new magazine “Democracy” on the faculty lounge coffee table. He was shunned. Perhaps they did not like where he was going with his last book, or could see it coming much earlier: Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism (2008). Here is that interview, Segment Seven from a nine part series at the RealNewsNetwork

Modern economic thought, and practice, since the 1970’s, has witnessed a growing crescendo of Market Utopianism – the “purer the better” - is still the rallying cry of the Republican Right, even in the wake of the sobering events of 2008-2009 and despite some professional economists making substantial dents in the pretentions. And if you had any doubts about that, then you haven’t been watching the Republican Presidential Primary debates of 2015-2016, or the sheer destructive obstructionism of its behavior towards President Obama as shamefully displayed in Congress. In its deliberate jamming of the democratic process itself, the Republican Right echoes the behavior, if not the ideas, of the Fascist parties in the Parliaments of Italy and Germany in the early 1920’s and 1930’s, before they became outright dictatorships. Republican words do not mock the democratic process itself, but that is their effect, and it is clear that the intent is to de-legitimize the fairly elected President of the United States. Therefore it is very important for American readers to be clear about where Karl Polanyi thought the original Market Utopianism of the early 19th century would lead, and the connections he drew between the origins of classical economics and the collapse of the “long” 19th century in the 1930’s: “In order to comprehend German fascism, we must revert to Ricardian England.”

Polanyi was far more broadly educated than most economists, perhaps an equal to Keynes. He was employed in Vienna in the 1920’s as the “senior editor for the premier economic and financial weekly of Central Europe”– the Financial Times of its day and region. On the very first page of the opening chapter of The Great Transformation, Polanyi delivers his judgment on where the logic of mandating free markets as the dominant force in society would lead if not tempered with countervailing power:

Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.

That dilemma, the struggle over the nature of allowable interventions into the private market system to cope with its seemingly inevitable imbalances, gyrations, recessions and depressions, is still with us. There were prominent claims, however, in the late 1990’s, that recessions were gone forever, the perpetual growth machine having been overseen by Alan Greenspan, and he was confident that the new financial derivatives would spread the risk to those who could best bear it. Greenspan was one of the members of Bill Clinton’s “Committee to Save the World” along with Robert Rubin and Larry Summers. During that time they were Utopians and would be Prometheans.

The nature of these interventions was at the heart of the struggle to cope with the collapse of capitalism, 1929-1932, centered on currency issues (the gold standard and balanced budgets) and labor markets (public spending/public job creation vs tax increases/ budgets cuts – “austerity”). In the near collapse of 2008-2009, when financial markets froze around the world, the same basic arguments from the 1930’s and indeed, the second half of the 19th century, could be heard swirling around President Obama’s stimulus program. The main issues are still unresolved, and the now ancient stalemate that Polanyi so forcefully describes is a growing worry to some of the better economists in Washington, DC, who wonder what tools, if any, will be available to meet the next financial collapse. They worry as well, if they could ever be politically deployed.

Some would maintain, as Alan S. Blinder did in his review of Jeff Madrick’s Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World, that the “mainstream” of the profession is still neo-Keynesian (some would say only “emergency room” Keynesian) and not Market Utopian at all, but that remains to be proven in the realm of policy application via the political process. The attack of four well known “liberal” mainstreamers in a very public February, 2016 letter, upon a fellow professional for projecting high growth rates for candidate Sanders’ policy proposals, and James Galbraith’s stinging reply to them, casts some doubt as to just which channels the “mainstream” flows in.

Just in case his readers might have missed “our thesis” which Polanyi declared on the first page of his first chapter, he reiterated it with a bit more detail, seventy- five pages later:

To allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demolition of society. For the alleged commodity ‘labor power’ cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological , and moral entity ‘man’ attached to that tag. Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organization was protected against the ravages of this satanic mill.

These are powerful indictments, secular jeremiads hurled against the Market Utopianism of the 19th century, and now applicable again to Neoliberalism and its present day program of austerity. Perhaps the main reason Polanyi’s work has been kept on the margins of America economic life for so long – that is changing now, however slowly – is that the American economy of 1945-1971 stood so successfully upon the foundations of the New Deal, which Polanyi supported, without major panics and depressions, and with Wall Street curbed and Main Street employed, a far more egalitarian society than the one which surrounds us in 2016. There were significant exceptions, of course, delineated best by Michael Harrington’s (1928-1989) The Other America (1962).

Were Polanyi’s indictments too harsh? No, they were not, if one remembers the human wreckage strewn about the Western world in the wake of the events of 1929-1932 – and what followed politically in the 1930’s, which plunged civilization into World War II, what the historian Max Hastings has recently called “the greatest event in human history.” And they weren’t too harsh if one understands the “previews” to the Great Depression - the financial panics and the recessions/depressions which usually followed in their wakes in the United States in the 19th century: 1837, 1857, 1873, and 1893, and that broader, but shallower depression-price deflation, what some have called the first “Great Depression,” 1873-1896, which helped fuel the migration from rural Eastern Europe to the United States. These convulsions grew in scope, intensity and scale of human suffering so that the acute periods of social pain stretched four years, then more than a half a decade. And the comparisons are not too harsh if one remembers that public job creation and all the other counter-cyclical tools which the New Deal inaugurated on a large scale were absolutely forbidden by economic and political orthodoxy prior to that Great Depression/New Deal watershed.

Thus when successful businessman Jacob Coxey led his dissenting “army” on a long march from Ohio to a protest on the Capitol’s steps in Washington, DC, in the spring of 1894, driven by the terrible conditions from the 1893 panic, he petitioned for the creation of public jobs building and repairing roads - and was promptly arrested for his efforts. Just another example, alas, of the ancient clash between democracy and economic orthodoxy, the theme being pursued today, in Europe, with intensity, by Yanis Varoufakis and the DiEm25 movement, as well as the Sanders campaign in the United States.

And we must face the facts of daily life for those who lived on the Lower East Side of New York, 1890-1910, or Hell’s Kitchen at mid-town, the forties, on the West Side, the Irish Hell…and their equivalents in all the other major industrial cities, and then, much later in the 20th century, the “rise” of the black ghettoes in the Northeast and Mid-West, and parts of “sunny” California, where American racism joined in “solidarity” with the worst features of the lowest rungs of industrial life, the most dangerous jobs, the last hired-first fired syndrome, leading to the formation of a true American “Lumpenproletariet.”

The ultimate cruelty for black citizens turned out to be that the later years of “The Great Migration” from the rural South, between 1917-1970, ran headlong into the beginnings of another “Great Migration”: the flight of industry, of capital, fleeing first to the nearby union-free suburbs, then to the rural Midwest, and eventually to the American South and the U.S. Mexican border region, then on to Puerto Rico and finally, Asia. It was in these desperate but widespread pockets of underclass American life, and in the 13 states of Appalachia, that the poorer people of America lived out their own version of Polanyi’s awful England of the 1840’s.

Two more important points need to be made in addition to Polanyi’s stark warnings about the dangers of pure free market-driven societies. One comes on the very first page of his masterpiece, that there were four pillars to that long nineteenth century, the one that began in the late 18th century and stretched, in reality and foundational principles, to the collapse of 1929-1932. And those pillars formed an interlocking nexus of the social/military with economic life. The first was the balance of power between nations that began with the Congress of Vienna in 1815; the second was the international gold standard, which required balanced budgets domestically and in trading accounts as well, or else the British navy would appear on the errant nation’s horizon – a form of militarily enforced “austerity”; third, the “self-regulating market,” the one that was built in England first…then held up as a model for the whole world, and fourth, the “liberal” state, with that word having a meaning somewhat closer to the Tories of the second half of the 19th century in Britain than to the New Deal liberals of the second half of the 20th century in America. Polanyi supplies an immediate qualifier to that liberal state, which he says was a creation of the market ideas and mechanisms, or more precisely, those whom imposed it. And therefore, he must logically say that the free market was the key element which underlay all the other institutions.

Let us now shift to the modern day neoliberal equivalents of this interwoven nexus that was crucial to that long 19th century, to those ideas which have ruled the Republican Right since at least 1980, and to which the Democratic Party, chiefly in economic and foreign policy matters, has deferred since the rise of Bill Clinton, although the outlines were clear to attentive observers during the tarnished one term presidency of Jimmy Carter, 1976-1980.

The contemporary cognitive scientist and linguist George Lakoff has given us a very useful and compact version of the Republican Right’s moral and policy synthesis, a ten word summary of the pillars of Neoliberalism in our era, and they do echo very closely what Polanyi sketched out for us as the core of 19th century civilization in Europe. Lakoff put it this way: the Republican Right stands for “free markets; smaller government; lower taxes; family values; strong defense.” He also took a stab at what a ten word equivalent would be for Progressives, but it does not resonate with the same clarity and if one understands the many diverse movements composing the Democratic Party, it is not difficult to see why. One might count seven, if one includes corporate America and the professionals who serve them, the upper 20% of the income demographic that the 1% vs the 99% glides over. Revealingly, Lakoff’s formulation did not include the word “equality.” One attempt at a unifying summary might be: universal healthcare, full employment, greater equality, economic security and environmental protection, to which the corporate wing would likely object for every value. Yet one can also hear Feminists, Black Lives Matter, the Hispanic Caucus and LGBT activists complaining that their issues are being submerged – or ignored, or subsumed, under these oppressive “universals.” And unions? They have lost their independent voice, as demonstrated most vividly by their lack of stirring Labor Day national addresses. And they were perhaps the preeminent “countervailing” domestic power during the post World War II “golden decades.”

As tight as Lakoff’s ten words seem to be in describing the Republican Right’s 20th century recreation of the 19th century’s core values, they fail to capture the razor sharp cutting blades the movement uses to carve up what’s left of liberalism, the faint vestiges of the New Deal which hung on through the Reagan era. To do the Right full justice, we have to see how President Bill Clinton’s famous declaration fit in so seamlessly with their program, which was to dismantle the New Deal and shrink the size of government to the point where it could be “drowned in a bath tub”: anti-tax activist Grover Norquist’s death threat for “liberalism.”

When President Bill Clinton declared the “Era of Big Government Over” in his 1996 State of the Union Address, he was signaling far more than what those words literally stated. The year and unstated context are as important as the declaration itself. Market Utopianism was at its zenith, economic downturns banished, or so many thought: all the right Washington players and a probably a majority of the economics profession. The crucial unstated premise in Clinton’s declaration was that big problems stemming from the private sector economy were over as well. It was a major premise already on the way to be disproved: by the collapse of the Mexican peso in 1994-1995, trying to swim in the immediate wake of NAFTA; the Asian crisis of 1997; the Russian bond disaster of 1997-1998; and the collapse of the Promethean hedge fund Long Term Capital Management in 1998, the fund put together by the “best minds” in mathematical economics. But of course, since the Committee to Save the World and the Federal Reserve were there as an emergency room crew, who needed legislation and federal programs? This was the late 20th century’s equivalent of the rescue operations of financier J.P. Morgan in the wake of the 1907 panic.

The Clinton pronouncement did a good job of hiding the numerous policy implications that flowed from his premise (and wish?). The government was no longer going to be an ally of progressive movements outside of government, because there would be no big programs to promote, a mutually reinforcing dynamic of lowered expectations that is still playing out today in 2016 between the campaigns of Bernie Sanders and Hillary Clinton. And there were no powerful movements either, least of all from the economic left, none pushing a coherent program; the greater force on that side of the political spectrum had become the “ecological left.” The de-regulatory movement that went hand-in-hand as the enabler of the financialization of the economy and further political empowerment of Wall Street accelerated under Clinton, with near catastrophic consequences in 2007-2008.

Closely related to the de-regulatory push which the Democrats facilitated in alliance with the Republican Right was the growing movement for “privatization” of all formerly public functions: military, diplomatic, educational, social services, the prison and criminal justice system, even entire probation systems. Perhaps most publicly prominent in this trend was the move towards Charter Schools, the attacks upon teacher unions, and overthrowing the seniority system for teachers. Hedge fund leaders and high tech-social media champions like Mark Zuckerberg played a major role in this movement as principal funders, with a large dose of accommodation from the Obama Administration and Democratic urban mayors like Cory Booker in Newark, now a U.S. Senator.

The Clinton pronouncement of 1996 does a very good job at keeping the discussion of taxation off the policy table, which the Republican Right has dominated ever since Proposition 13 passed in California in 1978. This policy direction goes hand-in-hand with the neglect of American infrastructure, the inability to raise the gas tax, or raise the funds for any major left proposal for national health insurance, proper family leave programs or pre-school programs.

It also meshes nicely with the declaration of various leaders of the Republican Right in Congress, which may also be actively shared, or silently accommodated to, by almost the entire Democratic Party short of Senator Sanders and a few members of the Progressive Caucus: that “only the private sector can create jobs.” In order to believe this fiction, one does indeed have to bury the history of the New Deal, which is the still barely breathing historical legacy which refutes it (along with the domestic production record during World War II), the Civilian Conservation Corps and the WPA’s public work projects now nearly erased from citizen memory. If citizens all need jobs and only the private sector can create them, and it refuses do so unless the public gives it an even greater share of GDP, then have we not created a powerful dynamic to further imbalance the distribution of power in society, reinforced now by Supreme Court decisions putting the wealthy in the drivers’ seats of the political system?

The logical questions following upon Bill Clinton’s dramatic pronouncement are these: what will replace big government in an era of growing private sector economic crises? What will stop the spiral of America’s decline from world economic leadership (disputed, as we will see by the Clinton campaign) which is driven in good part by inadequate tax revenue despite the money leaving labor’s hands and congealing in the accounts of the 1% - here and abroad, given the rise of tax havens? Are not average citizens, the political parties and the public good itself now at the mercy of the economic powers of the private sector? Acquiescence in all of these dynamics was signaled in that 1996 declaration of Bill Clinton’s that the era of “Big Government” was over.

As one proof that Clinton’s declaration had turned into Neoliberal catechism, we have CNN host Chris Cuomo’s grilling of Senator Sanders at one of the televised town halls in early 2016, trying to get him to confess that his policy proposals violate this major commandment dominating the political sphere in the name of economic reality, the additional fitting irony being that Chris is the son of one of the last embers still glowing from the old New Deal’s ideals, of the late Governor Mario Cuomo of New York. It wasn’t a question; it was more of a secular Inquisition, a mini-McCarthy hearing on the potential violations of the boundaries drawn around political economy.

And what about that other major term of our neoliberal era, austerity, which is so cruel sounding, as if it came from the mouth of a Dickens villain from the mid-Nineteenth century? It is such an ingrained assumption that the word was never uttered during the American presidential debates. Mark Blyth, who has written a passionate, readable book about it, subtitled “The History of a Dangerous Idea,” defines it as “a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state’s budget, debts and deficits” which will “inspire ‘business confidence.’” Blyth considers it very dangerous because it was the failed “classical” response to the Great Depression, 180 degrees in opposition to the Keynesian prescriptions, and also exactly what Germany has been prescribing today for Greece with predictably disastrous results, as Yanis Varoufakis had predicted and then resigned over in 2015.

Another way to look at austerity is that it functions as the policy “operating system” of Neoliberalism. Yet in America, it has some particularly sadistic policy edges meant to bleed the remains of the New Deal federal government until it expires, what has been called the “starve the beast” direction. If “sadistic” sounds too strong for your middle class sensibilities, please follow closely the tale of the lead in the water for Flint, Michigan, where the poor got lead to drink and General Motors got the science driven clean-up, a story which even tops the cruelty of Wall Street banks selling very complex “interest rate swap” deals as budget deficit stop-gap measures to rural school boards in Pennsylvania – and local and state governments around the world. In both cases, this was the Austerity reality show, and the little people weren’t just “fired,” they were crucified on a cross of austerity. You can still find Bruce Bartlett’s informative article, Starve the Beast, online.

It has been noted that the Republican Right is gripped with a near religious intensity about their policy goals, and this registers its highest pitch in their anti-tax commandments and the pledge that Grover Norquist requires of their candidates, which is enforced via primary election challenges by groups like the Club for Growth. It has become particularly effective since the 1970’s as middle class/working class wages and incomes have stagnated or declined, so that these segments of society look for any financial relief within their grasp, and the Republican Right is only too happy to offer the anti-tax pledge to them as an emblem of its fidelity. It is usually accompanied by a not very well disguised Greek Chorus singing gently offstage, reminding them that most of their tax money was going to lazy minorities anyhow, not “hardworking families” like themselves, a phrase which carries within its unspoken terms the old 19th Century distinction between the deserving and undeserving poor. Hillary Clinton has sung this song as well, a milder tune, to the middle class in 2016, pledging her own version of “no new taxes.”

In the United States, the “no new taxes” declaration has particular saliency, and cruelty, because almost all state and local governments must balance their budgets by law, even in times of recession and financial crisis, and if the Republican Right is successful in applying this reasoning to the federal government, it means that the Keynesian fiscal response to economic crisis has been entirely taken off the table, except for tax cuts. If the left proposes increased spending for a jobs program, via infrastructure spending or, heaven forbid, direct public job creation like the old Civilian Conservation Corps, then budget balancing is thrust forward as the Commandment, no matter how much the Right ignored it in their own administrations since 1980.

The “Starve the Beast” direction is also reinforced by one of the great “common sense” myths of American political life, the “kitchen table” wisdom that governments must balance their budgets just like families, thus assuring that all sectors, public and private, will be “contracting” during times of economic stress – just like the Great Depression. Disbelief accompanied my own online survey in 2010 in Maryland, at what state- wide candidates were saying on these matters. Democrats were indistinguishable from Republicans, even in this post Great Financial Crisis mood, most repeating verbatim the kitchen table wisdom equating family and governmental budgets, with no mention that the federal government, with the powers delegated to the Federal Reserve, was an entirely different institution with specially designed powers…the crucial difference which can mean life or death for citizens and local governments in a severe economic crisis. Thus the family’s “kitchen table” common sense supplies the butcher’s knife to cut the umbilical cord of federal stimulus spending, the result being millions of families foreclosed upon.

And thus sadly the intellectual fulcrum point of American political economy is no different in 2016 than it was in 1929-1932, Modern Monetary Theory and the life of Keynes be damned. In terms of economic ideas we are still in the late 19th century, and as Karl Rove has declared, that’s just where he and the Right want us to be, secure in the embrace of William McKinley, not listening to William Jennings Bryan’s sermons about being “crucified on a cross of gold (or fiscal austerity).”

And what a world that long 19th Century was. If Mr. Rove wants us to remember it for its spectacular economic growth, lack of a federal regulatory state and the illegality of unions, he certainly will not dwell upon, or perhaps even mention, the growing intensity of its economic crises, with even the king of the trusts, Mr. Morgan himself, realizing after 1907, that the slumps of the age would have to mitigated by a hybrid institution, the Federal Reserve. Karl Polanyi was correct: no one, not even the kings of the private sector, could live with the effects of a “pure” free market.

Someone exploring the evolution of political economy in America is more than likely to come across a very powerful sentence uttered by President Woodrow Wilson, usually placed as an epigraph introducing an important chapter of larger works. Wilson said, in a bold, direct way, what no modern president or candidate except perhaps Bernie Sanders could even be imagined as saying in public, the words being heresy to the illusions of our age, which shares much in common with the one Wilson was addressing: “‘The Truth is, we are all caught in a great economic system which is heartless.’”

Wilson was a progressive Conservative or conservative Progressive. Richard Hofstadter, whose classic The American Political Tradition appeared in 1948, entitled his forty-four page chapter about him “The Conservative as Liberal.” Wilson’s powerful, compact judgement about our economic system is taken from the collection of his campaign speeches from 1911-12, published in book form as The New Freedom, and upon rereading it in 2016 it is remarkable how similar Wilson sounds to the Democratic candidates, sometimes leaning towards Sanders, sometimes sounding closer to the more cautious Clinton.

In private correspondence, according to Hofstadter, Wilson seemed to be evolving into a Social Democrat, especially in matters of energy and natural resource ownership; in public, on economic reforms, he was caught in that whirlpool which spins so many progressive reformers round and round: he brandished anti-trust rhetoric and thought jailing even just one prominent corporate lawbreaker would be sufficient shock to restore the “common good.” In fact and policy, though, he longed to restore the past, the economy of Lincoln’s antebellum boyhood, of many small competing firms. In reality, from his Progressive Era to the New Deal, and into our own times, America has never put a vigorous, sustained anti-trust policy into action. The reason for the failure to do so, most likely, is because such a program would mean accepting what those further to the left have always said about capitalism itself: left to its own inclinations, it tends towards oligopoly if not monopoly.

Wilson was a Southerner at heart, raised by parents with deep roots in the Protestant ministry, and it is not unfair to say he was, at his worst, a moralistic, racist Victorian, linking him even more to the feel of the 2016 campaign, as black activists at Princeton University seek to rename buildings and schools for someone better, and those at Yale do the same for John C. Calhoun. Wilson’s name today evokes a string of epithets from even the most refined on the academic left, like Corey Robin. Yet in re-reading his book, it is hard not to see a better side to him, someone who grasped that the private powers, the interlocking trusts of the late Gilded Age, were deeply impairing if not destroying democracy.

The New Freedom reminds us that we have now had three great Gilded Ages in America: the original, 1880-1916; then “the frenzy” of 1922-1929; and 1980 through to the present, with the high-water mark coming in the “Roaring” late 1990’s, with the crash of 2008-2009 still not marking the end of “Part III” because we have nowhere come close to dealing with the loss of industrial jobs overseas, wage stagnation or the great maldistribution of wealth. In other words, we still don’t have a new green New Deal, one that will have to come up with freshly invented countervailing forces to keep private economic power from strangling democracy. Hofstadter says that was also Wilson’s great failing: he called for a revitalization of American democracy, but not for economic democracy. The American state he envisioned was going to be a neutral arbiter among competing interests rather than a champion of the middle and working classes. His intervention into World War I, left stranded, for a generation, the moderate reforms his administration did pass, and gave us an all too realistic preview of how powerful and reactionary the American state can be when embarked upon one of its “crusades” against evil “others.” Even when these directed enthusiasms, or orchestrated hatreds, did not start out that way, they have usually ended up being aimed at the American left.

For now, however, consider these brief passages for the connection of President Wilson to our own times and troubles, the better similarities, from the pre-war Wilson. All are taken from the early chapters of The New Freedom:

Since I have entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know there is a power somewhere, so organized, so subtle, so watchful, so interlocked, so complete, so pervasive that they had better not speak above their breath when they speak in condemnation of it…if he enters certain fields, there are organizations which will use means against him that will prevent his building up a business which they do not want to have built up…Why? Because the laws of this country do not prevent the strong from crushing the weak…

All over the union people are coming to feel they have no control over the course of affairs…until two years ago we had witnessed with increasing concern the growth in New Jersey of a spirit of almost cynical despair. Men said: ‘We vote; we are offered the platform we want; we elect the men who stand on that platform, and we get absolutely nothing.’ So they began to ask: ‘What is the use of voting? We know that the machines of both parties are subsidized by the same persons, and therefore it is useless to turn in either direction.’…

We are in a temper to reconstruct economic society, as we were once in a temper to reconstruct political society…We stand in the presence of a revolution, not a bloody revolution; America is not given to the spilling of blood, but a silent revolution, whereby America will insist upon recovering in practice those ideas which she has always professed, upon securing a government devoted to the general interest and not to special interests…

The law is still living in the dead past which we have left behind…We have not adjusted the law to the facts of the new order. (Editor’s Note: the emphases are mine, not Wilson’s.)

In early May, 2016, the American Presidential Primary looks as if it has clarified the choices: it will likely be Donald Trump versus Hillary Clinton, barring a Black Swan legal event against Secretary Clinton. Senator Bernie Sanders has had a powerful impact in pushing her further to the left than her natural political inclinations would probably lead - which is to the moderate side of Neoliberalism. It remains to be seen if Sanders has founded a movement with life beyond his candidacy. It is appropriate to ask, then, if Karl Polanyi’s insights, his framework for understanding capitalism, can help us make sense of these political dynamics in the world’s most hyper-capitalist developed economy.

In the campaign so far, it is clear that citizen unhappiness with the economic status quo has driven both Trump and Sanders’ supporters, with cultural grievances, and worse, making the Trump phenomenon more difficult to explain, although those familiar with all that is meant by the dynamics of “Weimar Culture” will have less trouble. Alternatively, President Obama and Secretary Clinton have been emphasizing the success of the American recovery since the 2008-2009 financial crisis, especially the drop in the formal unemployment rate to 5%. This focus has its evasions.

Within the space of just five months, there have been two important studies released, the first from a pair of Princeton University economists, documenting increased pain – increased suicide rates - especially among working class citizens, 45-54 years old – and another showing increases in suicide for all categories but the elderly and black men, the overall rate now the highest for the nation in 30 years. The cheerful official facade also evades the more telling statistics of how low the labor force participation rate has fallen, and how high the unemployment rates for non-college young black people are, between 30 and 51 percent, depending on the measuring tools. It is the young, both in and out of the workforce, including college graduates, who have most deeply embraced Senator Sanders’ narrative about the acute economic distress. And it is Senator Sanders who has explained his democratic socialist roots by linking them to FDR’s Second Bill of Rights, the “Second Bill” serving as the outline for an American version of social democracy, given in his State of the Union address from 1944, with Sanders repeating its ringing declaration that “necessitous men are not free men.” This framing is very close to where Polanyi leads us in his concluding chapter’s discussion in The Great Transformation, entitled “Freedom in a Complex Society,” and published in the same year as FDR’s speech.

And what about Polanyi’s dramatic assertions about where free market fundamentalism might lead, if not mitigated by various “interventions,” his dramatic opening page declaration about the “stark utopia” in store, that would end up “annihilating the human and natural substance of society?” If one adds the Trump vote to the Sanders vote, it is clear that a majority of the American voting public believes something dramatic has happened, that the economy is vastly underperforming, even as the solutions from the two camps have few points of intersection. The suicide findings add another dimension to the overall sense in the nation that something has gone terribly wrong.

If citizens have the inclination to look a bit further, there are indeed two recent works which place the reality at the bottom of American society close to Polanyi’s bleak warning. They are Michelle Alexander’s The New Jim Crow: Mass Incarceration in the Age of Colorblindness and the Harvard Law Review’s study of Policing and Profit from April of 2015. This is where the realities of America’s long and ugly history of racial dynamics meet the mechanisms of austerity, Neoliberalism’s drive for lower taxes and the privatization of prisons and the probation systems – and much else. The results are perhaps the more jarring in that they have reached a culmination under the nation’s first black President, who has continued the policies which drive the trends, especially the War on Drugs. And yet, in step with the Zeitgeist, which their factual revelations challenge directly, neither of these startling works actually invokes the term Neoliberal, and both emphasize racial over economic forces.

All through late 2015 and early 2016, observers of American politics have struggled to explain the phenomenon of Donald Trump, but none have tried to do so with the assistance of Polanyi’s “double movement,” which is the pattern, often denied on the Right, of interventions into the market mechanisms to ease the suffering and social disruption, for both businesses and workers, and to protect the environment. Chapters Eleven, Twelve and Thirteen of The Great Transformation, which present the “double movement” in considerable detail - and documentation - for the second half of the 19th Century and on into the 1930’s, contain some of the best fine-grained judgements and most distinguished writing about political economy in modern history.

We should remember that Polanyi states that the double movement ends in legislative turmoil and eventually, Parliamentary paralysis. This set the stage, in the 1930’s, for the triumph of fascism. The contemporary manifestation, “the gridlock in Washington, DC” is so familiar it needs no additional emphasis here.

Let us not be shy: many serious observers, from all parts of the spectrum, have issued warnings about Mr. Trump’s tendencies in this direction, towards a homegrown U. S. fascism without the organized Brown and Black shirts. Trump has clearly, by choosing to run as a Republican in this era, placed himself on the Right side of the ideological spectrum, even as he has brought down the wrath of the Republican Right “establishment” by making explicit what in previous years had only been hinted at. Most observers agree he has succeeded by splitting off the working and lower middle class segments of the Right from the more affluent constituencies in the Republican coalition, partly by his ugly cultural framing, and partly by turning against “free trade” as practiced by both parties. Yet his tax proposals do not at all square with his populist job creation rhetoric, in fact are anti-egalitarian, and most of his other economic policy pronouncements are no more substantive than blustery promises and wishes. His emblazoned slogan – Make America Great Again! - is a way of hiding, by assertive nationalism, the bitterness of his anti-modernist supporters and denying the claims of progress made by both President Obama and Secretary Clinton. Yet, still, the race offers a billionaire running against a mere multi-millionaire who insists that America has never lost its greatness. And then there is author Thomas Frank, in Listen Liberal, reminding us that a good portion of the top 20% income demographic has moved, since the 1960’s, from the Republican party into the Democratic camp, further alienating the crucial white working class voter, especially the men, because it is this new Democratic demographic that has authored the “political correctness” catechism.

Trumpism arises at this late moment after each of the major party’s efforts to mitigate the fallout from the unleashed markets of the late 1990’s have failed: the Right’s efforts to militarily bring democracy to the Middle East (and a clearly Neoliberal constitution to Iraq), after the opening provided by the tragedy of 9/11 and a vast intervention to bail out the collapsed airline industry. Whatever the multi-causal motivation, including the logical extension of Neoliberal Globalization’s burdens, it became a multi-trillion dollar exercise in military Keynesianism, and futility, with even more now being promised by the man who says Iraq was a terrible mistake but that he will smite ISIS in one grand stroke, meanwhile expanding the military to even greater magnitudes of world supremacy. In addition to their complicity with military Keynesianism, there was also the Democratic Centrist attempt to mitigate the Great Financial Crisis of 2008-2009 through Federal Reserve monetary gymnastics and emergency room Keynesianism. It was New Deal lite, with no CCC or WPA, no public job creation or any reference to FDR’s Second Bill of Rights until Senator Sanders’ heretical speech at Georgetown University in November of 2015. These efforts were crowned by a willingness to increase the public debt to save Wall Street, but not to save millions of evicted homeowners, leaving many citizens with a very bitter aftertaste that has lingered into the election year.

Who can say where Trumpism leads, or if it can win in November of 2016? In many ways, openly expressed by Trump himself, his movement can be seen as the climax of the Republican Right’s attempt to maintain Victorian moral values in the sexual and cultural realm against the waves of Creative cultural Destruction unleashed by its own championed Free Market Forces in the economic realm, ever since the 1960’s. Hence the attack upon Political Correctness. When this framing is used against President Obama, it hurls the accusation of American economic and military decline - due to “liberal” weakness. “True Conservatives” to Trump’s Right bristle at the notion that this New York real estate tycoon is the defender of their “traditional” values.

It is not an exaggeration to see in these themes a milder version of Weimar dynamics. The opposing candidate, the first major woman contender for the Presidency, will, by her symbolism alone, raise these three aspects to a fever pitch, even as her own diplomatic history will be deployed defensively to show how tough she can be in foreign policy. We will also hear many references to the high-tide wonders of Market Utopianism in the late Roaring 1990’s, under her husband’s policies.

The sophistication of Polanyi’s handling of the double movement, how cross-class alliances of a surprising and counter-intuitive nature affected policy struggles in the political arena, means that his insights can inform us about the most ominous year in American politics since 1896. Unfortunately, even the best insights cannot predict the outcome.

In the broadest terms, the contest still, with all due respect to Sanders’ achievements, is between the Neoliberal Right, now in its populist phase, and the Neoliberal Center, trying to move left, some would say “fake left” - but not too far. If the Democratic Party background papers of the primary season, of Larry Summers and Joseph Stiglitz from early 2015, are the intellectual source springs for Clinton’s policies, then structural interventions into the labor markets remain beyond the pale. This despite the low labor participation rate, infrastructure and global warming crises all making the obvious case for public jobs and a new Civilian Conservation Corps. This shows the power still of Neoliberalism in economics, our modern day version of the four pillars which Polanyi explained were the mainstays of the 19th Century’s “classical” economy, the one that ended in disaster in 1929-1932. If Trump wins in November, we simply don’t know what form his governance will take, especially its economic policies. But Polanyi has made the outline of the possibilities remarkably clear. In Germany in the 1930’s, the worst case, those four pillars were demolished and something new and terrifying put in their place. Brace yourself.

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ABUSE: IPs or network segments from which we detect a stream of probes might be blocked for no less then 90 days. Multiple types of probes increase this period.  

Society

Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers :   Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism  : The Iron Law of Oligarchy : Libertarian Philosophy

Quotes

War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda  : SE quotes : Language Design and Programming Quotes : Random IT-related quotesSomerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose BierceBernard Shaw : Mark Twain Quotes

Bulletin:

Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 :  Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method  : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law

History:

Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds  : Larry Wall  : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOSProgramming Languages History : PL/1 : Simula 67 : C : History of GCC developmentScripting Languages : Perl history   : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history

Classic books:

The Peter Principle : Parkinson Law : 1984 : The Mythical Man-MonthHow to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite

Most popular humor pages:

Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor

The Last but not Least


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FAIR USE NOTICE This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to advance understanding of computer science, IT technology, economic, scientific, and social issues. We believe this constitutes a 'fair use' of any such copyrighted material as provided by section 107 of the US Copyright Law according to which such material can be distributed without profit exclusively for research and educational purposes.

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Last modified: March, 11, 2017