Reading Block and Somers’ The Power of Market Fundamentalism (Part 3)

I concluded part 2 in this series of posts on Fred Block and Margaret Somers’ The Power of Market Fundamentalism with several questions about the meaning of local in Polanyi’s global-national-local analytical framework. It seems that Polanyi is not so much focused on the local in any spatial or place-based sense but rather on the social sub-units that comprise groups interested in particular forms of protection from the market. This is significant, I believe, because of Block and Somers’ argument (one that I find convincing and important to this point) that not only Polanyi’s analytical framework but also the political-economic mechanisms that he identified (most importantly, the gold standard, which today’s system of international capital controls resembles) are useful for understanding the contemporary crisis we face today. However, the significance of the local today appears more consistent with the 15th century, when city-states ruled the European landscape, than the 19th century, when the nation-state form came to prominence. At the same time, today’s quasi-city-states resemble other metropolises around the globe to a far greater degree than neighboring places that are less integrated into this global urban network. And although they are networked, as Richard Sennett notes there is a tendency to think of these cities in terms of autonomy, approaching them as self-shaping entities. Of course, this strand of thought was present in the work of sociologists like Max Weber during the 19th century, but the structure of the city has changed in important ways since then. And, as Sennett argues, it must (and inevitably will) change again as global problems such as climate change alter the systems that underlie the illusion of autonomy (in this way, the autonomous city-state idea resembles the idea of the autonomous free-market).

If Polanyi’s use of the local suggests some spatial-analytical confusion in his work (and I’m not sure that it does), it is not the only point of confusion. In chapter three, “Karl Polanyi and the Writing of The Great Transformation,” Block and Somers take up the complicated relationships that Polanyi’s work has to both Marxism and economic liberalism. Because Polanyi wrote The Great Transformation with the intention of shaping the post-World War II world order, it was hurried through the final stages of writing. For this reason, it appears that Polanyi did not have time to work out some of the contradictions that developed as his thought progressed in the process of writing the book. These contradictions centered around the questions of determinism and market autonomy.

Polanyi wrote within the expanded tradition of Western Marxism that sought to integrate the early-Marx of the Economic and Philosophical Manuscripts and the late-Marx of Capital. Departing from vulgar Marxist formulations of working-class consciousness, Polanyi (like Gramsci) “insisted that the working class had to win leadership of society by representing the interests of society as a whole” (76). This was possible because all segments of society, even the most ardent defenders of the free market, seek protection from the market. As a consequence, the working-class has a basis for creating a hegemonic socialist bloc. This is, Block and Somers suggest, is consistent with Marx’s vision of social revolution in the context of shifting relations of production. Where Polanyi diverges from Marx is in the expectation that the state will disappear once the relations of production no longer require state coercion. Polanyi insists that the state is a necessary institution and the source of democratic control of a socialist society. This is consistent with his broader conception of the always embedded economy. Because Marx begins his analysis in Capital from the idealized market of liberal economics, Marx sustains the illusion of an autonomous market, even if he does so to isolate the contradictions at the heart of liberal economic thinking. By contrast, Polanyi seeks to avoid the liberal economic illusion altogether. Even under market society conditions, Polanyi argues, the economy is shaped by social relations that incorporate both economic and non-economic concerns. And it is from the starting point of the embedded economy that he arrives at the idea of fictitious commodities, which the state must manage for any market society to exist.

Yet, despite these breaks from Marxism and economic liberalism, Polanyi occasionally treats the idea of an autonomous economy as a possibility and expresses a form of market determinism that denies the ever-present social relations and contingency of market societies. For example, Polanyi writes as if the Speenhamland Act interfered with the functioning of a free-market system, which made the New Poor Law of 1834 inevitable and ultimately determined the emergence of the working-class as a class. Moreover, the collapse of the market system in the 1930s follows inevitably from the free-market system that emerged in the 19th century. On the one hand, Polanyi appears to validate market fundamentalist arguments that the crisis of the early-19th century came about as a result of state interference. On the other hand, Polanyi appears to take a Marxist position by suggesting that market systems inevitably generated crises as a result of the contradictions of capitalism.

But the logic of Polanyi’s argument, according to Block and Somers, is that, “there can never be a self-regulating market system, so the idea of impairing its functioning is illogical” (94). This is because, in the first instance, markets depend on institutions that produce land, labor, and money as fictitious commodities and, in the second, countermovements arise to protect society, which lead to measures that shape how markets operate. But the direction of these movements and countermovements are not inevitable. For example, according to Block and Somers, Polanyi implies “that if international statesmen after World War I had decided to discard the gold standard, they could have escaped the crisis of the 1930s” (85). In other words, the collapse of the market system, the rise of fascism, and the outbreak of World War II was contingent upon keeping the gold standard in place. And it was political ideology rather than economic necessity that led to this decision.

It is this last point, that beliefs in things like the autonomy of the market and the proper role of the state shape outcomes, that Block and Somers argue was behind Polanyi’s interest in Speenhamland. They write that Polanyi’s point  was that,

the trauma of Speenhamland had a long-term impact on the consciousness of the English working class. Because state policies played a central role in destroying the established way of life of the rural working class, it was logical that as the memory of these events was passed along from generation to generation so also was a profound distrust of the state… In short, historical experience had inoculated the English working class against political socialism because that doctrine required viewing the state as a potentially benign force (89).

From this perspective, Polanyi’s argument is less about the inevitable crises that emerge from the back-and-forth between market liberty and market interference but about the root causes of beliefs about the relationship between the economy and the state and the effect that these beliefs have in shaping that relationship over time.

It is fascinating that Polanyi’s own beliefs about shaping the post-war peace led to a book that contained enough ambiguity that market fundamentalists felt comfortable reproducing whole chapters as support for their claims about market autonomy. For better or worse, we are necessarily implicated in shaping society and marking out the boundaries of markets. As Block and Somers summarize Polanyi’s argument, “the economy has to be embedded in law, politics, and morality” (94). By neatly combining the biographical and theoretical strands of Polanyi’s life and work, it seems that Polanyi lived his thought to a great extent. In this way, he seems very much in line with Marx and others like Gramsci with whom Polanyi shared so much intellectually. This relationship between praxis and theory is undoubtedly one of the most interesting aspects of this discussion.

Next I will discuss chapter four, which turns to Polanyi’s critique of the utopian in free market thinking.


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