Karl Polanyi's Critique

Author: Block • Filename: POMF-CH.4 LHP: THE POWER OF MARKET FUNDAMENTALISM RHP: TURNING THE TABLES Words: 6,291 / Chars: 40,895 • 1 • Printed: 06/18/14 8:39 PM Author: Block • Filename: POMF-CH.4 4 Turning the Tables Polanyi’s Critique of Free Market Utopianism In The Rhetoric of Reaction, Albert Hirschman (1991), identifies three distinct “rhetorics” that conservatives have used to discredit reform movements since the French Revolution. Chapter 6 of this volume is devoted to the “rhetoric of perversity”—the claim that a reform will have exactly the opposite of its intended effects and will hurt the intended beneficiaries. The second, “the rhetoric of jeopardy” is exemplified by Friedrich Hayek’s The Road to Serfdom (2007 [1944]); it is the claim that a reform will erode the freedoms we depend on. Hirschman’s third is the “rhetoric of futility”—the insistence that a reform is literally impossible because it goes against everything that we know is natural about human beings and social arrangements. This is the ploy that Malthus used in his Essay on the Principle of Population (1992 [1798]) to challenge the egalitarian ideas of William Godwin. Malthus professed to admire the beauty of Godwin’s vision, but he ultimately dismissed the vision as impossible. It was futile because Malthus declared it to be against the laws of nature—in other words, utopian. The rhetoric of futility is the main weapon that conservative intellectuals have wielded against socialists and communists for more than two centuries. They contend that an egalitarian social order would destroy any incentives for effort and creativity, which makes it utterly inconsistent with human nature. But while these arguments are open to debate, there is one aspect of the right’s critique that has proven compelling. This is the claim put forward by Marx and Engels and other theorists of the left that ending the class power of the bourgeoisie would also bring an end to political conflicts and the exercise of political power. As Sheldon Wolin Words: 6,291 / Chars: 40,895 • 2 • Printed: 06/18/14 8:39 PM Author: Block • Filename: POMF-CH.4 (1960) and others have noted, a deep hostility to politics led socialist thinkers to imagine mistakenly that it was possible to escape the necessity of governmental and political power. One neglected aspect of Karl Polanyi’s thought is his showing the parallels between market liberalism and Marxism with respect to their utopian views of state power. They both disdain it and imagine that it is possible to escape from governance and political constraint, and they both prioritize the economy as the central organizing force in society. To be sure, they differ in their normative evaluation of the economy. Economic liberalism celebrates the absolute freedom of unfettered markets as the means to transform politics into a purely technical exercise of maintaining optimal market conditions. Marxism, of course, associates the capitalist economy not with freedom for all but with unfreedom for most, but it upholds the redemptive powers of a stateless socialist economy. There is certainly nothing novel about arguments that Marxism is utopian. Where Polanyi is utterly original is in his startling claim that the self-regulating market—the central precept of free market doctrine—is a utopian idea. A self-regulating market, according to Polanyi, has never and will never exist, making its prescriptive demands for societal reorganization wholly futile. Years before Hirschman’s typology of conservative rhetorics, Polanyi mobilized the rhetoric of futility against free market thinking. Another indication of the prescience of Polanyi’s rhetorical move was that Friedrich Hayek—arguably the thinker most central to the revival of free market ideas in the twentieth century—openly embraced utopianism just a few years after the publication of The Great Transformation (hereafter GT). In a 1949 University of Chicago Law Review essay entitled “The Intellectuals and Socialism,” Hayek proposed his own sociology of knowledge to explain why so many intellectuals had come to embrace socialism. His argument is that, notwithstanding the impracticality of socialism: “… theirs has become the only explicit general philosophy of social policy held by a large group, the only system or theory which raises new problems and opens Words: 6,291 / Chars: 40,895 • 3 • Printed: 06/18/14 8:39 PM Author: Block • Filename: POMF-CH.4 new horizons, that they have succeeded in inspiring the imagination of the intellectuals.” Moreover, the socialists have been able to drive political debate continually to the left by contrasting the status quo to the ideal world of the socialist utopia. Hayek asserts of his fellow market liberals, “What we lack is a liberal Utopia, a program which seems neither a mere defense of things as they are nor a diluted kind of socialism, but a truly liberal radicalism which does not spare the susceptibilities of the mighty (including the trade unions), which is not too severely practical, and which does not confine itself to what appears today as politically possible.” He goes on to say: “The main lesson which the true [market] liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote.” (Hayek 1949, 432-433.) [ So, in fact, Hayek and his Mont Pelerin colleagues proceeded through the 1950s, 1960s, and 1970s to follow this counsel and repackage market liberalism as a utopia. Rather than proposing mild and incremental reforms, they called for radical new measures to overturn what they saw as the drift towards socialism. And just as the socialist utopia had been grounded in a deep moral commitment to equality, the market liberals rooted their utopia in constant appeals to expanding personal liberty. And lo and behold, Hayek was vindicated; free market ideas made deep inroads among Western intellectuals.1 <A>The Elements of Utopia Ever since Thomas More first coined the term, utopian thinking has been linked with the unrealistic starry-eyed idealism of radical and socialist philosophers who, against all evidence, insist on the achievability of what the Oxford English Dictionary (OED) defines as “an impossibly ideal scheme … a place, state, or condition ideally perfect in respect of politics, laws, customs, and conditions.” In light of this association between utopia and anti-capitalist Words: 6,291 / Chars: 40,895 • 4 • Printed: 06/18/14 8:39 PM Author: Block • Filename: POMF-CH.4 movements, how does Polanyi justify attributing an unattainable perfectionism to classical and neoclassical economics? Economics is the discipline, after all, that consistently played a major role in defeating even the tamest of progressive reforms, using its self-confident claims to scientific foundations to accuse movements for social justice of “utopianism.” To make his intellectual turnabout even more paradoxical, Polanyi makes Robert Owen the hero of GT. Robert Owen was the early nineteenth century English industrialist turned philanthropist, socialist philosopher, and architect of the first cooperative industrial village (New Lanark, Scotland). He has long been held up as the poster child for nineteenth century utopianism. Yet Polanyi insists that Owen is the realist, for it is he who recognized that it is both necessary and right for government to intervene in the economy. Malthus and Ricardo, Polanyi insists, are the true utopians, notwithstanding the fact that Thomas Carlyle labeled their political economy as the “dismal science” because of its gloomy predictions about future wage levels and the disasters that would inevitably be wrought by overpopulation. A century of political economy’s disciplinary development changed little in Polanyi’s estimation. No less than Malthus and Ricardo, he applied the same label of utopianism to von Mises and Hayek rather than the communists and socialists that they vilified in Vienna. To get a deeper understanding of Polanyi’s meaning and motivation, we turn to the passage that comes right after he first labels the self-regulating market as a “stark utopia”: “… such an institution [a self-regulating market] 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” (GT, 3). Polanyi insists that the free market utopia is not a harmless fantasy; he is blunt and graphic in characterizing its consequences as producing a dystopia—“a society characterized by human misery, as squalor, oppression, disease, and overcrowding:”2\\EN\\End punctuation?\\EN\\ Words: 6,291 / Chars: 40,895 • 5 • Printed: 06/18/14 8:39 PM Author: Block • Filename: POMF-CH.4 To understand why and how Polanyi predicts this inevitable slide from utopia to dystopia, it is useful to return to and deconstruct the OED’s characterization of utopianism as an “impossibly ideal scheme for the amelioration or perfection of social conditions.” Parsing this carefully, we can divide its conception of utopia into three distinct parts—it is an “ideal” of social “perfection,” it is a “scheme” to achieve amelioration or perfection, and it is a tragic “impossibility.” <A>The Utopian Ideal Free-market doctrine is an ideology founded on three assumptions—that power resides exclusively in the state, that political power is a chronic threat to freedom and commerce, and that the economic sphere does not entail the exercise of power. It is the dream of eliminating the need for political power or government that makes these assumptions utopian. Governance and societal order is now left exclusively to the putatively noncoercive workings of the self- regulating market (Hirschman 1977). Indeed, it is the absence of political power that they see as the precondition for individual liberties, societal prosperity, and the freest of all possible worlds.

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