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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

beyond neo-liberalism « Previous | |Next »
June 12, 2009

Robert Wade in Financial Regime Change in New Left Review makes an interesting point about the global financial crisis. He says:

The shocks of the past year—another thirty years on from the last major shift—support the conjecture that we are witnessing a third regime change, propelled by a wholesale loss of confidence in the Anglo-American model of transactions-oriented capitalism and the neoliberal economics that legitimized it (and by the US’s loss of moral authority, now at rock bottom in much of the world). Governmental responses to the crisis further suggest that we have entered the second leg of Polanyi’s ‘double movement’, the recurrent pattern in capitalism whereby (to oversimplify) a regime of free markets and increasing commodification generates such suffering and displacement as to prompt attempts to impose closer regulation of markets and de-commodification (hence ‘embedded liberalism’). ... The first leg of the current double movement was the long reign of neoliberalism and its globalization consensus. The second as yet has no name, and may turn out to be a period marked more by a lack of agreement than any new consensus.

Polanyi argued in the Great Transformation that under capitalism the economy becomes disembedded and dominant, thereby creating grave dangers for humanity and the environment. 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, neighbourhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed.

In the face of this danger, society develops defence mechanisms that, in turn, can hinder the pursuit of profit. This is the famous 'double movement' which, Polanyi strove to show, emerged spontaneously in market societies--a sort of dialectical relationship between destruction and protection.

Polanyi's work holds explanatory potential in the current period of neoliberal globalisation. Some have even suggested that a new 'double movement' can currently be witnessed: the destructive impact of neoliberal globalisation and attempts, by different groups within society, to regulate it. Wade begins to spell this out when he says that the double movement means that the globalization model itself needs to be rethought. It over-emphasized capital accumulation or the supply side of the economy, to the detriment of the demand side (since the stress on export-led growth implied that demand was unlimited).

The failure of catch-up growth,, stems in part from neoliberalism’s lack of attention to domestic demand, reflecting the dominance of neoclassical economics and the marginalization of Keynesian approaches. Developing domestic and regional demand would involve greater efforts towards achieving equality in the distribution of income—and hence a larger role for labour standards, trade unions, the minimum wage and systems of social protection. It would also necessitate strategic management of trade, so as to curb the race-to-the-bottom effects of export-led growth, and foster domestic industry and services that would provide better livelihoods and incomes for the middle and working classes. Controls on cross-border flows of capital, so as to curb speculative surges, would be another key instrument of a demand-led development process, since they would give governments greater autonomy with regard to the exchange rate and in setting interest rates.

If the second leg of the present ‘double movement’ turns out to be a period from which consensus is largely absent, it may also provide space for a wider array of standards and institutions—economic and financial alternatives to the system-wide prescriptions of neoliberalism. This may give the new regime that emerges from the current upheavals greater stability than its predecessor.

| Posted by Gary Sauer-Thompson at 9:01 PM | | Comments (21)
Comments

Comments

Always attack the economists! I say. Their conception of the markets' equilibrium-seeking self-corrective mechanism is fictive. A mystifying ideology.

Amazing how the free-marketer economists on Wall Street now embrace big government with such a fervour.I find the fervour rather embarrassing, given the way that Wall Street disguised how the movement towards their de-regulated global market system was achieved through strong state intervention.

This was no smooth, gradual and organic evolution of the market according to natural principles. The emergence of the global financial market, was the outcome of a conscious and often violent intervention on the part of a government which imposed the market organisation on society.

These models of economics are not as simple as they were when either/or models of free or controlled capitalism/socialism/communism were thought up. Capitalism has continued to find/invent new territory, as Marx said it would, and it's also sown the seeds of its own destruction, although that's been more of a series of temporary blips than total destruction.

I can't access John Quiggin's site at the mo, but he's got a post on IP that's worth thinking about from this perspective. On one hand you have mega capitalism and its various doings, on the other you have individuals producing, distributing and consuming. Then again, there's a mass of activity somewhere in between that doesn't fit the models and won't obey the rules of private property. You can't have capitalism as we know it without private property.

If the free market model is fine, in its Darwinian shape, then some kinds of IP should be left to die a natural death because the market won't support them. But IP is a kind of private property. What happens when the edifice of private property is undermined?

Right now "welfare" does not seem to be a dirty word. At least where corporations are concerned. That said, "regulation" is still a taboo subject. Sure the patient died, but the operation was a complete success. Faith, brothers... faith will see us through.

Absolute deluded horseshit. I have made a killing on my asx200 calls over the past 5 weeks.The John Quiggins of this world should be in straightjackets.

What's missed is the system's ability to reify; to self replicate both at and thru the interaction of, economic base and cultural superstructure (values, ideas, mores,aspirations). What's missed is the "processive" aspect, as this seems paradoxical to the hegemonic aspect but actually is symbiotic to and with it it.
We replace Howard with- Howard!

The Rudd triumph is not of social democracy over reactive Toryism, but of the rebirth and triumph of the Tory tendency in the form of new corporatism purged of any atavistic idealism or restraint that lingered in the overthrown form; also the the death of the intellectualism and idealism that defined Labor in opposition: Rudd Labor represents the underlying tendency thru, with and in the ruthless triumphing of idea and ideal-resistant (Right, in particular)Factions and the vested interests these interact with, over the transformative tendency.

Brown Labour in Britain shows where this form purged of the "vision" and the motivation to do good eventually heads, devoided of vison.The Arbib types actually embrace the system as a "given",as what they imagine to be an "opportunity". They just survive and feed parasitically in a cognitive landscape "red in tooth and claw" content with the venal rewards of graft, conditioned to never know of anything better or more fulfilling. Ruddism (and Obamaism?) eg botoxed Toryism, means the promise of change becomes the means thru disillusion, of the reinforcement of an older and mindless status quo populated by opportunists.

That the status quo encourages resistance in no way challenges its fundamental existence, since this is its actual form.This actual form has actually incorporated resistance as a component, so beneath the surface illusion of democracy and ideas, the oxygen of hope actually feeds that which is inamicable to it, producing an underlying reality starkly at odds with appearances.

John
I do not think that Polyani's double movement is "deluded horseshit." The idea is that the double movement is the result of the interplay of two fundamental principles on which modern liberal capitalist society is based.

One is the principle of economic liberalism, which postulates the self-regulating market as the supreme mechanism of social and economic coordination, with laissez-faire and free trade as its instruments. The other is the principle of self-protection, as an instinctive reaction of society to preserve both its nature and its productive organisation through protective legislation, dedicated associations and other forms of societal intervention.

The double movement makes sense of the 1980s economic reforms to loosen up the market and the social reaction to the negative effects of opening up the economy.

Peter,
certainly we need to criticize those free market economists who maintain that capitalism is a natural order, that it is self-regulating mechanism, that globalization is natural necessity, and that the movement of history is one of ever increasing progress, with just the occasional ‘reversal’ or hiccup.History is perpetually on the up for this kind of economist.

As long as John Greenfield is "doing alright Jack"... nobody has any reason to complain.

Clear evidence that the current system is flawless.

I have a quote here from Ellen Meiksins Wood, (no reference) in which she says that that globalisation

is not some transhistorical natural process—certainly not if it means things like the withdrawal of the state from regulatory and social welfare functions in the interests of capital mobility and ‘competitiveness’ in the world market. These are the products of policy choices, not the working out of natural laws, not the inevitable destination of history....

A response to the effects of globalisation on society should begin with a critique of globalism’s neoliberal ideology, its economic unidimensionality, its linear conception of development and its political authoritarianism in relation to the world market.

Lyn,
In a article published after The Great Transformation, Karl Polanyi formulated his views advocating regionalism as a world order superior and preferable to universalism.By universalism he meant the actual universalisation of capitalism. He described regionalism as a countermovement---a pattern of world affairs that is one of regional systems coexisting side by side.

This looks to be what we have--Europe, America, China, Russia etc.

mars08
there does seem to be a pattern since the 1980s of a period of market expansion, that then entails some kind of economic crisis, and then some particular forms of societal response aimed at reducing the adverse effects of capitalist expansion and prosperity.

At this moment we are living though the societal response to an economic crisis.

The Washington Consensus- --a neo-liberal conception of globalisation based on the worldwide dominance of market forces--- was a utopian project to create a global self-regulating market.

I like this quote from this article at the electronic book review:

the globalization of environmental crisis is a direct outcome of the globalization of capitalism.The international market economy has transformed planetary natural systems, such as the atmosphere. These changes have, in turn, radically disrupted whole societies, rearranging their most basic energetic processes and further straining the geopolitical relationships between them.

I'm none too happy with the suffering caused by the "traditional" boom/bust cycle. It's the modern devotion to bubbles which really shit me.

Pollies need to wake the people up to what is real and what is going to blow up in their faces. And the voters have to mature enough to accept it.

Suggest you all try and see the interview with Peter Schiff on the Daily Show recently. This guy knows what's at stake.

Perceptive comment from Nan.
From here we easily arrive at (yet) another form of private gain/ public liability.

To the extent that Wikipedia summary is accurate, Polanyi was an historically-illiterate hillbilly.

The State, per se, arose 7,000 years ago to:

1. Legitimate property acquisition and distributions;

2. Mediate property disputes;

3. Coordinate defence and security against forces without who threatened propety.


To think this relationship between the state and propety is a modern, even 19th century development, is as insane as it is ignorant as it is preposterous.

FFS. Has the guy even read Thucydides?

John,
Polanyi was dead accurate on the enclosure movement in the UK . This history of the state using its power to enforce the enclosure of the commons is a classic example of the movement of the market becoming disembedded from society.

And, in 2002, Alan Greenspan received an honourary knighthood from the Queen for "his contribution to global economic stability". The man was a wizard.... apparently. But that's history, innit?

The State arose at different times, for different reasons, through different mechanisms, and serves different purposes wherever a State can be said to exist. 19th century aside, even now different States support property to varying degrees and in different ways.

The UK State had been supporting private property long before the closure of the commons. How long had the State been collecting taxes? Granting freehold to feudal lords? Raising armies? Does the State necessarily begin with parliaments?

Hey... forget about the state... we have an ECONOMY to worry about...