We live in a period of profound change and transformation, with neoliberalism now under siege and becoming channeled in new directions. At the center of all of this is the state, especially states that are also great powers. Shifting geopolitical fortunes, the impact of technological change, the corrosion of established political institutions and the pernicious effects of growing inequality, resurgent nationalism and nativist populism have revived debates about the sources and management of such change. As before, attempts to manage change, sometimes in the form of worker movements, more often in the forms of government intervention, are usually dismissed as ‘socialist’ and ‘ineffective’, although not as much when such interventions tend to benefit large corporations, in what is otherwise known as welfare for the rich. For Karl Polanyi, an Austro-Hungarian economist and sociologist born in 1866, rapid, uncontrolled, and unmanaged change – a prominent feature of capitalist economy – can wreak havoc locally and internationally when the system is global. The consequences can be devastating, and have included world wars, millions of dead people, and institutional, cultural and environmental destruction.
In one of the lesser noticed passages of his masterpiece, The Great Transformation (TGT), Polanyi makes the following statement: “Nowhere has liberal philosophy failed so conspicuously as in its understanding of the problem of change” (TGT p. 35). Only two pages later he lauds the wisdom of an old British document from the early 1600s: “The poor man shall be satisfied in his end: Habitation; and the gentleman not hindered in his desire: Improvement” (TGT p. 37). Polanyi contends that such household truths of statesmanship, namely that rapid change should be managed in order to accommodate as much as possible those on its losing end, were discredited and abandoned when free trade liberalism took hold in the nineteenth century. These truths were revived to an extent during the post-1945 Bretton Woods period, but they were forgotten once more with the resurgence of neoliberalism after the 1980s. That Polanyian statement rings a very familiar bell. Polanyi had a very particular way of describing and controlling change. His historical approach towards how change occurs is through the lens of what he calls a double-movement, where the state is the central site of conflict and contestation. In a recent paper to be published by the Review of International Political Economy, we consider these concepts as underutilized, but also very important for understanding our international political economy today.
For Polanyi, the liberalization of the market causes both middle class and poor groups (factory workers, state employees, farmers, small business) as well as economically powerful groups (large capitalists and rich elites) to seek protection from their effects. They create alliances which often cross ideological lines in order to advance their interests. As they become drawn into these contests, the state and its institutions grow to become the main regulator of the market by responding to the pressures of such groups. We argue that this is how the state comes to be the primary side of conflict mediation for Polanyi. We add to this what Polanyi calls the ‘rate of change’, which is one of his ideas not often picked up by IPE scholarship. For Polanyi, there are two aspects of change we must consider: change in the direction and in the speed or rate at which it occurs. By the direction of change he means whether it is epochal or systemic in nature, as for example from a feudal to a capitalist mode of production. This type of change is rare. What is much more pressing is the question of controlling the rate of change, which is really the rate of capitalist development. In our technological capitalist system of accumulation, this rate affects how we live, the characterization of our humanity, and the biosphere. Taken together this is often experienced as an unstoppable technological march over which we have little control. The relentless advance of market economy forms the basis for different groups to mobilize on behalf of their own interests and beliefs, leading in turn to the formation of groups, political parties and ultimately broad-based (and sometimes global) social movements. Such forms of collective mobilization inevitably gravitate towards the state as the venue through which to pursue and advance their interests. This is why the state becomes the central site of conflict over the foundations of the market economy, where control over the pace of change is mediated. Its international dimension flows from states reflecting outwards the implications of how the double-movement is playing out domestically. Such a focus on the state as the fulcrum between economy and society downgrades the importance of what is known as ‘global governance’, as the power dynamics involved in their contestation are primarily driven by and played out within institutions firmly anchored to states and especially great powers.
In TGT Polanyi famously notes that the roots of European fascism must be sought in Ricardian England, and our analogy to this is that the roots of the current crisis must be sought in the failure to embed the world economy after World War II. Since the 1980s, as the intensity of globalization has leveraged the power of capital through efforts to insulate the market from the effects of its own consequences. Social protection was weakened or dismantled entirely under the ideology of neoliberalism throughout rich and poor countries alike. But when cracks visibly opened after the millennium, followed by the 2008 crisis, the system shook. Protection (such as nationalization of the car industry in America and subsidies for financial institutions everywhere) was extended only to capital. Social movements like the Occupy Movement, which tried to demand protection for marginalized and vulnerable classes and groups, were ignored. The market system in this way was strengthened, but dissatisfaction boiled under the surface. Sectional interests seeking protection from market forces reacted in various forms as the status quo became increasingly difficult to support. Formerly fringe politicians, such as Donald Trump and Bernie Sanders in the US, Marine Le Pen in France and Nigel Farage in Britain, formed new alliances seeking to redress social problems, and have received support from sections of the working class, as well as religious and agricultural interests across many rich nations. Indeed, in the most recent US election, the support that Trump and the Republicans received from working classes, minorities and immigrants, traditionally supporters of the Democratic party, shocked many, but this would not have surprised Polanyi.
Such shifts are happening everywhere. Like Polanyi, we direct our attention towards the myriad of (mostly) national counter-movements contesting the over-reach of neoliberal efforts, through the institutions of the state, to bend the world to its interests. Some of these movements, both national and international, promise little more than the colonial and fascist responses that early 20th century liberal internationalism unleashed on the world. But others have not left behind the democratic ethos that animated Polanyi’s vision of the future. Re-engaging with Polanyi’s concept of the double movement, and layering in a concern for controlling the rate of change within the context of seeing the state as the primary site of contestation, we think helps us to understand the current state of affairs in an accurate and productive manner.
