The economy was always embedded in society until capitalism arrived on the scenethis perhaps best explains the rise of Donald Trump
Donald Trump’s first week in office has set the cat among the pigeons. Fond hopes that he would become more moderate after assuming office have evaporated rapidly. It’s clear that we are no longer dealing with politics as usual; the cosy politically correct consensus of decades has been thrown out and the world’s greatest economic and military power now has a president out to disrupt the status quo.
There is no dearth of theories to explain the rise of Donald Trump, Brexit, the backlash against globalization and the rise of authoritarian right-wing nationalism. Explanations range from the economic distress of the working class in developed countries as they see their jobs disappearing over the border, to the stagnation caused by the financial crisis, to racism and a desire to protect cultural identities and, in the case of some developing countries, a desire to seek comfort from and reassert religious and cultural traditions in the wake of disruption caused by modernization.
But while there may be differences in interpreting what exactly is the motivating force behind the rise of the New Right, there is little doubt about what it aims to overthrow.
The enemy is liberalism, the narrative of free trade and globalization and multi-culturalism that has been dominant in recent decades. The liberal order is on its way out and a new one is being fashioned. The smug post-political consensus, which offered the masses a fake choice of political parties that pursued more or less the same policies with a few bells and whistles added on to tell them apart, has cracked open. The election of Donald Trump is nothing less than a bomb lobbed at the old liberal order. It is a revenge for the abysmal failure of the elites to understand and give a political voice to the fears and hopes of their people.
The world’s greatest economic and military power now has a president out to disrupt the status quo.
To understand the forces at work, there is perhaps no better source than the work of Karl Polanyi, an Austro-Hungarian political economist who in 1944 published his magnum opus The Great Transformation. His thesis was that the economy was always embedded in society until capitalism arrived on the scene.
Capitalism created a market-based society, which tries its level best to disembed the economy from society, insisting instead that society should follow the logic of the markets. Remember Margaret Thatcher’s comment that there is no such thing as society? Wrote Polanyi, “the control of the economic system by the market is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market."
But this free-market fundamentalism is a utopian dream. People are not willing to be treated as commodities, to be used and discarded at the whims of the market.
Market societies, therefore, have two opposing forces at work—the free market tendency to disembed the economy from society and the counter-tendency that seeks to make society paramount and the economy an adjunct to the well-being of society. This ‘double movement’, said Polanyi, sums up the political economy of our times.
In The Great Transformation, Polanyi outlined how the liberalism of the 19th century was opposed by social welfare legislation and the building of protectionist walls after the Depression of the 1870s. That led to a scramble for new colonies and the First World War, ending the first wave of globalization. It was followed by the Great Depression of the 1930s and the rise of fascism, which promised to insulate workers from the vagaries of free market fundamentalism. In a sense, therefore, fascism arose naturally from liberalism.
Free-market fundamentalism is a utopian dream. People are not willing to be treated as commodities, to be used and discarded at the whims of the market
But so did social democracy.
After the Second World War, free markets were reined in. This was the age of fixed exchange rates, managed trade and strong trade unions. That regime, by the logic of Polanyi’s double movement, was replaced in turn by globalization and financialization, the free movement of capital and free trade.
That ended in tears with the financial crisis of 2008, leading to widespread distress that continues years after the crash. In short, the dialectic of Polanyi’s ‘double movement’ is what has driven recent history.
The parallels between the 1930s and current reality are painfully obvious. Sociologist Fred Block, in his introduction to The Great Transformation, wrote: “Polanyi’s arguments are so important for contemporary debates about globalization because neoliberals embrace the same utopian vision that inspired the gold standard. Since the end of the Cold War, they have insisted that the integration of the global economy is making national boundaries obsolete and is laying the basis for a new era of global peace. Once nations recognize the logic of the global marketplace and open their economies to free movement of goods and capital, international conflict will be replaced by benign competition to produce ever more exciting goods and services. As did their predecessors, neoliberals insist that all nations have to do is trust in the effectiveness of self-regulating markets." The neo-liberal project is now under threat, as the second part of Polanyi’s double movement—the reaction to market liberalism—gains the upper hand.
There are, of course, several other competing narratives of recent history. There’s no question that capitalism, or the market society, has vastly improved the standard of living for the masses. Karl Marx, for instance, waxed lyrical about the dynamism of capitalism in The Communist Manifesto, writing that ‘Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones." But Polanyi’s insight is about how the dialectical ‘double movement’ propels history and politics forward.
Capitalism’s relentless dynamism comes at a cost. Rapid change has winners and losers and periodic crises disrupt lives. It’s no wonder then that, during periods of profound crises, people seek refuge in strongmen who promise them the moon
Capitalism’s relentless dynamism comes at a cost. Rapid change has winners and losers and periodic crises disrupt lives. It’s no wonder then that, during periods of profound crises, people seek refuge in strongmen who promise them the moon. It happened in Europe in the 1930s and it’s happening all over the world today.
As the philosopher Slavoj Zizek points out, “when people awaken from their apolitical slumber, it is as a rule in the guise of a rightist populist revolt."
Trump’s actions have evoked almost hysterical opposition from the liberals. But he, as well as the other leaders of the New Right, have done a very important public service. They have brought out the contradictions in society that liberalism glossed over, they have ripped away the mask of gentility and, in Marx’s words, “man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind."
Manas Chakravarty looks at trends and issues in the financial markets. Respond to this column at firstname.lastname@example.org.
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