Saturday, July 19, 2014

Henry Farrell — The free market is an impossible utopia: Karl Polanyi's Critique


Henry Farrell interviews Fred Block (research professor of sociology at University of California at Davis) and Margaret Somers (professor of sociology and history at the University of Michigan) about their new book, “The Power of Market Fundamentalism: Karl Polanyi’s Critique” (Harvard University Press, 2014). The book argues that the ideas of Karl Polanyi, the author of “The Great Transformation,” a classic of 20th century political economy, are crucial if you want to understand the recession and its aftermath.

Good read.

The Washington Post — Monkey Cage
The free market is an impossible utopia: Karl Polanyi's Critique
Henry Farrell

Karl Polanyi seems to be making a comeback, along with Hyman Minsky. Lot of other good stuff to be resurrected that neoliberals have buried.
Polanyi’s core thesis is that there is no such thing as a free market; there never has been, nor can there ever be. Indeed he calls the very idea of an economy independent of government and political institutions a “stark utopia”—utopian because it is unrealizable, and the effort to bring it into being is doomed to fail and will inevitably produce dystopian consequences. While markets are necessary for any functioning economy, Polanyi argues that the attempt to create a market society is fundamentally threatening to human society and the common good. In the first instance the market is simply one of many different social institutions; the second represents the effort to subject not just real commodities (computers and widgets) to market principles but virtually all of what makes social life possible, including clean air and water, education, health care, personal, legal, and social security, and the right to earn a livelihood. When these public goods and social necessities (what Polanyi calls “fictitious commodities”) are treated as if they are commodities produced for sale on the market, rather than protected rights, our social world is endangered and major crises will ensue.
Free market doctrine aims to liberate the economy from government “interference”, but Polanyi challenges the very idea that markets and governments are separate and autonomous entities. Government action is not some kind of “interference” in the autonomous sphere of economic activity; there simply is no economy without government rules and institutions. It is not just that society depends on roads, schools, a justice system, and other public goods that only government can provide. It is thatall of the key inputs into the economy—land, labor, and money—are only created and sustained through continuous government action. The employment system, the arrangements for buying and selling real estate, and the supplies of money and credit are organized and maintained through the exercise of government’s rules, regulations, and powers.

By claiming it is free-market advocates who are the true utopians, Polanyi helps explain the free market’s otherwise puzzlingly tenacious appeal: It embodies a perfectionist ideal of a world without “coercive” constraints on economic activities while it fiercely represses the fact that power and coercion are the unacknowledged features of all market participation.

28 comments:

Bob Roddis said...

Claim #1: We commies are "scientific" and only deal with actual evidence and events.

Claim #2: The free market has never existed.

THEREFORE....

From the actual existing factual evidence, we know it cannot work.

Bob Roddis said...

Claim #1: We commies are "scientific" and only deal with actual evidence and events.

Claim #2: The free market has never existed and can never exist.

THEREFORE....

From the actual existing factual evidence, we know that most economic problems in the world are the fault of the free market.

Unknown said...

"By claiming it is free-market advocates who are the true utopians, Polanyi helps explain the free market’s otherwise puzzlingly tenacious appeal: It embodies a perfectionist ideal of a world without “coercive” constraints on economic activities while it fiercely represses the fact that power and coercion are the unacknowledged features of all market participation."

The Big Lie at the heart of right-wing 'libertarianism'.

Matt Franko said...

" power and coercion are the unacknowledged features of all market participation."

I think this part is a bit over the top... perhaps for non-discretionary goods... but I dont think this applies to discretionary items (luxury goods, entertainment, leisure, etc...)

Food, housing, education, medical services, etc. yes I would agree power and coercion are present... items of subsistence. rsp

Matt Franko said...

Bob the free markets DO exist in the trade of illegal things... drugs, stolen property, smuggling, human trafficking, etc... anywhere outside of the law

Matt Franko said...

" power and coercion are the unacknowledged features of all market participation."

These kinds of statements can help to obscure the fact that we have a surplus economy by mis-applying power and coercion...

Tom Hickey said...

power and coercion are the unacknowledged features of all market participation."

I think this part is a bit over the top... perhaps for non-discretionary goods... but I dont think this applies to discretionary items (luxury goods, entertainment, leisure, etc...)

Food, housing, education, medical services, etc. yes I would agree power and coercion are present... items of subsistence. rsp


Show me a market that is not infected with market power. Moreover, Polyanyi and institluitonalists are not talking about specific markets but the institutions that underlie the existence and operation of markets.

Institutions are inherently power-based.

The extreme libertarian answer, e.g., of Rothbard is essentially to get rid of institutions and limit interaction to individuals acting voluntarily with the only constraint being the NAP.

First, that requires considerable power to accomplish to create a society of those equal in power, or admits the development of power relationships based on property ownership.

Secondly, human progress has been based largely on the ability to organize and execute in groups. This organization is institutional, being based on institutional arrangement that serves a rules and criteria. To eliminate one of the greatest human discoveries would be like banning use of the wheel.

Tom Hickey said...

@ Bob

And to paraphrase Mises, we don't need no stinkin' evidence since we have a priori truth and know we are correct without having to look at evidence. So don't bother bringing up evidence to counter our position, since we know a priori it cannot be good evidence.

Tom Hickey said...

Bob the free markets DO exist in the trade of illegal things... drugs, stolen property, smuggling, human trafficking, etc... anywhere outside of the law

Matt, by definition crime is an offense subject to enforcement. The War on Drugs as to be one of the biggest government interventions in markets ever.

And the drug market, as most black markets, is heavily contested with violence.

I don't see how that is a free market operating on the basis of competition without government intrusion or market power of participants.

Tom Hickey said...

" power and coercion are the unacknowledged features of all market participation."

These kinds of statements can help to obscure the fact that we have a surplus economy by mis-applying power and coercion...


Even neoclassical economics admits that a competitive market doesn't produce a surplus, since everyone receives the marginal product of their contribution. So there is no profit as surplus.

If one means by surplus, more value of real goods produced than consumed so that some have more than others, how did they get more without application of power through institutional arrangements that favored them? This has only been possible through a rather high level of organization.

It took humanity many millennia to achieve this as a result of growth that lead to agriculture and urbanization. By that time societies were considerably institutionalized and power relationship defined by power elites.

Matt Franko said...

Tom,

What about stuff on EBay?

Like for instance somebody is selling a set of golf clubs on EBay, and the two people dont even talk to each other or communicate other than the bids...

How can 'power' (dunamus: 'ability') be involved or coercion if the person selling the clubs wants too much for them, the buyer can always not bid with impunity... other than he may be embarrassed at the condition of his present set of clubs when he shows up to tee off at the course on the weekend... which is not coercion imo...

I just dont see coercion or power being involved unless the item being bought or sold is related to a persons/persons family's subsistence... then I definitely see coercion or power in play...

rsp,,

Anonymous said...

How is it that Bob is even employed or got through college when he can't even write a logical syllogism?

It like he's completely unaware of the non-sequitur.

I'm beginning to agree with y that Bob must have physical brain problems as he clearly unable to think rationally at the most simple level.

Matt, I think the most basic proof the necessity of power and coercion is land.

You can't produce anything without access to land based resources so since one can't exclude others from accessing land without claiming at right to do violence against the bodies trying to access the "property" then it must necessary follow that everything that is produced from system using the violence of property i.e. must reflect the power imbalances between the owners and the dispossessed in the valuation of the of any good that requires access to the property system.

You are correct that amount of dispossession can vary between goods in terms of the final market price but I don't think you can claim the imbalance ever goes away completely.

So since perfect non-aggression is physically impossible we define economy in terms of a hierarchy of violence and necessary outcomes and the rates at which necessary physical output meet with rates of adaptivity within a changing hierarchy of needs versus necessary violence.

Roger has talked the most about adaptivity on site this site and better than myself.

Lastly, I would like to note that issues of access to discretionary goods versus subsistence goods is related to another power within the human society. I've recently come to the conclusion a great of inequality is deliberately created out of the physically necessity for distinguishing accumulation as part of human sexual selection.

Lower classes are denied access to resource not because they couldn't be provided but because providing access would equalize mating opportunities to lesser males. Violent exclusivity is enforced purely for the purpose of exterminating completing genetic lines hence racism, classism, etc...

Libertarian and Reactionary politics can be seen as a sexual strategy in promoting "property rights" as a system that results in excluding the "lesser males" and thus a more inclusive system as social democracy is seen threatening the "natural" system which benefits people of established (white) families.

Bob Roddis said...

Mr. Hickey: The "a priori" stuff is pretty limited to what everyone knows to be empirical but self evident and ubiquitous in human action, and is therefore untestable. Everything else is an empirical issue. If you think something is in fact testable, then test it.

Rothbard:

Whether we consider the Action Axiom “a priori” or “empirical” depends on our ultimate philosophical position. Professor Mises, in the neo- Kantian tradition, considers this axiom a law of thought and therefore a categorical truth a priori to all experience. My own epistemological position rests on Aristotle and St. Thomas rather than Kant, and hence I would interpret the proposition differently. I would consider the axiom a law of reality rather than a law of thought, and hence “empirical” rather than “a priori.” But it should be obvious that this type of “empiricism” is so out of step with modern empiricism that I may just as well continue to call it a priori for present purposes. For (1) it is a law of reality that is not conceivably falsifiable, and yet is empirically meaningful and true; (2) it rests on universal inner experience, and not simply on external experience, that is, its evidence is reflective rather than physical7; and (3) it is clearly a priori to complex historical events.8


Further, you folks are the ones claiming economic theory can be derived from history. How can you simultaneously claim a total lack of historical evidence of a free market but at the same time claim that history proves that the free market cannot work?

That you have to fudge these issues says a lot.

I'd like to point out that the issue of whether US banks require reserves in order to to lend or scrounge for the reserves after making loans is an important EMPIRICAL issue.

Tom Hickey said...

My SO is an ebay seller and has been one for over a decade. She can tell you about market power on eBay, especially since eBay has been recruiting volume sellers and giving then favorable treatment over small sellers that aren't as profitable for eBay.

Of course, individual auctions may be a free market competitively but the whole framework of eBay as other corporations rest on a complex network of institutions involving institutional power.

Why does eBay itself have no significant competition. Does capital intensity create an entry barrier that results in market power?

What appears like a competitive market from the outside may look quite different from the inside.

Just about the only way to survive and prosper in modern capitalism is by generating some market power.

If you don''t have some market power, your profit will be driven toward zero eventually as others enter the market. This is brutal fact that eBay sellers have to contend with daily.

Bob Roddis said...

septeus7:

Please provide a detailed explanation, perhaps in the form of a lawsuit complaint with each factual element of your claim, showing how a ubiquitous and enforced prohibition upon the initiation of force and violence impairs poor and minority people.

Matt Franko said...

Tom as far as 'surplus' issues..

First principles who are we talking about:

"one of these, the least of My brethren" Mat 25:40

OK, this cohort ie "the least" of those among us are who we are talking about (I am anyway)... not people who have access to the surplus... and are trying to negotiate a few thousand off of the BMW guy by threatening to go over to the Mercedes dealer...

I submit these people, 'the least among us' often think there are shortages and they are not receiving their just allotment because there is not enough to go around... and even those in the 'socio-economic justice' cohort who would otherwise advocate for these people, ie 'the least' among us, imo often are led to think there is not a general surplus but rather there are shortages and so forth

... like "we're out of money" from Obama himself, these otherwise good people do not understand that we have a surplus society in general and imo it is part of what is holding us back...

iow people who gain possession of subsistence items and then use their power provided by this possession to get over on others, get off the hook because many of 'the least' and their advocates think 'there is not enough to go around anyway' and they end up surrendering (yielding to the coercion) instead of fighting...

In a surplus society, the power/coercion only exists if we dont realize there is a surplus in the first place...

If we all realized there was a great surplus, how could these people ever get away with this? We would never let them get away with this...

rsp,

Tom Hickey said...

Mr. Hickey: The "a priori" stuff is pretty limited to what everyone knows to be empirical but self evident and ubiquitous in human action, and is therefore untestable. Everything else is an empirical issue. If you think something is in fact testable, then test it.

If you think that I have mischaracterized the Libertarian position, I think you have mischaracterized the Keynesian position.

But in the end, and we have argued to the bitter end, it's disagreement over fundamentals.

Evidence cannot prove a theory, since every theory is constituted of general propositions, not all instances of which can be known owing to ontological and epistemological uncertainty. Hypotheses can be disconfirmed by contrary evidence. Theories that provide the best explanation and prediction are preferred for pragmatic reasons.

Evidence for major hypotheses strengthen the explanatory and predictive aspects of a theory, and contrary evidence for major hypotheses weakens a theory. Theories are generally only replaced when a theory that provides superior explanation and predication is developed.

But I would argue that political economy is philosophy rather than science, being based on normative preferences and fundamental principles that serve as the foundation of a world view.

There is no overarching criterion for deciding the debates among world views. The criterion is history, which shows which world view prevails for how long in different regions, and what it accedes to.

Evidence counts, but not in the same way as science, since scientists are in general agreement over criteria, whereas in philosophy, criteria are in dispute as well as how putative facts are construed. So it is difficult to impossible to arrive at agreement regarding foundational issues and key points of contention.

Based on evolutionary theory as the most comprehensive account of everything historical, i.e., a rationale for what happens dynamically over time, selection of what comes to dominate is based on evolutionary principles relating organisms to the changing environment, in which environmental and ecological change is now being affected directly by humans.

What we see from history is first, increasing organization in the human species, which gradually separated homo sapiens from other species and made it dominant on the planet.

Secondly, we see that initially, liberalism was in a balance with organization in the hunter-gather stage, while, organization eclipsed liberalism in the succeeding stages until the birth of philosophical liberalism at the time of the Enlightenment, followed by the political revolutions that made it a reality.

The present challenge of humanity is to bring organization back into balance with liberalism. How that will manifest is anyone's guess, but this is the dialectic now at work.

Tom Hickey said...

Please provide a detailed explanation, perhaps in the form of a lawsuit complaint with each factual element of your claim, showing how a ubiquitous and enforced prohibition upon the initiation of force and violence impairs poor and minority people.

Frivolous request.

The NAP is not a blanket principle (sufficient) and never could be one, even though most human societies have recognized a right to security of person and property in use, first by custom and then by law. So could say that some form of the NAP has been recognized as a "natural" right necessary for peaceful social functioning.

However, by custom and law this has been interpreted differently, and also many other rights and responsibilities have been recognized as natural or necessary in custom and law. And on top of that, as organization developed, institutional arrangements were also developed, generally involving power relationships.

Disregarding this frivolous.

Septeus7 brought up the issue of land, which is a pertinent one. Land was enclosed from the commons not as much as personal use, as Locke imagines, but by force. And where do land titles come from. Governments and states (ancient cities were states).

If a truly Libertarian solution would be adopted, then there would first have to be a reset to the commons with land then allocated by personal use for production, which would be obvious to others.

Then this raises more questions. Is using vast stretches of the common personally sufficient to convert it to private property. Some (Bundy) would say yes, others (the public to whom the commons belongs) would say no.

In the case of the US, for instance, the commons was forcibly enclosed from the native population, who where demonized as terrorists for defending themselves from aggression. By right, the whole of the US should be returned to those who where using it prior to the arrival of Europeans, who seldom used the niceties of exchange, and when they did, the contract was invalidated by the conditions.

Resorting to the NAP as the ultimate criterion in debate is frivolous and a waste of time.

Bob Roddis said...

Resorting to the NAP as the ultimate criterion in debate is frivolous and a waste of time.

No. We already live in a society based upon the NAP, but with politically based exceptions and an extreme failure to protect the rights of the poor and powerless. You need to show that the meticulous enforcement of the NAP for the benefit of the poor and powerless does not benefit them and/or that it harms them. You can't do that, septeus7 can't do that and so you obfuscate.

You should be able to give point by point specific examples of how this would harm, for example, Shia living in Sunni areas of Iraq and Syria. You won't even attempt it because it would destroy your phony narrative.

Your entire schtick is to distort and deny the meaning of simple and well known ideas and concepts.

Tom Hickey said...

The NAP already applies in law, other than the enforcement power required for the rule of law. Your argument is that may other factors blunt its effect.

You have to show that the NAP alone is necessary and sufficient and you cannot.

NAP is too restrictive and defines aggression and violence too narrowly.

No society has ever run on the NAP alone, so it cannot be claimed to be "natural."

Moreover, evolutionary development hasn't support this either. Power in endemic to human relationships and power is the potential to force others involuntarily.

The so-called voluntary prohibition against naked aggression permits the subtle use of power to promote accumulation by the class in power, namely, ownership class. History shows this quite clearly.

The Libertarian view is that some imaginary la-la land. It's supposed to be utopian but there are many good reasons to expect it to become dystopian.

It's not worth arguing over because it is never going to happen anyway. It is too narrow a conception of the way the world works. It's simplistic and only appeals to adolescents and people who never grew up.

Unknown said...

Sideshow Bob said:

"Please provide a detailed explanation, perhaps in the form of a lawsuit complaint with each factual element of your claim, showing how a ubiquitous and enforced prohibition upon the initiation of force and violence impairs poor and minority people."

Septeus' point is that your political ideology ('anarcho-capitalism') does not prohibit the initiation of force and violence.

This is a point which you are to stupid to understand.

Unknown said...

Sideshow Bob said;

"We already live in a society based upon the NAP, but with politically based exceptions"

if tax revenue is the legitimate property of the state, then demanding payment of taxes, or enforcing payment, is not 'aggression' according to the NAP, and as such it is not a violation of the NAP.

Tax revenue is the legitimate property of the state, so taxation is not aggression and it does not violate the NAP.

Unknown said...

Tom,

Locke held that declaring land to be your private property as a result of 'homesteading', and forcefully excluding others from that land, was only morally acceptable or just if there was enough equally good land left over for everyone else to do the same.

Right-wing 'libertarians' scrupulously ignore this part of the homesteading principle.

Anonymous said...

Quote from Bob: "Please provide a detailed explanation, perhaps in the form of a lawsuit complaint with each factual element of your claim, showing how a ubiquitous and enforced prohibition upon the initiation of force and violence impairs poor and minority people."

Okay, sounds fun.

Here Goes:

Court of Public Opinion
The Dispossessed,
Plaintiffs,
vs.
The Landed Plutocrat,
Defendant.
------------------------------------ Complaint:

The Plaintiff "the Dispossessed" brings forth the following causes of action and alleges that the following:

1. Plaintiff is are residents of the Planet Earth and required to live on Planet Earth for now.

2. The Defendant is corporation and a resident of Plant Earth at the time of complaint.

3, The Defendant at the beginning of civilization approximately 5000 B.C. contacted the Plaintiffs and informed them that he would be taking the following actions. All land claimed by himself would be the exclusive property of himself and his descendents due his proficiency using in arms and convincing other men at arms of the validity of his claims against any objectors. The Defendant then proceeded to claim that any challenge to his "divine rights of property" to his kingdom would be considered violence against his corporation and privileged realm and therefore a "ubiquitous and enforced prohibition upon the initiation of force and violence(against his privilege)" would be exercised.

The Dispossessed requiring access to said property as a require for survival ignored the proposal of such privileges and decided that they should take off the land what they and their families needed at they had always had done for the prior 200,000 years. The Defendant responded by unleashing on the Dispossess a relentless and organized campaign of war, terrorism, murder, rape, pillaged, molestation, kidnapping, genocide, ethic cleansing, censorship, battery,etc... in short the legion of all criminal actions imaginable where taken against the bodies of dispossessed without their consent until they relented to the so-called validity of the his corporate property and "divine right" of rule over his property. He then forced the Plaintiffs to sign "contracts of consent" for labor and goods to transfer the products of such "capitalization" over to his corporation while allowing only the smallest amount necessary to be sold back to the conscripted workers and soldiers at a "profitable" level i.e. that was necessary to keep the consumption of armed men at a level needed to suppress the working men at ever increasing rate. The Defendant calls this process of suppression the "free market". The Plaintiff alleges this system to be "Slavery Now, Slavery Then, Slavery Forever."

It is the claim of the Plaintiff that this relenting under such oppressive, unequitable, and odious conditions do make any claims of consent to this notion of private property to be unjust, irrational, unrulely, and not suitable for continued human survival on this planet or any other and therefore calls for the abolition of this condition of Slavery to Corporate "free market" capitalism. Socialism is Abolition; Abolition is Socialism.

4. The Plaintiff requests that that more equitable and less exclusionary and privileged systems for protection of human life, development and distribution of wealth and human cooperation be established in the interest of all mankind in the present and in the future. The establishment of a society free arbitrary privileges now and forever the is the only and best remuneration that be attained.

Signed -The Dispossessed,Non-Propertied, Non-Capitalist, Enslaved Majority of Earth.

Tom Hickey said...

Locke held that declaring land to be your private property as a result of 'homesteading', and forcefully excluding others from that land, was only morally acceptable or just if there was enough equally good land left over for everyone else to do the same.

Yes, and like Adam Smith's barter theory of exchange leading to money to overcome the double coincidence of wants constraint, it's a just so story conjured from imagination rather than evidence, and which subsequent evidence contradicts.

It's excusable concerning the time frame since much less was known of history and anthropology was not yet in its infancy.

Some of the little land on the global that was obtained by personal use (homesteading) occurred in America, but only after dispossessing the indigenous population of their ancestral lands, so that doesn't count either.

The commons was enclosed largely by force by power elites.

Unknown said...

Locke's source of facts about history is the Bible.

Tom Hickey said...

Like I said, imagination.

Almost no serious scholars impute historicity to the most of the early biblical accounts. They are myths in the sense of teaching stories. The truth embedded in them is not historical.

Owing to limitations on biblical scholarship until the late 19th century, this was not known based on scholarship and evidence. In fact, the early scholars that put forward the initial research often lost their positions.

Bob Roddis said...

I just noticed septeus7's response because I'm not getting email notification of comments which used to appear instantaneously. I too am against property obtained by force, violence and other criminal methods. He does not list property that was, in fact, obtained by true homesteading. Would a one-time re-distribution of criminally obtained property be enough?