"Solving" the financial crisis by only helping the financial sector - which is responsible for this to begin with - will not enamour ordinary people very much to the governing classes. In fact, such a situation will not only enrage most people; it will enrage them at a time when we can expect day-to-day life to become seriously tough for the next few years. Such an environment is a breeding ground for radical politics. Considering the current state of political discourse in the U.S., this something that should not be encouraged.
I said I'd come back to that point and here I am. That first post was called "The Great Transformation" in reference to a book of the same name by a theorist called Karl Polanyi. Polanyi was a Austrian who fled to the U.S. in the 1930s to escape the rise of fascism. Here he worked on his book which was published in 1944. His central question was where did fascism come from, and the answer he gives seems especially relevant in today's climate.
The basic argument runs as follows:
We are inculcated to believe that "the market" is some sort of asocial and universal entity that exists in of itself (this belief is probably more prevalent today than it even was in Polanyi's time). Markets are considered to operate with a law-like regularity much like gravity. It is this belief system that leads people and organizations such as the WTO to argue for things such as "market access rights" or against "interference in the market". The market is a natural system that exists independent of man, and is only screwed up when we stick our hands in and interfere. This is the fundamental principle of the Chicago School of Economics and the Washington Consensus, for example.
I use the phrase "belief system" intentionally for, as Polanyi points out, there is no natural market system that exists independently of human beings. On the contrary the natural market requires a huge and conscious intervention by society in order to survive. There cannot be a functioning market without contract enforcement, laws, courts, means of exchange, credit etc. How many successful markets do you see in governance-free zones such as Mogadishu or Darfur? In other words the market is a social construction that is embedded in society.
The danger before WWII, according to Polanyi (thought the logic applies for contemporary times too), was when people advocated for markets being disembedded and being allowed to act "naturally". When this occurred elements of society such as land and labour were treated as if they were market commodities. However, they were not. Land cannot suddenly reproduce itself if demand requires it too, as commodities do. Labour cannot suddenly retrain itself so it can "flow" into new opportunities ,as capital can. To treat them as if they can is to generate massive strains and tensions in society as people and land becomes increasingly subject to extremely anti-social and repressive systems of governance. All in the name of the "natural" market.
At the expense of overstating the point, the entire edifice of markets is a social construction designed to legitimate the rule of the richest in the world. Yet the more that this market disembeds itself from society the more dangerous and unstable society becomes. For as Polanyi points out, the only natural part of this whole story of disembedding is that at some point there is a backlash and people revolt. The exact nature of this revolt is uncertain, according to Polanyi, but not the fact that it happens. The fact of revolt is natural. In Germany this revolt manifested itself in the form of fascism, where Jews and other marginal elements were blamed for society's woes, as the German state began to re-embed the market into a new, and crazy-warped society.
This is why I argued that further removing the market from the control of the people would not solve its problems, but probably only hasten its own demise by generating some form of backlash. The possible nature of that backlash is the subject of my next post.