“Labor, land, and money are essential elements of industry; they also must be organized in markets; in fact, these markets form an absolutely vital part of the economic system. But labor, land, and money are obviously not commodities; the postulate that anything that is bought and sold must have been produced for sale is emphatically untrue in regard to them. In other words, according to the empirical definition of a commodity they are not commodities. Labor is only another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power which, as a rule, is not produced at all, but comes into being through the mechanism of banking or state finance. None of them is produced for sale. The commodity description of labor, land, and money is entirely fictitious.”[1]
In his classic book (1944) from which the above extract comes, Karl Polyani describes how from the 18th and 19th centuries, we lost our way. From a vision of markets as being embedded in the social order and functioning to serve such a social order, markets became the new deity. Urged on by neoclassical economic thinking, they became the defining feature of our political economies. Rather than markets acting in the interests of society, today we have all drunk the ‘self-regulating, free market’ Kool Aid. Our priorities have flipped; people and societies are now seen as only useful if they serve markets.
This is obvious in, for example, some people’s attitudes to international trade. At a recent meeting discussing the US tariffs on Chinese made EVs, one international trade economist for whom I have a lot of respect came up with the usual mantra that trade barriers are an unalloyed evil. Instead, he claimed, the West must just come to terms with the idea that it will no longer have an automobile industry. It will be dominated by the Chinese.
I found it utterly shocking that someone would express such a flagrant disregard for people’s livelihoods and for an economic order that serves social needs rather than the other way around. But maybe I should know better. Because, in some people’s world, a penny off is worth endless societal disruption. As Joseph Stiglitz puts it in his foreword to a recent edition of Polyani’s book, this is no more than ‘ideology and special interests masquerading as economic science and good policy.’
The view that everything must be subjugated to the need of the market has led us to places that we are now regretting finding ourselves in. People are no longer human beings; they are merely commodities to be traded in ‘the labour market’. We have now gone further as the age of the internet has almost completed the transformation of people and their inner lives into commodity products to be traded on social media platforms in the interests of ‘the market’.
Houses are no longer places where people can live in some comfort and security. They are financial assets to be traded and speculated on to create a ‘free market’ in housing stock; to concentrate further the accumulation of wealth; and to exclude an ever-greater proportion of the citizenry from a secure and affordable place to live. While in the UK many complain of the increasing difficulty of purchasing one’s own home, one of my Swiss friends laughs at this. For him, the idea that he might ever own his own home is simply beyond comprehension.
Land and nature have no value other than a market value. Even conservationists and others for whom the preservation and restoration of nature is their raison d’être have been captured by the economics of the market. Many have bought into the idea that the only way to ‘save’ nature is by pursuing ‘market-based solutions’, a mindset that is leading us inevitably to yet more financialization of that on which we depend for our existence. As a friend once put it to me: “We have delegated dealing with climate change and the restoration of nature to the finance industry; what could possibly go wrong?”
Yet who can blame them? We have reached a stage where we seem to believe that every societal issue can only be addressed legitimately if the proposed solution is market-based. Anything else is unacceptable and will not get much of a hearing beyond shock at such heresy and the threat of excommunication from the social circle that benefits from that ideology - and, remarkably, actually truly believes it.
A similar schism was evident during the Brexit debate in the UK. The arguments of those who wanted to remain in the EU were almost exclusively market based. The purported impact of leaving the Single Market. The Leave campaign also promised sunlit economic uplands from a more ‘global Britain’ (yet to materialise). But their campaign also focused on political economy issues. The idea that British laws and regulations should be made in Britain. The focus on a better ability to manage immigration in ways that preserve social cohesion.
Post-Brexit, the arguments have not changed. Remainers define it as an utter failure on classical economic grounds. Leavers stress the trade-offs: “Obviously any change on the scale of leaving the EU entails both costs and benefits. Assessing that trade-off is not just about economics and trade, but also about intangibles like control and national democracy, upon which free Western countries have traditionally put a high value.”[2],[3]
Should we, therefore, weep about Brexit because of its effect on markets? Or should we celebrate it as a course-correction where broader societal considerations (whether real or just perceived) won out over purely market-based arguments. Take your pick – and maybe reflect on what your pick says about your own world view.
Change is here
I have argued in my own recent book that the world is changing. That the market-based obsession coupled with almost total disregard of broader societal issues is starting to fray. We have come to realise that nothing is an unalloyed good. It’s all about trade-offs.
While markets have created wealth and lifted many out of poverty, the one-sided perspective has also wrought much societal damage - as all extreme ideologies always do.
I argue for a better fusion of the principles of liberal democracy with well-functioning, regulated markets. “A state of affairs where private enterprise, citizens, civil society and legitimately elected governments – the polity – all have an important role to play in the constant contestation of how we can all create a better society. That the creation of a better society should be the overarching purpose for all.”
The whole idea of such a change is seen in the emergence of ESG considerations in business and in markets. While many have been reducing ESG to a mechanistic, technocratic, measurement and compliance, tick-box exercise, it if far from that. It is the embodiment of a new social outlook. One that requires business to take a broader view of their role in society.
I’ll leave further discussion of all that to a future newsletter. Here I’ll just end with a positive note.
The world is changing. We have realised that we have not always made the right trade-offs when we abandoned the political economy lens and got sucked into market fundamentalism and financialization. Defining a viable course correction and implementing it while keeping our societies and our economies going will be the difficult work of at least one or two generations.
That work has started. Rather than complaining that change is all too slow, we can all contribute by helping find viable pathways to change. We're starting from where we are even if we would rather be starting from somewhere else.
[1] Polanyi, Karl. The Great Transformation (pp. 75-76). Beacon Press. Kindle Edition.
[2]Frost, David. “Nobody is confronting the great Remainer lie about Brexit.” The Telegraph, 21 June 2024
[3] The author does not address the idea that there are also political economy trade-offs from Brexit in terms of Britain’s ability to project its values when outside v inside the EU. On that, too, there are conflicting perspectives.
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