Free Trade and Migration in Peril As Politicians Shun Globalization

There are three arguments in The Great Transformation that require recognition and response from free market enthusiasts. First, Polanyi pushed back vigorously against the assumption that unregulated markets were the “natural” state of the world. Governments take concerted action, Polanyi noted, to maintain the modern capitalist system.

One present-day example is intellectual property rights. To incentivize innovation and creativity, governments enforce laws that protect trademarks, patents, and copyrights. If the state did not do that, innovation would be lower but diffusion would be much more rapid, as films, software, and pharmaceuticals would be pirated almost immediately. The tradeoff of more innovation for less diffusion might be worth it, but getting there requires purposive government action.

Polanyi’s second argument was that the ultimate result of laissez faire policies is “the demolition of society.” According to The Great Transformation, human beings inevitably resist efforts to turn labor into a commodity. Market liberalization would produce rising inequality. And then, Polanyi’s predictions turned rather gloomy: “Robbed of the protective covering of cultural institutions, human beings would perish from the effect of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed.”

Finally, Polanyi described what he called the “double movement.” If the state consciously tried to create a marketplace disembedded from the rest of society, it would trigger blowback against markets. Exactly how that double movement manifested itself could vary. While socialists might call for expanded state support of the less fortunate, another possible response would be xenophobic nationalism. Polanyi drew a straight line from 19th century globalization to the horrors of the 1930s and ’40s.

How accurate is all this in describing the current moment? If we look at the United States, we can see undeniable similarities. The hidden shocks from liberalizing trade with China and migration from Latin America, combined with the very prominent shock of the 2008 financial crisis, produced a lot of social disruption in the last 15 years. Throw in climate change, a pandemic, and great-power rivalries, and suddenly Polanyi’s hyperbolic description of a society ravaged by the market starts to sound familiar.

via reason.com

This is this morning’s head scratcher. What dost thou think?