What is it about free market ideas that give them tenacious staying power in the face of such manifest failures as persistent unemployment, widening inequality, and the severe financial crises that have stressed Western economies over the past 40 years? In this interview with Institute President Rob Johnson, Fred Block discusses his book The Power of Market Fundamentalism, which extends the work of the great political economist Karl Polanyi to explain why these ideas have been revived from disrepute after the Great Depression and World War II to become the dominant economic ideology of our time.
Block’s book discusses Polanyi’s contention that the free market championed by market liberals never actually existed. Growing up in the Great Depression and during two World Wars, Polanyi’s came to a similar conclusion about markets as John Maynard Keynes, which is to say that while both conceded that markets were essential to enable individual choice, they also made the argument that self-regulating markets could not work because they require ongoing state action.
Polanyi further noted that there needed to be a paradigm shift in regard to freedom itself. In a complex society, the Robinson Crusoe notion of freedom (i.e. “do no harm” or “leave me alone”) is an unacceptably low threshold to encourage the full development of the individual. We require a state mechanism that creates the space to develop one’s capacity via strengthening democracy and restricting the scope of market fundamentalism by adopting a higher form of political development.
It was Polanyi’s argument that the free market could not by itself provide such necessities of social existence as education, health care, social and personal security, and the right to earn a livelihood. When these public goods are subjected to market principles, social life is threatened and major crises ensue, as the events of 2008 so vividly illustrated.
Despite the manifest shortcomings of market fundamentalism that have been on display over the past few years, Block argues that these principles remain powerfully seductive because they promise to diminish the role of politics in civic and social life, which is a particularly attractive feature for the “haves” who want to maximize their assets at the expense of the “have-nots.” Since politics entails coercion and unsatisfying compromises among groups with deep conflicts, the wish to narrow its scope is understandable. But like Marx’s theory that communism leads to a “withering away of the State,” the flip-side argument that free markets can replace government is just as utopian and dangerous, as Block seeks to demonstrate in this interview.