The ‘embedded economy’ as critique

Chris Hann and Keith Hart call their Introduction to a recently published collection titled Market and Society: The Great Transformation Today ‘Learning from Polanyi’ (2009, pp. 1-17). It’s an intriguing title because so much seems to have changed since Polanyi’s time. Polanyi supposed that he was contemplating the passing of a market system that would be replaced by command economies, either socialist or fascist (1945, pp. 246-7), and while for us nothing appears to be unequivocally off the table concerning the future, we no longer inhabit the political regimes of Polanyi’s post-war world. Even so, Polanyi’s unmasking of the free market ideologies that blocked countermovements from a self-protective civil society still has much to offer us. We first encounter Polanyi’s critical purposes in his diagnosis of the fallacies and the ideological intentions of an economic liberalism that disavowed the market’s reliance on sustaining political powers. There was, he observes, ‘nothing natural about laissez-faire, free markets could never come into being merely by allowing things to take their course’ (1945, p. 141). Representation that the market system defies and replaces politics is an ideological contrivance that masks the magnitude of suffering ‘inflicted on innocent persons' by unregulated markets. Born of a ‘mere penchant for non bureaucratic methods’, economic liberalism evolved into a veritable faith in ‘man’s secular salvation through a self-regulating market’ (1945, p. 137). Free enterprise and private ownership are celebrated as the essentials of freedom while ‘[t]he freedom that regulation creates is denounced as unfreedom: the justice, liberty and welfare it offers are decried as a camouflage of slavery’ ( 1945, p. 246). To the extent that this identification of modern freedoms with free enterprise and private property referred itself to the ‘non-political’, natural, character of market mechanisms, it was an ideology that was sustained by a fallacy. The Great Transformation carefully demonstrates that there was nothing spontaneous about the rise of a market society. A range of international and national conditions had to be put in place, then maintained and secured by new institutions and creeds. The idea of the self-regulating market was a complete fabrication and 'laissez-faire was planned’. Polanyi goes on to note a paradox in economic liberal histories of market societies. The magnitude of the suffering and the irrationalities that flowed from market society made regulation and political controls necessary so, while laissez-faire was planned, it set in train unanticipated costs and damages that had to be controlled and in this sense, ‘planning was not planned’ (1945, p. 143). A second layer in the process of embedding was called upon to deal with the unintended results of a planned but unregulated market society (1945, p. 137 and 1977, pp. 31-2).

Polanyi challenges Adam Smith’s claim that the market system liberates a natural bent to ‘track, barter and exchange’. In particular, he hopes to wind back ideological doctrines that equate ‘the human economy in general with its market form’ (1977, p. 6). The supposition that a market society heaved itself unaided into existence appears to be a vital prop to an ideology that welcomes market society as a new kind of unpolitical power. Polanyi’s historicizing analysis of the rise and the development of a market system is clear about its target. It challenges the naturalizing categories that support economic liberalism’s ideological purpose of lifting market society outside the realm of political contention.

It is not apparent though that this version of the embedded economies thesis is sufficient to penetrate the ideological supports of a neoliberal version of market society. Rather than an advocacy for the market as a new political power that is rooted in the authority of nature, neoliberalism makes a political claim about the market as the model for our modern freedoms more generally. Certainly, neoliberalism does not issue an invitation to contest and debate but only affirms an already settled ’win'. This is what Thomas Lemke means when he describes neoliberalism as a ‘political project that endeavours to create a social reality that it suggests already exists' (2001, p. 23). This shift in strategies of legitimation sidesteps the critical force of Polanyi’s historicizing concept of the embedded economy that was supposed to unseat an advocacy of the market system that appealed to its natural credentials rather than to its putative achievements.

It seems that the distinctive character of neoliberal objectives was laid down in direct opposition to an economic liberal framework. Friedrich Hayek reworked the liberal justification of market societies and denounced a ‘dogmatic laissez-faire attitude’ (1944, p. 39). This near contemporary of Polanyi shared the latter’s scepticism about the reliance of eighteenth- and nineteenth-century liberal justifications of a market system on naturalistic ideologies. In direct opposition to Polanyi though, Hayek advocated a liberal representation of the market system as foundation of, and as a line of defence for, modern freedoms. He called upon market thinking to provide a haven to the best of our ideals, and he supposed that laissez-faire could not be entrusted with this role. Planning was needed so that the ‘knowledge and initiative of individuals is given best scope so that they can plan most successfully’ (Hayek, 1944, p. 39, emphasis in original). There was a significant risk in all this. Neoliberalism committed to jettisoning the naturalizing ideology of economic liberalism but needed to reproduce its depoliticizing effect. Michel Foucault identifies the new mechanisms that were put in place. Neoliberals were not interested in how to cut out or to contrive a free space of the market within an

already given political society, as in the liberalism of Adam Smith and the eighteenth century. The problem of neo-liberalism is rather how the overall exercise of political power can be modeled on the principles of a market economy. So it is not a question of freeing an empty space, but of taking the formal principles of a market economy and referring and relating them to, of projecting them onto the art of government.

(2008, p. 131)

Occupied with building legitimacy for the market system, economic liberalism insisted on ‘the natural mechanism of the market and the formation of a natural price that enables us to falsify and verify governmental practice’ (Foucault, 2008, p. 32). The ambition to carve out a space for a market economy by drawing upon naive naturalism was, as Polanyi predicted, never going to be able to respond to the economic and social problems it had set in train. It seems that neoliberal strategies took up and responded to learning processes prompted by the weakness of economic liberal justifications. Carrying the point forward, Jens Beckert observes that at one stage ‘the insight that markets have social and political preconditions also reached policymakers in international organizations like the World Bank, where “social capital”, for instance became a core concept’ (2009, p. 39).

Hayek was clear that neoliberalism is a political project that champions the market as the best defence of modern freedoms. Competing descriptions were to be denied all oxygen and market descriptions of modern freedoms were put forward as ‘an ethic in itself capable of acting as a guide to all human action, and substituting for all previously held ethical beliefs’ (Harvey, 2005, p. 3). For Foucault, neoliberalism meant a ‘complete change’ in the way in which we understand economic activity and the motivations of the economic actor. While in its liberal version homo economicus stood as the bearer of private rights and as partner in relations of exchange, this came to be replaced by the idea oí homo economicus as ‘entrepreneur, an entrepreneur of himself (Foucault, 2008, pp. 225-6).

Economic liberalism and neoliberalism share an ideological project: both commit to closing down scrutiny about damages and costs of a society organized by market imperatives. However, they prosecute this purpose differently. Dropping naturalizing representations of economic motivations and market interactions, neoliberalism seeks to identify market norms with modern freedoms as such and to do this it needs to convert and reappropriate all alternative ways of representing them that might otherwise measure losses and costs. In order to diagnose the particular ideological strategies deployed by neoliberalism, we turn to an analysis of the embedded market system that explores how capitalism has tried to justify and reproduce itself by raiding its cultural surroundings for value descriptions.

Boltanski and Chiapello’s account of the ‘spirit of capitalism' as a strategy of cultural appropriations that are designed to both justify and harness motivations to the market system focuses on the ideological strategies of a neoliberal project. The framework of The New Spirit of Capitalism (2005) clearly resonates with Max Weber’s diagnosis of the grounding of capitalism in ascetic motivations set in place by the Protestant Reformation and it also connects with dimensions of the concept of embeddedness encountered in Polanyi. Missing from Weber but very evident in Polanyi are the critical purposes that permeate Boltanski and Chiapello’s diagnosis of the functions of the spirits of capitalism.