‘It is at least doubtful whether at this stage a detailed blueprint of a desirable internal order of society would be of much use – or whether anyone is competent to furnish it. The important thing now is that we shall come to agree on certain principles and free ourselves from some of the errors which have governed us in the recent past. … The first need is to free ourselves of that worst form of contemporary obscurantism which tries to persuade us that what we have done in the recent past was all either wise or inevitable. We shall not grow wiser before we learn that much that we have done was very foolish.’
These words were written in 1944, and their central message about the need for new principles to free ourselves from the obscurantism and foolishness that imprisons our development remains very relevant for our times. However, it comes from the final pages of Friedrich von Hayek’s The Road to Serfdom, a book that was to have immense influence as it offered the key guiding principles for neo-liberalism. Margaret Thatcher read it at the age of 18 and said it guided her political philosophy throughout her life.
The coronavirus crisis can be seen to be the end point of four decades of following this script that champions the freedom of the individual over the power of the state with the latter being seen as inevitably leading to oppression and tyranny, even when exercised within strict democratic control such as through social democracy. For this was the central message of Hayek, regarded as extreme and unrealistic when first published but 30 years later it became the guiding principle of governments around the world. In Ireland we called it the Celtic Tiger.
Covid-19 has finally exposed the folly of handing over vast swathes of vital public services to private market forces and systematically eroding the power of the state through cutting taxes and dismantling regulatory controls. Yet, whenever some version of normality returns with economy and society reactivating, avoiding a return to business-as-usual will require a different set of guiding principles, offering a very different understanding of the relationship of economy to society. Beyond this, it will most importantly require a deeper and fuller appreciation of what freedom means, rooted in a more adequate understanding of the nature of the human person.
The work of Karl Polanyi, who in the 1920s attended some of the same economic seminars in Vienna as did Hayek, and whose most important work The Great Transformation was published the same year as The Road to Serfdom, offers what we so badly need today. What he saw clearly was that subordinating society to the dictates of the self-directing market would be catastrophic for society, especially for workers and for nature, resulting in breakdown and collapse.
Writing during the second World War, Polanyi saw that collapse all around him but he was hopeful that the attempts to ensure the market served society through the managed social democratic capitalism of the post-war era had finally re-integrated the market in society. He died in 1964 and so didn’t live to see the re-emergence of a form of capitalism which ‘required that the individual respect economic law even if it happened to destroy him’ as he had written in 1944. The violent imposition of market processes on society, and the rampant destruction of individuals and communities that resulted, led to a resurgence of interest in Polanyi’s works as he offered a clear analysis of what was again happening.
While climate change and biodiversity loss are showing the extent of the destruction of nature, and obscene inequality and erosion of social protections the extent of the social crisis, the coronavirus has finally exposed the whole system directed by a self-governing market and its rapacious demands as devastating. A new social paradigm is urgently needed but without a clear set of principles to base it on, it is not going to emerge.
As I outline at some length in my forthcoming book, Karl Polanyi and the Contemporary Political Crisis: Transforming Market Society in the Era of Climate Change (Bloomsbury, 2020 with a Foreword by President Higgins) Polanyi’s work focuses attention on the central features of this ‘market society’ as he called it. With the British industrial revolution in the late 18th and early 19th centuries, a new principle came to govern society, he wrote, namely the self-regulating market. Instead of the economy being embedded in society and being directed by social values and institutions to ensure it served social needs, society was forced to serve the needs of the market.
Central to the creation of this market society was the commodification of land, labour and money, namely making private gain rather than social need the motive force of development. Money came to dominate all spheres of life destroying in the process the subtle balance between the individual, the community and nature that human beings need to flourish. The commodification of land, labour and money, the ‘fictitious commodities’ as Polanyi called them since treating any of them as commodities completely distorts what each is, lies at the heart of the great crises that convulse today’s world – the ecological, the social and the financial.
Polanyi spent the final decades of his life working with a team of economic anthropologists in Yale University investigating the role that markets, money and trade played in societies around the world before the industrial revolution. From this he concluded that the self-regulating market did not then exist and that the economy was embedded in society through three principal forms – reciprocal relationships (often today called the gift economy or the economy of care), redistribution by the state, and exchange through local markets (though these bore no relationship to the market mechanism that today governs society since they were social institutions).
Another very important contribution that Polanyi offers is his understanding that the fullness of freedom, so essential to the individual, lies in the individual assuming responsibility for society, never in the individual acting against the good of society. He thus turns on its head the whole edifice of the neo-liberal understanding of the relationship of the individual to society. As he wrote:
‘Being free no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility… it is thus not a form of releasing oneself from society but the fundamental form of social connectedness’ (emphasis in original).
‘Nothing obscures our social vision as effectively as the economistic prejudice,’ wrote Polanyi. As we seek a new social vision to guide society in moving beyond the coronavirus crisis and entering into the long and difficult transition to a low-carbon society, Polanyi draws our attention to the need to break out of the straitjacket that economistic thinking places on our views of what a fully human and supportive society requires. He takes us back to essential roots that have been so obscured by placing the economy above society, beyond Hayek to a very different future.