Wolfgang Streeck en de uitgestelde crisis van het Democratisch Kapitalisme

Wolfgang Streeck in het bezette Maagdenhuis

Wolfgang Streeck in het bezette Maagdenhuis, zie de hele lezing hier.

Veel te weinig mensen stellen zich de cruciale vragen van onze tijd: waarom lijken we als samenleving steeds minder te zeggen hebben over de cruciale economische vraagstukken en hebben we al dertig jaar lang te maken met neoliberaal afbraak-beleid en waarom is niet langer toenemende welvaart? Wanneer mainstream commentatoren zich al deze vragen stellen komen ze niet verder dan een dooddoener als ‘globalisering’. Wolfgang Streeck probeert juist de bovenstaande vragen te beantwoorden en komt met een historische analyse over de diepere oorzaken van de huidige crisis. De losstaande feiten van de oorzaken waren voor mij niet nieuw, die had ik allemaal al eens ergens eerder gehoord. Maar Streeck plaatst het allemaal wel in een overtuigend narratief dat tot op zekere hoogte wel nieuw is. Het is ook een verhaal dat vrij makkelijk is over te brengen naar een groter publiek en dat ansich is erg waardevol.

Sociale vrede op krediet

Streeck richt zich op het democratisch kapitalisme van het ‘Westen’ en hoe de crisis steeds wordt uitgesteld. Hoewel een land als de Verenigde Staten vaak een voorhoede rol opneemt, is de onderliggende dynamiek in vrijwel alle Westerse landen hetzelfde, ook voor bijvoorbeeld de Scandinavische landen, zo illustreren de talloze grafieken en tabellen. Het verhaal begint met het ‘postwar settlement’ dat na de tweede wereldoorlog onder dreiging van het communisme totstand kwam kwam, met een interventionistische overheid die de markt disciplineerde en zorgde voor toenemende welvaart en voorzieningen, wat we dus het ‘democratisch kapitalisme’ zouden kunnen noemen. Dit leidde tot ongekende groei en welvaart, maar eind jaren ‘60 begon de economische groei terug te lopen. Werkers waren in de jaren ‘70 echter nog militant en bleven loonsverhogingen en stijgende voorzieningen eisen, waarmee het verdelingsconflict tussen wat Streeck ‘winstafhankelijken’ en ‘loonafhankelijken’ noemt weer op de voorgrond kwam. Hierop begon het Kapitaal investeringsmiddelen in te trekken. Om de sociale vrede te bewaren stuurden overheden aan op een monetair beleid dat groeiende lonen mogelijk bleef maken, met enorme inflatie tot gevolg. Mede dankzij de oliecrisis stagneerde de groei ondanks inflatie; met het zogenaamde ‘stagflation’ als gevolg.

Halverwege de jaren ‘70 begon het Kapitaal het neoliberale project van deregulering en liberalisering om daarmee de interveniërende overheid terug te dringen en de markt weer het primair economisch allocatiemechanisme te maken. Onder het voortouw van Reagan en Thatcher brak men met de inflatie door de te rente te verhogen met stijgende werkloosheid tot gevolg, wat op de langere termijn de kracht van vakbonden en stakingen verder ondermijnde. De sociale vrede werd vervolgens gekocht door de (schulden-)staat, overheden staken zich massaal in de schulden om te voldoen aan de sociale zekerheid (waarop door de hogere werkloosheid vaker een beroep opgedaan werd).

De kapitalistische vrede was hiermee echter tijdelijk en niet duurzaam verlengt. In de jaren ‘90 begonnen regeringen zich steeds drukker te maken over hun schuldenlasten en vroegen schuldeisers zich af of staten hun schulden nog wel terug konden betalen. Onder Clinton ging men ertoe over om de begroting weer sluitend te maken. De meeste andere Westerse landen volgden het voorbeeld van de Verenigde Staten, al dan niet tot de orde geroepen door het IMF of de OESO. Maar nog steeds moest de sociale vrede bewaard worden. Deze werd nu gekocht door de groei van particuliere schulden, door middel van krediet voor consumenten (de proliferatie van creditcards), maar ook door hypotheken. Dit hielp natuurlijk ook om consumptie te bevorderen en daarmee de gevaarlijke achteruitgang van vraag tegen te gaan. De particuliere schuldopbouw is de derde (en tot nog toe laatste) manier waarop de sociale vrede kunstmatig in stand gehouden wordt. De particuliere schuldenlast steeg niet alleen gigantisch in de Verenigde Staten en Groot Brittannië, maar dus ook in de Scandinavische landen.

Er is kortom al 40 jaar lang een telkens uitgestelde crisis van het democratisch kapitalisme. Inflatie, staatsschulden en particuliere schulden zijn de drie op elkaar volgende ingezette methodes geweest voor groei- en welvaartsillusies, waarmee steeds tijdelijk tijd werd gekocht. Het is sociale vrede op krediet geweest. Neoliberale hervormingen bepaalden ook de voorwaarden van alle drie overgangen, ten koste dus van de loonafhankelijke bevolking. Het einde van de inflatie was het begin van de tot de dag van vandaag aanhoudende structurele werkloosheid (en daarmee een gedeeltelijke verklaring voor de zwakte van de vakbonden). Vervolgens leidde het terugdringen van de overheidsschulden in de jaren ‘90 tot bezuinigingen en de privatisering van overheidsdiensten. En met de particuliere schuldopbouw zien we het verlies aan spaargeld, verdere bezuinigingen en een nieuwe generatie die opgroeit met schulden. De hervormingen van de afgelopen veertig jaar komen neer op een definitieve poging om de kapitalistische economie en de markt te bevrijden van de massademocratie die deel uit maakte van het postwar settlement. Het lijkt er nu op dat het kapitalisme het nu zonder vredesformule moet doen van het op krediet gefinancierd consumentisme. Continue reading

Changing the world with Hollowayism

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This is a book I have wanted to read for a long time. I am very interested in theories of social change. It is a tremendously important topic but one that is rarely discussed among the left and very much ignored in academia. John Holloway is one of those few authors that made a well-known contribution to the topic, but reading articles about and interviews with him, it always seemed Hollowayism is a perspective that I very much disagree with. That is why this book was on my to-read list for a long time: what better way to challenge your own perspective than to read something you think you very much disagree with. I still disagree with Holloway, but this is also one of the best books I have read in the last year.

It starts out brilliantly with the first two sentences, a paraphrasing of Goethe´s Faust: “In the beginning is the scream. We scream.” While you don’t realize it in the beginning, this already includes the main epistemological implications that are worked out in the rest of the book. The introduction is brilliant, it’s angry and not holding back:  ‘we need no promise of a happy ending to justify our rejection of a world we feel to be wrong’. While the book is quite complicated, with many difficult concepts being introduced and discussed, it is also written as accessible as one possibly could at this level of theoretical sophistication and still very poetic at times.

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Naomi Klein – This Changes Everything

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This is the first book of Naomi Klein that I have read. Of course I have known of Naomi Klein’s existence pretty much since I have been properly politicized many years ago. I just never got to read the books and thought there wasn’t that much new in it for me. I thought of her as a great introduction for the interested-but-not-yet-radical people out there and I obviously didn’t really need that introduction anymore. Watching the horrible Shock Doctrine documentary didn’t help, although I recently gathered that Naomi Klein distanced herself from that as well and hopes to do better with the This Changes Everything documentary that should come out in the near future. But I thought it would be a good idea to read this ‘classic’ (that’s what all Naomi Klein books become) while it was still fresh. Plus I never really read a book fully focused on climate change and had heard that this was Naomi Klein’s most radical book yet, including the subtitle ‘capitalism vs the climate’.

And I liked it a lot more than I expected. It is brilliantly researched (she has an entire team working for her) with tidbits and facts that were completely new for me. Actually, the entire geo-engineering topic was new for me, I didn’t know it even existed, let alone how seriously it is taken by some as a solution to climate change.

It is a movement book. It provides the frames and arguments for a movement to unite both the radicals and the progressives and gives them the ammunition to convince people and grow a movement. And I love the framing. It is divided in three parts. The first one sets out the problem; its massive scale and what will need to be done to save the world. The second part takes aim at the false solutions; those that are presented by big business, green billionaires and the big green NGOs, and how the latter are utterly corrupted (with the most shocking example of the Nature Conservancy drilling for oil in their own nature reserves), dismissing them and their freaky geo-engineering techno-fixes as magical thinking. And then in the third part she sort of sets out a strategy, with the anti-extractivist movement of Blockadia fighting off new pipelines and extraction projects, the divestment campaign and the potential to delegitimize the fossil-fuel industry, the legal and moral challenges for industry from indigenous peoples, all in all coming to a conclusion where she compares the movement necessary to combat climate change with the abolition movement against slavery.

I love the framing. It has a lot of frames, small and big, words and metaphors (‘sacrifice zones’, fossilized resources as ‘decayed remnants of long-dead life-forms’, extraction as ‘grave digging’). Just look at this quote:

“Given this legacy, our task is not small, but it is simple: rather than a society of grave robbers, we need to become a society of life amplifiers, deriving our energy directly from the elements that sustain life. It’s time to let the dead rest.”

Beautiful right? And just like the term ‘shock doctrine’ has become common usage, some of this book’s metaphors are already popping up elsewhere.

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Sterilizing the City

yuppenterrasbaarsjes

In explaining people’s apathy in Northern European countries, many make the argument of how the ‘objective conditions’ are not ripe yet for massive protests, how things are simply not bad enough at the moment. This is bullshit. In the past there have been massive uprisings while things were objectively getting better. ’68 happened in a time of annual wage increases of 5-8% with new consumer goods that became affordable for the masses. Looking at the Netherlands, the ‘objective conditions’ are worse than in the ’80s. It has the most flexibilized labour market of continental Europe and unemployment rates are almost as bad as the worst in the ’80s. Besides that, being unemployed nowadays is a lot worse than in the past (getting benefits is a lot harder) and back then young people could decide to study an extra couple of years without being indebted for the rest of their lives.

But people have to know it. The average person doesn’t ‘feel’ the unemployment rate and the most flexibilized labour market. It has to be told. And it has to be told that it is really fucked up and that action has to be taken. Otherwise the average person will blame himself for being un(der)employed or will simply think of their part-time contract as normal. They will deal with their frustration individually rather than collectively. And that is exactly the problem currently. People turn to medication and self-help books rather than setting up action-committees.

There are many reasons for this individualization of collective problems. A major problem is that people simply are not being told. And when trade unions and leftist parties fail in producing a counter-hegemonic discourse of how fucked up things are and how things can be different through action, then it is up to the extra-parliamentary leftists to fulfill that task. And for a marginalized small group of people that is not backed by money or powerful connections, the easiest way to get your message across to a wider audience is by putting up posters and graffiti on the streets. But this is exactly something that is more and more repressed in many modern developed nations.

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Reflections on Violence – Georges Sorel

Georges Sorel (1847-1922)

Georges Sorel (1847-1922)

I ended up reading this book when I found it in a give-away library in one of Amsterdam’s social centers. I had heard of the book before, it’s one of those influential classics that probably almost nobody reads. As I’m quite interested in the question of violence for achieving social change, Sorel’s book on the functions of violence seemed relevant. Plus Sorel wrote about the role of myths in converting and motivating people, which sounded quite intriguing. And also the fact that Georges Sorel was supposedly Benito Mussolini’s favourite philosopher actually made me only more curious.

Now after reading it seems to be a hard one to review. I do think it was certainly worth the effort of reading.  It is written in 1906, before the world wars and before the Bolshevik revolution, but it is still easy enough to follow, especially after reading up Wikipedia on the Dreyfus Affair and characters as Jaurès. Sorel is also rather convincing. In fact, I’m quite sure this book may have turned me into a syndicalist from one day to the other if I had read it somewhere between 1900 and1930, but the world has drastically changed and we live under completely different conditions now. Sadly, there are (for as far as I know) no books around now that would have such a convincing answer of what needs to be done in order to achieve lasting social change. For me, the struggle with this book is determining in which ways Sorel’s ideas and concepts can be made relevant to today’s world. Consider this review to be an attempt.

Let me first start by explaining why Sorel may have turned me into a revolutionary syndicalist before 1930. It is actually the purity of his revolutionary strategy that I really like. There is nothing like it today. The puritanism of Vaneigem seems just to be about following his own egoistic individual desires, while for Sorel there are also no compromises, but there is still a coherent strategy that is logically deduced from Marxist theory. It is the myth of the general strike that reflects the fundamental principles of Marxism. Firstly, it intuitively shows how society is divided into two antagonistic blocs, namely the proletariat (the producers) and the bourgeoisie. No philosophical explanation is necessary, the general strike makes all oppositions extraordinary clear. Secondly, it entails that rebellion is necessary for capitalism to disappear. Workers could be tempted to the capitalist order of things, through capitalist philanthropists and parliamentary socialist promises, but the myth of the general strike will keep them in a state of revolt, plus the class war perspective will prevent the masses from turning to other reactionary forms that could help them loose their anger. Thirdly, to partisans for the general strike, even the most popular social reforms will look silly. Finally, the brilliant thing is the anti-elitist implications. With the myth of the general strike there is no need for intellectuals thinking for the masses, no party line, no leaders.

“These results could not be produced in any very certain manner by the use of ordinary language; use must be made of a body of images which, by intuition alone, and before any considered analyses are made, is capable of evoking as an undivided whole the mass of sentiments which corresponds to the different manifestations of the war undertaken by Socialism against modem society. The Syndicalists solve this problem perfectly, by concentrating the whole of Socialism in the drama of the general strike; there is thus no longer any place for the reconciliation of contraries in the equivocations of the professors; everything is clearly mapped out, so that only one interpretation of Socialism is possible. This method has all the advantages which “integral” knowledge has over analysis, according to the doctrine of Bergson.”

A problem for relating Sorel’s myth of the general strike to the Netherlands in 2013 is that for Sorel the proletariat is only the producers. And what Sorel in 1906 categorizes as producers does not include retailkeepers, and also not the foremen that are less likely to join the strike. I certainly don’t think that class analysis is no longer relevant. You can certainly still divide society into two antagonistic blocs, those who control the wealth and means of production and those who have no control over the means of production and have to work for a wage. But limiting the possibility for social change (through the general strike) to what Sorel uncompromisingly and narrowly defines as ‘producers’ is no longer relevant for 21st century developed nations. It’s hard to imagine how syndicalism on itself can lead to revolutionary change. As for the historical record, revolutionary syndicalism did have quite the impact and potential. Having recently read a bit on Gramsci’s involvement in post-WW1 Italy, Turin was a hotbed of lengthy general strikes that were beyond control of the Italian Socialist Party (and subsequent Communist Party) or intellectuals that wanted to think for the masses. Similar events transpired all over Europe. But everywhere, they were in fact beaten down by the freikorps and similar paramilitary fascist organizations. It seems that the myth of the general strike and proletarian violence was not enough for the producers to actually win the revolution. Unfortunately, if we look in history (with some exceptions) it seems that labour militancy at best achieved social reforms and led to fascist reaction every time the masses demanded more than just a piece of the cake.

Fiat factory occupation in Turin in 1920

Fiat factory occupation in Turin in 1920

Now let’s progress to the question of violence. It is first worthwhile to remark that Sorel makes a distinction between violence and force. Force is what the governing minority uses to impose the social order, violence are the acts of revolt to destroy that order. He then notes how violence is also useful for parliamentary socialism. Without exceptional circumstances created by striking and rioting, the parliamentary power of socialists is reduced. It is in these exceptional circumstances that parliamentary socialists (/social-democrats) take up the role of peace-makers, scare the middle-classes into conceding reforms to restore order. Also without the consent of socialist leaders*, “[workers] endeavour to intimidate the prefects by popular demonstrations which might lead to serious conflicts with the police, and they commend violence as the most efficacious means of obtaining concessions. At the end of a certain time the obsessed and frightened administration nearly always intervenes with the masters and forces an agreement upon them, which becomes an encouragement to the propagandists of violence. ”

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The Revolution of Everyday Life – Raoul Vaneigem

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I have had this on my to-read list for years. This is the first Situationist text that I have read and its influence is obvious, while reading it I recognized a lot that I had seen before in other cultural artefacts that came after it, from punk bands as Crass with which I sort of grew up to anarchist and political zines I’ve read over the years. As with everything, it’s good to finally read the original. It is also good read one of the main ’68 texts yourself rather than just the usual historically appropriated accounts of what it was all about. With the events May ’68 in your mind, it’s crazy to see to what extent writers like Vaneigem sort of expected something along those lines to happen. But it is also shocking to see to what extent we have actually regressed in achieving the radical changes Vaneigem envisioned.

The foundation of Vaneigem’s theory was to me surprisingly orthodox Marxist. Most of his account of history is basically the same as the one you can find in the communist manifesto. The bourgeoisie superseded the feudal system, which enabled capitalism and the creation of the proletariat. But the dominance of the bourgeoisie is only a transitional phase in the development of humanity, as the very same capitalism that they created allowed for the progress in productive forces and technology which will allow the proletariat to take over and finally actualize the egalitarian visions. The main thing that Vaneigem and the Situationists add is that it is not just about material conditions, which in the rich industrialized countries took the proletariat beyond the struggle of survival, it is the poverty of everyday life. The poverty of choice offered by our shallow consumer society, the lack of imagination, the alienation, and that all the liberal freedoms offered are a sham. “Anyone who talks about revolution and class struggle without referring explicitly to everyday life – without grasping what is subversive about love and positive in the refusal of constraints – has a corpse in his mouth”. According to Vaneigem, we’re past the struggle of survival, as in many parts of the world we have achieved a decent enough standard of material well-being. We’ve got our fridges and televisions. Now we want to live, not just survive. He loathes the work-ethic that was (and to a smaller extent still is) a big part of the Left, in for example the right-to-work campaigns and simplistic narrowing of class struggle to wage-bargaining. He reminds that the Latin word for labour means suffering. “Today the love of a job well done and belief in the rewards of hard work signal nothing so much as spineless and stupid submission”.

May-68

It is easy to see the appeal of all this, it´s not material poverty that pisses off young radicals in the ‘rich West’, it is this poverty of everyday life that makes us want to throw bricks at the cops. Vaneigem wants to give free reign to subjectivity, to our individual desires to live intensely. The theory he sets out is logical and coherent, but to me ultimately unsatisfying. You can write of the ‘rich West’ all you like, and we’re still free from the risk of starvation, but what’s left of the fat Keynesian-Fordist welfare state? This radical critique written in the heydays of welfare state capitalism made me angry. Angry at the so-called ‘social-democrats’ that have been destroying the welfare state, our social security, social housing, labour rights, healthcare-system and public services, by completely giving into neoliberal reforms. But also angry at Vaneigem, that constantly belittles all the achievements of that welfare state that was once ours, and which was achieved by socialist parties, through trade-union organizing, and militant leftists of all these ‘-isms’ that he loathes (Socialism, Stalinism, Trotskyism, Maoism etc). I wish we still had expanding welfare state with its annual wage increases that he bemoans. I am not saying that we should go back to the welfare state of the past and leave it at that, far from it, I completely support Vaneigem’s analysis of the poverty of everyday life, but I think that the revolution required to overthrow it is much more probable with the leftist militantism of the 60s and 70s that he despises still around.

What it basically comes down to is that I detest the puritanism of it all. This puritanism is present in Vaneigem´s writing and also in many other anarchist writings. He is against all kinds of hierarchy, against all kinds of reform and against any kind of sacrifice, as your actions should always come from your own true inner self (what is this true inner self anyway and how can we know?*), never from an “ideology” or leader. Never cooperate with more ‘reformist’ organizations. No mass organizations. Only self-managed communities and small radical cells. “I have already said that the confused conflict between so-called progressives and reactionaries comes down to the issue whether people should be broken by the carrot or the stick”. No nuance seems to be possible for Vaneigem, all reform is reactionary. “I want to live intensely, for myself, grasping every pleasure firm in the knowledge that what is radically good for me will be good for everyone.” Alright, it’s fine if you want to have fun in your actions towards social change and revolution, but don’t fucking belittle all those other people that work fucking hard for social change in different ways, because you’re whole theory is only rationalizing your own selfish ego by pretending everything will change because you and some others are “intensely following their inner desires”. If you don’t want work hard improving the political consciousness of the ‘masses’, then don’t, but fuck off belittling those who do. I mean, get real, politics is dirty. If you’re truly serious about achieving social change** then prepare to get your hands dirty and know that some foul Machiavellian shit needs to be pulled off by someone somewhere sooner or later.

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The problem is that Vaneigem lacks a theory for social change. Vaneigem explicitly does not want to write a “what is to be done” step-guide towards revolution ala Lenin, but the question of how you want to achieve the social change towards a radically different system remains. Without it, what remains is merely an intellectual legitimation for petty violence, vandalism and shoplifting. There are never enough of those of course, but still. The system is not scared of you living out your “true inner desires”. Vaneigem’s idea is that everyone’s harmonized individual perspectives will successfully construct a new coherent and collective world. But how do you get there? Vaneigem expected that people were fed up and would soon collectively live out their subjectivity, but this simply never really ended up happening, perhaps except for a month in ´68. In the last chapters Vaneigem becomes a bit clearer on what the revolutionary approach ought to be. “Each phase of the revolutionary process is a faithful reflection of the ultimate goal.” Prefigurative politics it is I suppose.

I hoped that the part on culture, the spectacle, and how capitalism and the commodity form corrupts culture and leisure time would inspire me, but after reading the brilliant Culture Industry essays last year this part wasn’t much more than an Adorno-for-5-year-olds. I was quite curious about the part on sexuality, but the whole Wilhelm Reich fetish is weird to me and seems and typical 60s. Then there’s Vaneigem loathing the moralism of many leftist side-issue struggles and he beats up the anti-racist and anti-antisemetic hobbyhorses of the Left (“we’re all just niggers to the rulers of this land” to quote Crass) which is entertaining, but I am not sure whether I agree.
There were some parts that I really liked though. It is filled with a vast array of highly quotable sentences. Besides, I found the conceptualizations of roles, specialists, stereotypes and power actually rather insightful. On the masochistic nature of humans in their everyday life for instance:

“Consider a thirty-five-year-old man. Each morning he starts his car, drives to the office, pushes papers, has lunch in town, plays poker, pushes more papers, leaves work, has a couple of drinks, goes home, greets his wife, kisses his children, eats a steak in front of the TV, goes to bed, makes love and falls asleep. Who reduces a man’s life to this pathetic sequence of clichés? A journalist? A cop? A market researcher? A populist author? Not at all. He does it himself, breaking his day down into a series of poses chosen more or less unconsciously from the range of prevalent stereotypes.”
[..]
“The satisfaction of a well-played role is fuelled by his eagerness to remain at a distance from himself, to deny and sacrifice himself”
“We live our roles better than our own lives”

Alienation Is Not Quantifiable. By Kommunist Sex Klub: https://www.facebook.com/pages/Kommunist-Sex-Klub/

Alienation Is Not Quantifiable. By Kommunist Sex Klub: https://www.facebook.com/pages/Kommunist-Sex-Klub/

 

And on power:

“Slaves are not willing slaves for long if they are not compensated for their submission with a shred of authority”

“There is no Power without submission”

“Power is partial, not absolute”.

His concept of Power is vague and abstract, but you do get a sense of what he means. I like the insight that those that climb the ladder, the specialists, subject themselves to Power the most. The specialists are the masters-as-slaves. The more they climb the hierarchy, the more Power, but also the more restricted on what they can do with this Power. I do sort of agree here, changing the system from within by climbing the system’s hierarchy most of the time does not work at all. Vaneigem expected the proletariat to collectively rise and live out their subjectivity. To let us all become masters-without-slaves. Sadly, WE’RE STILL WAITING. Anyway. Let’s end this critique with the spectacle of some more brilliant Vaneigem quotes.

“The millions of humans being shot, imprisoned, tortured, starved, brutalized and systematically humiliated must surely be at peace, in their cemeteries and mass graves, to know how history has made sure that the struggle in which they died has enabled their descendants, isolated in their air-conditioned apartments, to learn from their daily dose of TV how to repeat that they are happy and free”

“To consume is to be consumed by inauthenticity, nurturing appearances to the benefit of the spectacle and the detriment of real life”

“Whatever you possess possesses you in return. Everything that makes you into an owner adapts you to the order of things”

“the feeling of humiliation is simply the feeling of being an object”

“the abstract, alienating mediation that estranges me from myself is terribly concrete”

* Vaneigem is also not going to convince me that he wrote all these books and read even more out of a “pure inner desire to live intensely”) I mean, everyone seeks to rationalize their own behaviour, but nobody truly knows why we do what we do. I just do not believe in some sort of repressed pure inner desire that exists somewhere in all of us.
** It’s kind of typical of this day and age that I say social change rather than revolution. The word revolution simply isn’t part of me and many other’s vocabulary as it seems too far away.

The Great Transformation – Polanyi

Where should one begin in reviewing a classic like this one? It was always recommended to me as a forgotten classic, a great critique of markets, ignored by the mainstream, and highly relevant to our times despite being over 60 years old. And relevant it is; it is a great assault on the idea of self-regulating markets, an idea that sadly still seems to inform most of today’s mainstream discourse. There is some uncanny resemblance between the events Polanyi writes about and many of the things still going on in our own neoliberal era. Furthermore, this book is also about the break-down of the market society and its collapse into the Great Depression, which makes it even more relevant considering today’s crisis of capitalism.

The Great Transformation is a work that combines several disciplinary fields of the social sciences which ought not to be separated: anthropology, sociology, history, (political) economy and political science. It’s all in there. Polanyi gives a history of the emergence of the market economy and its social implications. Its greatest strength and what makes it so uniquely different from other books is its rediscovery of society. Society is the perspective taken, rather than for example class (which is dismissed as crude Marxist dogma by Polanyi). When explaining the social dislocations from imposing the market economy, it’s society that suffers and consequently brings forth its reaction. Markets did not naturally evolve or start out of individual acts of barter (NO, people did not barter in ancient societies, anthropologists never found a single society to do so out of the thousands that have been researched). Markets were actually imposed on the people by government intervention from the very beginning. History shows that regulation and markets grew up together, but it was the idea of the self-regulating market that found ground during the Industrial Revolution was a complete reversal of this trend.

In the ‘ideal type’ market economy all production is for sale on the market and all incomes derive from these sales. This means that markets are there for all elements of industry, not just goods, but also for labor, land and money. Interest is the price for money and it’s the income for those that are able to provide it (the financiers); rent is the price for the use of land and also the income for those who supply it (the property-owners); wages are the price for the use of labor and the income for those who sell it (the workers). The market economy assumes that supply at a definite price will equal the demand. Production and distribution depend on prices, for prices form the income that ensure the distribution. The brilliant insight here is of course the recognition of Polanyi that land, labor and money, despite being subjected to the market, are obviously no commodities; they are not produced for sale! That is why Polanyi refers to them as fictitious commodities. The commodity description is entirely fictitious, but this fiction is used to organize them. They are being bought and sold on the market; their price depending on supply and demand. All this to enable the self-regulating market.

A market economy, in which the economic system is controlled, regulated and directed by markets alone, exists only in a market society. As when land and labor are being turned into commodities, it is society itself that is being subordinated to the market. This was utterly new and beyond people’s imagination before the Industrial Revolution. Mercantalism, with all its tendency towards commercialization, never attacked the safeguards which protected these two basic elements of production -land and labor- from becoming the objects of commerce. For the market society to work, the homo economicus had to appear, the idea that human’s primary motive is to maximize gain. But the early laborer could not be lured into the factory, as he did not feel compelled to make as much money as he could, where he felt degraded by the work. Only the threat of corporal punishment and starvation, not the allure of high wages, would make him sell his labor on the market. The masses first had to be pauperized and forced off the lands before a labor market could come into being. As Polanyi argues, it is much more social status than monetary gain that humans crave.

“Now, what the white man may still occasionally practice in remote regions today, namely, the smashing up of social structures in order to extract the element of labor from them, was done in the eighteenth century to white populations by white men for similar purposes. Hobbes’ grotesque vision of the State –a human Leviathan whose vast body was made up of an infinite number of human bodies- was dwarfed by the Ricardian construct of the labor market: a flow of human lives the supply of which was regulated by the amount of food put at their disposal.”

In rewriting the history of the Industrial Revolution and the establishment of the market society, Polanyi comes up with a highly interesting account of all the contradictions coming out of obscure laws in England at that time. Nobody truly understood the reasons for poverty at that time, often going for morality tales like Hannah More’s Christian suffering (blaming it on drinking tea was common as well!), the connection between a higher total trade and unemployment wasn’t seen. The intellectuals at that time believed the more poor people there were, the more wealth as well. The Speenhamland laws led to a market economy without a labour market and no reliable statistics. It was during this time of confusion that economic theory was founded.

The discovery of economics was astounding. Interestingly enough, back then it was natural science that gained in prestige by its connection to social science (instead of vice-versa!). The triumphs of natural science had been merely theoretical and were of no practical importance, while the discovery of economics critically hastened the great transformation and the establishment of the market society. The creators of machines were mere uneducated artisans who often could barely read or write.

Because of the overall confusion the great minds did not really understand capitalism and many came up with the dues ex machine of Nature, with the most well-known example the Malthussian law of population. They thought of economic society as subjected to laws from Nature rather than human-made laws. Ricardo combined the naturalistic and the humanistic, with the laborer being the only force to create economic value in his theory of value (mistakingly adhered to by Marx according to Polanyi), who was then again subjected by the self-regulating market that followed the inexorable laws of Nature. Polanyi puts the proto-socialist Robert Owen forward as the only person who saw the meaning of it all. He understood that what appeared to be as an economic problem was in fact a social one. In economic terms the worker was certainly exploited and did not receive a fair exchange. But in spite of exploitation, it was the massive social dislocations, degradation and misery that was truly problematic. And here Owen rightly called for legislative interference against the devastating forces from the self-regulating market.

“My life was not useless; I gave important truths to the world, and it was only for want of understanding that they were disregarded. I have been ahead of my time.” – Deathbed statement (November 1858), in response to a church minister who asked if he regretted wasting his life on fruitless projects

But at that time the dominant intellectuals thought differently. The word laissez-faire may come from France in the mid 18th century, it was only in the 1820s that it began to stand for its three classical tenets: for a labor market, the gold standard and free trade. Economic liberalism became a secular religion: “Born as a mere penchant for non-bureaucratic methods, it evolved into a veritable faith in a man’s secular salvation through a self-regulating market”. It is no coincidence that Adam Smith’s constantly quoted “invisible hand” has such a divine connotation. Laissez-faire became a secular faith that was pursued with evangelical fervor in order to make the market economy reality. In the 1830s it suddenly became policy, the 1832 reform created a free labor market, the gold standard became the automatic steering mechanism, and England started to depend on food from overseas sources. Under the self-regulating market the most productive and inventive would be able to survive and the British believed their factories would be able undersell to the rest of the world. This also meant the expansion of the market system on a world scale powered by the might of the British Navy.

But there was nothing natural about laissez-faire. It was enforced by the state, which required enormous increases of centralized legislation, control and intervention to introduce free markets. Furthermore, freedom of contract is not a principle of noninterference as liberals argue; it destroys noncontractual relations between individuals, it imposes atomistic individualistic organization on societies. Laissez-faire was not a method to achieve a thing, it was the thing to be achieved. Paradoxically, the philosophy that demanded the restriction of state activities and intervention, could not but entrust the same state with the new powers and instruments in order to establish laissez-faire. If laissez-faire means the opposite of interventionism, how then can laissez-faire claim to be laissez-faire? And ironically enough, while laissez-faire was planned, the counter-movement against laissez-faire was not. While laissez-faire was utopian, that what Polanyi calls the ‘double movement’ was spontaneous and pragmatic and became successful in the 1860s in protecting a broad range of vital social interests against the expanding market. Liberal economists as Mises, Spencer, Summer and Lippmann have a mistaken interpretation for this double movement, explaining it on impatience, greed and shortsightedness. These writers blame the rise of socialism and nationalism for frustrating economic liberty and they often point to trade unions, Marxist intellectuals, greedy manufacturers and reactionary landlords as the villains in their narrative.

Polanyi also connects the emergence of the market society and the subsequent double movement with colonial expansionism. There was a time that even the tories considered colonies to be a waste, but after the double movement caused protectionism, countries ´irrationally´ stopped trading with each other as much and instead started ´trading´ with the overseas market. As a result the colonial population was subjected to the same kind of social dislocation as the British people were earlier. The introduction of market organization of land and labour broke up the village life and subsistence living. This -much more than the mere brutal economic exploitation- caused massive famines in for example India. And colonial societies were even less capable of protecting themselves against the market forces than the British peasantry.

His discussion of the Great Depression and the Gold Standard is of great contemporary relevance. There are many similarities here with the current crisis and the adherence to euro. The European elites are doing everything they can to keep inflation low and maintain the euro while simultaneously imposing austerity and social misery upon the periphery, disregarding the democratic wishes of the people there with more and more technocratic rule. And just as liberal economic theory in Polanyi´s time ignored country differences and their trade imbalances, putting Great Britain on the same rank and footing as Denmark or Guatemala, the creators of the European single market and monetary union conveniently failed to see problems that would come out of a monetary union without fiscal and political union (despite being warned by plenty of people that saw it coming).

Also relevant is his discussion of constitutionalism, which changed in meaning during the demand for popular democracy by the Chartist movement. The Chartists threatened to stop the satanic mills of the market economy during the massive social dislocation of the emerging market society and were violently put down by the authorities. A hundred years earlier Locke´s constitutional safeguards were meant to protect commercial property against arbitrary acts from above (the Crown), but now constitutional safeguards were put in place to protect industrial property from the people. The separation of power that constitutionalism entails was now to separate people from power of their economic lives. The American constitution that put private property under the highest conceivable protection created the first legally grounded market society in the world, where people, in spite of universal suffrage, are powerless against the owners. In our current globalized market society we have what could be called the new constitutionalism (coined by Stephen Gill) in which political-economic structures are shielded from democratic rule and popular accountability in order to grant privileged rights to corporate capital and large investors. The European Monetary Union is a prime example of the new constitutionalism and the soon-to-be implemented fiscal pact will be an escalation in sacrificing democratic participation on macro-economic policy in favor of imposing automatic austerity on the member-states.

Following the new constitutionalism, Polanyi´s discussion of fascism serves as a warning for European’s ongoing malaise: “The stubbornness with which economic liberals, for a critical decade, had, in the service of deflationary policies, supported authoritarian interventionism, merely resulted in a decisive weakening of democratic forces which might otherwise have averted the fascist catastrophe”. The European elites, with their constant separation of economics from popular accountability, with their constant assault on the welfare state, and with their disregard for the democratic wishes of people in the periphery, are very likely to underestimate the social forces they are slowly unleashing by the social misery they impose on the people. The scenes of Golden Dawn mobs beating up immigrants and leftists in Greece, while police look the other way, should speak volumes for the need to heed Polanyi´s warning. To Polanyi the success of fascism in the 1930s is best explained by the failings of the market system. It had nothing to do with local causes, national mentalities, historical backgrounds, it sprang up everywhere. Many fascist movements were in fact non-nationalist. One should actually not speak of a fascist ‘movement’, as fascism relied upon the goodwill of people in high positions rather than popular masses; nowhere fascists took power by an actual revolution, it was always no more than a sham rebellion that had tacit approval of the authorities that pretended to be overwhelmed by force. Between ´24 and ´29 fascism faded away as the market system seemed ensured, but after the crisis in 1930 fascism became a world power in just a few years.

Polanyi considers the victory of fascism to be the result of the liberal’s simple-minded idea of freedom that sees any control or planning to be a denial of freedom. Freedom then degenerates into a mere advocacy for free enterprise, which is reduced into a fiction by the hard reality of giant trusts and monopolies. His last chapter on freedom in a complex society seems like preliminarily answer to the arguments found in Milton Friedman’s Capital and Freedom 18 years later. Without regulation freedom is only freedom for the few. Liberals believe in an illusionary idea of freedom that denies the reality of society, as if all power and compulsion is gone when we engage in contractual relationships in the market economy as individuals. The fascists are the response to the failings of the market economy; they relinquish freedom and glorify power which is the reality of society. It is then up to the socialist to accept the harsh reality of society, but to defend freedom in spite of it, as Polanyi concludes: “Uncomplaining acceptance of the reality of society gives man indomitable courage and strength to remove all removable injustice and unfreedom. As long as he is true to his task of creating more abundant freedom for all, he need not fear that either power or planning will turn against him and destroy the freedom he is building by their instrumentality. This is the meaning of freedom in a complex society; it gives us all the certainty that we need.”

Now 68 years later the word freedom continues to be abused as a simple-minded justification for markets. In our current neoliberal era market-oriented solutions are put forward to every problem. Whenever a government is unable to balance its budget, it often sells one of the tasks it used to fulfill off to the market. Essential parts of the modern welfare state like healthcare, education, housing, are increasingly subject to market forces. But also for credit (see the deregulation of the financial sector – the market knows best) and even for climate change (see cap and trade, CDM, REDD etc) markets are forwarded as the solution. Paradoxically, the solution is in fact the problem. Just as in the old times Polanyi writes of, the technocrats separate society into an economic and a political sphere, and attempt to solve (fundamentally highly political) social problems with ‘depoliticized’ technical solutions. The markets are seen as neutral arbitrators that will lead to a natural and objective equilibrium. Of course, it is not just ideology, turning something into a market is also the politically convenient way out that does not impede on powerful interests.

But to Polanyi markets in themselves are not a problem. It is the self-regulating market that is problematic, as upholding the commodity fiction threatens society and human life.  When the commodity fiction is abandoned and labor, land and money are no longer treated as commodities on the market, then the market can, even in principle, no longer be self-regulating. But the end of the self-regulating market and the market society does not mean the end of markets, as they should continue to ensure consumer freedom, to indicate the shifting of demand, to influence producer’s income, and serve as an instrument of accountancy. Here Polanyi, who self-identifies as a socialist, distinguishes himself from many leftists and Marxists that do want to abolish all markets. Polanyi in this day and age seems to be more some kind of radical social-democrat, who looks to reform society by regulation and planning that increases the freedom of all and always protects the individual’s right to nonconformity.

One could wonder how dismissive Polanyi is of Marxism. He did read Marx and accepts the exploitation of the worker in the capitalist system as a given. The most important difference between the two may be one of perspective. To Polanyi it is much more the massive social dislocation from imposing the market society (especially during the phase that Marx would call ‘primitive accumulation’) rather than the purely ‘economic’ exploitation of the worker creating more value than he earns that is important. Instead of the class struggle of the proletariat against the bourgeoisie, Polanyi opts for the less antagonistic perspective of society as a whole (the working, middle and landed classes) protecting its general interest against the brutality of the market. The narrative he sets out to defend this perspective is convincing. He faults the ‘economic determinism’ that misses out on society. On Ricardo’s labor theory of value he writes for example: “In a mistaken theorem of tremendous scope he invested labor with the sole capacity of constituting value, thereby reducing all conceivable transactions in economic society to the principle of equal exchange in a society of free men”. Marx adhered to Ricardo’s labor theory of value but added that it was not an equal exchange in a society of free men, but that the laborer was in fact exploited by the capitalist. I am guessing that the problem for Polanyi here might be that this theory of value, be it Marx´s or Ricardo´s, is too individualistic and atomistic, excluding other forms of economic organization, like for example communal. To Polanyi the main problem is of course not the worker being exploited (better to be exploited than not to be exploited at all), but the social dislocations that come out of the establishment of the market society.

Rather than arguing for one perspective or the other it may be best to conclude that one sees different things by using a different lenses and that both perspectives having their uses. I do however think that right-out dismissal of the ‘economic determinism’ of Marxism and other theories is mistaken. He does in fact lack a convincing explanation for the Great Depression. Polanyi looks at failings of the market system and the subsequent double movement, he kind of seems to argue that protectionism then led to the Great Depression, but it remains rather unclear. He certainly does not look or have any kind of explanation for the boom-bust cycle of capitalism and why the markets ‘failed’ at this or that particular time. His dismissal of other theories as the falling rate of profit, underconsumption or overproduction is therefore rather inappropriate.