“All the populations made destitute”?!? Is a subsistence farmer being forced to take care of their parents in poverty barely able to feed each other really some terrible “retirement system” to abolish? You really think feudal systems had some kind of positive connotation? I think those people just worked until death and didn’t really get much out of it.
This article kinda misses the huge reduction in subsistence poverty that has happened, and a host of other gigantic benefits that humanity has accrued over the last 200 or so years.
I totally agree about the WEF shenanigans, but it is because they are out of touch people who think they can plan society for the benefit of the unwashed masses.
The issue here isn’t the fundamental tools of classical economic analysis, it is the folly of social and economic planners trying to apply their morality on everyone else.
Populations were absolutely made destitute by structural adjustment and shock therapy. Take Russia as a case in point. That doesn’t mean there weren’t also successes, which I mention specifically (poor rural people brought more rapidly out of poverty).
As for feudalism, of course it was a miserable state of existence for most people. But that doesn’t change the fact that, as Polanyi notes, there existed a patrimonial safety net that was shredded by the early capitalists to create a wage labor market. Polanyi discusses this for several chapters — the elimination of the Speenhamland Act of 1795.
An important term to interrogate is 'rural poverty' as it means radically different things in different places. As others have discussed about rural Ladakh, the lack of a cash economy there doesn't mean they are 'poor'--Ladakh people enjoy food security from their crops and have a peaceful and generally egalitarian social structure that produces most things they need. The lack of cash to participate in the global economy was not life-threatening and in fact they might be better off not 'working' at a 'job' which takes young people away and has been destabilizing to their culture. The same is obviously not true for rural people in Somalia who have been devastated by climate change and colonial empires and literally have nothing left to lose.
All good points, but life is nothing but a series of unsettling step changes that cause disruptions and challenges. Some are human made tragedies (e.g. wars, great leaps forward, etc.) and some are natural (hurricanes, volcanoes, crop failures).
It may feel kind of crass as an analogy, but if you wanna make an omelet you gotta break a few eggs. It is useful to analyze the disruption to try and minimize the impact with policy choices, but nothing will ever eliminate impacts and make things perfectly fair. Best not to try and stop progress...
a) Isn’t there some responsibility for leaders to know and make informed decisions on behalf of their country, rather than placing all the blame at the door of western “advisors”? This is obvious in Sri Lanka where trying to adopt organic farming overnight and banning all chemical fertilizer at once was obviously preposterous. Arguably, Yeltsin and his own staff should have taken the west’s extreme privatization prescriptions with a grain of salt.
b) Shouldn’t we distinguish between market regulations and social safety nets, versus wasteful subsidies of energy and food that would be less-expensively provided as direct assistance to the poor. That is what the IMF advocates, not dismantling the welfare state.
c) You seem to be blaming capitalists for the overbearing climate regulations imposed by bumbling left-center governments. I’m pretty sure there is a wide variety of both possible and suggested solutions to reduce emissions without draconian regulations. These are policy mistakes, not harbingers of evil.
a) Absolutely. But the two are not so easily separable, because the governments that make those decisions are usually drawn from each country's elite strata, and often come into office thanks to the direct and indirect support of the very Western interests that extend them those loans (think "Our Brand Is Crisis").
b) From Polanyi's point of view, what market regulations and safety nets and industrial subsidies have in common is they're all deliberate efforts to distort the market, as the neoliberals would also claim, but that they're organic and entirely rational responses from society to assert control over things that have social value outside of their commodity values. Of course, often regulations and subsidies are also just the result of corruption and undue political influence from incumbent players. And I agree that those cases are worth distinguishing from what Polanyi discusses.
c) I think that the owning class is intent on putting the burden of climate adaptation onto their respective nations' working classes. This manifests in overbearing climate regulations imposed by bumbling left-center governments. Not sure our perspectives are mutually exclusive.
I agree with several of your points, including the negative effects of "shock therapy" in some countries. However, as with Rationalista, I think you understate the overall decline in global poverty during a period of economic liberalism (or neoliberalism if you will). See, for example: https://ourworldindata.org/extreme-poverty
Leighton, this one so knocked me out that I felt compelled to take the audacious step of printing the thing out. On real paper. Made from trees. Not a fashionable thing to do, but this one, I have to study and maybe even annotate. With a pen. And ink. Marks on paper. It's a thing. This angle of capitalism as a system elites foisted on non-elites is just upending my world. Holy f, the antiracists are right after all! (Uh...irony, if not obvious.)
It strikes me as very post-modern to imagine that the free market is a product of violence and coercion. I think most free market advocates, myself included, would argue that the use of violence and coercion is the opposite of a free market. I think the single best work that highlights this contrast is Rothbard's Power and Market. You mention Smith and Ricardo as if their ideas laid a solid foundation for real economics. Their failure to appreciate the subjective nature of value instead laid the foundation for the labor theory of value of Marx. Is it accurate or useful to categorize an economic legacy terminating in Marxism as "free market"? I don't think it is. If you want to understand a useful conception of "real" free market economics, you must become familiar with the work of the Austrians, especially Mises and Rothbard. Mises was at a "free market" symposium that included the likes of a young Milton Friedman. He rightfully identified Friedman and his associates as the socialists that they were with their affinity for using central banking to manipulate interest rates. Manipulating interest rates with a central bank is just about the most aggressive way to violate market principles as it violates the property rights of every individual with savings in the manipulated currency. The Austrian Business Cycle Theory has much better explanatory power than this retrospectively constructed narrative that free markets are the source of society's ills. In this case, I think the premise that the "free market" requires the initiation of violence and coercion is the source of some great confusion that would be instantly resolved by familiarity with the heterodox Austrian school of economics.
Polanyi was Austro-Hungarian himself and his work was in part a direct response to the Austrian school. His book is a work of historical interpretation: he marshals empirical evidence to demonstrate that the invention of the free market (and specifically the commodification of land, labor and money) was a profound rupture from the patrimonial relationships of production and exchange that it replaced. In order for the conditions to prevail to make that commodification possible, the state had to destroy old social structures. He goes through each in detail. You can call it post-modern (though I don't see how it is — Marx makes a similar case about the "primitive accumulation of capital" and his theory was the height of Enlightenment thought), but to refute it you'd need to make an empirical case against his. His argument, in other words, isn't a "premise" at all, but a conclusion based on his examination of the historical record.
He would agree with Mises, by the way, on central banks. His entire argument about the commodification of money was that the free market approach, which was the gold standard, failed, and was replaced by a system of central banks which is the opposite of the "self-regulating" market.
Thanks for the thoughtful reply. The point I was trying to make wasn't so much about Polanyi as it was about where you seem to be coming from. I'm just surprised someone familiar with Austrian economics would be persuaded by Polanyi's interpretation of history. In the current context and with common usage of the term free market, Polanyi's interpretation of the historical record seems to be constructed to support his conclusion as opposed to an unassuming analysis, but that could just be my own biases talking. Gold as money was an emergent phenomenon. The gold standard being codified by rule of law after it had emerged as money through market forces is one example of the overall problem with Polanyi's analysis. The free market produces a given phenomenon, such as money, the government co-opts said phenomenon, the imposition of the coercive apparatus of government on a previously voluntary arrangement creates system points of failure, failure results, Polanyi blames free market (even though the government was the cause of the failure). If you're interested in what I thought was a very persuasive examination of how Polanyi's work doesn't accurately describe reality from the libertarian perspective, I liked this article: https://www.libertarianism.org/blog/karl-polanyis-battle-economic-history (but then again, as a libertarian I would. I like to think I'm good at evaluating arguments without being influenced by my own biases, and I think the arguments in this article are very strong)
I'd be interested in hearing your conclusions from the book but my sense is the chaotic economic conditions exacerbated by Sachs' crew gave rise to the mafiosa capitalism that emerged from the rubble of the Soviet Union.
On the back cover of the book is a review from W. L. Webb of the Gaurdian, “To live now and not to know this work is to be a kind of historical fool missing a crucial part of the consciousness of the age”.
OK. “I don’t want to be an historical fool”, I thought. So I’ll read it.
Conclusions? The peoples of the Soviet Union and in particular Russia, Ukraine and the European portion were brutalized. For generations! I like to think I grew up interested in and aware of the world around me. Not this. You hear snippets of the repression under Lenin, Stalin et al. No freedoms, jailing of dissidents etc. But not this. The scale of evil is horrifying, the legacy inescapable.
If you haven’t read this book, you absolutely should.
You are ignoring the state of the country's culture, social and legal framework. Communism destroyed any civil society and led to lawless hypocrisy. There is no way for anything but gangster behavior to evolve in a low-trust society.
“All the populations made destitute”?!? Is a subsistence farmer being forced to take care of their parents in poverty barely able to feed each other really some terrible “retirement system” to abolish? You really think feudal systems had some kind of positive connotation? I think those people just worked until death and didn’t really get much out of it.
This article kinda misses the huge reduction in subsistence poverty that has happened, and a host of other gigantic benefits that humanity has accrued over the last 200 or so years.
I totally agree about the WEF shenanigans, but it is because they are out of touch people who think they can plan society for the benefit of the unwashed masses.
The issue here isn’t the fundamental tools of classical economic analysis, it is the folly of social and economic planners trying to apply their morality on everyone else.
Populations were absolutely made destitute by structural adjustment and shock therapy. Take Russia as a case in point. That doesn’t mean there weren’t also successes, which I mention specifically (poor rural people brought more rapidly out of poverty).
As for feudalism, of course it was a miserable state of existence for most people. But that doesn’t change the fact that, as Polanyi notes, there existed a patrimonial safety net that was shredded by the early capitalists to create a wage labor market. Polanyi discusses this for several chapters — the elimination of the Speenhamland Act of 1795.
An important term to interrogate is 'rural poverty' as it means radically different things in different places. As others have discussed about rural Ladakh, the lack of a cash economy there doesn't mean they are 'poor'--Ladakh people enjoy food security from their crops and have a peaceful and generally egalitarian social structure that produces most things they need. The lack of cash to participate in the global economy was not life-threatening and in fact they might be better off not 'working' at a 'job' which takes young people away and has been destabilizing to their culture. The same is obviously not true for rural people in Somalia who have been devastated by climate change and colonial empires and literally have nothing left to lose.
All good points, but life is nothing but a series of unsettling step changes that cause disruptions and challenges. Some are human made tragedies (e.g. wars, great leaps forward, etc.) and some are natural (hurricanes, volcanoes, crop failures).
It may feel kind of crass as an analogy, but if you wanna make an omelet you gotta break a few eggs. It is useful to analyze the disruption to try and minimize the impact with policy choices, but nothing will ever eliminate impacts and make things perfectly fair. Best not to try and stop progress...
a) Isn’t there some responsibility for leaders to know and make informed decisions on behalf of their country, rather than placing all the blame at the door of western “advisors”? This is obvious in Sri Lanka where trying to adopt organic farming overnight and banning all chemical fertilizer at once was obviously preposterous. Arguably, Yeltsin and his own staff should have taken the west’s extreme privatization prescriptions with a grain of salt.
b) Shouldn’t we distinguish between market regulations and social safety nets, versus wasteful subsidies of energy and food that would be less-expensively provided as direct assistance to the poor. That is what the IMF advocates, not dismantling the welfare state.
c) You seem to be blaming capitalists for the overbearing climate regulations imposed by bumbling left-center governments. I’m pretty sure there is a wide variety of both possible and suggested solutions to reduce emissions without draconian regulations. These are policy mistakes, not harbingers of evil.
a) Absolutely. But the two are not so easily separable, because the governments that make those decisions are usually drawn from each country's elite strata, and often come into office thanks to the direct and indirect support of the very Western interests that extend them those loans (think "Our Brand Is Crisis").
b) From Polanyi's point of view, what market regulations and safety nets and industrial subsidies have in common is they're all deliberate efforts to distort the market, as the neoliberals would also claim, but that they're organic and entirely rational responses from society to assert control over things that have social value outside of their commodity values. Of course, often regulations and subsidies are also just the result of corruption and undue political influence from incumbent players. And I agree that those cases are worth distinguishing from what Polanyi discusses.
c) I think that the owning class is intent on putting the burden of climate adaptation onto their respective nations' working classes. This manifests in overbearing climate regulations imposed by bumbling left-center governments. Not sure our perspectives are mutually exclusive.
I agree with several of your points, including the negative effects of "shock therapy" in some countries. However, as with Rationalista, I think you understate the overall decline in global poverty during a period of economic liberalism (or neoliberalism if you will). See, for example: https://ourworldindata.org/extreme-poverty
Leighton, this one so knocked me out that I felt compelled to take the audacious step of printing the thing out. On real paper. Made from trees. Not a fashionable thing to do, but this one, I have to study and maybe even annotate. With a pen. And ink. Marks on paper. It's a thing. This angle of capitalism as a system elites foisted on non-elites is just upending my world. Holy f, the antiracists are right after all! (Uh...irony, if not obvious.)
I'm very late reading this article, but I wanted to thank you for another great piece.
It strikes me as very post-modern to imagine that the free market is a product of violence and coercion. I think most free market advocates, myself included, would argue that the use of violence and coercion is the opposite of a free market. I think the single best work that highlights this contrast is Rothbard's Power and Market. You mention Smith and Ricardo as if their ideas laid a solid foundation for real economics. Their failure to appreciate the subjective nature of value instead laid the foundation for the labor theory of value of Marx. Is it accurate or useful to categorize an economic legacy terminating in Marxism as "free market"? I don't think it is. If you want to understand a useful conception of "real" free market economics, you must become familiar with the work of the Austrians, especially Mises and Rothbard. Mises was at a "free market" symposium that included the likes of a young Milton Friedman. He rightfully identified Friedman and his associates as the socialists that they were with their affinity for using central banking to manipulate interest rates. Manipulating interest rates with a central bank is just about the most aggressive way to violate market principles as it violates the property rights of every individual with savings in the manipulated currency. The Austrian Business Cycle Theory has much better explanatory power than this retrospectively constructed narrative that free markets are the source of society's ills. In this case, I think the premise that the "free market" requires the initiation of violence and coercion is the source of some great confusion that would be instantly resolved by familiarity with the heterodox Austrian school of economics.
Polanyi was Austro-Hungarian himself and his work was in part a direct response to the Austrian school. His book is a work of historical interpretation: he marshals empirical evidence to demonstrate that the invention of the free market (and specifically the commodification of land, labor and money) was a profound rupture from the patrimonial relationships of production and exchange that it replaced. In order for the conditions to prevail to make that commodification possible, the state had to destroy old social structures. He goes through each in detail. You can call it post-modern (though I don't see how it is — Marx makes a similar case about the "primitive accumulation of capital" and his theory was the height of Enlightenment thought), but to refute it you'd need to make an empirical case against his. His argument, in other words, isn't a "premise" at all, but a conclusion based on his examination of the historical record.
He would agree with Mises, by the way, on central banks. His entire argument about the commodification of money was that the free market approach, which was the gold standard, failed, and was replaced by a system of central banks which is the opposite of the "self-regulating" market.
Thanks for the thoughtful reply. The point I was trying to make wasn't so much about Polanyi as it was about where you seem to be coming from. I'm just surprised someone familiar with Austrian economics would be persuaded by Polanyi's interpretation of history. In the current context and with common usage of the term free market, Polanyi's interpretation of the historical record seems to be constructed to support his conclusion as opposed to an unassuming analysis, but that could just be my own biases talking. Gold as money was an emergent phenomenon. The gold standard being codified by rule of law after it had emerged as money through market forces is one example of the overall problem with Polanyi's analysis. The free market produces a given phenomenon, such as money, the government co-opts said phenomenon, the imposition of the coercive apparatus of government on a previously voluntary arrangement creates system points of failure, failure results, Polanyi blames free market (even though the government was the cause of the failure). If you're interested in what I thought was a very persuasive examination of how Polanyi's work doesn't accurately describe reality from the libertarian perspective, I liked this article: https://www.libertarianism.org/blog/karl-polanyis-battle-economic-history (but then again, as a libertarian I would. I like to think I'm good at evaluating arguments without being influenced by my own biases, and I think the arguments in this article are very strong)
Hmmmm. I just finished the abridged version of Solzhenitsyn’s “Gulag Archipelago”. Russian Gangster Oligarchs are not a creation of the IMF.
Among other things!
I'd be interested in hearing your conclusions from the book but my sense is the chaotic economic conditions exacerbated by Sachs' crew gave rise to the mafiosa capitalism that emerged from the rubble of the Soviet Union.
On the back cover of the book is a review from W. L. Webb of the Gaurdian, “To live now and not to know this work is to be a kind of historical fool missing a crucial part of the consciousness of the age”.
OK. “I don’t want to be an historical fool”, I thought. So I’ll read it.
Conclusions? The peoples of the Soviet Union and in particular Russia, Ukraine and the European portion were brutalized. For generations! I like to think I grew up interested in and aware of the world around me. Not this. You hear snippets of the repression under Lenin, Stalin et al. No freedoms, jailing of dissidents etc. But not this. The scale of evil is horrifying, the legacy inescapable.
If you haven’t read this book, you absolutely should.
You are ignoring the state of the country's culture, social and legal framework. Communism destroyed any civil society and led to lawless hypocrisy. There is no way for anything but gangster behavior to evolve in a low-trust society.