Ch. 3: From the Great Transformation to Global Free Market

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Ch. 3 From the Great Transformation to Global
Free Market

• John Gray (Excerpted from Gray, From the Great
  Transformation to the Global Free Market, in
  False Dawn The Delusions of Global Capitalism,
  The New Press, 1998)

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• The origins of the catastrophe lay in the
  Utopian endeavour of economic liberalism to set
  up a self-regulating market system (Karl
  Polanyi, The Great Transformation, 1944)

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The Great Transformation

• The Great Transformation the creation of free
  market to replace social market
• Also the title of Karl Polanyi's 1944 book about
  this process, the destruction of the commons,
  replacement by enclosures, and the
  countermovement in defense of society/social needs

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social market vs free market

• In the past, economic life in the West was
  constrained by need to maintain social cohesion
  it was conducted in "social markets
• Social markets are regulated, by social
  norms/values and governments
• Today, Scandinavian are known for having social
  market economies
• The free market created a new type of economy in
  which prices of all goods, including labor,
  changed without regard to effects on society
• Free markets are deregulated operate
  independently of social needs

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The Enlightenment thesis

• Enlightenment thinkers (Jefferson, Paine, Mill
  and Marx) believed all nations would eventually
  adopt some version of Western institutions
  values
• Diversity of cultures is temporary, a stage on
  the way to universal civilization
• Traditions and cultures of the past will be
  superseded by a new, universal community founded
  on reason

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Washington consensus

• Economic policies advanced by the US
  Administration and Congress as well as the
  DC-based IMF World Bank
• Key elements are trade liberalization,
  privatization, deregulation, etc., that are often
  applied to all countries and all situations in
  a one-size-fits-all way that ignores local
  conditions and cultural diversity
• Gray sees the Washington Consensus as the latest
  manifestation of the Enlightenment thesis

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But progress on the way to universal
civilization has not come easily

• The push for a single global free market, a
  Utopia, has already produced social dislocation
  and political instability on a large scale
• Enlightenment utopias (capitalist or communist)
  embody rationalist hubris cultural imperialism
  (27)

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Imperialism

• imperialism the policy of forcefully extending a
  nation's authority by territorial gain or by the
  establishment of economic and political dominance
  over other nations
• cultural imperialism involves the extension of
  Western values and norms across the world

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The free market myth vs reality

• Free market economy in which markets are
  entirely free from social or political control
  was a myth even in the 19th century, during the
  era of laissez-faire
• It was created by state coercion, and depended on
  power of governments to work
• The reality is that across history there have
  always been a varieties of capitalism
• Today our world economy propagates new regimes
  spawns new kinds of capitalism (27)

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The central paradox of our time

• Economic globalization does not strengthen the
  current regime of global laissez-faire but works
  to undermine it
• -and creates political countermovements opposed
  to globalization, or the current form of
  globalization, at least