The Myth of Markets

On the durability of harmful ideologies, here’s an interesting piece about an economist I had never heard of, Karl Polanyi, called “The Power of Bad Ideas.” The premise is summarized thusly:

Polanyi challenges the choice between free markets and regulated markets as a false one. Not only are efforts to impose free markets destructive, the assumption that markets can, in principle, be free has never been true, nor could it be.

Yet the free market axiom is now widespread, notwithstanding glaring and recurrent market failures. Once the ideological stomping grounds of the Republican and Tory right, it now forms the rhetorical bedrock of policy paradigms across the Western world. And the neoliberal project to realize this political utopia seems to have advanced since the 2008 crash.

Polanyi rejects the idea that markets are independent from states, and that they therefore can self-regulate (and even, on some level, that they exist in the first place). People take abstract markets’ existence as a given, however, because of the strong cultural narrative associated with them:

Block and Somers’s unique contribution is to argue that these public narratives about the economy are key drivers of regulatory policy. Why, for instance, did free market ideals, revived under Reagan and Clinton, weather the storm of the Great Recession, while policies adopted after World War II—policies rooted in people’s connectedness and the public good—are long lost? Free market narratives have immense cultural power; the popular rhetoric about the economy plays into centuries-old ways of thinking about the economy and indeed into people’s very sense of identity. And this power explains why the free-market policy paradigm is so persistent.

And oh how persistent it is:

Social naturalism, the idea that markets are pre-political, autonomous, and ultimately guided by natural laws, is not simply something embraced by Chicago school economists or policymakers. Market fundamentalism taps into our individualism, our independence, our conception of freedom, our sense of self, our very ethos.

And as with many quotes I read about economics, my response is “speak for yourself.” I am an individual, with a strong desire for independence (independence from work, for starters), and with a very well-developed sense of self, etc. Does that make me a free-market fundamentalist? Methinks not. In fact, putting so much power into abstractions of abstractions (numbers on a computer screen, which represent pieces of paper, which represent fabricated wealth, and so on) necessarily diminishes the autonomy of individual, living people.

But I don’t think this is news. A lot of people realize the inherent stupidity of riding the wave of market capitalism, as if on some kind of bucking bronco (a sorcerer’s tempest that has escaped the command of the sorcerer, as Marx described it). I think people believe the myth that all problems are solved by markets—or at least profess to believe it—because it’s simply easy to do so. Everyone knows that banks foreclosing on someone’s house never had the money they loaned to begin with, or that capitalism requires at any given time a number of unemployed people who want to work, but so what; concentrated wealth is concentrated power, and when the boss wants you to believe the myth, you typically at least say, “Sure, that makes sense,” even if you secretly know it’s illogical. It’s just like at the office.

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