By Fred Block & Margaret R. Somers
What is it about free-market ideas that give them tenacious staying power in the face of such manifest failures as persistent unemployment, widening inequality, and the severe financial crises that have stressed Western economies over the past forty years? In The Power of Market Fundamentalism Fred Block and Margaret Somers extend the work of the great political economist Karl Polanyi to explain why these ideas have revived from disrepute in the wake of the Great Depression and World War II, to become the dominant economic ideology of our time.
Polanyi contends in his The Great Transformation (1944) that the free market championed by market liberals never actually existed. While markets are essential to enable individual choice, they cannot be self-regulating because they require ongoing state action. Furthermore, they cannot by themselves provide such necessities of social existence as education, health care, social and personal security, and the right to earn a livelihood. When these public goods are subjected to market principles, social life is threatened and major crises ensue.
Despite these theoretical flaws, market principles are powerfully seductive because they promise to diminish the role of politics in civic and social life. Because politics entails coercion and unsatisfying compromises among groups with deep conflicts, the wish to narrow its scope is understandable. But like Marx’s theory that communism will lead to a “withering away of the State,” the ideology that free markets can replace government is just as utopian and dangerous.
Gianfranco Poggi on Books & Ideas wrote:
"Fred Block and Margaret Somers have performed a signal service by providing, on the seventieth anniversary of the publication of The Great Transformation, a detailed reconstruction and assessment of its arguments, bringing out the distinctive contribution made by Polanyi, and explaining why his work has exerted such influence on so much work in political economy in the last fifty years. Polanyi offered one of the most important theoretical and methodological analyses of social democracy, providing a critique not only of free market liberalism but also of Marxism, with which he had become increasingly disillusioned because of its fatalism and economism. He was one of the first to argue that free market liberalism and Marxism shared the same assumption that the economy was the most significant force shaping modern society. Both were also utopian because they believed in the possibility of a world without politics, the withering away of the state. [...] Block and Somers identify three key propositions in his thought. The first is that markets are necessary and important institutions, but if they are left unregulated they threaten human freedom and the collective good. [...] The second proposition is that the market is not an autonomous and separate entity, and cannot therefore be ‘freed’ from the state. It is always embedded in specific political, legal and cultural arrangements. [...] The third proposition Polanyi advanced was that the reason free market ideology was so effective and so seductive was precisely because it appeared to promise a society free of politics and free of conflict, or at the very least to substantially reduce the role of politics in civil and social life. [...] Block and Somers devote considerable space to analysing the return of what they term, following George Soros, ‘marketfundamentalism’, using Polanyi’s framework to understand its character. [...] One of his abiding beliefs was that if democracies failed to control the malign effects of markets, particularly the growth of insecurity and inequality, then people would flock to the populist right to find the security they craved. [...] Polanyi resolutely opposed utopian thinking on right and left, arguing that freedoms and rights could only be sustained through politics and law, and that economics should be balanced in public policy by socio-cultural and historical knowledge. These are all insights with great relevance for understanding and analysing our contemporary political and economic malaise, and Block and Somers provide a lucid and insightful account of how they inform Polanyi’s distinctive form of political economy."
Michael McCarthy on Boston Review wrote:
"From Marx’s standpoint, society is no more than the site of the hostile confrontation between the conflicting economic interests of two historically variable groups – freemen and slaves in antiquity, lords and serfs under feudalism, the bourgeoisie and the proletariat under capitalism. [...] For Polanyi, 'society' is a complex reality constituted by relatively autonomous sets of diverse institutional arrangements, varying widely in time and space, some of which address concerns of no immediate economic significance. They generate and validate similarities and contrasts between individuals and between groups that may override - or any rate frame and constrain, rather than masking or justifying - the relations regarding their economic interests and the resulting collective identities. Block and Somers’ entire book can be considered as a sustained exploration and elaboration of this key motif in Polanyi’s thinking, the so-called ‘embedding’ of the economic aspect of the social process within a pre-existent, more complex matrix. [...] Block and Somers’s title has another distinctive component - 'The Power of Market Fundamentalism'. This announces their forceful contribution to an ancient theme of social analysis, conventionally phrased as 'the role of ideas in history'. They argue that certain bodies of ideas not only are passionately held and proclaimed, not only constitute for those sharing them a cherished component of collective identity, but can make a decisive difference to critical aspects of social reality."
"Karl Polanyi is far less well known than the big three of economics: Marx, Keynes, and Hayek. But Polanyi’s ideas are distinct. [...] In The Power of Market Fundamentalism (hereafter TPMF) Fred Block and Margaret Somers revive Polanyi to analyze the free market’s origins and staying power. [...] Block and Somers’s unique contribution is to argue that these public narratives about the economy are key drivers of regulatory policy. [...] But their argument does not completely satisfy. Why are free market ideas so durable if they are so obviously wrong and destructive? [...] Because they focus exclusively on culture and ideas, capitalism - our system of private property relations, which produces antagonistic interests by pitting the survival needs of different groups against each other on the market - is barely mentioned in TPMF. Following Polanyi himself, at the least the Polanyi of The Great Transformation, they instead rely on the 'market society.' But market society does not work as a substitute for capitalism; as they show, modern political economies are more complex than simple free markets. Their concept is only concerned with exchange. But this is far too limited. How economic activity is linked to domination and exploitation is left unclear. And while TPMF convincingly demonstrates that the economy and politics are mutually constitutive, it doesn’t give any insight into the relationship between economic power and political power. [...] This is not just a matter of emphasis on cultural processes rather than economic interests. It points to a crucial difference between TPMF and accounts of the rise of neoliberalism that emphasize class antagonisms. [...] TPMF is a thorough critique of free market ideas, but discarding capitalism makes its depiction of markets themselves unclear. [...] By ignoring their constituent parts, they spare capitalist markets a full critique."
Interview about The Power of Market Fundamentalism
A 40-minute interview with Fred Block by Rob Johnson, president of The Institute of New Economic Thinking.
More Reviews of the Book
The academic social theory journal Thesis Eleven has published a 'review symposium' on the book, consisting of three reviews in the same issue:
- Review by Claus Offe, Hertie School of Governance, Germany
- Review by Johanna Bockmann, George Mason University, USA
- Review by Damien Cahill, University of Sydney, Australia
- “Polanyi’s The Great Transformation at Seventy-Five” - article by Fred Block & Margaret Somers in a special issue of Global Dialogue on Polanyi's The Great Transformation, December 2019
Table of Contents of The Power of Market Fundamentalism
- Karl Polanyi and the Power of Ideas
- Beyond the Economistic Fallacy
- Karl Polanyi and the Writing of The Great Transformation
- Turning the Tables: Polanyi’s Critique of Free Market Utopianism
- In the Shadow of Speenhamland: Social Policy and the Old Poor Law
- From Poverty to Perversity: Ideational Embeddedness and Market Fundamentalism Over Two Centuries of Welfare Debate
- The Enduring Strength of Free Market Conservatism in the United States
- The Reality of Society
About Fred Block and Margaret Somers
Fred Block is emeritus professor at the sociology department of the University of California, Berkeley. He specializes in economic sociology and political sociology. Block’s recent writing focuses on innovation in the U.S. economy, the intellectual legacy of Karl Polanyi, and the critique of free market economics. He also leads the Center for Engaged Scholarship, that provides fellowship support for Ph.D. students in the social sciences whose work has the potential to make U.S. society more egalitarian, more democratic, and more environmentally sustainable.
Margaret Somers is emerita professor at the sociology department of the University of Michigan. She is a social theorist and comparative historical sociologist specializing in economic, political, and cultural historical sociology. She works under the guidance of Karl Polanyi’s intellectual and moral legacy and seeks to express Polanyi’s commitments in her writing.