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)

“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)

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

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

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of cultures is temporary, a stage on the way to universal civilization Traditions and cultures of the past will be superseded by a new, universal community founded on “reason”

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

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)

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

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)

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