Is liberalism a static creed?

MartinBeddeleem

Canadian Centre for German and European Studies (CCGES) Université de Montréal martin.beddeleem@umontreal.ca

ConferencePaper

Is liberalism a static creed?

The Great Transformation faced with the neoliberal project

Thepurposeofthispaperistwofold.1 ThefirstintentionistodemonstratethatKarlPolanyi interpretedtheliberalcreedasasecularreligionwhichfilledmansspiritualuniverse.Thisnew faith (GT:141)2 ashecalledit,bornoutofthe darkSatanicmills ofthe)ndustrialRevolution, hingedonthesingleprincipleoftheself-regulatingmarket(similartopredestinationforthe Calvinists)whichspurredtheideologyof laissez-faire capitalism.Polanyiexposedthepeculiar springsofthe economic theodicy whichprovidedthedominantstructureoftheeconomicethics ofthe19th centuryinthemidstofthebreakingdownoftheoldcivilization(GT:3).Theselfregulatingmarketwasthe fountandmatrixofthesystem and gaverisetoaspecific civilization GT: .Thisnew marketcivilization or industrialcivilization GT:258)followed a post-ChristianeraofWesterncivilization[…],inwhichtheGospelsdidnotanymoresuffice, andyetremainedthebasisofourcivilization GT:268).Thespiritualfunctionofeconomic liberalismwasthusprimordialforitsdevelopmentandsuccess.

Inthesecondpart,IcontendhoweverthatPolanyisanalysismakescomparisonwithpresentdayliberalismdifficult.Iwillshowthat,whileretainingafaçadeutopianism, neoliberalism

1 IwouldliketoacknowledgethesupportoftheFQRSCforthisresearch.IwanttothankAugustinSimardforthefeedbackonthe initialinsightthatledtothisessay.

2 AllquotesfromtheGreatTransformation(GT)takenfromKarlPolanyi, The Great Transformation: The political and economic origins of our time,Boston:BeaconPress,2001.

departed significantly from its predecessor The enduringlegacy ofKarlPolanyioughtthen tobereassessedprudentlybeforemakingassumptionsabouthiscontinuingrelevancefor unravelingthetheoreticalandideologicalstructureofneoliberalism.Polanyisseverediagnostic oftheliberal creed cameparadoxicallyatamomentofredefinitionforliberalism,which,with Hayekasitscenterfigure,gavebirthtoneoliberalism.Thispaperwillthusseektocontrast Polanyisclaimsaboutthenatureofliberalismwiththeincubationoftheneoliberalprojectinthe 1930sand1940s.

I. The Liberal creed according to Karl Polanyi

The Liberal Utopia wastobetheoriginaltitleof The Great Transformation3;andthefirstpageof theinitialchaptersummonsKarlPolanyismainthesiswithutmostclarity: theideaofaselfadjustingmarketimpliedastarkutopia GT:3).Expoundingthe birthoftheliberalcreed (chap.12),hedescribestheprogressivesacralizationofthethreeeconomictenets(gold standard,freeinternationaltrade,labormarket)thatwouldcometodelineatethe faith of economicliberalism,drivenbytheutopianeschatologyofaworldwidemarket.

Whatstrikesthereader,however,isnotsomuchtheconsiderationofeconomicliberalismasa modernutopia,butthestrongreligiouslexiconandundertoneswhichrunthroughthetext.

DespitetherecentpublicationfromBlockandSomers The Power of Market Fundamentalism, 4 littleattentionhasbeengiventothe fundamentalist characterofthefree-market.Yet,this deservescarefulanalysisoncewetakeseriouslytheideathatPolanyiconsideredeconomic liberalismagenuinefaithwhichhadsupplantedbothtraditionalconservatismandproto-

3 ClausThomasberger, TheBeliefinEconomicDeterminism,Neoliberalism,andtheSignificanceofPolanyisContributioninthe Twenty-FirstCentury, International Journal of Political Economy,vol.41,no.4(Winter2012-2013);p.31note7;seealsoKarl PolanyiDigitalArchives,Con_13.

4 FredBlockandMargaretSomers, The Power of Market Fundamentalism: Karl Polanyi’s Critique,Cambridge,MAandLondon: HarvardUniversityPress,2014.

socialistideals.Infact,Polanyiapproachedeconomicliberalismasa secularreligion, a significanttermforhimasadedicatedChristian; manssecularsalvation (GT:141)wastobe foundthankstotheself-regulatingmarket.Thus,IsuggestthatPolanyiconsiderseconomic liberalisma theodicy,onethatrunscounterthegreatemancipatoryprojectofChristianityand Socialism.

a. The liberal theodicy

Atheodicyisarationalnarrativethatreconcilesameaningfulworldorderwithitsimperfections inthequotidian.5 Itseekstoaccountforsuffering,usuallythroughaneconomyofsalvationand liberation.Theprogressiverationalizationofourpositionintheworldandtheinequalityin sufferingengenderedarationaltheodicyofmisfortuneandsufferingasapositivevalue.In Christianity,thepromiseofanother-worldlysalvationdependsonouractionsinthisworld;our positionandsufferingareaccountedforbyProvidence,althougheachgrouporclassmaypossess itsownspecialwayofaccountingfortheirsocialprivilegedorunprivilegedsituation.

LikePolanyi,Weberdidnotthinkthatreligiousbeliefsweredeterminedbytheeconomic positionofthebeliever.6 Onthecontrary,theethicalneedtomakesenseofsocialorganization runsprior,oratleastparallel,totheprimacyofeconomics,andre-inscribeseconomicsinawider networkofinstitutionsandbeliefs.)nthisway,Polanyidoesntrelyonthefallaciesoforthodox Marxism.7 Yet19th centurycivilizationplacedtheself-regulatingmarketatthecoreofarational theodicy,likeagoldencalf.Theliberalcreedprovidedameaningfulworldorderbasedonthe ideaoftheself-regulatingmarketasalawofGodandnature,andinwhichtheeschatologyofa

5 MaxWeber, Economy and Society,2vol.,Berkeley:UniversityofCaliforniaPress,1978;p.519

6 Cf.MaxWeber, TheSocialPsychologyoftheWorldReligions, in(.(.GerthandC.W.Mills, From Max Weber: Essays in Sociology,NewYork:OxfordUniversityPress,1946;p.275.

7 Somethingallcommentatorsarekeentonote.

worldwidemarketsociety,andtheallegedconspiracyagainstit(GT:158ff),alwaysprovidedan explanationforthecontradictorystateofaffairs.

Itsdogmaswereassertedmoreforcefullywhenevertheyfailedtoaccountforthese discrepancieswithquotidianlife.Realitywasmadetoconformtotheaxiomsofeconomic liberalism:dogmatismturnedintoapologetics.The darkSatanicmills whichBlakehad describedin Milton8 –animagePolanyiparticularlyappreciated(GT:35)–werefuelledbya fanaticism whichledtoanunthinkable magnitudeofthesufferingsthathadtobeinflictedon innocentpersons GT:141)9 asthecreedoftheself-regulatingmarketsoughttoexpandtothe wholeworld.The evangelicalfervor ofthecrusadingfree-marketliberalsincreasedasan answertowhattheyperceivedasanunsufficientrealizationoftheirprinciples(GT:141).This newlawofnaturehadtobeaccomplished,itshistoricallogicaccelerated.10 Thesearethetwo essentialcharacteristicsofaninner-worldlyorientedsoteriologicaltheodicy–wheretheactive transformationoftheworldbringsheavenlyrewards.

Polanyisawclearlythattherewasnonobleendtothisimmenseenterprise,unlikeearly Protestantsects.Thereisafundamentaldifferencebetweenearlycapitalismasanelective affinitywithChristianityandtheradicalideaoftheself-regulatingmarketasitwasbeing developedinthe19th century.MycentralhypothesisisthatPolanyitakesseriouslytheideathat thenaturalisttheodicyof laissez-faire isakintoawickedperversionofthe Lebenswelt,which invadednotonlytheothersocialspheres,butthespiritualrealmofmanaswell.Christianitywas notabletoholdonfacingthedestructionofeverydaylifethatthe great transformation engaged:

8 Laterretitled Jerusalem,anhymnfrequentlyusedbyLabour,notablyClementAttleeafterWWII.Blakewasalsoanunorthodox Christian.

9 )tisoutsidethescopeofthispapertoexplorethethemesofguiltandinnocenceinKarlPolanyiswritings,althoughitisclear thatsuchadialecticissuggestedhere.IsuggestbrieflyherethatPolanyithoughtLiberalismwasafurtherdebasementofman fromChristianity–afallfromhismoralandspiritualexcellence;andthatredemptionwillcomewiththeembraceofSocialism, whereacommunitybasedonbrotherhoodwillberestored.

10 Forasimilarcomprehensionofideologyasthelogicofanideathatdemandstobeactualized,seeHannahArendt schapter )deologyandTerror inher Origins of Totalitarianism

Anewwayoflifespreadovertheplanetwithaclaimtouniversalityunparalleledsincetheage whenChristianitystartedoutonitscareer,onlythistimethemovementwasonapurelymaterial level. GT:136)Thishypothesissuggeststhattheideologyoflaissez-faire,supportedbythe activeprincipleofaself-regulatingmarket,enactedanarrativeofthedestructionofsocietyfrom theIndustrialRevolutiononwardswhichtrumpedothercompetingnarratives.

b. The link between past and present

Thedevelopmentofeconomicliberalismwasaccompaniedbyastrongrevisionismofeconomic history.AdamSmithsbarteringsavageandTownsendsgoatsanddogsfableallowedformarket tobebothnaturalizedandhistoricized;theirsocialphilosophy hingesontheideathat laissezfaire wasanaturaldevelopment GT:148).Theliberalswere enabledtoformulateacasewhich linksthepresentwiththepastinonecoherentwhole GT:150).Theoreticalcoherenceanda synopticsenseofhistoryasimpededprogress(akintoWhighistory)conferredagreat ideologicalpremiumupontheliberalnarrativewhichdisplacedtraditionaltheodicies.

Incontestably,EdmundBurkeprovidedthisintellectuallinkbetweenpastandpresent.11 Polanyi acknowledgedBurkeamongtheoneswho sharedwiththeFrenchRevolutionthespiritual parentageofnineteenth-centurycivilization GT:88).Hewasthefirsttonoticethatanincrease intradecouldcomewithasurgeinpoverty.WithinPolanyisreconstructionofEnglish intellectualhistory,Burkebridgedtogethertheoldruralworldofthesquireandthefarmer,and theurbanoneoftheindustrialistandtheworkers.Alreadyin1795, theultra-traditionalist Burke(GT:133)suggested12 toabolishpoorreliefandtotreatlaborasanyothercommodity.He hadnooppositiontoletthemarkettakechargeoftheproblemofpoverty;hungerwoulddothe

11 EdmundBurkeenjoyedamarkedrevivalatthetimeofthepublicationof The Great Transformation.Burkeisalsoafatherfigure forFriedrichHayek.

12 EdmundBurke, Thoughts and Details on Scarcity, 1795

jobtheparishcouldnotprovide: Thelawsofcommercewerethelawsofnatureand consequentlythelawsofGod GT:122).Burkesendorsementofthenewscienceofpolitical economyhadalargeinfluenceontheambivalentattitudemostConservativeswouldeventually embracetowardsthefree-market,untilMargaretThatcherbrokewiththeheritageof MacMillans Middle Way. 13

TheimportanceofBurkesconversiontothenaturalizationofeconomiclawsandthemarket cannotbeoverstated.HecontributedtosubvertingthePoorlawsbyturninghisbackonthe societywhichtheadventofpoliticaleconomywasbeginningtounravel.Insteadoffirmly opposingthemechanizationofsociety,Burkeaccommodatedit.Fromnowon,conservatismas anideologicalforcewouldbemorewaryofdemocracythaneconomicliberalism.Worse, traditionaliststurnedtheirbackonatrueChristiansociety.)nsteadofBlakesflamboyant denunciationofthe)ndustrialRevolution, reactionarypaternalism GT:107)wasmoreprompt todenouncepopulardemocracythanthespreadofruthlessindustrialization.Yet,themajor consequenceofSpeenhamlandhadbeenthespiritualdegradationofthepeople:

thetraditionalunityofaChristiansocietywasgivingplacetoadenialofresponsibilityon thepartofthewell-to-dofortheconditionoftheirfellows.[…]Scholarsproclaimedin unisonthatasciencehadbeendiscoveredwhichputthelawsgoverningmansworld beyondanydoubt.Itwasatthebehestoftheselawsthatcompassionwasremovedfrom theheartsandastoicdeterminationtorenouncehumansolidarityinthenameofthe greatesthappinessofthegreatestnumbergainedthedignityof a secular religion GT: 106-107)

13 JohnD.FairandJohnA.(utchesonJr., BritishConservatismintheTwentiethCentury:AnEmerging)deologicalTradition, Albion,vol.19,no.4(Winter1987).

SincePolanyiacknowledgedthatcapitalismbroughtrichesneverbeforepossible;themaincrisis of19th centurycivilizationhadthusbeenmoralandintellectualratherthaneconomic(GT:267). Theeconomictheodicyof laissez-faire haddecisivelyclaimedthescientifichighgroundthrough the discovery ofpoliticaleconomyasthemainpreoccupationofthetime.Thepromiseofa Socialistpost-Christianworld,embodiedbyRobertOwen,hadfailedtomaterialize;butPolanyi hopedthatthisletdownwasnomorethanapostponement,ashewasanxiousthathisbookbe publishedbeforetheendofthewarsothatitwouldcontributetothediscussionaroundthepostwarsettlement.14

c. Preaching to the poor – Harriet Martineau

Sociologically,thissecularreligionneededitsprophets,itsleadersanditspriests.Theprophets, Polanyiidentifiedclearly:theearlyonesinMalthusandRicardo,laterSpencer,andafterWorld WarI,MisesandLippmann.15 Polanyirepeatedlywarnedusnottolookforonepeculiarclassas anexclusiveactorofhistory,andfurthermore,nottoexplaintheinterestsandactionsofaclass uniquelyintermsoftheireconomicposition(GT:160).16 Nonetheless,hemadeitquiteclearthat the tradingclassesalonewereinpositiontotaketheleadinthatearlytransformation andthat amongthetradingcommunityitwasthecapitalists lottostandforthestructuralprinciplesof themarketsystem GT: .

Butasanexemplarypriest,PolanyifoundthewritingsofHarrietMartineau.Althoughshehad beenavanguardfemaleintellectual,shewasaproponentofthenewrationaleofpolitical

14 BlockandSomers, The Power of Market Fundamentalism,p.82

15 Totheprophet,boththelifeofmanandtheworld,bothsocialandcosmicevents,haveacertainsystematicandcoherent meaning,towhichman'sconductmustbeorientedifitistobringsalvation,andafterwhichitmustbepatternedinanintegrally meaningfulmanner. MaxWeber, Economy and Society,p.450.

16 Thoughhumansocietyisnaturallyconditionedbyeconomicfactors,themotivesofhumanindividualsareonlyexceptionally determinedbytheneedsofmaterialwantsatisfaction.Thatnineteenth-centurysocietywasorganizedontheassumptionthat suchamotivationcouldbemadeuniversalwasapeculiarityoftheage. GT:

economythathadsurfacedattheturnofthe19th century.Underthepatronageofrich industrials,shesetuptowritepamphletssupportingthePoorLawreforms.AsPolanyidescribes: sheundertooktoenlightenthepoorabouttheinevitabilityoftheirmisery―shewasdeeply convincedthatitwasinevitableandthatknowledgeofthelawsofpoliticaleconomyalonecould maketheirfatebearabletothem. (erpatrons couldnothavefoundamoresincereand,onthe whole,better-informedadvocateoftheircreed. (GT:286)

Martineauwasthusanearlyconverttothetheodicyofthenewpoliticaleconomy,andshe purportedtorelayitsworldviewtothosedirectlyaffectedbyit.Martineauembracedthe substitutionoftheChristianProvidencewiththeeconomicprovidenceofthemarket,shewalked thetrailBurkehadblazed.Shethoughtthatwiththerightknowledgethepoorwouldceaseto resenttheirposition.Moreimportantly,Polanyipointsatherethicaljustificationofthemoral degradationoftheworkingclassbycontrasting independentlaborers andthe paupers. She understoodthatitwasnotpovertyassuchwhichelicitedthestrongestdiscontent,buttheethical disarrayofavarietyofstatusgroups,firstamongthemtheworkingpoor,thehonestand honorablepoor(GT:104-105).WhatstrikesPolanyiisthatMartineauunderstoodthespiritual crisisfacedbymanydisplacedlaborerswhocouldnotabidetobeconfoundedwiththeidlepoor, andyetweresubjectedtothesamecontemptfromtherich,andsharedthesameeconomic burden.Theirhonorhadtobereconciledwiththeblindlawsofthemarket:herpriestlyrolewas toenactthetheodicyandreconcilewhatappearedcontradictory.Trueeducationwasforhera knowledgeofpoliticaleconomythatwouldexplaintheireconomicconditions,17 thesamewaya knowledgeofthesacredtextstellsusofourmoralandspiritualaxioms.Ifonlythepoor

17 Curiouslyenough,MichaelPolanyiwouldhavethesameprojectnearlyacenturylaterwhenheproducedtwoeducationalfilms in1938and1939abouttheworkingsoftheeconomy,themarketandunemployment.Cf.WilliamT.ScottandMartinX.Moleski, Michael Polanyi: Scientist and Philosopher,Oxford:OxfordUniversityPress,2005;pp.161ff

understoodthearcanelawsofnature,theywouldnotseekoblivionoftheirwretchedlotthrough idlenessanddebauchery. It was their beliefs that needed to change, not society itself.

d. Christianity between Socialism and Fascism

ThespiritualquestionisthusattheheartofPolanyisanalysisofeconomicliberalism:howcould adoctrinewhichseparatesmanfromhimselffillthespiritualvoiditcontributessomuchto create?Thesimpleansweristhatitpossessedthenecessaryideologicalcoherencetoprovidethe bewilderedthinkingminds GT:106)withanewnarrativewhichmadesenseoftheirworld seeminglyindisarray.Oncetheirbeliefsandexpectationshadbeenrerouted,thelogicof economicliberalismcouldbefullydeployedtoexplainthestateofaffairs.TheBurkeanequation of(lawsof)God=(lawsof)nature=(lawsof)commercewasasymptomofamuchdeepercrisis, thatistosaythedisaggregationanddeathofanoldercivilizationsupersededbyaseparationof manfromsociety,ofmarketfromsociety,andofsocietyfromGod.Heobservedthatthespiritual qualityofmanwasbeingdismantledbythecommodificationofhismeansofexistenceand everydaylife(GT:102).18 AndherememberedthatRedViennahadbeenasuccessneveragain repeated(GT:298-299).

)fweinsistthattheideational/spiritualelementofeconomicliberalismcomesfirstinPolanyis narrative,itisbecauseheismostconcernedwiththe production of social reality basedonthe self-regulatingmarketsystem,whichhequalifiesasa superstition GT:103).Speenhamland andthebirthof19th centurycivilizationwerethemoldintowhich20th century social consciousness wascast(GT:87).Moregenerally,the belief ineconomicdeterminismhad materializedastheeffectiveprincipleofthenewtheodicyofeconomicliberalism,because if

18 NeitherCharlesKingsleynorFriedrichEngels,neitherBlakenorCarlyle,wasmistakeninbelievingthattheveryimageofman hadbeendefiledbysometerriblecatastrophe (GT:102).

manbelievesintheobjectiveexistenceofeconomiclaws,theselawswillbecomereal. 19 The translationfromeconomiclawstoafully-fledgedtheodicyabletovouchforthesocialmeaningof theselawswasthe tour de force ofeconomicliberalism: )tsamazingregularitiesandstunningcontradictionshadtobefittedintotheschemeof philosophyandtheologyinordertobeassimilatedtohumanmeanings. The stubborn facts and the inexorable brute laws that appeared to abolish our freedom had in one way or another to be reconciled to freedom. GT:88)

Thediscoveryofsocietyhadtobeintegratedwith mansspiritualuniverse GT:89)tobecome effective, anewsetofideasenteredourconsciousness GT:89).WeagreewithBlockand Somerswhentheyconcludethat: Polanyi[…]isinsistingthateconomictheoriesandsocial sciencemodelsdonotrepresentandgeneralizealreadyexistingeconomicentitiesbutrather makes markets,economicpractices,andindeedentiremarketsocieties. 20 Theproductionof socialrealitydependsonthebeliefsandtheoriesoneholdsabouttheworldtoaccountforit,of primaryimportarethoseoftheintellectualclass.Economicliberalismsucceededintheendasa rationaltheodicywhichreconciledautopianconceptionoforderwiththelogicaldiscrepancies andhumansufferingsittriggeredineverydaylife.

19 ClausThomasberger, TheBeliefinEconomicDeterminism,Neoliberalism,andtheSignificanceofPolanyisContributioninthe Twenty-FirstCentury, International Journal of Political Economy,vol.41,no.4(Winter2012-2013).

20 BlockandSomers, The Power of Market Fundamentalism,p.107.

II. Karl Polanyi faces Neoliberalism

Asthetitleofthepapermakesclear,IwanttocontrastPolanyistheodicyofeconomicliberalism withtheincubationofneoliberalism.Alotoftherecentliteratureandspeakershereatthis conferencehaveinsistedthatPolanyisanalysisisstillrelevantforourunderstandingof st centurycivilization,thathis enduringlegacy castsalongshadowoverourcomprehensionof actuallyexistingliberalism.

OneaspectIwillnotexamine,becauseithasbeenlargelycoveredelsewhere,iswhether neoliberalismruledinPolanyisfavoronthematterofthe embeddedness ofmarketswithin society.Itwasoneofthecoreprinciplesofearlyneoliberalism(andOrdoliberalism/Soziale Marktwirtshaft)thatmarketsweretobedependentonsocialorganizationinordertobe functional.21 ApartthenotableexceptionofMises,everyneoliberalpleadedfora re-embedding ofmarketswithinthestatepower.22 Yet,Polanyisconsiderationofeconomicliberalismasa theodicyandhisbeliefthattheself-regulatingmarketwasdefinitelydiscreditedbytheendofthe 40s23 makesastraightforwardapplicationofhisanalysistoneoliberalismdifficult.Despitehis failureto(fore)seetheepistemologicalbreakbetweenneoliberalismandclassicalliberalism,the legacy ofKarlPolanyimayrestalotmorewithhisconsiderationoftheroleofideasandbeliefs inthemaintenanceofapoliticalorder.

21 Cf.theparadigmaticexamplesofA.R“stow, FreieWirtschaft–starkerStaat–DiestaatspolitischenVoraussetzungendes wirtschaftspolitischenLiberalismus, Schriften des Vereins für Sozialpolitik,187(1932);andH.C.Simons, A positive program for laissez-faire : some proposals for a liberal economic policy,Chicago(1934).Forthebestdevelopmentofthisapparentparadox,see BenJackson, AttheOriginsofNeo-Liberalism:TheFreeEconomyandtheStrongState,1930- , The Historical Journal,vol. 53,no.1(2010).

22 AsearlyastheLippmannsymposiumin1938,throughthefoundationoftheMont-PèlerinSociety.Withthenotableexception ofMises,everyneoliberalproposed,onewayoranother,anactivelegalsupervisionfromthestate,withstrongcompetences.

23 KarlPolanyi, OurObsoleteMarketMentality:Civilizationmustfindanewthoughtpattern, Commentary 3(1947).

a. Liberal revival

WeneednowtoappreciatehowtheexplanatorystrengthofPolanyisargumentvis-à-vis19th centuryliberalismalsoconstitutesitsweaknesswhentryingtograspthetransformationof liberalismfrom onwards.AquickoverviewoftheapparentsourcesofPolanyistakeon liberalismtellsusthathereadmostlyLippmanns Good Society24 published andMises Liberalism (published1927)25 Socialism (firstpublishedGerman1922),26 and NationalÖkonomie (publishedinGerman1940).27 HewasalsoacquaintedwiththewritingsoftheAustrianschool (forinstance:Hayek, Monetary Nationalism and International Stability,published193728,and others)FrankKnight,LionelRobbins,LeslieStephen,CarltonJ.H.Hayes(Historical Evolution of Modern Nationalism,1931; A Generation of Materialism,1942)althoughhedidnotquotethem frequentlyinthetext.WhenPolanyineededtworepresentativesofpost-WWIintransigent liberalism,heoftennamedLippmannandMises(GT: , : (e[Mises]andLippmann mirroredliberalreactiontothenewprotectionismofthe sand s GT:288).

ThefactthatPolanyis Great Transformation and(ayeksinfluential Road to Serfdom wereboth publishedin1944hasbeendulynoted.29 Inwritingsimmediatelyfollowingthepublicationofthe Great Transformation,Polanyiacknowledgedthatacompetingexplanationhasbeenissuedfor theriseoftotalitarianismandthedefeatofliberaldemocracyin1930sEurope.Buthesawthat onceagain,HayekresortedtothesameargumentsMisesandLippmannhadusedbeforeandthat hehadtakensuchpainstorefute: TalkabouttheRoadtoSerfdominaplannedeconomywas proofofanuncriticalbeliefinthevalidity,ingeneral,ofeconomicdeterminism.Suchabeliefisa failuretorecognizethepeculiarcircumstancesinwhicheconomicdeterminismwaspossible,

24 SourceKarlPolanyiDigitalArchivesCon_09_Fol_03

25 KarlPolanyiDigitalArchivesCon_10_Fol_02

26 KarlPolanyiDigitalArchivesCon_19_Fol_07

27 KarlPolanyiDigitalArchivesCon_06_Fol_06– Liberalism ,pp. -67.

28 KarlPolanyiDigitalArchivesCon_06_Fol_06–p.106ff

29AninternationalconferencewasdevotedtothetwothinkersearlierthisyearinAustralia: Polanyi–HayekWorkshop: QuestioningtheUtopianSpringsofMarketEconomy, UniversityofSydney, -16August2014

namelyamarket-economy WhitherCivilization? , .30 Thesameargumentrecurredin Polanyisfirstmajorpublicationafterthe Great Transformation: Ourobsoletemarketmentality (1947).31

Nonetheless,contrarytowhatBlocks)ntroductionwouldletusthink(GT:xx),bothLippmann andMiseswereparadoxicallysidelinedduringthecrystallizationofneoliberalism,despite contributingtoitsstronginitialimpulsion.TheLippmannsymposiumof1938markedthe surgingofaconnectedliberalnetworkwhichmetanddiscussedthepresentstateofliberalism honoringthepublicationofLippmanns The Good Society.ButLippmannhimselfnevertookan activepartintheproceedingsandsoonturnedouttobeanardentadvocateoftheNewDeal. Mises,althoughreveredasapioneer,wastoointransigenton laissez-faire toallowfortheStateto meddlewithcreatingacompetitiveorder32 –somethingbothearlyneoliberalsandordoliberals thoughtwasindispensableifpoliticalandeconomicfreedomwastobeperpetuated.33 Polanyis diagnosticwasthenright,thesemenandthemarketmentalitytheyembodiedwerequickly becomingobsolete.(ayeks Road to Serfdom,despiteitswidecirculationintheU.S.,didnot achieveastronginfluenceonpolicydebates.Freemarketsideaswereonthewaneeverywhere.

Yet,thecreationoftheMont-PèlerinSocietywastobemuchmorethanalast-ditchattemptat resurrectingthe19th centurycivilization.

b. The epistemological shift of Neoliberalism

Wepositthatthetransitionfromliberalismtoneoliberalismmarkedalargerdiscontinuitythan Polanyiandmostofhisepigoneswouldbereadytoacknowledge.Theenduranceofcapitalismin

30 KarlPolanyiDigitalArchives,Con_14_Fol_04,p.16

31 KarlPolanyi, OurObsoleteMarketMentality.

32 Despitehisintellectualprestige,hewasthoughttobethemanofanothertime,whichearnedhimthequalificationof paleoliberal. HefamouslystormedoutofoneoftheMont-Pèlerinsessionsshoutingtoothers: Youreallabunchofsocialists!

33 SeeBenJackson, AttheOriginsofNeo-Liberalism

theWest,theColdWarandtheWelfare-Statehavedrivensometoassumethatneoliberalismwas simplyaneconomicliberalismresurgentafteraperiodofclasscompromise.34 Thelater ideologicalsuccessofneoliberalismtopermeatenationalandinternationalpolicydebates,to rollback and rollout 35 hasoftenbeenperceivedastheactualizationofa laissez-faire 2.0.But thereisaclearbreakbetweentheliberalismofthe19th centuryliberals,andtheneoliberalism whichemergedinthe1940s.Oneisbasedon laissez-faire andtheself-regulatingmarket,the otheronefficientmarkets,competitionasadiscoveryprocedure,andthemarketasan informationprocessor.Eventhecontinuingsurvivalofneoliberalismafterthiscenturysfinancial crisis–its strangenon-death 36 –doesntexhaustitselfofitssuperior ideological embeddedness 37 dismissingthefoundationsofitsactualideationalpowers.Oneofthe transversaldebatesofthe1938LippmannSymposiumconcentratedonthevulnerabilityofthe markettothevagariesofhumanpsychology(LouisRougier),whichwouldaccountforthe nefariousattractiontowardsstateplanning.Numerousparticipants,contraMises,shared Polanyisdiagnosticofthevacuityofthe laissez-faire dogma,whichdissolvedthemoraland spiritualrealmsfortheabstractlawsofthemarket(Rüstow),leavingitincapableoffulfilling mansneedforsocialmeaningandplacinghiminaperpetualstateofperplexity(Michael Polanyi).38 Liberalismhadalienateditselffrombothsocietyandits clercs.

Fromthisdiagnosticofliberalismsfailureandimpotency,wecontendthatinnovativeneoliberal thinkersproposedanepistemologicalrecodingofthemajorliberalconcepts:notablythemarket, freedom,theruleoflaw,andknowledge.FriedrichHayek,MichaelPolanyiandKarlPopperall criticizedthecentralizationofthestate,notbecauseitwaspotentiallyinfringingonpersonal

34 AsarepresentativeofofDavidHarvey, A Brief History of Neoliberalism,Oxford:OxfordUniversityPress,2005.

35 JamiePeck, RemakingLaissez-faire, Progress in Human Geography,vol.32,no.3(2008).

36 ColinCrouch, The Strange Non-Death of Neoliberalism,London:Polity,2011.

37 BlockandSomers, The Power of Market Fundamentalism;DamienCahill, The End of Laissez-Faire? On the Durability of Embedded Neoliberalism,Cheltenham:EdwardElgar,2014.

38 Cf.SergeAudier, Le Colloque Lippmann: Aux Origines du Néo-libéralisme,Latresnes:ÉditionsduBorddelEau, .

freedom,butbecause,epistemologically,itcouldnotknowwhattodo.39 Itwasimpotentbecause themarketwasbothlargerandmorecomplexaprocesswhichdidnotrelyonthelimitationsof thehumanmind.Forallthreeauthors,liberalism,tosurvive,neededtoberevampedwithanew epistemologicalapparatus.Thejustificationformarketswasnevertobepurelyeconomic.They embodiedahigherprincipleofcoordinationastheyextractedthemostknowledgeoutofour largelytacitstock.40 Through(ayeksconceptionofthemarketasaninformationprocessorand thedispersednatureofknowledgeinsociety,strictdeterminismwasputincheckbythe complexityofmarketoperations.41 Theseoperationscouldnotbereconstructedlogicallybyan economicscience,andsocialscienceswereworkingwithfactswhichtheyhadtoextractby isolatingdiscreetelementsofalargerdynamicset.42 Duringthewar,Popperlaunchedhischarge againsthistoricismandtheprophesizinginthesocialsciences:heradicallyreducedtheirclaims toreachscientific truths aboutthecourseofhistoryandtheevolutionofsociety.Allthesocial sciencescoulddoweretostudy,fromthepointofviewoftheindividual,theresultsof unintendedconsequencesofcomplexphenomena.43 MichaelPolanyicriticizedthestateplanning ofscienceandarguedthatknowledgeandtruthswerebestservedinaspontaneousorder directedthroughenvironmentalinterventions.Sciencewasliberalandliberalismwasthe embodimentofitscoordinatingprinciple: TheLiberalconceptionisthatfreedomistheonly methodbywhichwecancontinuetodiscovertheregionsofyetundisclosedtruthintowhichwe areadvancing.Truthissocomplex,andeachparticleofithangstogetherdirectlywithsomany others,thatitcanberevealedonlybyacontinuousseriesofindependentindividualinitiatives. 44

39 FriedrichHayek, The Road to Serfdom,Chicago:ChicagoUniversityPress,2007[1945];KarlPopper, The Open Society and Its Enemies,London:Routledge,2011[1945];MichaelPolanyi, The Logic of Liberty,Indianapolis:LibertyFund,1998[1951].

40 Friedrich(ayek, EconomicsandKnowledge [1936]inFriedrichHayek, Individualism and Economic Order,Chicago:University ofChicagoPress,1948.

41 Friedrich(ayek, TheUseofKnowledgeinSociety, [1945]inFriedrichHayek, Individualism and Economic Order.

42 FriedrichHayek, “TheFactsoftheSocialSciences, ininFriedrich(ayek, Individualism and Economic Order.

43 KarlPopper, PredictionandProphecyintheSocialSciences, in Conjectures and Refutations,London:Routledge,2002[1948].

SeealsoKarlPopper, The Poverty of Historicism,London:Routledge,2002[1957].

44 MichaelPolanyi, TheGrowthofThoughtinSociety, Economica vol.8,no.32(1941);p.448.

The plurality of methods, the complexity and unpredictability of truth, a belief in the spontaneous ordering of interactions under artificial conditions: these three factors informed the epistemological foundation of neoliberalism and its crystallization in the 1940s.

Neoliberalismwasnot laissez-faire butaconstructivistprojectofbuildingmarketsthatwould processallinformationandallowforallbeliefstobeconfrontedonthemarketplaceofideas.45

Contrarytoclassicalliberalism,marketsandtheirregulationwerenottobediscoveredinnature, theyhadbeenfoundandinventedalongtimeagoasanevolutionarysolutiontosocial coordinationissues.46

c. The limits of applying Polanyi to neoliberalism

Now,thisdiagnosticwasnotavailablewhenKarlPolanyiwrotethe Great Transformation andit isonlyrecentlythattheliteraturehasstarteduncoveringthepeculiarideologicalstructureof neoliberalismmodeledonepistemologicaluncertainty.Nonetheless,Polanyicorrectlyunderlined theartificialityof themarket,anditsembeddednessintosocialandpoliticalinstitutions; somethingthatcontrarytothe naïve th centuryliberalism,neoliberalismembraced: “The neoliberalself-conceptionregardstheconstructionandextensionofthemarketsystemasa neoliberaltask. Marketsarenotseenastheresultofnaturalprogress,butasahumanconstruct, apoliticalproject,whichcangaingroundagainonlyifitissupportedbyastrongneoliberal politicalmovement. 47 Thatiswhy,contrarytothedispersionofearlyliberalthought, neoliberalismorganizedandinstitutionalizeditself,takingforitsmodelthesocialistdispositive

45 Cf.PhilipMirowski, Never Let a Serious Crisis Go to Waste,London:Verso,2013.

46 FriedrichHayek, The Constitution of Liberty,Chicago:UniversityofChicagoPress,2011.

47 ClausThomasberger, TheBeliefinEconomicDeterminism,Neoliberalism,andtheSignificanceofPolanyisContributioninthe Twenty-FirstCentury, p. .

ofpropaganda,organizedaroundpowerfulclubsandsocieties.Hayekrevivedtheideaofaliberal Utopia,notasaneschatologicalvision,butasaninstrumentaltooltogainthesupportofthe intellectuals,precious second-hand dealers of ideas 48 Theliberalutopiawaspreserved,butonly asanexotericidol;theinnercircleofneoliberalswasinfactbuildingontheideathatthemarket orderhadtobepreserved,whateverthe(political)meansemployed.49

Intheneoliberalconstellation,intellectualinnovationtricklesdownfromthecoretothe peripherythroughanelaboratenetworkofthink-tanks,advocacygroups,andfinancialsponsors. FromtheinitialmeetingoftheMont-PèlerinSociety,Hayekunderlinedtheprimacyand artificialityofthebeliefsandopinionsuponwhichsocialrealityisbeingproduced: Public opiniononthesemattersistheworkofmenlikeourselves,theeconomistandpolitical philosophersofthepastfewgenerations,whohavecreatedthepoliticalclimateinwhichthe politiciansofourtimemustmove.[…]Itisthebeliefswhichmustspread,ifafreesocietyistobe preserved,orrestored,notwhatispracticableatthemoment,whichmustbeourconcern. 50 The ordoliberalWilhelmRöpkeharboredsimilarfeelingsin1945withhisjournal Occident which wouldappealtothe upper intellectual class andintendednotto exercisedirectinfluenceonthe masses,but[…]acquireprestige,whichwouldmakeitagenerallyrecognizedauthority,that beinglegitimate,cannotbeignored. 51

Understandingthereasonsbehindthesuccessofneoliberalismhasoccupiedalargeshareofthe recentliteratureonthetopic,butlittlehasbeensaidonitspeculiarepistemologicaldimension. From ethos toconduct,neoliberalismhadsucceededwheremanyothershadfailed:ithad

48 Friedrich(ayek, )ntellectualsandSocialism, University of Chicago Law Review (Spring1949).

49 SeeKarinFischer, The)nfluenceofNeoliberalsinChilebefore,during,andafterPinochet, inPhilipMirowskiandDieter Plehwe(eds.), The Road from Mont-Pèlerin,Cambridge,MAandLondon:HarvardUniversityPress,2009.

50 Friedrich(ayek, Free EnterpriseandCompetitiveOrder, in Individualism and the Economic Order,p.108.

51 WilhelmRöpke, Planforan)nternationalPeriodical, Box ,folder ,(ayekPapers;seeAngusBurgin, The Great Persuasion: Reinventing Free Markets since the Depression,Cambridge,MA:HarvardUniversityPress,2012;pp.

becomean everydayneoliberalism, 52 penetratingthesocialconsciousnessofourtimeand embeddingitselfintoinstitutionswhichare embodimentsofhumanmeaningandpurpose GT: 262).Contrarytoclassicalliberals,neoliberalswereconvincedthatbeliefswereparamountto theproductionofreality,andthatnosuchbeliefsweremarketableasatruthintheframeworkof criticalrationalism.Manufacturingneoliberalismrequiredtheoccupationofpeoplesmind: Unlesswecansetadefinitetasktothereformatoryzealofmen,unlesswecanpointoutreforms whichcanbefoughtforbyunselfishmen,withinaprogramforfreedom, their moral fervor is certain to be used against freedom 53 Politiciansandintellectualsmustmaketheneoliberal doctrinetheirownbeforebecomingitscertifiedbroadcasters;theymustfeelitsinternal coherencedrivingtheirreformistlibido.CallinghisfellowMont-Pèlerinmemberstoideological unity,Hayekwishedtoseparatetheproductionofideasfromthepoliticsofthepresent,while homogenizingtheneoliberalepistemiccommunity,andgivingitsteachings apropheticand esoterictonetoinspirejournalists,politicians,and second-hand dealers of ideas. The Liberal Utopia heportendedtorestorewasnothingmorethanarhetoricaltrickdesignedtogive intellectualscravingloftyworldviewsthespiritualalimenttheyneeded.Thisconscious sociology of knowledge,bornoutoftheturmoilofthe1930s,constitutesthecornerstoneofthe doubletruth doctrine ofneoliberalism:anepistemologicaluncertaintyinthecenterwhichoffers circumstantialadaptabilitytowardspublicpolicies;andanexotericrhetoricofrollingbackthe stateandpromotingindividualfreedom.

52 PhilipMirowski, Never Let A Serious Crisis Go to Waste,chapter3.

53 Friedrich(ayek, FreeEnterpriseandCompetitiveOrder, p. .

Conclusion

ThemaingoalofKarlPolanyis Great Transformation wastoinfluencethedebatesoverthe natureofthepost-warsettlement.Earlyneoliberalswerealsoengagedinthesamestrugglefor conqueringthethinkingmindswhowouldbeinchargeofimplementingthepost-totalitarian politicalreforms.Europeanexileshad,indeed,apreponderantroleinshapingtheideaswhich wouldinformthesocialsciencesonbothsidesoftheAtlantic.Hayek,Popper,andbothPolanyi brotherspublishedtheirmostfamouspoliticalworkasananswertothechallengeofrebuilding freedomafterthewar.

(owever,thereisacleardistinctionbetweenKarlPolanyisconceptionofeconomicliberalismas atheodicybasedonnaturallaws,anditsneoliberalconversiontoanideologyofcompetitive marketsasepistemologicallysuperior.Itisworthrecallingthat,contrarytoacreed,liberalismis notastaticdoctrine.54 AnanalysisofPolanyisintellectualdevelopmentandsourcesdemonstrate hisover-relianceonMisestocharacterizetheliberalcritiqueofthe1930s.Bothhadcrossed swordsoverthepossibilityofarationaleconomiccalculationinasocialisteconomyinhe20s, andMises,throughhis Privatseminar,wastheleadingViennesedefenderofanintransigent laissez-faire liberalismagainstthesocialexperimentsofRedVienna.ButHayek,andothersafter him,werecarefultodistinguishtheirapproachfromthestrictMisesianframework55:the dispersionofknowledge,itslargelytacitnature,andthepossibilityofaspontaneousorderas justificationforcompetitivemarketswereincompatiblewiththepraxeologicalmethod.Despite continuitiesbetweenMisesandlaterneoliberals,notablyintheroleofbeliefsandideasas

54 MichaelFreeden, Ideologies and Political Theory: A conceptual approach,Oxford:ClarendonPress,1996.

55 SeeBruceCaldwell, (ayeksTransformation, History of Political Economy,vol.20,no.4(1988)

determinantsofsocialaction56,wehavetocautioninterpretersagainstapplyingPolanyis critiqueoftheliberalcreeddirectlytoneoliberalism.

Wehaveshownthatbeliefsandperceptions,morethantheactualeconomicsituation,determine thelastresortintheproductionofsocialreality.Butwhatdidwelearnfromtheconfrontationof KarlPolanyiwithearlyneoliberalism?Mostly,thattheshapeofideasmattermorethantheclass carryingit,oritsparticularsuitabilitytoagivensituation.BlockandSomersacknowledgedthe epistemicprivilege tocharacterizeatheorywhichcomeswithitsown internalclaimsto veracity. Nonetheless,these epistemologicalbootstraps 57 pointonlyatthesurfaceofthe peculiarideationalstructureofneoliberalism.Ifweassumethatneoliberalismwasfirstand foremostanepistemologicalrecodingofliberalism,thisepistemologicaldimensionisnotsolely anasset,buttheverycorefromwhichitsideologytakesshape.Thecriticofthepredictivepower ofsocialsciences,ofitsestablishedexpertise,andthedefenseofthemarketasanequivocal institutiongaveapeculiarshapetotheneoliberalideology.Itsovertsociologyofknowledgeand useofdoubletruthsensuredthattherewasalwaysacriticalstandpointopenedfortheneoliberal discoursetoproduceitseffects.

Finally,neoliberalideashaveembeddedthemselvesineverydaylifeduetotheircorrect assessmentthatitwasbeliefsandassumptionsaboutourselvesandoursocialrealitywhich were,intheend,decisivetoexplainourbehavior.Thatobservationwasafundamentalaxiomfor theneoliberalscientificviews:thatiswhyinformation,knowledgeandforesightwereatthe frontoftheirtheoreticalwork.Theorieshavebeenmoreresilientandadaptivetofalsifiedthan Popperwouldhaveliked,andthiswasmanifestedinanextraordinary stability of beliefs58: )nthe fieldoftacitassumptions,utopianideasaboutsocialideals,andworldviews,thereisnoprocess

56 SeeClausThomasberger, TheBeliefinEconomicDeterminism.

57 BlockandSomers, The Power of Market Fundamentalism,pp.155-156.

58 AfamousarticlebyMichaelPolanyi, TheStabilityofBeliefs, British Journal for the Philosophy of Science vol.3,no.11(1952).

MartinBeddeleem–CONFERENCEPAPER– )sLiberalismaStaticCreed?The Great Transformation facedwiththeneoliberalproject

offalsification,noweedingoutofwrongideas,andnoautomaticconvergenceinthedirectionof truth.Itiserroneoustothinkthateconomicdisasters,breakdowns,orcrisescanhelpto overcometheliberalutopia.Reality as such canneitherprovenorrefuteabelief.The interpretation and explanation oftheoccurrences,byscientificmodelsandtheories,are decisive. 59 Alltherecentliteratureontheextraordinarysurvivalofneoliberalismhasproven rightthiselegantPhilipK.Dickaxiom:that thetheorychangestherealityitdescribes… so decisivelythatithasbecomehardtodistinguishneoliberalismfromcompetingideologies.

59 ClausThomasberger, TheBeliefinEconomicDeterminism, p. .