The current Harper's reprints an article by John Gray that first appeared in September in the Guardian's Observer. Gray describes the current economic crisis and what he predicts will be the waning of American power. Reading it, I experienced a sense of deja-vu; it was like reading page one of a book by Karl Polanyi, first printed in 1944.
I am starting to wonder if the economy has been in continual crisis for something like a century now. It's enough to make you want to put the phrase "current economic crisis" in scare-quotes. The difference between 1944 and now, between Bretton Woods and now, is that this time, time is up. Planet Earth will wait no longer. So somebody better get something right.
Here is Gray, writing in Guardian's the Observer:
Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over.
-- snip --
The irony of the post–Cold War period is that the fall of Communism was followed by the rise of another utopian ideology, which created the laissez-faire financial system that has now disintegrated. In America, a type of market fundamentalism became the guiding philosophy. It came to be believed that the free market, once it was released from the shackles of government, would regulate itself; an era of uninterrupted economic growth would follow. Instead, financial laissez-faire led to an economy built on unsustainable debt, much of it serviced by other countries. The collapse of American power is the predictable result.
Not just predicatable but downright repetitious. Gray's idea is that the fall of Communism led to a "peculiar and highly unstable variety [of capitalism] that has existed in America over the last 20 years." However, it is not as though we haven't seen this before.
In 1944, working at Bennington College, Karl Polanyi published a study of the fall of free-market society (remember he was writing amidst the ruins of WWI, the Great Depression, and WWII) titled The Great Transformation. This is page one:
Nineteenth century civilization has collapsed. This book is concerned with the political and economic origins of this event, as well as with the great transformation which it ushered in.
Nineteenth century civilization rested on four institutions. The first was the balance-of-power system which for a century prevented an occurance of any long and devastating war between the Great Powers. The second was the international gold standard which symbolized a unique organization of world economy. The third was the self-regulating market which produced unheard-of material welfare. The fourth was the liberal state. Classified in one way, two of these institutions were were economic, two political. Classified in another way, two of them were national, two international. Between them they determined the characteristic of the history of our civilization.
Of these institutions the gold standard proved crucial; its fall was the proximate cause of the catastrophe. By the time it failed most of the other institutions had been sacrificed in a vain attempt to save it.
But the fount and matrix of the system was the self-regulating market. It was this innovation which gave rise to a specific civilization. The gold standard was merely an attempt to extend the domestic market system to the international field; the balance-of-power system was a superstructure erected upon and, partly, worked through the gold standard; the liberal state was itself a creation of the self-regulating market. The key to the institutional system of the nineteenth century lay in the laws governing market economy.
Our thesis is that the idea of the self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.
Gray, writing in 2008, is describing a process parallel to what Polanyi described in 1944. In fact, not just parallel, the same process. Could it be that the "current economic crisis" is simply the final failure of a system that by all rights should have died 60 years ago?
It is no secret that Bretton Woods, which occured the same year as Polanyi published his book, was a holding action, a last-ditch attempt to save the international system from itself. As Wiki sez:
The United Nations Monetary and Financial Conference, commonly known as Bretton Woods conference, was a gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire to regulate the international monetary and financial order after the conclusion of World War II.
Now, read the first page of Polanyi's book again; but replace "gold standard" with "international finanicial institutions." Passages like this result: "Of these institutions the international financial system proved crucial; its fall was the proximate cause of the catastrophe. By the time it failed most of the other institutions had been sacrificed in a vain attempt to save it."
One begins to feel troubled.
It may be that market economies cannot help but revert to the catastrophic conditions described by Polanyi in 1944 and by John Gray and many others in 2008. To this, many with me on fairly far political left (for America) will say, "no shit." However, it is worth pointing out the parellels, I think.
What we are faced with in the first place, I think, is a question. Are the resources for a different sort of economy to be found in other countries? Gray writes, "Now, with federal finances critically dependent on continuing large inflows of foreign capital, it will be the countries that spurned the American model of capitalism that will shape America's economic future." His point is that it is just those countries that most refused American neo-liberal economic advice that seem to be in the least trouble at the moment. Again, perhaps, "No shit."
But it may also be that any half-assed market economy, once the country it is a part of gains enough power, will blossom willy-nilly into the "utopian" (or dystopian) form described by Polanyi. "Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness."
Here, of course, I am stating things that any quasi-Marxist (or any leftist skeptic) would call the merest truisms. But the point at the moment is to ask a question: Do any of the countries who attended the recent G20 have a solution in their back yards?
(24 dignified world leaders and one hand-waving dork at the G20 meeting)
Since reading Cassiodorus's skeptical appraisal last night I am not sure. I think it is likely that just as Polanyi wrote in 1944 about the previous gold standard, current leaders will simply throw everything else overboard in an attempt to save what is regarded as central; the financial system itself -- even the market itself can be compromised in the short term, in order to save it:
"I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown," Bush said.
We've seen all this before. If we're not careful, we'll see it again. Or rather, we won't. The world, meaning both the people of less developed nations and the planet itself, are not going to wait for another go-round.
And that, I take it, is the real problem. Whether Bush or Obama or anyone at the G20 really get it or not, this is their last run round the Maypole. There will not be time for another cycle of Bretton Woods style stop-gaps. The people of the developing world could never afford them; now, neither can we.