The Liberalism Nobody Knows

Liberal democracy (or liberal-democracy) appears as one of those natural pairings of the English language – a linguistic partnership that enhances, rather than does violence to, its constituents. It has become a modern truism that liberalism and democracy are inseparable bedfellows, soul mates even. Where liberalism is vanquished, democracy, at best, becomes a plebiscitary tool to vindicate the wishes of absolute rulers. Conversely, where liberalism is allowed to flourish, democracy – defined as free elections, an independent media and free speech – inevitably follows.

But this comfortable view, which permits its proponents to always feel they are siding with the angels, is a delusion. As Domenico Losurdo shows in Liberalism: A Counter-History, liberalism had quite separate roots from democracy and was fully prepared to countenance the seemingly illiberal tools of coups and dictatorship if it felt threatened from below. The much vaunted, and supposedly natural, coupling of liberalism and democracy was a slow, painful and fitful process, invariably achieved against the will of liberals and to which they have never been reconciled.

The rarely told history of liberalism

Losurdo traces the history of liberalism back to the Glorious Revolution in Britain in 1688. The subsequent Bill of Rights limited the power of the monarch and allowed a Parliamentary (though emphatically not democratic) system to emerge. From that point, liberalism was defined as opposition to concentration of power, in the form of the monarch and sometimes the Catholic Church. The other side of the coin was the liberty of people to be unrestrained by state power. But this liberty was never meant to be the birthright of everyone. Far from it, only “the community of the free”, in Lusurdo’s phrase, a small minority of male property-owners, were so blessed. The role of everyone else – the vast majority of people – was merely to be their servants.

Thus it was no accident that the liberal era was coeval with the slave trade, “the largest involuntary movement of human in all history”, and the establishment of a brutal system of racial chattel slavery in the United States – a British settler colony that achieved independence. In the metropolitan countries, the vast majority of non-property owners were not slaves but they were enchained as serfs or wage labourers. Freedom, to early liberalism, was the freedom of property owners to enjoy their property as they wished. In England, from 1688 (the Glorious Revolution) to 1820, the number of crimes carrying the death penalty increased from 50 to between 200 and 250 and these were almost always for crimes against property. In England at the start of 19^th century you could be hung for taking an unauthorized clipping from an ornamental bush.

The newly independent United States of America was a bastion of liberalism. But as British loyalists pointed out, this love of liberty went hand in hand with the consecration of the ‘worst species of slavery’. The Britain derived from the Glorious Revolution, the rebel colonists shot back, presided over the horror of the slave trade and treated its white servants little better than slaves.

Both accusations were true and both exposed the underbelly of liberalism. The veneration of freedom for some people was dependent on the complete opposite – total subjection and domination – for many others. To work this required an intricate ideology of dehumanisation. The French liberal Emmanuel-Joseph Sieyès regarded wage labourers as “bipedal machines”, while the British liberal-conservative Edmund Burke (a man considered to be the father of modern conservatism who incidentally subscribed to the most elaborate Jewish conspiracy theories) looked upon workers as mere instrumentum vocale.

And when these machines began to make demands, the sheen of opposition to ‘despotism’ miraculously fell away. John Locke, the most influential of the early liberals, regarded physical force as entirely justified in the event of a tax not authorised by those affected by it. Alexis de Tocqueville, author of Democracy in America, was intransigently opposed to attempts to legally reduce the 12 hour day, introduce progressive taxation or instigate rent controls and believed “nothing authorizes the state to interfere in industry”. He supported the idea of a temporary dictatorship to modernize France. In Britain, between 1790 and 1820, more than 60 Acts of Parliament were passed aimed at repressing working class activity. Liberals enthusiastically endorsed the discipline of the workhouse.

The story of the vote

This is not to deny the umbilical connection of liberalism to self-government and representative, elected institutions – ‘no taxation without representation’ as the American rebels famously proclaimed – but the section of the population to be represented was necessarily and intentionally tiny. Britain had Parliamentary institutions – powerful bodies that had succeeded in executing a King and, since the Glorious Revolution, formed part of a constitutional monarchy – but prior to the Great Reform Act only 3 per cent of the public were entitled to determine who their members were – about 200,000 out of a population of eight million.

In 1832, the franchise was extended to 13 per cent of adult males, but Chartism, a mass movement calling for universal manhood suffrage and annual elections, was bitterly resisted and above all by avowed liberals. “In England” Karl Polanyi reminds us, “it became the unwritten law of the Constitution that the working class must be denied the vote. The Chartist leaders were jailed; their adherents, numbered in millions, were derided by a legislature representing a bare fraction of the population, and the mere demand for the ballot was often treated as a criminal act by the authorities …. Inside and outside England, from Macaulay to Mises, from Spencer to Sumner, there was not a militant liberal who did not express his conviction that popular democracy was a danger to capitalism.”

Britain did not approach becoming such a democracy until after the First World War. On the eve of that conflagration, only 30 per cent of the adult population (no women and 60 per cent of men) could vote. Britain was thus less democratic than its illiberal adversary, Germany, which had manhood suffrage.

The community of the free in the US was more expansive – voting for all white men was in place by 1856 – but that was because of the existence of millions of black slaves and endless expanses of supposedly “unpossessed” land. Even so, the idea that wage labourers were, in reality, wage slaves – because of their material dependence on employers, their state was comparable to that of chattel slaves – was enormously strong in the 19^th century.

And one of the strongest of the liberal “exclusion clauses” related to women. The vote wasn’t granted to women in the US until 1920. In Britain female votes were only achieved following a campaign of militant civil disobedience and hungry strikes and the massive turmoil of World War One. Women gained the vote partially in 1918 and, unconditionally, in 1928.

Far from being synonymous with democracy, liberalism, as Losurdo points out, regarded it with “coldness, hostility and sometimes frank contempt” – an attitude maintained for more than two centuries. Democracy and equal rights didn’t flow naturally from liberalism; they had to be prised from it:

… it must be borne in mind that the exclusion clauses were not overcome painlessly, but through violent upheavals of sometimes quite unprecedented violence. The abolition of slavery in the wake of the Civil War cost the United States more victims than both world wars combined. As for censitary discrimination [restrictions on the electoral franchise], a decisive contribution was made to its abolition by the French revolutionary cycle. Finally, in major countries like Russia, Germany and the United States the accession of women to political rights had behind it the war and revolutionary upheavals of the early twentieth century (Liberalism: A Counter-History, p 341).

The new liberalism

But, it will be objected, all this refers not so much to the history of liberalism, as its pre-history. With the emergence of the ‘new liberalism’ in the late 19^th century, the creed of liberalism changed beyond recognition. It became reconciled to – even championed – democracy, economic regulation and racial and gender equality. John Maynard Keynes, for example, an economist synonymous with scepticism towards laissez-faire capitalism, was a lifelong member of the British Liberal party. Franklin Delano Roosevelt, probably the most famous of 20^th century American liberals (he never called himself a socialist), placed freedom of speech and freedom of worship on a par with freedom from want for “everyone in the world”.

The face of modern liberalism can be seen in the public letter of 30 writers, historians and Nobel laureates published in January who warn that European “liberal democracy” is confronted with “a threat not seen since the 1930s”. The liberal values espoused here are those of internationalism, anti-populism and toleration. Democracy is ostensibly defended, not derided.

But the older liberalism has not died. It is, in fact, arguably more influential than its modernised twin. Neoliberalism (‘new liberalism’) has been guiding force of the economy since the 1980s. Neoliberalism holds that market forces should determine economic decisions, taxes on wealth and corporations should be as low as possible and government budgets should be balanced (a feat always to be achieved by cutting public spending rather than raising taxes on the wealthy). Neoliberalism harks back very directly to economic liberalism, the doctrine of laissez-faire that asserted that contracts negotiated between ‘free’ individuals should not be interfered with by the state.

Except that economic liberalism is a misnomer. The original 20^th century economic liberals, such as Friedrich Hayek and Ludwig Von Mises, did not regard themselves as economic liberals but consistent liberals. To them, the other liberals had abandoned the tenets of liberalism and embraced ‘socialism’. It was always a cause of some regret to Hayek that his ideas were taken up by the British Conservative party – he was a major influence on Margaret Thatcher – rather than the Liberals.

Taking the risk out of democracy

And Hayek and Von Mises retained the older liberalism’s coldness towards democracy. Hayek, for example, was full of praise for Chilean dictator Augustus Pinochet and believed that “liberal dictatorship” was infinitely preferable to “democratic government devoid of liberalism”. Von Mises, a generation older, regarded trade unionism as a form of terrorism and thought the merit of Italian Fascism – won through saving European civilisation from the workers’ movement – would “live on eternally in history” (and this in a book entitled Liberalism).

The temptation is to say that we are dealing with two distinct political currents that, by dint of historical coincidence, go by the same name. But that would be too hasty a judgement. Hayek, for instance, was very sympathetic to the idea of European federalism. To him it offered protection against the virus of democracy. “The absence of tariff walls and the free movements of men and capital between the states of the federation has certain important consequences which are frequently overlooked,” he wrote in a 1939 essay. “They limit to a great extent the scope of the economic policy of the individual states.”

Hayek’s praise for the virtues of “one single market” thus prefigures the creation of the EU’s single market which does indeed limit the economic policy of individual European states and enshrines the free movement of capital and people. And the single market – resolutely supported by Margaret Thatcher it should be recalled – is the core institution of a European Union whose “liberal values”, intellectuals warn, are under attack from nativists and xenophobes.  

But the clearest bridge between the two liberalisms can be seen in the outlook of the corporate elite at the Davos World Economic Forum. Their concern about the threats to what they term the “liberal order” has now risen to a crescendo. This order comprises the free movement of capital and commodities (globalisation) coupled with a cosmopolitan attitude and support for gender and racial diversity.

However their stance towards the arch destroyer of that liberal order – Donald Trump – is revealing. They are repelled by his protectionism, hostility to immigrants, sexism and xenophobia but irresistibly attracted to his indulgence of the immensely wealthy. When, in 2017, Trump massively cut taxes for the rich (reducing the corporate tax rate from 35 to 21 per cent and instituting tax breaks for millionaires), Davos went weak at the knees at this long overdue “tax reform”.

Contrast this with the unrelenting hostility directed towards left-wingers such as Jeremy Corbyn, Alexandria Ocasio-Cortez or Bernie Sanders who are in fact resiliently liberal in their opposition to attacks on immigrants, refugees or LGBT people but also in favour raising taxes, moderately, on the wealthy (and, in Corbyn’s case, renationalising public services). Should Corbyn become UK Prime Minister – which now seems likely – expect that hostility to ramp up into brazen attempts to bring down his government, by any means possible. And liberals will be at the forefront of that effort. The tragedy is, they will always return to their roots.

The Carbon Lie, part two

The crucial role of international trade in global warming

I’m going to do some speculating. The reason the rate of embodied, trade-based carbon emissions discussed in part one is so significant is that overall CO₂ emissions are intimately connected – not to the degree of economic growth per se – but to the amount of international trade.

Foreign direct investment – and thus global trade – mushroomed from the 1990s onwards as globalisation took root. Manufacturing companies upped and left the deindustrializing West and relocated to countries like China*.The products they made had to be transported back to consumers in rich countries via container ships and aeroplanes and therefore emissions shot up. Between 2000 and 2008 the emissions’ growth rate reached 3.4%.

Everything came to a juddering halt in 2008 with the global financial crisis. But the respite was short-lived – in 2010 emissions’ growth returned with a vengeance, hitting 5.9%.

Then something strange happened. Global economic growth continued, albeit at a historically subdued level, but carbon emissions did not follow suit. They were, in fact, flat for three straight years (2014-2016). For the first time ever emissions were not rising in tandem with GDP growth. This prompted notions that the world had reached peak emissions and that CO₂ pollution was finally “decoupling from economic activity”.

However, such hopes were dashed almost as soon as they were raised. In 2017, carbon emissions started growing again, reaching a historic high.

These developments become a lot less puzzling when global trade, as opposed bare economic growth levels, is brought into the picture. According to the United Nations Conference on Trade and Development (UNCTAD) Status of World Trade 2017 report, world trade grew at less than 2 per cent a year from 2011-14, declined by 10 per cent in 2015 – during which time the profitability of global shipping companies sank like a stone – and dropped by a further 3 per cent in 2016. However, reports UNCTAD, the “dismal performance” of world trade over the previous eight years came to an end during 2017.  

After an unpromising beginning at the start of the year, “Trade growth”, notes the report, “picked up substantially in the second and third quarters of 2017”. In the fourth quarter, trade was expected to achieve growth rates 10% higher than those of 2016. Trade was anticipated to outperform GDP growth in 2017 (4 percent points compared with 3.6), something it had done consistently since the middle of the 19^th century, except for the period 2011-2016, when coincidentally carbon emissions remained flat or fell. Importantly, noted UNCTAD, trade growth was widespread across both developed and emerging economies.

Hence, the years in which global CO₂ emissions did not rise were concurrent with declining world trade, and the return to rising emissions synchronous with the revival of world trade. I don’t think that’s a coincidence.

It is true that global economic growth has increased as well, but to nothing like the same degree. According to the International Monetary Fund it was 3.1% in 2015, 3.2% in 2016, 3.6% in 2017 and projected to reach 3.7% in 2018: an incremental rise but nothing spectacular. If trade growth – as anticipated – has continued into 2018, it is a sure fire bet that carbon emissions will have increased as well.

Why does international trade cause emissions? Through a combination of the pollution caused in the manufacture of goods or extraction of raw materials and in transporting them often thousands of miles to end user markets.

The Establishment in denial

But this connection between global trade and global warming is anathema to both liberal and conservative commentators. Donald Trump, for example, is roundly lambasted for stoking a trade war with China by introducing tariffs on commodities like steel. Such restraints on trade and protectionism are seen as dangerous and potentially leading, as they have done in the past, to actual physical conflict. These worries are warranted – protectionism and tariff imposition preceded the massive conflagrations of the First and Second World Wars, although it should also be pointed out that most countries, including the US in the 19^th century, industrialised precisely because they protected their domestic enterprises.

However, we also know that the way the world economy is currently configured – a configuration in which unfettered trade between nations is considered sacrosanct – will cause drought, mass poverty, the inundation of coastal areas, a refugee crisis to dwarf anything we have so far experienced and, very likely, physical conflict in just over 20 years.

The fixation on international trade as beneficial and leading to peace, not war, among nations is immensely hard to dislodge. It is, as this article points out, the most venerable of the “numerous ideological shibboleths” of the liberal-capitalist order, which can be traced back to the notion of the 19^th century economist David Ricardo that free trade allows countries to exploit their ‘comparative advantage’. Unimpeded trade between nations, said Ricardo, would maximise benefit to consumers and allow for the most efficient use of domestic natural resources.

In time, the notion that countries that trade with each other were unlikely to go to war was added to the carapace justifying unfettered trade. Not only does international trade benefit the consumer but is also forges links of mutual self-interest between nations. Hence, UNCTAD’s synonym for world trade – “economic interdependence”.

In our era, the significance of trade has grown beyond its relevance to the consumer. A lot of trade is now intra-industry. International supply chains allow corporations to shift production or assembling to where it is cheapest (a process known as ‘global labour arbitrage’), while more intricate, technical processes take place in developed countries. The most famous examples are Apple’s iPhone, iPads and iPods. Their components are manufactured in multiple countries – including the US, China, South Korea, Japan, Germany, Switzerland and the Netherlands – but assembled in just one, China. The threads of international trade involved in constructing Apple’s products, and then transporting them to the consumer, are immense.

The transformation that isn’t

But still – in spite of the acknowledged gravity of the situation – proposed solutions to climate change eschew structural change in favour of financial incentives and technological transformation, demonstrating, if nothing else, the stubbornness of the liberal-capitalist faith in international trade.

The IPCC paints a picture of the calamities that will ensue if CO₂ emissions are not drastically reduced by 2040 but places its hopes in widespread carbon pricing – charging producers for the amount of CO₂ they emit. This is despite the fact that carbon pricing has been introduced by many countries but global emissions have continued to rise.

We need an economic transformation, says the IPCC, for which there is “no documented historical precedent”. But in terms of how to achieve this radical change the well documented precedent of neoliberalism reigns supreme.

The International Maritime Organisation has agreed a non-binding commitment to reduce shipping emissions by 50% by 2050. But the way to achieve this is purely technological. Projections that global trade is to increase dramatically over the coming decades are accepted without question. Rather it is proposed that the currently 50,000-strong global shipping fleet rapidly adopt zero-carbon technology, such as batteries, renewable fuels derived from hydrogen and bioenergy.

Such a transformation is regarded as quite possible with “the correct level of investment”.  Studiously ignored is the fact that investment – the financing of new equipment or machinery – has steadily fallen in advanced capitalist countries, including in export giants like Germany, over the past four decades (see Chart 5.2, p 143). Contemporary, financialised capitalism specialises in extracting profit but not in long-term technological transformation.

Introducing tariffs and stoking trade wars is not the way to achieve the necessary slashing of carbon emissions. Even if it did succeed in reducing emissions – which is far from certain – the consequences are perilous. Notwithstanding the rampant racism involved, rising international tensions might well lead to war.

The rational reduction of global trade

Nonetheless, if climate change is to be mitigated significantly, which must be the aim of any rational political movement, the shibboleth of uninhibited world trade must be tackled. As Naomi Klein says in This Changes Everything, long-haul, energy intensive transport has to be rationed – “reserved for those cases where goods cannot be produced locally or where local production is more carbon-intensive”.

So it falls on the Left to steer a delicate course – reducing world trade in such a way that does not provoke xenophobia and international conflict, economic or physical. This, to be frank, is not an easy task. Jeremy Corbyn’s ‘Build it in Britain’ campaign and assertion that a future Labour government would try to ensure that “we build things here that for too long have been built abroad” was a step in the right direction. But, inevitably, insourcing – the reversal of outsourcing to the other side of the world – is going to have to happen on a large scale.

But there are clear non-capitalist consequences that should be embraced. The ultimate source of profit can be endlessly debated but, in essence, profit is a mark-up over costs. Hence, enormous profits are made from the trading of oil and gas (oil has to be extracted, transported and refined; all occasions for the insertion of profit). However, renewable energy embodies a completely different logic. It does not have to be transported and is freely available. Beyond the high costs of infrastructure development, the price of transmitting the resultant energy to consumers and enterprises, is minimal. There is no reason at all why the production and transmission of renewable energy should be privately owned or a source of profit.

Likewise, the technological future of production, for example 3D Printing, is not for goods to be transported thousands of miles to end markets but to be produced locally. If global trade is to be radically curtailed in the coming years – as it has to be – such a development will likely go with the grain of economic development, not be in conflict with it.

*This process, by the way, wasn’t exclusive to Anglo-European countries. South Korea, a major industrialised country by the 1980s, also shifted production to China and, as a result, trade between the two increased by 1431% between 1995 and 2015.

The Great Repetition? Karl Polanyi and today

“Some books refuse to go away” it says in the introduction to the 2001 edition of The Great Transformation by the Hungarian economist Karl Polanyi.

Painstaking research sponsored by Google reveals that those words were written by a historian called Charles P Kindleberger, who with a name like that has to be American, in 1974.

If in 1974, The Great Transformation was obstinately sticking around, by now it is snaking out of book shelves across the world, screaming “Read me!”

Written as the Second World War was raging, The Great Transformation:  the Political and Economic Origins of Our Time, to give its full title, is a book that becomes more prescient the older it gets.

The book is about another age that is frighteningly reminiscent of our own. Its subject is the creation, in the nineteenth century, of what we would call now free market capitalism, molded and justified by the ideology of economic liberalism. It shows how that free market, liberal civilisation reigned supreme for a while but then imploded in the 1930s, as Fascism took over.

In keeping with the best Hollywood tradition, the plot of the sequel is uncannily similar to the original.

Then there was economic liberalism, now there is neoliberalism. Then, Fascism and Stalinism were in the ascendancy, now there is a fear that totalitarianism will return as neoliberalism flails ineffectually, unable to deal with the consequences of the society it has created.

Polanyi says the only humane alternative to the utopian fantasies of economic liberalism and the nightmares of totalitarianism, is socialism. He defines socialism as the conscious subordination of the free market to the demands of democratic society.

As such, The Great Transformation has provided inspiration to those who want to re-regulate capitalism. Maurice Glasman, the English political thinker behind Blue Labour is a “Polanyian”. The preface to the latest edition is by Joseph Stiglitz, the American Keynesian economist, who believes that government intervention will make capitalism stable and just.

But The Great Transformation can be interpreted in more than one way. It has also influenced more radical thinkers like the libertarian socialists Murray Bookchin and Noam Chomsky, who see in the book an appreciation that for almost all of human history, capitalism was rejected as a way to run society. And why should the future not draw on the wisdom of the past?

What The Great Transformation does is to destroy the notion that capitalism is a natural way to be, that a market economy automatically emerges when the restraints are taken away and people’s innate competitiveness is allowed to surface unimpeded. On the contrary, free markets are conscious creations, dependent on the destruction of older, more stable forms of society. Human nature, according to the evidence that exists, is not naturally competitive about the means of life.

Capitalism is an artificial economic system, in exactly the same way Communism was. And what has been created, can be uncreated.

Polanyi looks in detail at the first society that experienced this “great transformation” – England during the Industrial Revolution. He was able to study this history first hand because he fled to England from Vienna in the 1930s.

A market economy was pitilessly created by systematically annihilating the old society. Peasants were forced off the land and into the ‘dark, satanic mills” by government enforced enclosure of the open common lands on which their livelihood depended. Craft guilds, which set wages and established the quality of products, were abolished. A labour market was created by repealing laws which restricted workers’ mobility, obliged employers to provide seven-year apprenticeships, and enforced annual wage assessments by public officials.

In this blog, it has been asserted that the market economy is a myth, that the economy is not the scene of an entrepreneurial, Dragons’ Den-style, battle of the fittest among individuals, but a place where large corporations, controlled by tiny elites, seamlessly work for their own advantage.

But in the eighteenth and early nineteenth centuries, the market economy was not a myth. There was a transformation from an ordered, hierarchical and static society to an immensely fluid society in which new inventions could change the fortunes of people and the society around them. Industrialists often came from ordinary backgrounds, although they were soon swallowed painlessly into the British aristocracy. Corporations did not come into being until the 1850s.

This market economy did two things that are often not contemplated together. One was to create the dependency of millions of people on the fortunes of an economic system. In pre-capitalist societies, people were not threatened by society with starvation unless they made enough money. They were economically secure, although not rich. This changed with the creation of a market economy. People’s livelihoods and, often lives, were dependent on the kind of employment they could find. In Marxist terms, masses of people were turned into proletarians, surviving by selling their labour. The Left in the nineteenth century called it “wage slavery”.

The second was to create “unheard of material welfare.” For the first time in history, production based on machines became dominant and people were compelled to work for it, on threat of starvation. This raised the possibility, if not the actuality, of material abundance for everyone. “At the heart of the Industrial Revolution of the eighteenth century there was an almost miraculous improvement in the tools of production,” says Polanyi “which was accompanied by a catastrophic dislocation of the lives of the common people.”

This feature of capitalist societies, economic insecurity in the midst of material plenty, is an essential fact of life today. Most people are in an economically precarious situation – they are one or two payslips away from insolvency - but the economy produces an immense superfluity of goods.

The Great Transformation shows how the Industrial Revolution in England, which became the model for the rest of the world, was justified and shaped by the ideology of economic liberalism. Shaped because the idea of a laissez-faire economy, in which everything was a commodity and there was no outside intervention, became the unimpeachable principle of the age. England’s cotton industry, for example, initially got off the ground with the help of protective tariffs on imports, but later in the nineteenth century, free trade was supreme.

Economic liberalism sought validation in the past. It, finally, was liberating an elemental feature of human nature, which had been artificially held down by “civilisation” for thousands of years, the desire for individual gain. Adam Smith, who inspired free market philosophers, based his thought on man’s “propensity to barter, truck and exchange one thing for another”.

But this idea, though immensely powerful as a spur to action, was a gigantic error. “No society could, naturally live for any length of time unless it possessed an economy of some sort,” says Polanyi, “but previously to our time no economy has ever existed that, even in principle, was controlled by markets.”

Primitive societies lived through reciprocity. There was division of labour – different people performed specialised tasks – but not markets. A person coming back from a hunting or foraging expedition shared their spoils. Later, they would take as others gave. There was no motive of gain, or labouring for remuneration.

Later societies, even those horribly oppressive like the despotism of Egypt under the Pharoahs, were based on distribution in kind, rationing, not markets.

In Europe after the 15^th centuries, markets in towns were created, but they were deliberately prevented from trading with the surrounding countryside.

Past societies were not more altruistic or selfless, but non-economic purposes were paramount.

The historical falsity of economic liberalism means that its fabled concept of laissez-faire is also false. Laissez-faire has come to mean that if society is left alone by government, a market in which everyone competes and some people inevitably emerge victorious, will naturally come into being. Government regulation stops this natural competition happening. Much as laws against assault stop physical aggressiveness happening.

(Although notice the inverted logic, government stops market competition happening so it should get out of the way. Laws stop assaults happening, without them there would be mayhem, so they are necessary)

There is nothing natural about laissez-faire. What Polanyi shows is that laissez-faire can only happen once other ways of reproducing life, are destroyed. And then a laissez-faire, free market economy can come into being, rigorously policed by the state, so that it is not improperly interfered with. Economic liberals in Britain in the 1830s/1840s were fanatically opposed to extending the vote to the working class. And trade unions were illegal because they interfered with labour, now seen as another commodity, finding its price on the market. Neoliberals hate trade unions for exactly the same reason.

“For as long as that system [the market system] is not established, economic liberals must and will unhesitatingly call for the intervention of the state in order to establish it,” says Polanyi, “and once established, in order to maintain it.”

As the former New Labour health advisor, Paul Corrighan, put it in 2010, “The state has to actively create a market, they don’t appear of their own account.”

The experience of India under the British Empire illustrates what Polanyi is trying to get across. Millions of people died in famines in late 19^th and early 20^th centuries. The natural reasons for crop failures had not changed but the effect was far more devastating.

The explanation is that whereas in the old feudal arrangements of the past, there were stores of grain in case of famine, in the new market system, they were destroyed. Millions of people had to buy what they could on the market, where prices rocketed because of shortage.

“The three or four large famines that decimated India under British rule since the Rebellion were thus neither a consequence of the elements, nor of exploitation, but simply of the new market organisations of labour and land which broke up the old village without actually resolving its problems,” writes Polanyi. “While under the regime of feudalism and of the village community, noblesse oblige, clan solidarity, and regulation of the corn market checked famines, under the rules of the market the people could not be prevented from starving according to the rules of the game.”

So the great transformation was justified by piling fiction upon fiction. Humans weren’t naturally economically competitive, laissez-faire wasn’t just leaving things alone so that liberty could flourish, the power of the state didn’t diminish under the free market.

But balancing above all this was a still more fundamental fiction. Under a free market system, everything has to be a commodity and find its price on the market. Humans and nature were treated as commodities like everything else. But they aren’t commodities. They are, in Polanyi’s description, fictitious commodities.

A commodity is something – like a mobile phone – produced for sale. But human beings and the natural world are not produced for sale. They are not “produced” at all. But in the world of economic liberalism, they were assumed to be commodities, just in the same way that cotton was. Owners of land could do what they want with it. People had to get the means to live by selling their labour. If they can’t find a job or the economy goes into downturn, they can’t sell their labour commodity, and person irrevocably attached to that commodity, starves or is reduced to poverty.

Polanyi’s point, and one reason why he is extremely relevant today, is that people naturally rebel against being treated as commodities. “To expect that a community would remain indifferent to the scourge of unemployment, the shifting of industries and occupations and to the moral and psychological torture accompanying them, merely because the economic effects, in the long run, might be negligible, was to assume an absurdity,” he writes.

But as The Great Transformation shows, that rebellion can take different forms. It can be a civilised transition to what he calls socialism. But it can also entail scapegoating minorities, armed conflict and totalitarianism. In the 1930s, that rebellion meant the American New Deal but also Nazism and the Second World War.

Treating people as commodities, that periodically are not needed, has effects. What economic liberals said in the Great Depression was that if trade unions and the government stopped interfering, wages would naturally drop, in the long run, to allow profit to be made and the economy would eventually return to health. Theoretically, they have been right. But, in the long run, as John Maynard Keynes, said we’re all dead. What was said about Marxism by the Darwinist psychologist Edward Wilson, is now most descriptive of free market capitalism: “wonderful theory, wrong species”.

In part two, we will look at how economic liberalism gave way to totalitarianism in the 1930s. And what not treating human beings as commodities, really means.