From 1860 to 1914, Europe horribly morphed from a period of expanding liberalism and increased internationalism to one of fascism, communism, and World Wars. In his great opus, The Great Transformation, Karl Polanyi set out to explain how the world could have been so altered during his lifetime. He was a man born at the height of the Gilded Age, in 1886. His family, wealthy, liberal, and Jewish, were from Budapest. After serving in World War I, Polanyi went to cosmopolitan Vienna where he became a prominent socialist journalist. However, when Austria united with Germany under Hitler, Polanyi emigrated to London. After the war, he was awarded a teaching position at Columbia University and taught there from 1946 to 1953; but his wife who had formerly been a member of the Communist Party in Europe was denied an American visa. Polanyi therefore spent his final years in Canada, where he died in 1964.
Polanyi’s work provides the world with a powerful critique of market liberalism and a diagnosis of the harmful impact that laissez-faire logic can have on society. It, moreover, provides a strong model for explaining the contagious nativist and populist movements we see today, which have developed in response to globalization. The problem is that his work uses evocative metaphors that make the actual application of his theory difficult. To explore how the “double movement” can be used to analyze twenty-first- century politics, this chapter begins by tracing the contours of Polanyi’s theory in more detail and then explains what the difficulties are with applying it to the present.
Polanyi contends that the seeds of the catastrophes that befell the twentieth century were planted in the mid-1800s. The seedling—the new force that emerged in the nineteenth century—was what was commonly referred as haute finance (high finance), basically international finance or finance capitalism. What distinguished haute finance from other forms of capitalism is that, for first time in history, financial firms became the lynchpin of the international system.1 With their enormous powers, the great international banking consortiums of the day reigned over countries around the world, controlling their economies and even their politics. Polanyi describes how under the regime of haute finance neither finance nor diplomacy “would consider any long-range plan, whether peaceful or warlike, without making sure of the other’s goodwill.”2 In short, international finance steered politics, and politics protected international finance. The power and reach of this new form of capitalism was personified by the Rothschild family. As the bankers to Europe’s monarchs, the Rothschilds had become “the only supranational link between political government and industrial effort in a swiftly growing world economy.”3
Yet, the dramatic changes brought about by haute finance went even deeper than the fusing of international politics and finance capitalism. The rise of haute finance signifies for Polanyi the moment when social life became almost entirely consumed by market forces. Polanyi makes the case that for most of human history, trade was a minor and adjacent part of the economy. There were port cities that specialized in the trade of luxury goods; there were also local markets, to which peasants might travel for days to trade in eggs, pigs, or vegetables; there were even artisans who sold wares. But the vast majority of the world’s population lived off the land and infrequently engaged in market exchanges. Not organized around trade, the economy was a function of the social order; it was there to ensure production and distribution to help maintain that social order. Whether the reciprocal trading practices of Trobriand Islanders of Western Melanesia, or the great redistributive systems of the Incas, or the elaborate hierarchy of feudal relations in Europe and Japan, the economy was embedded in the sociopolitical system that it served to sustain. Nor were people motivated by a “predilection for gainful occupations” in earlier societies.4 To the contrary, the economic system was run by “noneconomic motivation” and functioned within “the frame of the social system as a whole.”5 Adam Smith’s “homo economicus,” the narrowly self-interested and ever-calculating individual, came into being much later in history—with the modern state. Of Smith’s famous dictum that human nature is marked by the “propensity to barter, truck and exchange,” Polanyi tersely remarks, “In retrospect it can be said that no misreading of the past ever proved more prophetic of the future.”6
How then did the profit motive come to define and mediate most of our social intercourse? Polanyi argues that market ideology began in England and, because of her enormous financial powers, was spread around the world. According to Polanyi, the critical turning point came with the adoption of British poor law reforms in 1834. In fact, he states directly that “It is no exaggeration to say that the social history of the nineteenth century was determined by the logic of the market system proper after it was released by the Poor Law Reform Act of 1834.”7 To understand his claim, it is helpful to recount a short version of this history.
The Poor Laws had originally been instituted at the end of the eighteenth century, when Britain’s agricultural and industrial revolutions were forcing peasants into cities, creating an alarming escalation in urban poverty. To mitigate the suffering, poor relief was established. The poor reforms, or Speenhamland Law (so named after the parish where the reforms had been conceived) mandated that “a minimum income should be assured to the poor irrespective of their earnings” by providing wage subsidies “in accordance with a scale dependent upon the price of bread.”8 Thus, the Speedham Law was effectively an early form of welfare: a government program that provided financial aid to individuals or groups who could not support themselves. However, after the Napoleonic Wars ended in 1815, Britain was saddled with enormous debt and Europe suffered from a downturn in agricultural prices. Poor relief fell out of favor. In the face of falling prices, its continuation came to be seen as “a disastrous burden.”9
For those agitating against the Poor Laws, the theories of David Ricardo provided the ideological and moral grounds to rescind them. In 1817, Ricardo published his theory of the “Iron Law of Wages.” In it, Ricardo expanded upon Adam Smith’s theory of how wages were set. Ricardo argued that Adam Smith had been correct in arguing that there was a “natural price of labor,” determined by the basic consumption needs necessary for the reproduction of the workforce (e.g., food, shelter, clothing). However, there was also a “market price of labor,” which was regulated by the supply of laborers relative to demand. Ricardo explained that because this “market price of labor” was governed by the natural laws of the market, any government policy designed to alleviate the distress caused by the market’s ebb and flow would only create greater scarcity and pain. Therefore, even though market fluctuations often hurt the weakest members of society, that pain was necessary. Ricardo concludes: “These, then, are the laws by which wages are regulated, and by which the happiness of far the greatest part of every community is governed. Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.”10
With the changing political and economic environment of the 1830s, Ricardo’s theory became the basis for the Poor Law Reform Act of 1834. It was now argued that, for the greater good, the government would abandon the minimum income mandates set in the Speenhamland Law. Instead, laborers would be subject to “the inexorable laws of Nature”; and wages would be determined solely by the “ineluctable necessity” of the market.11 Polanyi tells us, the “scientific cruelty” of this reform bill was “shocking to public sentiment.”12 “Never perhaps in all modern history has a more ruthless act of social reform been perpetrated; it crushed multitudes of lives while merely pretending to provide a criterion of genuine destitution in the workhouse test.”13 This then, the application of Ricardo’s “Iron Law of Wages” to British socioeconomic policy, is when free-market ideology, or the “liberal creed” as Polanyi refers to it, was lifted from the pages of books to pervert and corrupt society at large. It was with the striking down of the Poor Laws that Adam Smith’s homo economicus first made his appearance.
Once adopted by Britain, this market ideology was quickly spread across the globe. That was because at the time London was fast becoming “the financial center of a growing world trade.”14 As the world’s creditor, Britain used her formidable powers to impose the gold standard worldwide, and with it the liberal creed exalting the primacy of markets over social protections. In this way, “the peoples of the world [became] . . . institutionally standardized to a degree unknown before.”15 Polanyi argues that by the 1880s, “the essentiality of the gold standard” had become “the one and only tenet common to men of all nations and all classes, religious denominations, and social philosophies.”16 However, this new liberal economic order brought with it dangers. With this “enforced uniformity,” global finance “hovered as a permanent threat over the freedom of national development.”17 Designed to propel international commerce, the gold standard undermined national governments. States lost the power to direct their economies and prioritize national interests. Instead, “foreign trade and the gold standard had undisputed priority over the needs of domestic business.”18
Thus, for Polanyi, the introduction of gold as the international standard of exchange marked a watershed in human history. Gold had been a medium of trade for centuries. What was momentous about the gold standard was that, for the first time, nearly all countries agreed to fix the value of their currencies to a specified amount of gold. With gold functioning as a preset, unchanging, secure vehicle for international payment, currency conversions across countries became trouble free. Soon, global trade and finance achieved historic levels. But the gold standard also allowed international finance to extend its reach, encircling national economies and choking their ability to act independently.
To compound matters, at the same time that Britain was imposing the gold standard on nations across the globe, a host of wondrous and seemingly infallible technological innovations were reshaping the world. So magical was the period, so full of art and innovation, that the French dubbed it the belle époque, the “Beautiful Age.” Enthralled by the marvels of the age, the belle époque became overconfident in what the market could provide. A mystical faith in the free-market’s ability to promote and preserve liberty and progress took hold. Markets ceased to be understood as the outcome of social and political processes. Like Newton’s clockwork universe, it was now believed that once the market was set in motion, it proceeded mechanically with no need of human intervention. Through its own mechanical laws of supply and demand, the market was “self-adjusting” or “self-regulating.” Writers like Herbert Spencer became the apostles of the theory of “self-regulating” markets. Spencer described how:
there is in society, as in every other part of creation, that beautiful self-adjusting principle, which will keep all its elements in equilibrium; and, moreover, that as the interference of man in external nature often destroys the just balance, and produces greater evils than those to be remedied, so the attempt to regulate all the actions of a community by legislation, will entail little else but misery and confusion. [emphasis mine]19
The mechanism of supply and demand and its corollary, “the iron law of wages,” came to be understood as the best way to ensure that goods were produced, prices were reasonable, workers were employed, and society was increasingly enriched. Any attempt to curb or direct or control the market mechanism could only bring harm to the market and threaten the well-being of society. Government posed the greatest threat to the smooth functioning of the market.
What, then, do they want a government for? Not to regulate commerce; not to educate the people; not to teach religion; not to administer charity; not to make roads and railways; but simply to defend the natural rights of man—to protect person and property—to prevent the aggressions of the powerful upon the weak—in a word, to administer justice. This is the natural, the original, office of a government. It was not intended to do less: it ought not to be allowed to do more.20
Thus, with the power of haute finance, politics became severed from economics. More than that, market logic was imposed on all aspects of social life. Indeed, the whole social order was reconceived and reordered. The economy was no longer embedded in society; it was no longer a function of the social order. Now society had become embedded in the market. Wendy Brown’s description of neo-liberalism communicates the changes Polanyi identifies: “every human domain and endeavor, along with humans themselves, [were understood] according to a specific image of the economic. All conduct [became] economic conduct; all spheres of existence [were] framed and measured by economic terms and metrics, even when those spheres are not directly monetized.”21
For Polanyi then, the fatal flaw of the turn of the century was that faith in progress and free trade had made people “blind to the role of government in economic life.”22 What was lost was an understanding of government’s role in protecting society by “altering the rate of change, speeding it up or slowing it down as the case may be.”23 Without government as a buffer, industry and finance were able to operate without restraint. Human labor became the fodder of massive factory machines. The environment was treated as nothing more than a wellspring for industry and its dumping ground. Even the welfare of business and trade became threatened by global finance. Polanyi paints a bleak picture of what might have happened had society maintained this course and allowed itself to be fully subsumed by the market:
Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society.24
This state of affairs was untenable and unsustainable. Society pushed back. In an unchoreographed reaction, “persons belonging to various economic strata unconsciously joined forces to meet the danger.”25 A series of spontaneous resistance movements sprung up, all seeking to protect the world from market forces: environmental movements, labor movements, and even businesses lobbying for trade protections. Across Europe, safeguards against the market were instituted, including “factory laws, social insurance, municipal trading, health services, public utilities, tariffs, bounties and subsidies, cartels and trusts, embargoes on immigration, on capital movements, on imports.”26
This dual movement of increasing economic liberalization imposed from above, accompanied by pressure from below for social protectionism, is what Polanyi refers to as the “double movement.” He characterizes the “double movement” as the “defensive behavior of a society faced with change; it [is] a reaction against a dislocation which attacked the fabric of society.”27 Unfortunately, the cure was as bad as the disease. Society swung like a pendulum to the other extreme: the developed world was engulfed by communism and fascism. Critically for Polanyi, these extreme ideologies have to be understood in relation to the excesses of liberalism; they were all “determined by one factor: the condition of the market system.”28 As a result, “the emerging regimes of fascism, socialism, and the New Deal,” although different on almost all accounts, “were similar only in discarding laissez-faire principles.”29 “Fascism, like socialism, was rooted in a market society that refused to function”; hence, the response against the international liberal regime “was worldwide, catholic in scope, universal in application.”30 For these reasons Polanyi argues “Market society was born in England—yet it was on the Continent that its weaknesses engendered the most tragic complications.”31
Several scholars find Polanyi’s work to be remarkably apposite to the social, economic, and political transformations we are experiencing today.32 His concept of the “double movement” in particular has been found to be an extremely useful tool for explaining the transformation from the hey-day of market libarlism, initiated by the Reagan-Thatcher revolution of the 1980s, to the rejection of globalization and populist demand to reprioritize the “nation” that has grown in strength since the turn-of-the-century. However, applying Polanyi to the contemporary world is not as clear-cut as it appears at first blush. As Dale remarks, “For Polanyians, a countermovement is the short answer, but plotting its coordinates is no simple task.”33
In the first place, Polanyi is unclear about the mechanisms that launch the “double movement.” So much so that Polanyi’s work has been described as “an elegant parable.”34 Polanyi is almost purposely vague in accounting for the emergence of haute finance. He tells us that it was an institution so unique that it was “sui generis,” in a class of its own, and “peculiar to the last third of the nineteenth and the first third of the twentieth century.” And when he discusses possible explanations for its emergence, he is evasive:
Some contended that it was merely the tool of governments; others, that the governments were the instruments of its unquenchable thirst for gain; some, that it was the sower of international discord; others, that it was the vehicle of an effeminate cosmopolitanism which sapped the strength of virile nations. None was quite mistaken.35
His poetic reasoning is especially pronounced in his discussion of the second half of the “double movement.” Polanyi describes the response against market liberalism as “a deep-seated movement” that “sprang into being to resist the pernicious effects of a market-controlled economy.” But he leaves unclear how it could be possible that “Society,” presented as an undifferentiated whole—encompassing all classes and categories of people across all developed countries—could spontaneously organize to “[protect] itself against the perils inherent in a self-regulating market system.”36 To the contrary, he tells us that the movement against liberalism arose “sometimes over night [sic] and without any consciousness on the part of those engaged in the process of legislative rumination.”37
For these reasons, it has been charged that Polanyi presents society’s protectionist movements as “a grab-bag” of “utterly dissimilar policies and motives under [a] single heading.” As Dale argues, “This yoking” of “various species of protectionism” conflates such different social responses as “business protectionism or import duties” with “trade union struggles.”38 The overdetermination of the concept has left some to contend that “the ‘double movement’ concept tends to be reduced to a tautology, in that any organized behavior that challenges unfairness or inequality in the market is included without any further discussion.”39 This reflects what Arrighi and Silver (2003) identify as a core ambiguity in Polanyi: his “double movement” is “an inherently global process,”40 yet he does not account for what force or power enabled it to spread across the world.
Another hurdle in applying Polanyi is that, when his account is not ambiguous, it is concentrated on events that transpired in Britain in the early nineteenth century. He underscores that “Market economy, free trade, and the gold standard were English inventions,” and he states directly that “In order to comprehend German fascism, we must revert to Ricardian England”41 (by which he means the period when the Poor Laws were put into effect). Given that Polanyi’s analysis of the origin of the “double movement” is so exclusively centered on changes unique to British history, how can we use his insights to understand the countermovement of populism and nativism today? In fact, some have concluded that we cannot.
For several theorists the “Polanyian conceptual apparatus [has] proved incapable of identifying the forces that led to the resurgence of economic liberalism in the 1970s.”42 Indeed, applying Polanyi’s “double movement” to the present is questionable given the sheer magnitude of change that has occurred since the nineteenth century. Nineteenth-century economic, political, and social development was inextricably tied to industrialization and competing imperialist ambitions that led to the extraction of resources and the wholesale colonial enslavement of vast parts of the globe. The trajectory of the twentieth century was shaped by very different forces: the Cold War and the anti-colonial struggles and independence movements that characterized the mid-twentieth century. Understanding these processes is indispensable to a full understanding of the economic and political development of each of these eras.
Beyond this, the turn of the nineteenth century is not really comparable to the present. Today the world is for the first time in human history more urban than rural. Social enfranchisement movements have transformed politics across the globe. Technologies have reached much further and had deeper impacts than ever before. The list is endless. Therefore, despite the very compelling parallels, there is a danger of committing what historians refer to as the fallacy of “presentism,” that is, glossing over the innumerable, dramatic, and essential differences between periods. On a more esoteric level, using a hermeneutic understanding of the relationship between the past and the present, our current situation emanates from the historical epoch to which it is being compared. It is quite an artifice to slice and dice these two periods in such a way as to ignore the intrinsic developmental relationship between the two. All in all, the multitude of differences between the two periods makes any claim that they can be studied through the same lens rather dubious.
In addition to its historical specificity, another reason given for the inutility of using Polanyi’s model is that it is based on a false dichotomy—the distinction between “embedded” and “disembedded” markets. Critics say that Polanyi “romanticizes pre-market economies, and that his work is tainted by a moralizing anti-market mentality.”43 Markets have never been free from political constraints. Therefore, it has been argued that using the concept of “embeddedness” is at the very least misleading. Dale concludes that the “double movement” is best taken to be as “a heuristic” of “the dichotomy of economy and society,” but one that is limited because of its “undue emphasis upon a postulated moral distinction between” natural/embedded markets and artificial/disembedded ones.44 In short, using the “double movement” is challenging because of the historical specificity of the original argument, the danger of “presentism,” and the ambiguity of the core concepts inherent in the model.
Nonetheless, there are several counterarguments. First, it is true that the fuzziness of the distinction between “embedded” and “disembedded” markets presents difficulties for employing them. However, in this respect, the classification between “disembedded” and “embedded” markets is not really any different from many of the concepts we use to study the social world. “Embedded” and “disembedded” markets are no less clearly demarcated than other social science categories such as, “democracy,” “fascism,” and “communism”; or “community” and “society”; or “development” and “underdevelopment”; or even “class,” “race,” and “ethnicity.” It arguably should not make the utility of these concepts any more or less questionable than those commonly employed in political science, economics, history, and the like.
Moreover, in point of fact, Polanyi very clearly states in several passages that the “disembodied” self-regulating market was less a reality than a driving force used to reorganize how society should function and should be measured.45 As he puts it: “We are not dealing here, of course, with pictures of actuality, but with conceptual patterns used for the purposes of clarification. No market economy separated from the political sphere is possible; yet it was such a construction which underlay classical economics since David Ricardo and apart from which its concepts and assumptions were incomprehensible.”46 In particular, the gold standard made manifest that “the institutional separation of the political and economic spheres had never been complete, and it was precisely in the matter of currency that it was necessarily incomplete.”47 Therefore, what was pernicious was not the actual subsumption of the world under a totalizing market, but rather the increasing tendency toward market mechanisms. In another passage, Polanyi underscores that, though the “self-regulating market” had become the “organizing principle” of liberal society, “this is far from saying that market system and intervention are mutually exclusive terms.”48 In fact, he argues quite the reverse: “economic liberals must and will unhesitatingly call for the intervention of the state in order to establish” and maintain the self-regulated market system.49 The truth of the matter, Polanyi tells us, is that “The accusation of interventionism on the part of liberal writers is thus an empty slogan”;50 and therefore “far from excluding intervention [ . . . ] liberals themselves regularly called for compulsory action on the part of the state as in the case of trade union law and anti-trust laws.”51
Thus, despite these several critiques, a number of neo-Polanyian scholars believe the “double movement” has relevance beyond the historical circumstances for which it was developed and can be applied to current times. Recent studies have used Polanyi’s theory to explain contradictory economic and political processes in the “Global South.”52 Levien and Paret (2012) construct an “embeddedness index” with World Survey data, and find evidence of a global “double movement” today.53 Others have applied the embedded/disembedded dichotomy to prescribe ways of redressing problems caused by neo-liberalism.54 These narrower and more prescriptive analyses are valuable applications, but they leave aside the larger questions of what steers such world-historical processes.
In a more theoretical vein, Block and Somers (2016) use the “double movement” to understand how ideas can propel a major political conversion.55 They do so by analyzing parallels between the genesis of two welfare reform movements, the “1834 New Poor Law” in Britain and the 1996 “Personal Responsibility Opportunities Reconciliation Act” in the United States. They find in both cases that an extraordinary national crisis allowed for the repeal of the existing welfare system. They conclude that moments of national turmoil provide the opportunity structure that makes massive ideological shifts possible. The obvious limitation of this analysis is that, although it can be applied to other national situations, it is focused on unique national crises. Hence, their approach does not clarify what accounts for the simultaneity and the global scale of the changes that Polanyi was interested in—and that we are experiencing again today. Yet, the worldwide response against liberalism is absolutely critical to Polanyi. He takes it to be inviolable evidence of the pernicious overreach of globalized market forces and emphasizes that “the universal ‘collectivist’ reaction against the expansion of market economy in the second half of the nineteenth century [is] conclusive proof of the peril to society inherent in the Utopian principle of a self-regulating market.”56
There are several theories that can potentially explain how Polanyi’s “double movement” could be cyclical. There is, for example, “World-Systems Theory,” a strain of neo-Marxism, that explains economic patterns in terms of the global capitalist system.57 From International Relations studies, there is “Hegemonic Stability Theory” that examines world change in terms of the rise and fall of dominate global powers (generally understood as “Western” powers, such as Portugal, Holland, France, Britain, the USA);58 as well as “Long Cycle Theory,” which analyzes war cycles in terms of the life span of economically and politically preeminent states (cycles generally posited to be around one hundred years in length).59 For example, one of the more compelling contemporary uses of the Polanyi’s theory has been developed by two World System’s scholars, Beverly J. Silver and Giovanni Arrighi, who have indeed used Polanyi’s “double movement” to explain our times. However, they assert that there is a central limitation in Polanyi’s work that must first be overcome. For Silver and Arrighi, the problem is that Polanyi “underemphasized” the role of “unequal power relations” in “determining the historical trajectory he analyzed.”60 By putting power relations into his analysis, we can use Polanyi to account for changes happening, while at the same time keeping in mind the many of the differences between these periods. Thus, Silver and Arrighi maintain that the critical link between the two turn-of-the-century periods is that, in each era a hegemonic power (Britain and the United States, respectively) was able to use its economic and military dominance to push forward an international liberal agenda. In other words, globalization “did not just happen […]. It required considerable political stimulation without which technological and economic stimuli to increase international economic interdependence could not have taken place.”61
This kind of World-Systems approach enables us to come much closer to explaining the re-emergence of the “double movement.” In particular, the theory does a good job of accounting for the ascent of globalized liberalism in such different epochs. But it still falls a little short, for it does not fully explicate the nationalist responses against liberalism that developed across so many different countries. As a subset of neo-Marxist theory, World-Systems theorists understand the countermovement against liberalism primarily as a class-based struggle. Yet, nationalist movements are not class-based; people of all classes share the same national identity. Indeed, anti-globalization movements can be cross-sectional, unifying the wealthy with the working classes. Something more is still needed if we are to understand the simultaneity of these movements in the nineteenth century and in our own.
The goal of this study is to explain the rise of nativism and populism in the twenty-first century using Polanyi’s compelling conception of the “double movement.” To do so, some basic questions still must be addressed: How literally can we take the “double movement”? And is there a judicious way to apply the “double movement” to an alternate time in history?
I believe the answer to the latter is “Yes” and that the final passages in The Great Transformation provide the key to how this can be done. In his conclusion, Polanyi argues that the core problem with liberalism was that it fundamentally misunderstood how freedom is achieved in complex societies. That was because the “market view” had reduced liberty itself to nothing more than the right to make free contractual relationships. Therefore, everything had to be left to the market. This meant that under the liberal order, “The power of the state was of no account, since the less its power, the smoother the market mechanism would function.” But Polanyi argues sustaining freedom in a complex society encompasses so much more. Liberty is not simply about contracts; it is involves a broad spectrum of rights and opportunities. Liberty, therefore, requires a complex of institutions to safeguard it. Put simply, “rights must be enforceable under the law.” Missing this basic fact, the whole international economic order came to be based upon a “Utopian fiction.” Liberalism promised freedom, progress, and human perfectibility, but presumed these ideals could only be achieved in and through an economic system solely controlled by market prices. In the end, these romantic assumptions about the market “gave a false direction to our ideals.” Far from freeing the world, the liberal view of markets presented “a deadly danger to the substance of society,” promoting freedom “at the cost of justice and security.”62
In a nutshell, for Polanyi the central problem with the period of market liberalism was that “Society as a whole remained invisible.”63 Hence, the “double movement”—the rejection of the market as the basis of political and economic organization—can be understood, at its core, as a rediscovery of society. But what is “society” in the modern age? What exactly was rediscovered? This is at the heart of the question.
I suggest that if the “double movement” is the rediscovery of the crucial role played by the state in providing institutional safeguards for society, the nucleus of the “double movement” is ultimately the rediscovery of the role of the nation-state and, by extension, a rediscovery of nationalism. For, in the modern world, the nation-state reigns supreme. Ever since the nineteenth century, when empires were toppled and the sovereignty of kings was transferred to “the people,” states have been equated with the populations they represent (“the nation”). Today, nation-states are virtually the only political organization recognized internationally.64 Even kingdoms and totalitarian regimes legitimate their rule by claiming to represent their national populations. In short, we live in a nation-state system. Hence, the nation-state has become the only entity that can protect society from global forces and market overreach. I therefore propose to study the second half of Polanyi’s “double movement” as a surge of national populism, what I identify as an era of defensive nationalism.
Putting this all together, the aim of this work is to find a concrete way to study Polanyi’s “double movement.” It will do so by examining how defensive nationalism came to suffuse Europe and the United States. The rest of the book will trace how the turn of the nineteenth and the turn of the twentieth centuries were both periods of unparalleled modernization, when nation-states were assaulted on multiple fronts: expansive immigration, globalized finance, transnational liberalism, and transnational terrorism. By the end of both centuries, the ill effects of liberal market forces undermined people’s initial excitement over the promise of internationalization and globalization. Protectionism, nativism, and xenophobia materialized in their stead—the second half of the “double movement.”
There is, however, one more critical question remaining that Polanyi’s work cannot address and that directly pertains to understanding how the “double movement” could re-emerge. And that is the following: What specific set of changes made it possible for international finance to emerge in the mid-1800s? And might there be a parallel with changes that have occurred in the twentieth century? As we know, Polanyi gives little explanation for how and why finance capitalism arose. Yet, without this piece of the puzzle, it is difficult to explain a second cycle of the “double movement.” Therefore, to understand what could have set off haute finance in the nineteenth century, this study turns to the works of Schumpeter. More specifically, Schumpeter’s idea of innovation as the driver of social change will be used to explain how finance capitalism and liberalism emerged in both epochs. The case will be made that technological innovation gave rise of the first half of Polanyi’s “double movement.”