In The Great Transformation, published in 1944 as the Second World War was still raging, Austro-Hungarian economic historian Karl Polanyi analyzed how states responded to the implosion of the international economic system of the Belle Époque. In the aftermath of the 1929 Wall Street crash, societies the world over frantically attempted to overcome the chaos caused by skyrocketing unemployment and monetary instability. Polanyi famously described this as a “double movement”—a push for social rebalancing and equilibrium, away from the laissez-faire economics of a highly internationalized capitalism and toward state interventionism. Bolshevism, fascism, Nazism, and Roosevelt’s and Leon Blum’s social democracy were different responses to the same dilemma: how to protect society from the disruptive force of unfettered capitalism.
For some time, economists have been speaking of a new “Polanyi moment”: a crisis of globalization has led to the rise of all sorts of protectionist sentiments. The growing limits to mobility and concerns about supply chains that have accompanied the pandemic have only accelerated a political realignment that began during the 2010s. Economic stagnation since the 2008 financial crash has sapped the credibility of free-market recipes. Commercial rivalries and geopolitical tension have arisen between the United States and China, and between the United Kingdom and the European Union. Populist movements on the left and the right now question a number of aspects of the neoliberal consensus.
Global trade no longer enjoys the same popularity it once did. In the United States, the shift became clearest during Trump’s trade war with China, but this isn’t a one-sided partisan affair. Joe Biden’s trade policy is also protectionist: his White House has issued Buy American procurement rules directing state spending to U.S. firms and engaged in competition to secure the U.S. supply of semiconductors and rare earth minerals.
The belief in free trade isn’t the only pillar of neoliberal globalization that is shaking. Figures across the political spectrum are beginning to abandon reservations about state interventionism and aid, restraint on public spending and monetary policy, and the commitment to low taxation of the rich and corporations. Heavy state intervention has become widely accepted, at the monetary level with quantitative easing and large bond-buying programs and at the fiscal level with deficit spending and massive public investments. The strategy of green transition that many countries have subscribed to, which involves state planning to meet targets on emissions, electric vehicles, and renewable energy, revives one of the forms of state intervention most reviled by neoliberals.
In all these areas, there is a call for protection against the system risks created by neoliberal globalization. Protection is now invo...
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