Market Note:
Inescapable Regulation
22 July 2014

We try to learn something every day. This is easiest when we turn our attention to economics, a field of almost immeasurable ignorance for us. Today, we discovered Karl Polanyi, author of The Great Transformation and the subject of a new book by Fred Block and Margaret Somers. Block and Somers were interviewed by Henry Farrell at the Washington Post(via 3 Quarks Daily)

HF -  How do those ideas help us understand the vexing economic problems we still face today?

FB & MS – By putting government and politics into the center of economic analysis, Polanyi makes it clear that today’s vexing economic problems are almost entirely political problems. This can effectively change the terms of modern political debate: Both left and right today focus on “deregulation”—for the right it is a rallying cry against the impediments of government; for the left it is the scourge behind our current economic inequities.  While they differ dramatically on its desirability, both positions assume the possibility of a “non-regulated” or “non-political” market.  Taking Polanyi seriously means rejecting the illusion of a “deregulated” economy. What happened in the name of “deregulation” has actually been “reregulation,” this time by rules and policies that are radically different from those of the New Deal and Great Society decades. Although compromised by racism, those older regulations laid the groundwork for greater equality and a flourishing middle class.  Government continues to regulate, but instead of acting to protect workers, consumers, and citizens, it devised new policies aimed to help giant corporate and financial institutions maximize their returns through revised anti-trust laws, seemingly bottomless bank bailouts, and increased impediments to unionization.

The implications for political discourse are critically important: If regulations are always necessary components of markets, we must not discuss regulation versus deregulation but rather what kinds of regulations we prefer: Those designed to benefit wealth and capital? Or those that benefit the public and common good? Similarly, since the rights or lack of rights that employees have at the workplace are always defined by the legal system, we must not ask whether the law should organize the labor market but rather what kinds of rules and rights should be entailed in these laws—those that recognize that it is the skills and talents of employees that make firms productive, or those that rig the game in favor of employers and private profits?

This puts a new name to a few ideas that we happen to endorse, and makes them clearer, too.