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PSW0010.1177/1478929916644943Political Studies ReviewCha

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Political Studies Review

Re-reading Friedrich Hayek 2017, Vol. 15(3) 391­–403

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DOI: 10.1177/1478929916644943
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Late-Modern Condition journals.sagepub.com/home/psrev

of Fragility

Taesuh Cha

Abstract
The cardinal role of complexity in Friedrich Hayek’s theory of the market has hardly gone unnoticed.
Indeed, there is now a considerable corpus of literature that has established the importance of
spontaneity as a central concept around which neoliberal economic theory revolves. However, as
William Connolly analyzes, its closed conception of economic processes simplifies real economic
volatilities and ignores both modes of self-organization and creativity found in democracy and
social movements that periodically irrupt into market processes. This article builds upon this
critique of neoliberalism and employs Karl Polanyi’s genealogy of modern capitalism to understand
historical imbrications between the market and the social and their contribution to the fragility
of capitalism. Polanyi’s notions of “(dis-)embeddedness” and the “double movement” not only
show us a more “complex” view of modern political economy but also provide us with important
lessons for political responses to the recent crisis of neoliberal capitalism.
Connolly WE (2013) The Fragility of Things: Self-Organizing Processes, Neoliberal Fantasies, and
Democratic Activism. Durham: Duke University Press.
Hayek F (1973) Rules and Order. Chicago: University of Chicago Press.
Hayek F (1976) The Mirage of Social Justice. Chicago: University of Chicago Press.
Polanyi K (1944) The Great Transformation: The Political and Economic Origins of Our Time. Boston:
Beacon Press.

Keywords
Friedrich Hayek, Karl Polanyi, William Connolly, complexity theory, genealogy

Accepted: 11 March 2016

This review article compares Friedrich Hayek and Karl Polanyi to examine the emergence,
evolution, and fragility of the modern politico-economic system. Insights from complexity
theory as alternative readings of the world are employed to facilitate a conversation

The Department of Political Science, Johns Hopkins University, Baltimore, MD, USA

Corresponding author:
Taesuh Cha, The Department of Political Science, Johns Hopkins University, 3400 N. Charles Street,
338 Mergenthaler Hall, Baltimore, MD 21218, USA.
Email: taesuhcha@gmail.com
392 Political Studies Review 15(3)

between the two thinkers and to compare their respective understandings of the history of
capitalism. A group of complexity scientists, including Brian Goodwin, Ilya Prigogine,
and Stuart Kauffman, has challenged the prevalent reductionist assumptions of modern
classical science and altered the conventional image of the deterministic, stable, and closed
universe. By pointing to the existence of “pre-adaptation” that cannot be identified in
advance (Kauffman, 2008) and the role of “Poincare resonances,” nonlinear phenomena,
and self-organization under the condition of periodic disequilibrium (Goodwin, 1994;
Prigogine, 1997), they demonstrate that the natural systems occasionally transcend the
scope of our predictive power and produce surprising results replete with contingencies. In
addition, our world is depicted as something “heterogeneous and far from equilibrium”
(Prigogine, 1997: 158). Namely, the universe is composed of multiple open systems that
often explosively interact with one another and generate “dynamical instability” (Prigogine,
1997: 162). This premise explains why we are always witnessing a “wondrous radical
creativity without a supernatural Creator” (Kauffman, 2008: xi) in nature. Indeed, com-
plexity theorists advance that we need “the new laws of nature” (Prigogine, 1997) beyond
the “Galilean Spell” (Kauffman, 2008).
Understanding the distinctive themes of complex theory and applying them to the
analysis of the human estate are crucial in contrasting the Hayekian “simple” approach to
the economy with Polanyi’s compound analysis of capitalism. To be specific, drawing on
William Connolly’s (2013: 14) critique of neoliberal depictions of the spontaneous mar-
ket order that “confines human creativity too restrictively to entrepreneurial market activ-
ity,” I argue that Polanyi’s genealogy of capital not only shows us a more “complex” view
of modern political economy but also provides us with important lessons for the present
response to postmodern “fragile” conditions of capitalism. Above all, this review article
aims to play an invitational role, raising new research questions on the two interacting
open systems, the social and the economic, and interrogating the implication of their vola-
tile characters for our late-Anthropocene life.
Initially, I will examine why Hayek’s unique reading of the market can be interpreted as
a pioneering work that connects economics to complexity theory. Then I will explain how
his closed view of economic processes is far different from a complex image of “a world
of multiple, open-ended, interacting systems,” (Connolly, 2013: 94) which leads to neolib-
eral ignorance of the interconnectedness between the economic and the social. In contrast,
it will be noted how with the notions of “(dis-)embeddedness” and “the double movement”
Polanyi criticizes the Hayekian simple narrative on modern capitalism by analyzing two
important historical conjunctures: (a) bloody origins of the modern capitalist mode of pro-
duction that rests on domestic and international violence or the so-called “primitive accu-
mulation of capital”; and (b) the emergence of fascism (and socialism) in the wake of the
Great Depression as part of “self-protection of society.” Last, after briefly exploring the
rise and fall of “embedded liberalism” in the postwar era, contemporary implications of the
comparison between Hayek and Polanyi in our “post-crisis” moment will be discussed.

Hayek’s Catallaxy and Complexity Theory

At the outset, Friedrich Hayek (1973) contrasts an “evolutionary view” of the order of
society with the prevailing “constructivist” approach to the world. The latter is paradoxi-
cally based on both the conceit of modern science in the Age of Reason and primitive
“anthropomorphic modes of thinking” (Hayek, 1973: 10); it falsely assumes that humans
can deliberatively design societies with synoptic knowledge. However, “very complex
Cha 393

phenomena” (Hayek, 1973: 15) or “complex, spontaneously formed structures” (Hayek,

1973: 24), such as social life, cannot be understood from the Cartesian rationalism that
presupposes a simple, manipulable universe. Thus, Hayek stresses that “orderliness of
society” is the result of “evolution” (Hayek, 1973: 9) and that an alternative approach—
which was first invented by Scottish moral philosophers, including Adam Smith and
Edmund Burke (Hayek, 1973: 22)—is required to analyze “those unintended conse-
quences of individual action which all the truly social represents” (Hayek, 1973: 33). In
particular, the nature of market order or catallaxy1 is regarded as the spontaneous, evolu-
tionary order par excellence, which is “a wealth-creating game … one that leads to an
increase of the stream of goods and of the prospects of all participants to satisfy their
needs” (Hayek, 1976: 115).
Hayek’s unusually early engagement with complexity theory has been critically appre-
ciated by several scholars (e.g. Barbieri, 2013; Ciote, 2012; Kilpatrick, 2001; Metcalfe,
2010; Ormerod, 2009; Rosser, 2012). According to Roger Koppl’s (2009) standard list,
there are five similarities (BRICE) between Hayek’s and the present complexity econom-
ics: (a) bounded rationality against the constructivist pursuit of omniscience; (b) rule
following, not purposeful actions, as the operation manual for our mind and economic
agent; (c) institutions as a necessary part of the evolution/self-organization of social sys-
tems; (d) cognition showing that Hayek’s views of pattern formation in the mind is closely
related to the spontaneous emergence of order in the complex system of psychology; and
(e) evolution (and emergence) as a prominent metaphor for complex systems.
It is noteworthy that eminent complexity theorist Stuart Kauffman (2008: xi), who
advances a new non-reductionist scientific worldview focusing on “emergence” and
“wondrous radical creativity without a supernatural Creator” in the universe, describes
the “econosphere” as a “self-consistently co-constructing, ever evolving, emergent
whole” (Kauffman, 2008: 4) in line with Hayek’s analysis of the market as a complex,
spontaneously formed order. Kauffman’s simulation of the evolution of the economy or
“the economic web” that is mainly driven by technological and organizational innova-
tions seems to follow “the attractions of automatic economic growth through market pro-
cesses” (Connolly, 2013: 30), which is stressed in Hayekian economics.
Defining the task of economics as “understanding of the explosion of goods and ser-
vices in the past fifty thousand years, and of novel ways of making a living,” Kauffman
(2008: 154) narrates that the series of explosions in economic history “persistently create
the conditions for the next new ways of making a living with new goods and services.”
Such a Schumpeterian narrative of “creative destruction” indicates the existence of an
“autocatalytic, mutually sustaining economic-technological ecosystem of complements
that commandeer economic capital resources into that autocatalytic web and can create
vast wealth” (Kauffman, 2008: 160; emphasis in original). As a result, economic history
is similar to the evolution of the biosphere in the sense that both proceed “in a self-organ-
ized critical way” (Kauffman, 2008: 163).

Hayek’s Limits: The Image of Simple and Closed Order

William Connolly, who founded the so-called “Hopkins School” of political theory with
his colleague, the late Richard Flathman, first gained his reputation by writing The Terms
of Political Discourse (Connolly, 1974) that developed a critique of dominant positivism
in American Political Science and analyzed “essentially contested concepts in politics.”
Drawing on Friedrich Nietzsche, Michel Foucault, and Gilles Deleuze, among others,
394 Political Studies Review 15(3)

he then produced innovative works (Connolly, 1991, 1995, 2005) on “deep pluralism”
and “agnostic democracy.”
At the turn of the twenty-first century, Connolly embraced complexity theory in phys-
ics, biology, and neuroscience in order to reinnovate his post-Nietzschean theorizing on
the “world of becoming.” Complexity theory was brought to “foment new modes of
exchange between science and cultural theory.” In particular, he attended to two possibili-
ties newly introduced by such an interdisciplinary dialogue: (a) that the prevailing logical
empiricism and rational choice based on the binary understanding of the relationship
between nature and human culture come to lose their power because the demarcation line
between the two spheres looks significantly more ambiguous now; and (b) that the idea
of open systems can be positively examined in politics, noting “how the universe itself
may be an open cosmos composed of multiple, independent, moving systems of numer-
ous types” (Connolly, 2010: 224).
In this new theoretical schema, Connolly seeks to update his critique of capitalism2
in his most recent book, The Fragility of Things. He plays a role in setting a new direc-
tion of critical political economy by offering a new scientific foundation of an anti-
neoliberal or Polanyian thesis that holds “there is no such beast as a disembedded
economy” (Connolly and Wenman, 2008: 217). Put differently, we can now “scientifi-
cally” explore the intrinsic volatility of capitalism in its close imbrications with vio-
lence, social forces, and nature that periodically produce their own disequilibrium,
owing to Connolly’s innovative experiment. Interestingly, Connolly (2013: 62) admits
that he and Hayek share several important points in understanding the complexity of
our universe, such as “the periodic significance of spontaneity, uncertainty, creativity,
self-organization, and self-balancing powers in the world.” However, Connolly also
tries to go beyond the Hayekian closed world in which “entrepreneurs are the sole para-
digms of creativity” (Connolly, 2013: 66). He criticizes Hayek for “inflat[ing] the self-
organizing power of markets by implicitly deflating the self-organizing powers and
creative capacity of all other systems” (Connolly, 2013: 31). Put differently, the market
is “not the only human system that displays moments of creative spontaneity and dif-
ferential degrees of self-organizing power” (Connolly, 2013: 66). In this context, we
need to pay attention to an axiom of complexity theory, stating that our world is not
only composed of innumerable, interacting, open self-adjusting systems but is also sus-
ceptible to periodic crises (Connolly, 2013: 27).
Unlike a utopian image of the neoliberal market equipped with “beautiful powers of
rational self-adjustment” (Connolly, 2013: 31), this awareness of multiple interacting
sites of self-organization and their (often) violent disruption indicates an appreciation of
“the fragility of things” and our need for intervention on multiple fronts to manage such
a potential instability in the world. In particular, we should include “politics within the
domain of creative spontaneity,” as opposed to the Hayekian “desire to contain demo-
cratic politics” (Connolly, 2013: 66). As we shall see in Polanyi’s historical analysis of the
“double movement” and the general crisis in the interwar period, the lethal conflicts
between two self-organizing systems—the unregulated market and the rising social
movement—explain “how fragile and volatile economic markets can become at particu-
lar moments” (Connolly, 2013: 28).
Hayek’s (1973: 35–39) simplistic and tendentiously equilibrium-oriented understand-
ing of the complex world begins from his arbitrary demarcation between an exogenous
order and an endogenous one. He posits that there are two types of order in our universe:
“Taxis” and “Cosmos.” Given that the former is an “exogenously” constructed, artificial
Cha 395

system, it is simple and concrete. In contrast, the latter is complex and abstract, since it is
an “endogenously” grown, spontaneous structure. According to Hayek, Adam Smith’s
famous metaphor, the “invisible hand,” signaled the beginning of genuine social theory
that discovered the existence of self-generating orders, the “outcome of a process of evo-
lution whose results nobody foresaw or designed” (Hayek, 1973: 37).
Based on this strict distinction between the “inside” and the “outside,” Hayek argues
that it is truly undesirable to “interfere” in the endogenous, spontaneous order by direct
commands. In his theoretical schema, “interference” or “intervention” is not only “an
unjust act in which somebody is coerced” but also “an act which will always disrupt the
overall order and will prevent that mutual adjustment of all its parts on which the sponta-
neous order rests.” Moreover, it will establish a “privilege” that guarantees benefits to
several upper classes at the expense of other underclasses (Hayek, 1976: 129).
Likewise, neoliberals argue that all past failures are caused by too much external inter-
ference such as Keynesianism, socialist central planning, and labor/consumer movements
(Connolly, 2013: 70). Instead, we are required to preserve a pure, autonomous, and self-
regulating market as an ideal order, for “the only alternative to submission to the imper-
sonal and seemingly irrational forces of the market is submission to an equally
uncontrollable and therefore arbitrary power of other men” (Hayek, 1994 [1944]: 224). In
the same context, the “historical fact of the progressive growth of monopoly” at the turn
of the twentieth century is analyzed as an artificial and distorted tendency that was “sys-
temically fostered by deliberate policy” (Hayek, 1994 [1944]: 52), not by the natural
outcome of the market order.
Immanuel Wallerstein (2004: 25), however, reveals the fact that the “free market func-
tions as an ideology, a myth, and a constraining influence, but never as a day-to-day real-
ity,” following Fernand Braudel’s distinction between the free market and monopolies
and his unorthodox argument that capitalism is essentially the “anti-market” monopoly.
As an ideal free market would deter the endless accumulation of capital because of a very
low level of profit, capitalists actually prefer “markets that are only partially free” over
totally free ones (Wallerstein, 2004: 24). In other words, what capitalists have tradition-
ally desired is a “monopoly” that can create a larger profit. Hence, “the support of the
machinery of a relatively strong state” that would enforce a quasi-monopoly is indispen-
sable to them (Wallerstein, 2004: 25). In historical reality, contrary to the ideology of
laissez-faire, Great Britain, the United States, and Germany—essentially almost all
industrialized countries—used tariffs, protections of infant industries, control of capital
markets, and other quasi-mercantilist or state interventionist policies that promoted
domestic monopolies in order to gain international competitiveness (Chang, 2003). Even
in the neoliberal US political economy, oligopolies also emerge “through the state” that is
captured by active business initiatives (Connolly, 2013: 62–63).
In addition, Hayek “downplays too radically modes of self-organization that are found
in democracy and those uncanny modes of creativity periodically emerging out of social
movements” (Connolly, 2013: 14). Hayek’s fear of populism that might lead to “the road
to serfdom,” as arguably exemplified in Hitler’s democratic coming to power, generated
a neoliberal ideological attempt “to anaesthetize politics, curtail the state, and let corpo-
rate markets rip” (Connolly, 2013: 68). In contrast, Polanyi delves more into the “embed-
dedness” existing in the relationship between the economy and the social and reveals the
way the combination of the two interacting open systems dramatically destabilizes each
other in a particular historical setting by tracing the volatile trajectory of modern capital-
ism or “the double movement.” The next section will elaborate on this idea.
396 Political Studies Review 15(3)

Polanyi’s Critical Genealogy of Capital

Karl Polanyi’s critique of “the liberal creed” and his alternative narration of the history of
capitalism can be regarded as a genealogist work that highlights “a complex system of dis-
tinct and multiple elements” in which “numerous systems intersect and compete” (Foucault,
1984: 94, emphasis added) as well as one that discloses the political economy of “truth” in
the “scientific” discourse of orthodox economics. Initially, Polanyi situates a truth regime of
economic liberalism in the context of the rise of “planned” laissez-faire capitalism and criti-
cizes its suprahistorical perspective on the “origin” of the market system. It is revealed,
“There was nothing natural about laissez-faire; free markets could never have come into
being merely by allowing things to take their course” (Polanyi, 1944: 139).
Adam Smith’s “paradigm of the bartering savage” assuming the human “propensity to
barter, truck and exchange one thing for another” is a basic axiom of orthodox economics
that naturalizes and idealizes the “origin” of capitalism (Polanyi, 1944: 249–250).
However, Polanyi, as a genealogist armed with contemporary findings in social anthro-
pology, investigates the mystified “origin” of the market and discovers that “Adam
Smith’s suggestions about the economic psychology of early man were as false as
Rousseau’s were on the political psychology of the savage.” In fact, Smith’s theory is an
inversed interpretation of history or presentism that is “much more relevant to the imme-
diate future than to the dim past” (Polanyi, 1944: 43–44). In contrast, real history indi-
cates that “man’s economy, as a rule, is submerged in his social relationships” (Polanyi,
1944: 46) and the so-called human nature is not given but emerges “from the context of
social life” (Polanyi, 1944: 47).
In the same vein, Polanyi exposes the fact that the dominance of the market economy
is far from a natural tendency of world history. It is stressed that “the gearing of markets
into a self-regulating system of tremendous power was not the result of any inherent ten-
dency of markets toward excrescence, but rather the effect of highly artificial stimulants
administered to the body social” (Polanyi, 1944: 57; emphasis added). Basically, Polanyi
(1944: 3) believes that “the idea of a self-adjusting market” that is autonomous from other
open systems is a “stark utopia.” While Hayek and other liberals naturalize and depoliti-
cize the market as timeless and universal self-organizing processes (Connolly, 2013: 60),
Polanyi tries to denaturalize and politicize it by exploring the genealogy of the modern
market system in its particular historical settings. He further complicates the neoliberal
version of the complexity theory by calling attention to how the economy has evolved
through its interinvolvement with the social. To be specific, explaining the rise and fall of
nineteenth-century laissez-faire capitalism, Polanyi focuses on contingent and violent
interactions between two open systems (the market economy and socio-political forces)
that led to a general catastrophe. In the following, we will witness how Polanyi elaborates
on the trajectory of market-society imbrications in modern times by exploring two sig-
nificant historical cases; that is, the birth of Western capitalism and the perils of fascism.

“(Dis-)Embeddedness”: The Bloody Origins of Capitalism

Hayek (1973: 50), praising the global expansion of the modern market society, insists
that “those people who happened to adopt suitable rules developed a complex civiliza-
tion which then often spread to others” in a peculiarly abstract manner. Following the
Adam Smithian myth of “the bartering savage,” Hayek (1976: 109) argues that “the
adoption of barter or exchange” was the “decisive step” that led to the rise of capitalism.
Cha 397

The preconditions for the historical shift were merely the recognition of the benefits of
exchange/division of labor and the rule of private property (Hayek, 1976: 109). In this
very peaceful and romanticized description of the “origin” of capitalism, the history of
coercion that was used to lay the structural bases of the capitalist axiom is totally hidden
behind the scene. Instead, celebrations of the “Western Civilization” founded on the
tradition of individualism from classical antiquity and of a simple Eurocentric diffusion-
ist story fill the historical void in Hayek’s (1994 [1944]: 17–18) grand narrative on the
modern capitalist system.
In contrast, Polanyi vividly illustrates how the Western White ruling class exercised
brutal violence to both internal and external Others in order to initiate the endless accu-
mulation of capital through the concurrent early modern enclosure movement and impe-
rialism (Polanyi, 1944: 157–158). Drawing a distinction between “embedded” and
“disembedded” economic orders, Polanyi emphasizes that almost all historical economic
orders were functions of the social, in which they were embedded. There existed no
autonomous, separate economic systems in society before the end of the eighteenth cen-
tury when “economic activity was isolated and imputed to a distinctive economic
motive” (Polanyi, 1944: 71). We should note that “market economy is an institutional
structure which … has been present at no time except our own” (Polanyi, 1944: 37).
What is crucial here is that this “complete transformation in the structure of society” or
“singular departure” (Polanyi, 1944: 71) was not “spontaneous” at all. While Hayek
(1976: 114–115) insists that “the use of coercion” should be restricted to the sphere of
law “securing an abstract overall order” of “the game of catallaxy,” Polanyi (1944: 33,
73) reveals the historical fact that three fictitious commodities (labor, land, and money),
essential elements of a liberal market economy, had to be violently produced by the
“satanic mill.”
Especially, the commodification of labor should be given more attention in order to
understand the dynamics between the political and economic systems that created mod-
ern markets. In particular, the institutional–legal development in England is noteworthy.
A wave of enclosures during the earlier Tudor period that produced a rural proletariat
was the starting point of a market for labor power. The movement was a “revolution of
the rich against the poor,” and the rising commercialized ruling class disrupted the exist-
ing fabric of the society “by means of violence, often by pressure and intimidation”
(Polanyi, 1944: 35). As the Revolution in Agriculture (which paved the way for the
Industrial Revolution) unsettled the population and produced the ominous growth of
pauperism, the British Crown legislated a series of laws that attempted to ensure the
“right to live” of the poor and to limit the physical mobility of laborers; that is, to keep
the social fabric of traditional village life unbroken against the bourgeoisie class. The
culmination (or the last trial) was the enactment of the Speenhamland Law (1795) by the
ruling Tories (Polanyi, 1944: 77–78).
However, as the capitalist middle classes of England came into power, the Speenhamland
Law was repealed in 1832. Instead, the Reform Bill of 1832 and the Poor Law Amendment
of 1834 were passed, which “put an end to the rule of the benevolent landlord and his
allowance system” (Polanyi, 1944: 80). This change abolished the “right to live” and did
away with obstructions to the new capitalist economy by preventing the proletariat that
had previously been generated by enclosures from “gaining a living by their labor”
(Polanyi, 1944: 80). Thus, a labor market could be established on a national scale by
enforcing labor through the injection of the fear of starvation into laborers’ minds. This
transformation was commonly regarded as the starting point of modern capitalism and the
398 Political Studies Review 15(3)

“true birthday of the modern working class” (Polanyi, 1944: 101). In this particular con-
text, the “Two Nations were taking shape … unheard-of wealth turned out to be insepara-
ble from unheard of poverty” (Polanyi, 1944: 102). As the economy was disembedded
from society, all other elements of society came to be subjected to the principle of the
self-regulating market. The breakup of social institutions not only exposed people to the
instability of the market but also led to the denial of human essence as a social being and
freedom.
Furthermore, a striking parallel exists between what happened in the era of the enclo-
sure movement in Britain and what occurred in the nineteenth-century colonial regions.
As imperialists destroyed traditional communities and social institutions to “separate
labor from other activities of life and to subject it to the laws of the market” (Polanyi,
1944: 163), the same catastrophic outcomes as in early capitalist Europe were reiterated
in colonial societies. That is, colonial people experienced severe cultural degeneration.
Based on a comparative case study of contemporary colonial regions, Polanyi argues
that “the elemental force of culture contact, which is now revolutionizing the colonial
world, is the same which, a century ago, created the dismal scenes of early capitalism”
(Polanyi, 1944: 158) in general. In sum, as a precondition for global capitalism, it was
necessary to create free labor by destroying the premodern “organic society, which
refused to permit the individual to starve” all over the world, because the “application of
‘nature’s penalty’, hunger,” was the ultimate method to produce and discipline the “will-
ing worker” (Polanyi, 1944: 165).

“Double Movement”: The Fall of the Self-Regulating Market and the Rise
of Fascism
Hayek (1976: 111) pejoratively regards the notion of “solidarity” as an outdated “instinct
which we have inherited from tribal society” that led to “the two greatest threats to a free
civilization: nationalism and socialism.” Economic liberals, based on “the myth of the
antiliberal conspiracy” (Polanyi, 1944: 145), claim that the “collectivist” countermove-
ment was the result of a purposeful conspiracy of the opponents of liberal principles (i.e.
“the unholy alliance of trade unions and labor parties with monopolistic manufacturers and
agrarian interests”). They also maintain that all protectionism was a mistake mainly due to
the “blindness of the working people to the ultimate beneficence of unrestricted economic
freedom to all human interests” (Polanyi, 1944: 144). In the final analysis, the liberal doc-
trine attacks “political democracy, as the alleged mainspring of interventionism” (Polanyi,
1944: 145). Along the same lines, conservatives today propagate a revisionist history,
arguing that a variety of state interventionism is the main cause of the fascist emergence.
Furthermore, they coined the term, “liberal fascism,” to criticize all regulationist or wel-
fare policies as a variant of totalitarianism, “the road to serfdom” (Connolly, 2011).
Against such a right-wing mnemonics, Polanyi places emphasis on two co-constituent
mechanisms that shaped the nineteenth-century “double movement” and finally resulted
in the fascist crisis. The first one is “the clash of the organizing principles of economic
liberalism and social protection which led to deep-seated institutional strain.” The other
is “the conflict of classes which … turned crisis into catastrophe” (Polanyi, 1944: 134).
The great variety of forms of self-protectionism emerged to defend the vital social inter-
ests damaged by the expanding market mechanism. A remarkable irony is that whereas
“laissez-faire economy was the product of deliberate state action, subsequent restrictions
on it started in a spontaneous way” (Polanyi, 1944: 141; emphasis added). From the
Cha 399

eighteenth century onwards, society “unconsciously resisted any attempt at being made
into a mere appendage of the market” (Polanyi, 1944: 77, emphasis added).
As noted above in the insights from complexity theory, self-organizing systems are
often much more vulnerable and volatile than neoliberal ideologues pretend, for they are
inherently interconnected with other self-organizing systems. Especially, Connolly (2013:
70) holds that the modern capitalist system, “partly because of its self-regulating tenden-
cies and bumpy relations with other subsystems, periodically secretes volatilities, insta-
bilities, and meltdowns.” From a very similar analytical framework, Polanyi’s concept of
“double movement” describes how the two different interacting open systems of self-
organization (market and social forces) constructed and destructed the nineteenth-century
civilization. As already discussed, the birth of capitalism was based upon “the ravages of
the enclosures in English history and the social catastrophe which followed the Industrial
Revolution,” and the “effects on the lives of the people were awful beyond description”
(Polanyi, 1944: 76). In this context, “a deep-seated movement sprang into being to resist
the pernicious effects of a market-controlled economy” (Polanyi, 1944: 76). In Polanyi’s
diagnosis, self-protection of the society against the “satanic mills” of a self-adjusting
market order was the “one comprehensive feature” of this time (Polanyi, 1944: 76). The
emergence of socialism in the nineteenth century, which has long been demonized by
liberal ideologues, was, in essence, “the tendency inherent in an industrial civilization to
transcend the self-regulating market by consciously subordinating it to a democratic soci-
ety” (Polanyi, 1944: 234).
However, the real paradox was that the countermoves taken by society or anti-capital-
ist social forces eventually “impaired the self-regulation of the market, disorganized
industrial life, and thus endangered society in yet another way” (Polanyi, 1944: 3–4). By
the turn of the twentieth century, the market experienced a general crisis that culminated
in the Great Depression of 1929. Amidst the fierce conflicts between capitalists and labor
forces, the entire system itself came to be paralyzed, and when “fear” gripped the people,
charismatic leadership that “offered an easy way out at whatever ultimate price” arose
(Polanyi, 1944: 236). In other words, fascism “now emerged as an alternative solution of
the problem of industrial society” (Polanyi, 1944: 243). The reactionary movement that
led to the Second World War was, unlike the myth of neoliberals, “rooted in a market
society that refused to function” (Polanyi, 1944: 239).
Although Hayek and other neoliberals, who were overwhelmed by the tragedy of
Nazism and Stalinism, attempted to hide the real causal mechanism in interwar history
and to identify state interventionism in general with totalitarianism or “serfdom,” it
should be noted that the excessive expansion of nineteenth-century laissez-faire capital-
ism fatally collided with society and triggered massive turbulences, thereby opening the
historical path to the emergence of fascism as a virulent countermove.

“Embedded Liberalism” in the Postwar Era

In 1944, Hayek (1994 [1944]: 262) concluded that we should go back to the ideals of the
nineteenth century because “it is we, the twentieth century, and not they, who made a
mess of things.” However, the postwar political economy was, to his dismay, designed by
“those who preach a ‘New Order’” that was putatively no different from Hitler’s idea that
resulted in the Second World War and “most of the evils from which we suffer.” Although
Hayek (1973: 51) declared that “it can never be advantageous to supplement the rules
governing a spontaneous order by isolated and subsidiary commands,” really existing
400 Political Studies Review 15(3)

postwar capitalism was, in fact, saved by active political regulations on both the domestic
and international scale, as Polanyi (1944: 142) anticipated in the same year: “In retrospect
our age will be credited with having seen the end of the self-regulating market.”
In the domestic sphere, the “Keynesian Welfare National State (KWNS)” in the
Atlantic Fordist world was suggested as a political solution to the worldwide crisis of
unregulated capitalism of the interwar period. Basically, the mixed economy, as opposed
to the Hayekian imaginary of the pure self-regulating market, “provided the centre of
gravity for economic, social, and political regulation.” When markets failed, the state was
“called on to compensate for these failures and to generalize prosperity to all its citizens”
(Jessop, 2002: 61).
Internationally, on the other hand, the United States as a new predominant hegemon
could unilaterally play the role of a quasi-world government pursuing fundamentally dif-
ferent goals in political economy from the past British hegemony. It has been widely
accepted that the American hegemony departed “from the principles and practices of
nineteenth-century liberalism in favor of greater governmental responsibility for eco-
nomic regulation and for the welfare of subjects” (Arrighi, 1994: 71). For example, John
Ruggie, drawing on Polanyi’s main ideas, coined the term “embedded liberalism” to
explain the novelty of the postwar international order in which the economy was re-
embedded into politics under US leadership. Ruggie charts an Atlantic-wide shift in the
social purpose of the state, by which the state’s power was utilized to “institute and safe-
guard the self-regulatory market” (Ruggie, 1982: 386). What is crucial here was the role
of the postwar international economic regimes that reflected these new legitimate social
values under the guidance of the United States. In the international context of the postwar
“compromise” embodied in the Bretton Woods system, the advanced capitalist world
shared a set of social objectives and secured the room for both domestic welfare and free
trade (Ikenberry, 2011: 175–183).

Déjà vu in Our Time: Another Cycle of the Double

Movement?
After the coming of the “enduring problem of overaccumulation pervading the whole of
capitalism since the 1970s” (Harvey, 2005: 108), however, the emergence of transnational
finance and neoliberal globalization changed the entire socioeconomic terrain. As Mark
Blyth (2002: 4) points out, “the political struggle between disembedding and reembed-
ding the market” or Polanyi’s double movement continues in our time.
A significant phenomenon concerning our topic is that “accumulation by disposses-
sion” has again moved to the fore as the primary method of capital accumulation in recent
years. Drawing on Hannah Arendt’s and Rosa Luxemburg’s ideas, David Harvey (2005:
137–182) highlights the continuous role of the predatory practices of “primitive” accumu-
lation in the history of capitalism as opposed to Marx’s (and Polanyi’s) assumption that
relegates accumulation by dispossession solely to the bloody “original” phase. To be spe-
cific, Harvey (2005: 156–161) explains that accumulation by dispossession became salient
after 1973 as compensation for the problem of overaccumulation. One of the primary
methods was a new wave of “enclosing the commons” or the wave of privatization.3
It seems that we are experiencing another breakdown of market civilization or a “Karl
Polanyi moment” (Ikenberry, 2011: 338), as dramatically exemplified in the global finan-
cial crisis of 2008. Capitalism left to rule itself “proved incapable of doing so” just as it
could not in the early twentieth century (Schwartz, 2010: 322). Moreover, after the
Cha 401

meltdown of neoliberal globalization, we are again witnessing a harbinger of an even

more dangerous situation; that is, the re-emergence of fascism (Connolly, 2013: 39–40).
If radical libertarian movements such as the Tea Party, which is amplified by resentment
among the embittered White working class, become entrenched in the conservative camp
and generate a continuous political deadlock between social forces as we have already
seen in the case of the US government shutdown of 2013, we might regrettably write
again that “the victory of fascism was made practically unavoidable by the liberals’
obstruction of any reform involving planning, regulation, or control,” as Polanyi (1944:
257) lamented before.
So, do we have another socialist or democratic alternative, as Polanyi envisioned more
than half a century ago? He stressed that as long as people are sincerely trying to create
“more abundant freedom for all,” they need not fear that “either power or planning will
turn against” them (Polanyi, 1944: 258B). From a more updated, late-modern perspec-
tive, Connolly (2013: 10) calls for a “more militant democratic politics” that has an “edu-
cated sense of the fragility of things today.” In Connolly’s (2013: 67–68) diagnosis, our
stake is now much higher in regulating the market, for the indiscriminate expansion of
neoliberalism has intensified the destructive collision between the human estate and non-
human force fields, as shown in the case of climate change and other ecological turbu-
lence.4 Today, we are facing not just the dangerous rise of fascism but also the potential
end of all human history.
In conclusion, our practical question would be whether another pendulum swing of the
“double movement” has begun in the present conjuncture. There are contesting predic-
tions, both positive and negative, in the possibility of a “second double movement” in the
contemporary world. Using worldwide survey data, Levien and Paret (2012: 741) find
“the existence of a latent global countermovement, in the form of a widespread increase
in desire for re-embedding the market at a time of global disembedding.” Gareth Dale
(2012: 18), however, insists that the “double movement is at best stalled, at worst blocked”
under the unchanged hegemony of neoliberal ideas, which has generated a flourishing
literature on “zombie” or “undead” neoliberalism even after the worldwide financial cri-
sis of 2008. Yet, what is clear is that without massive social protests that set in motion the
“double movement” in the pre-war period, our current economic crisis will not lead to
“the historical oddity” of the postwar period when, to some extent, social protection and
regulation of the market were achieved by political interventions (Schwartz, 2010: 322).
Polanyi’s lesson is that failure to confront the double challenges of unfettered capitalism
and its corollary, fascism, produced massive suffering in the past century (Block, 2001:
xxxviii). In this sense, his contemporary relevance to our late-modern condition of fragil-
ity is manifest.

Acknowledgements
The author would like to thank Nicolas Jabko, three anonymous reviewers, and the editors of Political Studies
Review for their generous comments and suggestions on earlier versions of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes
1 According to Hayek (1976: 108–109), the term catallaxy, derived from the Greek verb katalattein,
describes “the order brought about by the mutual adjustment of many individual economies in a market.”
402 Political Studies Review 15(3)

2 Actually, Connolly has long sought to rethink the terms of political economy and interrogate the underlying
assumptions of contemporary capitalism since his earlier work (Connolly and Best, 1976). In particular,
he recently returned to the topic of political economy because of the emergence of “the evangelical-
capitalist resonance machine” under the Bush administration (Connolly, 2008; Connolly and Wenman,
2008: 216–217).
3 See the special issue of Third World Quarterly on “Global Land Grabs” (Volume 34, Issue 9), especially
Hall (2013) and Cotula (2013), among others, for an overview of recent studies on the topic and detailed
empirical analyses.
4 Fred Block (2001: xxvi) insists that Polanyi himself anticipates main tenets of contemporary environmen-
talists by opposing the constitution of nature as a fictitious commodity. Furthermore, we can actually find
that Polanyi himself attended to the inherent entanglements between the market and “external causes”: an
analysis of capitalism should be situated in the outside (non-human) contexts that periodically interrupt
our economic life. This “situational character” of economic processes in Polanyi’s thinking opened up
the theoretical possibility to challenge the socio-centric assumptions underlying every economic thought,
both orthodox and unorthodox, organized around what might be called an “internal logic of explanation”
(Connolly, 2013: 190–191).

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Author Biography
Taesuh Cha is a PhD candidate in the Department of Political Science at Johns Hopkins University, Baltimore,
USA. He holds a BA and an MA in International Relations from Seoul National University. He served as a full-
time instructor at the Republic of Korea Air Force Academy and as a researcher at the Korea Institute for
Defense Analyses. He has recently finished writing a dissertation on the construction of the American standard
of civilization.