Excerpt From False Dawn By John Gray

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The collapse of the global marketplace would be a traumatic event with unimaginable consequences. Yet I find it easier to imagine than the continuation of the present regime.
- George Soros

The origins of the catastrophe lay in the Utopian endeavour of economic liberalism to set up a self-regulating market system.
- Karl Polanyi

Mid-nineteenth century England was the subject of a far-reaching experiment in social engineering. Its objective was to free economic life from social and political control and it did so by constructing a new institution, the free market, and by breaking up the more socially rooted markets that had existed in England for centuries. The free market created a new type of economy in which prices of all goods, including labour, changed without regard to their effects on society. In the past, economic life had been constrained by the need to maintain social cohesion. It was conducted in social markets ' markets that were embedded in society and subject to many kinds of regulation and restraint. The goal of the experiment that was attempted in mid-Victorian England was to demolish these social markets, and replace them by deregulated markets that operated independently of social needs. The rupture in England's economic life produced by the creation of the free market has been called the Great Transformation.

The achievement of a similar transformation is the overriding objective today of transnational organizations such as the World Trade Organisation, the International Monetary Fund and the Organisation for Economic Cooperation and Development. In advancing this revolutionary project they are following the lead of the world's last great Enlightenment regime, the United States. The thinkers of the Enlightenment, such as Thomas Jefferson, Tom Paine, John Stuart Mill and Karl Marx never doubted that the future for every nation in the world was to accept some version of western institutions and values. A diversity of cultures was not a permanent condition of human life. It was a stage on the way to a universal civilization. All such thinkers advocated the creation of a single worldwide civilization, in which the varied traditions and cultures of the past were superseded by a new, universal community founded on reason.

The United States today is the last great power to base its policies on this enlightenment thesis. According to the 'Washington consensus', 'democratic capitalism' will soon be accepted throughout the world. A global free market will become a reality. The manifold economic cultures and systems that the world has always contained will be redundant. They will be merged into a single universal free market.

Transnational organizations animated by this philosophy have sought to impose free markets onto the economic life of societies throughout the world. They have implemented programmes of policies whose ultimate objective is to incorporate the world's diverse economies into a single global free market. This is a Utopia that can never be realized; its pursuit has already produced social dislocation and economic and political instability on a large scale.

In the United States free markets have contributed to social breakdown on a scale unknown in any other developed country. Families are weaker in America than in any other country. At the same time, social order has been propped up by a policy of mass incarceration. No other advanced industrial country, aside from post-communist Russia, uses imprisonment as a means of social control on the scale of the United States. Free markets, the desolation of families and communities and the use of the sanctions of criminal law as a last recourse against social collapse go in tandem.

Free markets have also weakened or destroyed other institutions on which social cohesion depends in the US. They have generated a long economic boom from which the majority of Americans has hardly benefited. Levels of inequality in the United States resemble those of Latin American countries more than those of any European society. Yet such direct consequences of the free market have not weakened support for it. It remains the scared cow of American politics and has become identified with America's claim to be a model for a universal civilization. The Enlightenment project and the free market have become fatefully intertwined.

A single global market is the Enlightenment's project of a universal civilization in what is likely to be its final form. It is not the only variant of that project to have been attempted in a century that is littered with false Utopias. The former Soviet Union embodied a rival Enlightenment Utopia, that of a universal civilization in which markets were replaced by central planning. The human costs of that defunct Utopia were incalculable. Millions of lives were lost through totalitarian terror, ubiquitous corruption and apocalyptic environmental degradation. An immeasurable price in human suffering was exacted by the Soviet project ' yet it failed to deliver the modernization it promised for Russia. At the close of the Soviet era Russia was in some ways further from modernity than it had been in late Tsarist times.

The Utopia of the global free market has not incurred a human cost in the way that communism did. Yet over time it may come to rival it in the suffering that it inflicts. Already it has resulted in over a hundred million peasants becoming migrant labourers in China, the exclusion from work and participation in society of tens of millions in the advanced societies, a condition of near-anarchy and rule by organized crime in parts of the post-communist world, and further devastation of the environment.

Even though a global free market cannot be reconciled with any kind of planned economy, what these Utopias have in common is more fundamental than their differences. In their cult of reason and efficiency, their ignorance of history and their contempt for the ways of life they consign to poverty or extinction, they embody the same rationalist hubris and cultural imperialism that have marked the central traditions of Enlightenment thinking throughout its history.

A global free market presupposes that economic modernization means the same thing everywhere. It interprets the globalization of the economy ' the spread of industrial production into interconnected market economies throughout the world ' as the inexorable advance of a singular type of western capitalism: the American free market.

The real history of our time is nearer the opposite. Economic modernization does not replicate the American free market system throughout the world. It works against the free market. It spawns indigenous types of capitalism that owe little to any western model.

The market economies of east Asia diverge deeply from one another, with those of China and Japan exemplifying different varieties of capitalism. Equally, Russian capitalism differs fundamentally from capitalism in China. All that these new species of capitalism have in common is that they are not converging on any western model.

The emergence of a truly global economy does not imply the extension of western values and institutions to the rest of humankind. It means the end of the epoch of western global supremacy. The original modern economies in England, western Europe and north America are not models for the new types of capitalism created by global markets. Most countries which try to refashion their economies on the model of Anglo-Saxon free markets will not achieve a sustainable modernity.

Today's Utopia of a single global market assumes that the economic life of every nation can be refashioned in the image of the American free market. Yet in the United States the free market has ruptured the liberal capitalist civilization, founded on Roosevelt's New Deal, on which its post-war prosperity rested. The United States is only the limiting case of a general truth. Wherever deregulated markets are promoted in late modern societies they engender new varieties of capitalism.

In China they have spawned a new variant of the capitalism practised by the Chinese diaspora throughout the world. In Russia the collapse of Soviet institutions has not produced free markets but instead a novel variety of post-communist anarcho-capitalism.

Nor is the growth of a world economy promoting the universal spread of western liberal democracy. In Russia it has produced a hybrid type of democratic government in which strong presidential power is central. In Singapore and Malaysia economic modernization and the growth have been achieved without loss of social cohesion by governments that reject the universal authority of liberal democracy. With luck, a similar government may emerge in China when it becomes fully post-communist.

A world economy does not make a single regime ' 'democratic capitalism' ' universal. It propagates new types of regimes as it spawns new kinds of capitalism. The global economy that is presently under construction will not assure the free market's future. It will trigger a new competition between remaining social market economies and free markets in which social markets must reform themselves profoundly or be destroyed. Yet, paradoxically, free market economies will not be the winners in this contest. For they too are being transformed out of all recognition by global competition.


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