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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varied traditions and cultures of the past were superseded by a new,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
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
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
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
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.
' Arab World Books