Pope Francis’s Theory of Economics

It would make for some pretty amazing headlines if Pope Francis turned out to be a Marxist.

Between his hints at rehabilitating liberation theology—condemned by his predecessors—and talk about casting off “the economic and social structures that enslave us,” Marxism isn’t totally out of the question.

But happily for nervous church leaders, Francis’s first Apostolic Exhortation, issued Tuesday, doesn’t quite suggest someone who would get “Marx” in an Internet-style “Which Economic Theorist Are You?” quiz. Granted, he wouldn’t exactly get Friedrich von Hayek or Ayn Rand, either.

But you know whom he might plausibly be matched with, though? A favorite political economist of anti-free market academics: Karl Polanyi.

Read more. [Image: Reuters/Giampiero Sposito/Wikimedia Commons]

Polanyi wrote that the entire tradition of modern economic thought rested on a faulty concept of the economy as an interlocking system of markets that automatically adjusts supply and demand through the price mechanism. He maintained that this concept sharply differs from the reality of humans societies and that the human economy has always been and remain embedded in the society and subordinated to politics, law, morality and social relations. According to Polanyi, the classical economists’ goal of a disembedded, fully self-regulating market economy was a utopian project that could not exist for any length of time without physically destroying humans and transfomring their surroundings into a wilderness.

-Anthony M.Orum and John G.Dale in Political Sociology, Power and Partcipation in the Modern World. Fifth Edition. Oxford University Press.2009

Discussion of Karl Polanyi

my utter disgust and hatred for neoliberalism and free market policies. GAH

Machine production in a commercial society involves, in effect, no less a transformation than that of the natural and human substance of society into commodities. The conclusion, though weird, is inevitable; nothing less will serve the purpose: obviously, the dislocation caused by such devices must disjoint man’s relationships and threaten his natural habitat with annihilation.
—  Karl Polanyi (The Great Transformation)
Industrial age made it difficult for individuals to take full responsibility for themselves. To be sure, a farmer might lose his crop… But he never lacks for gainful employment. In the modern industrial age, individuals are buffeted by forces they cannot control.

Joseph Stiglitz in Polanyi, Karl. 2001. The Great Transformation. Pg. xi

AT THE HEART of the Industrial Revolution of the eighteenth century there was an almost miraculous improvement in the tools of production, which was accompanied by a catastrophic dislocation of the lives of the common people…Nowhere has liberal philosophy failed so conspicuously as in its understanding of the problem of change. Fired by an emotional faith in spontaneity, the common-sense attitude toward change was discarded in favor of a mystical readiness to accept the social consequences of economic improvement, whatever they might be.
—  Karl Polanyi, The Great Transformation.

When state policies move in the direction of disembedding through placing greater reliance on market self-regulation, ordinary people are forced to bear higher costs. Workers and their families are made more vulnerable to unemployment, farmers are exposed to greater competition from imports, and both groups are required to get by with reduced entitlements to assistance….

It often takes greater state efforts to assure that these groups will bear these increased costs without engaging in disruptive political actions. This is what Polanyi meant by his claim that ‘laissez-faire was planned’; it requires statecraft and repression to impose the logic of the market and its attendant risks on ordinary people.

—  Fred Block - Introduction to Karl Polanyi’s The Great Transformation
Economic Anthropology: Formalist/Substantivist debate

Some more notes from my economic anthropology course:

Formalists -The form of economic decision making

Formalists argue that the decrease of marginal value is a fact of life and effects all economic decisions taken in different types of economy. Economic action thus becomes a product of rational choice- a weighing of costs, effects, time and energy put into work as opposed to the benefit reaped from the action. Formalists used terminology normally used to describe capitalist economic action.

 Critique: The formalist paradigm lacked embeddedness and assumed that economy could be studied separately. It also took little account of different types of exchange that could exist apart from market exchange-such as reciprocal and redistributive exchange.

Substantivists-The substance of cultural contexts 

Emerged as critics to the formalist point of view. Substantivists’ distaste for over-generalisation led them to argue for greater embeddedness. They took into account different types of exchange and believed that scarcity of resources was not a universal human condition. They redefined scarcity as scarcity of wealth-only brought about by the recent penetration of Western capitalism. They attacked the use of capitalist terminology for other forms of economy and argued for production for use rather than production for exchange in agrarian and peasant societies.

Critique: ay have ignored general facts about human being’s relation to the world that can form a general theory for the explanation of economic action. While formalist emphasis on rationalist balancing may have been exaggerated, there is no need to discount it entirely. People do think about how best to spend their time about what they valorise most.

As Karl Polanyi (1944/2001, 155) argued, nineteenth-century liberal doctrines of laissez-faire capitalism actually promoted “an enormous increase in the administrative functions of the state” – to enclose common lands, to create pools of wage labor, to police vagrants, to provide relief for the poor, to open colonial markets, to manipulate money and credit, and so on. At the same time, these powerfully destabilizing processes and events engendered countermovements for the reasonable “self-protection of society,” in the form of trade unions, voluntary associations, public health associations, public health initiatives, and rural and environmental conservation, as well as anticolonial movements for national sovereignty. What Polanyi called the “double movement” developed over time into a strong critique of the ideology of the self-regulating market, culminating in the social institutions and economic redistributions of the modern welfare state.

Nikhil Pal Singh, “Liberalism,” Keywords for American Cultural Studies, Second Edition (ed. Bruce Burgett and Glenn Hendler), pg.156

Pope Francis's Theory of Economics

A case for the pontiff’s debt not to Karl Marx but to Karl Polanyi

“Today everything comes under the laws of competition and the survival of the fittest,” he writes. “Human beings are themselves considered consumer goods to be used and then discarded,” and “man is reduced to one of his needs alone: consumption.” He rejects the idea that “economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.” Instead, he argues, growing inequality is “the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation,” which “reject the right of states, charged with vigilance for the common good, to exercise any form of control.” And he repeats the exact language he used in an early address: “Money must serve, not rule!”

Karl Polanyi, Markets, Ficticious Commodities, and the Need to Protect Society from the Market

Land, Labour, and Money are Ficticious Commodities

“For at the heart of neoliberal and neoliberal theory lies in the necessity of construction coherent markets for land, labour, and money, and these, as Karl Polanyi pointed out, ‘are obviously not commodities … the commodity description of labour, land, and money is entirely ficticious.’” Harvey 2005, 166

Capitalism needs these fictions

“While capitalism cannot function without such fictions, it does untold damage if it fails to acknowledge the complex realities behind them.” Harvey 2005, 167

Market Mechanisms | Fictions destroy society

“To allow market mechanisms to be the sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demolition of society. For the alleged commodity ‘labor power’ cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man’s labor power, the sytem would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to that tag. Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society.” Polanyi 1944 [2001], 76 (in Harvey 2005, 167)

Society needs protection from markets

“Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organization was protected against the ravages of this satanic mill.” Polanyi 1944 [2001], 76 (in Harvey 2005, 167)


David Harvey. 2005. A Brief History of Neoliberalism

Karl Polanyi. 1944 [2001]. The Great Transformation: The Political and Economic Origins of Our Time.

Al tempo stesso la disoccupazione e sotto-occupazione generate nei paesi sviluppati dalla globalizzazione neoliberale alimentano l’insicurezza socio-economica e la rabbia tra le masse lavoratrici. Ove si consideri tale sfondo, per il prossimo futuro appare vieppiú prevedibile un diffuso aumento di proteste, scioperi, manifestazioni non di rado corredate da episodi di violenza, com’è accaduto ad Atene nel maggio 2010. Da parte loro i governi saranno sempre piú propensi a effettuare interventi repressivi nell’immediato, e a introdurre progressivamente leggi reazionarie. È un processo che ha almeno due precedenti significativi: l’Italia dei primi anni ’20 del Novecento, e la Germania dei primi anni ’30. Cade qui opportuno un altro richiamo al concetto di contromovimento avverso la società del tutto-mercato elaborato da Karl Polanyi. Un contromovimento può prendere due direzioni. Da un lato si affermerebbe la versione democratica e socialista della regolazione dell’economia tramite l’intervento dello stato nell’industria e nella finanza; dall’altro, ci si ritroverebbe con la versione autoritaria della regolazione la quale permette a industria e finanza una grande latitudine di movimento, purché assecondino i fini del regime.
—  Luciano Gallino: Finanzcapitalismo - La civiltà del denaro in crisi