The Second Time Around? Polanyi and Today's Fascist Tendency

By Richard Sandbrook

Vanquished in 1945, the fascist threat again features on the opinion pages of newspapers and journals worldwide. “Strongman” far-right populist movements are now legion. The list of incumbent strongmen in Europe and North America includes Vladimir Putin (the patron saint of Western ethnic nationalists), Recep Tayyip Erdogan, Viktor Orban, Jaroslaw Kaczynski, and Donald Trump. Neo-fascists narrowly lost recent elections in Austria, the Netherlands, and France. And the collapsing support for the parties of the democratic left mirrors and abets this rightward trend.

How should we characterize these right-wing movements? What accounts for their rise? And what are their implications for world order in light of the aggressive nature of unleashed ethnic nationalism? I contend that, with appropriate qualifications, Polanyi’s work provides an important insight into these questions.

Polanyi concerned himself with fascism since his years in Vienna in the 1920s. It was precisely the rise of fascism—its incubation during the Great Depression, and its culmination in the Second World War—that spurred Karl Polanyi to write his masterpiece, The Great Transform-ation (1944 2001).

Polanyi characterized fascist movements arrestingly as a virus endemic to capitalism in an unpublished article, circa 1934, entitled “The Fascist Virus.” Fascism is a virus that, during normal times, remains latent within capitalism. At times of systemic crisis, however, it becomes virulent. The association of fascism with capitalism arises because of the inherent tension between capitalism and democracy, according to Polanyi. Capitalism is the sphere of private property, accumulation and, if the project of free markets holds sway, vast economic and hence political inequality and social dislocation. Democracy, in contrast, is theoretically the sphere of political equality where popular sovereignty governs decision making. The counter-movement of societal protection inevitably looks to the sphere of electoral politics and government to protect its constituent elements from the destructiveness of unleashed market forces. At times of crisis, demands may escalate, threatening even the basic principle of private property. This clash between the economic and political spheres releases the virus of fascism into the body politic.

Fascism is like influenza

Extrapolating from Polanyi’s thinking, we can portray fascism as a counter-revolution waged from above in countries where some degree of democratic politics obtains. For those determined to restore the “natural” order of private property, class privilege, and profitability, the key question arises: how to achieve this goal in an ostensibly democratic system where the majority rules? The only way is to attack liberal values as corrupt and channel popular anger via evocative stereotypes and conspiracy theories that inflame nationalist, racist or religious cleavages.

These tactics neutralize class struggle, which might otherwise overwhelm the coping mechanisms of the minority. If the top-down strategy succeeds, the outcome is an authoritarian, regulated capitalism with secure property rights that governs by stoking fear and hatred of outgroups.

The “virus” metaphor is an apt one. Fascism is like influenza. Often, flu takes a relatively mild form (right-wing populism). But under certain conducive conditions, it assumes the virulent form of National Socialism (Nazism), which threatens death and war. But the mild forms can mutate into the more virulent one.

Today, we need to take the chance of a virulent outbreak seriously. Russia, Hungary, Poland, and Turkey are close to neo-fascist regimes. Austria, the Netherlands and France held presidential or parliamentary elections in 2016-2017 in which the neo-fascist alternative took second place. And Donald Trump as president continues to weaken democratic institutions and undermine an inclusive society in the United States. Significant movements of the populist far right also exist in Bulgaria, Greece, and Scandinavia. Centrist candidates may prevail this time, but what happens in the next elections if current socioeconomic trends continue?

Yet we must be careful not to overstate the challenge: Contemporary nativist-populists are not full-blown fascists in the mould of Hitler and Mussolini. Fascism is a vague and contested phenomenon. However, most analysts would agree that it includes at least the following three features:

Most of today’s populists do not fulfill all these criteria; yet we find disturbing echoes of all or most of these elements in right-wing populisms. Hence, I refer only to a fascist tendency, not fascism as such.

Yet the danger is clear—that a severe crisis, or a series of crises, may overwhelm the remaining democratic safeguards, propelling societies into full-blown fascist regimes.

What accounts for the populist success? In each country, of course, one finds peculiar cultural and historical legacies and demographic profiles that play some part in generating resentment. But it would be a mistake to claim that these peculiarities do more than accelerate trends. Fascism and its cousins are a response to severe social dislocations. What are the nature and origins of these dislocations?

Polanyi’s analysis of European fascism has the advantage of a holistic, historical approach that situates the social breakdown within the complex political-economic dynamics of what he called “market society.”

Fascism, together with Stalinism, he argues in The Great Transformation, “was rooted in a market system that refused to function.” He contends that we should not seek the origins of fascist success in the organizational prowess of its parties or the exceptional skills and appeal of its leaders. Bluntly put, circumstances make fascism.

As proof for this interpretation, he relates successive socio-economic situations to the fluctuating fortunes of fascist movements. The tumultuous era 1917-23 saw conservative movements in a few countries solicit fascist assistance to restore economic and social order. However, when markets functioned well in 1924-28, fascism faded away. Fascist movements forged ahead in the period following the economic collapse of 1929. Fascism offered a solution to the deep crisis of industrial capitalism.

The Double Movement

To this point, the Polanyian thesis is interesting but relatively commonplace. What raises the theory above the mundane is the causal link he posits among four processes: the dynamics of capitalism, economic collapse, fascism, and war. The key is what I call the “dynamics of capitalism” and Polanyi refers to as the “double movement.”

The double movement is a complex explanatory device. Its essence is the inevitable emergence of a heterogeneous counter-movement of societal protection in liberal capitalism. The inevitability arises from the social and ecological devastation of the liberal movement’s drive to commodify land, labour, and money (to which we should add knowledge). The movement’s mantra is free markets, privatization, the gold standard, the liberal state, and free trade. The closer the movement comes to realizing the utopian ideal of the self-regulating market, the greater the dislocations: market volatility, economic insecurity, destruction of traditional morality, and environmental decay. The coun­ter-movement, comprising such contradictory elements as conservatives, landlords, social democrats, communists, trade unions, conservationists, and fascists, respond with demands to regulate, contain or transcend market forces. For Polanyi, the Great Depression was the outcome of a stalemate in which the counter-movement was strong enough to use the state to restrict markets and undermine their logic, but not to supersede them.

With stalemate, the market system seizes up, leading to a political as well as an economic crisis. This crisis, feeding the fury of ordinary people buffeted by global forces they do not understand, lays the groundwork for a fascist, authoritarian reaction—in countries where democratic institutions are not solidly grounded.

The strengths of this theory include its concision, its transdisciplinary framework, and its marrying of international factors (the gold standard, foreign trade) with domestic variables (the market, the liberal state, political movements). But we should also note one of its main failings. Stalemate, contrary to what Polanyi suggests, is not the necessary outcome of the double movement. It is possible for the movement and counter-movement to arrive at a societal accord that brings relative stability and widespread prosperity for a considerable time. The Keynesian era from 1947 until the mid-1970s is an important case in point. Capitalism is more flexible than Polanyi supposed, often able to adjust adeptly to regulations that its proponents vigorously denounce.

With this proviso in mind, what is the relevance of Polanyi’s theory of fascism to today’s rise of right-wing populism? We find a lot of parallels, though his theory needs to be qualified and supplemented.

Qualifying Polanyi’s Theory

Does the present fascist tendency stem from “a market system that refused to function?” Not exactly. The world economic crisis of 2008-2009 did not lead to another Great Depression. Our era is not one of generalized economic contraction, though specific countries are suffering this fate (especially those, like Greece and Brazil, who are following austerity programs). Growth, though halting, is the norm. Unemployment is not sky-high in most advanced capitalist countries (except among youth). We cannot aptly refer to a politico-economic stalemate in most cases.

Nor is neoliberalism (“market society”) the whole problem. Technological change has played a key role in speeding up the pace and scope of social dislocation. Without the revolutions in transport, communications, and information-processing, the complex, instantaneous world of neoliberal globalization could not exist. And the development of artificial intelligence and robots is displacing occupations, including skilled ones, at an accelerating pace. Techno­logical change, though not independent of the power structure whose interests it serves, is a powerful source of angst and insecurity world-wide.

Yet even if it is an exaggeration to say that the market system refuses to function, it is not functioning at all well. The ideal of the self-regulating market returned with a vengeance with the shattering of the Keynesian consensus in the mid-1970s and the rise of neoliberalism.

The movement to restore liberal capitalism has meant, as David Harvey observes in A Brief History of Neolib­eralism, the restoration of the class power and privilege of capital and its allies. This restoration in the United States, the United Kingdom and elsewhere has returned their societies to the Gilded Age. In overplaying their hand, the ruling elites have set in motion cataclysmic forces they may be unable to control.

For indeed, many people do experience our time as one of socio-economic crisis. They seek protection from unrestrained markets that are undermining the ecological and social foundations of societies.

In response to these trends, Polanyi’s “double movement” is again evident. But a different dynamic obtains today. The neoliberal movement to recreate untrammeled markets in labor, land, money and knowledge nationally and unrestricted trade, investment and financial flows globally, has inevitably sparked a societal countermovement. However, the leftist elements of the countermovement have proved ineffectual this time. The collapse of tyrannical state socialisms in the 1980s and 1990s has undermined faith in the socialist alternative.

Social Democracy’s decline

Meanwhile, the social-democratic parties that thrived in the Keynesian period are suffering electoral free-fall throughout the world. They have had no persuasive answer to the neoliberal challenge of privatization, liberalization, and the global market. Instead, versions of the Third Way have proliferated since the 1990s, signifying the left’s adoption of many neoliberal policies—including ultimately austerity to reduce deficits. We must recognize that social democrats face a perplexing challenge, however. How can their parties forge progressive social accords (akin to Keynesianism) in a world of globalized markets, an industrial working class in decline, dissipating union power?

The left’s weakness has opened the way for demagogues of the populist right to exploit the rage of unprotected citizens. It welds together traditionally right-wing constituencies opposed to progressive values with a traditionally left constituency that feels abandoned and left behind by progressive elites, together with an anti-immigrant, racist and/or homophobic constituency. In the economic realm, they advocate economic nationalism, including controls on globalization and/or leaving the European Union. Blaming foreigners and distant governmental elites for problems simplifies a world in which unfathomably complex global processes are at work. In addition, the populists promise to restore social solidarity and moral values by placing restrictions on immigrants, multiculturalism and sexual minorities. Chauvinism channels rage.

Yet right-wing nativist-populism is not a classic Polanyian counter-movement. It purports to protect society from global capitalism and its elite defenders; in practice, however, it accommodates the liberal movement on key policies.

Consider Trumpism. On the one hand, Trump appeals to those left behind by posing as the savior of “real” or authentic Americans. His promise to “Make America Great Again” conjures up the image of a return to an earlier era when whites were firmly in control, lucrative factory jobs were widely available and traditional cultural norms held sway. His opposition to global entanglements, free trade, and the export of jobs is societally protective. He promises to safeguard public health care coverage and government benefits in general. He undertakes to create new jobs through a massive infrastructural building program. Finally, he proclaims his intention to shelter society from the terrorism, criminality, and job competition that immigrants allegedly propagate by closing off the open borders. In these ways, Trumpism operates as a counter-movement.

On the other hand, other Trump policies and actions buttress the liberal movement. He does not blame markets for the mess; he is not against sacrosanct capitalism. He also fills his cabinet with prominent figures from Wall Street. He promises tax cuts, which will disproportionately benefit the wealthy and corporations. He undertakes massive de-regulation of markets. He intends to roll back Obama-era restrictions on the financial sector and health “markets”. He is exploring public-private partnerships in his infrastructure program. There is even the possibility of state support for private schools. Trumpism is thus an ambiguous (counter)movement, blaming “them”, but not capitalism, for the devastation. But this ambiguity is common to fascism: it allows far-right populists to garner reluctant conservative supporters, who reckon they can block the zanier promises and threatening rhetoric of the populist leader.

Climate and A destructive market

The danger in this situation fits well with the Polanyian thesis. The market system has become highly destructive as neoliberals drive to institute the self-regulating market, the damage being accelerated by rapid technological change. The relentless onset of climate change, in particular, raises tensions within and between countries as livelihoods vanish, resources become scarce, population centres are inundated, and environmental refugees seek sanctuaries. To make matters worse, the left has not yet succeeded in devising an egalitarian, sustainable, and societally protective alternative (other than stiffer regulation). Consequently, populist leaders have exploited the rage and despair attendant upon an out-of-control market. But if populism’s incoherent program fails, if a major economic setback occurs, if global warming accelerates, the scene is set for a full-fledged fascist reaction.

Right-wing populism, having undermined the legitimacy of democratic institutions—the “loyal” opposition, the press, the judiciary, the electoral system—and having polarized the ­population, may turn to an intolerant, fascist “solution.”

Such an eventuality would have dire implications for the international order. I suggested earlier that Polanyi’s model draws causal links among the dynamics of capitalism, economic calamity, fascism, and war. We now have arrived at the final link. A mutually reinforcing spiral of right-wing electoral shifts in the Western world is conceivable. If the 2017 presidential election in France had brought Marine Le Pen to power, the European Union would probably have crumbled. This catastrophe would have encouraged Russia to intervene further in promoting its surrogates in insurrections in the countries of the former Soviet Union. But this outcome may have just been delayed rather than obviated. Intolerant ethnic nationalism may still be unleashed.

The antidote to the fascist virus is clear. Fascism translates widespread economic and cultural insecurity into populist-authoritarian nativism. Neo-liberalism has created these insecurities, but it seems to have no viable remedies. Austerity, a widely utilized response to economic imbalances, magnifies insecurity and thus increases the risk of a pandemic.

What then to do? Outright racists, anti-Semites and Islamophobes will always be present, and few will be converted from their poisonous views. But they are a minority. The majority, we must believe, are open to a positive program that incorporates all those groups that feel left behind by the upheavals of neoliberal globalization and job-destroying technological change. A rejuvenated left must include the excluded through both policy and symbolism. The increasing income deriving from higher productivity must be shared with those who bear the pain. Easy to say, but much harder to do.

In the longer term, the inherent contradiction between capitalism and democracy can be positively resolved by extending democracy into the economic realm. This extension can involve various mechanisms, not all of which are revolutionary. Polanyi himself expressed an apocalyptic view of the future: either regression into the dark night of fascism or movement toward democratic socialism and the abolition of the market system. But Polanyi, I think, underestimated the protean nature of capitalism. “Socialism or barbarism” is not a correct prognosis (depending on what one means by socialism); indeed to hold rigidly to that bifurcated vision is a recipe for barbarism.

Richard Sandbrook is a professor emeritus of political science, University of Toronto.

Peace Magazine July-September 2017

Peace Magazine July-September 2017, page 20. Some rights reserved.

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