The Great Recurrence: Karl Polanyi and the crises of the European Union

• DOI: http://doi.org/10.1111/eulj.12241
• Published date: 01 July 2017
• Date: 01 July 2017
• Author: Matthias Goldmann

ORIGINAL MANUSCRIPT

The Great Recurrence: Karl Polanyi and the crises

of the European Union

Matthias Goldmann*

Abstract

In his seminal 1944 book The Great Transformation, Polanyi describes the rise and fall of liberal capitalism during

the long nineteenth century. Many have realised that Polanyi has a lot to tell about the European Union in the

aftermath of the financial crisis. The paper begins with an overview of Polanyi's historiography of the failure of

nineteenth‐century liberal capitalism and his account of the four elements that helped liberal capitalism thrive,

while precipitating its collapse—the idea of the self‐regulating market, the gold standard, international peace

and liberal constitutionalism. Thereafter, the paper describes the particular transformations that these four ele-

ments underwent in the course of European integration and after the financial crisis, with a particular focus on

the case law of the Court of Justice. The paper argues that their current constellation has a destructive potential

that exceeds the economic dimension of the Union and might pave the way for a much greater failure, one that

might defeat Europe's greatest success: the establishment of peace. Ultimately, the paper assesses current reform

proposals in light of these insights and makes a number of proposals for re‐embedding the economy in society.

1|INTRODUCTION

In his seminal 1944 book The Great Transformation, Polanyi describes the rise and fall of liberal capitalism during the

long nineteenth century. In a nutshell, he argues that liberal capitalism failed because markets that were supposed to

be self‐regulating were in fact not self‐regulating. This had fatal consequences. The idea of the self‐regulating market

was entangled with three further characteristic elements of liberal capitalism: the gold standard, international peace

and constitutionalism. According to Polanyi, the combination of these four elements precipitated the fall of liberal

capitalism.

1

I am not the first to realise that Polanyi has a lot to tell us about the recent financial crisis and its aftermath. For

example, Michelle Everson and Christian Joerges have analysed how the European Union had turned money, labour

*

Goethe University Frankfurt and Max Planck Institute for Comparative Public Law and International Law, goldmann@jur.uni‐frank-

furt.de. This paper is the substantially revised and expanded version of a keynote given at the doctoral meeting of the Budapest con-

ference of Fédération Internationale de Droit Européen (FIDE). A French language version of the keynote was published in the

proceedings of the FIDE conference. I would like to thank the organisers, and especially Petra Lea Láncos, for the opportunity to think

about these issues. For valuable feedback I am indebted to participants at the Budapest conference, at workshops at Birkbeck College

London, Universidad de Cartagena de Indias, Università degli Studi di Torino, as well as to Kanad Bagchi, Armin von Bogdandy, Iris

Canor, Francesco Costamagna, Sergio Dellavalle, Anuscheh Farahat, Christian Joerges, Silvia Steininger and Neil Walker. The anony-

mous reviewer deserves recognition for the most helpful comments that an author could wish to obtain, and Benjamin Arens and

SeoYoung Shin for their research assistance.

1

Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Beacon Press, first published 1944, 2nd edn,

2001), chs. 1 and 2.

Received: 24 April 2017 Accepted: 20 June 2017

DOI: 10.1111/eulj.12241

272 © 2017 John Wiley & Sons Ltd. Eur Law J. 2017;23:272–289.wileyonlinelibrary.com/journal/eulj

and nature into fictitious commodities in the run‐up to the crisis.

2

Nancy Fraser has investigated why we cannot

expect a counter‐movement to globalisation like the labour movement in the nineteenth century.

3

I consider it worth-

while to follow up on such analyses. I will apply Polanyi's methodological toolbox to the European Union and explore

whether the law and politics of the European Union have given rise to an entanglement of the modern‐day equiva-

lents of these four elements as constitutive parts of globalisation, which might entail fatal consequences.

In Section 2, I will describe Polanyi's historiography of the failure of nineteenth‐century liberal capitalism and his

account of the four elements that helped liberal capitalism thrive, while making it doomed at the same time. In Section

3, I will describe the particular constellation of these four elements in the post‐war period, which provided a fertile soil

on which European integration could thrive. In Section 4, I will analyse the transformation of the four elements since

the 1970s, which ushered in the return of the paradigm of the self‐regulating market. The financial crisis revealed the

destructive potential of that constellation, which has hardly changed since then. Accordingly, and this will be my the-

sis, we should not only be concerned about the state of the European economy, but also about how the current entan-

glement of the four characteristic elements of liberal capitalism might pave the way for a much greater failure, one

that might defeat Europe's greatest success: the establishment of peace. In Section 5, I conclude with some sugges-

tions as to how the European Union might wish to avoid such a consequence and achieve a more resilient shape

against the backdrop of recent reform proposals.

4

Before I proceed, a few disclaimers are in order. First, I will not approach the law of the EuropeanUnion from an

internal perspective that is first and foremost interested in the legality of a certain act.

5

Rather, in line with Polanyi's

epistemology, I will carve out law in context, i.e. law in the interplay between politics, the economy and society. My

hope is to derive some general insights about the role of law in the stabilisation of a market order that might inform

the current reform process. Second, let me be candid about my belief that history does not repeat itself. There are

remarkable differences between nineteenth‐century liberal capitalism and the variety of capitalism adopted for the

European Union since the 1970s in the era commonly known as ‘globalisation’. Also, social structures like Polanyi's

four elements do not determine historical outcomes completely. It requires acting individuals to transform a potential

disaster into an actual one. However, if we do not look at history and learn from past mistakes, we might sleepwalk

into another human, political, economic and social catastrophe.

2|THE GREAT TRANSFORMATION—THERISEANDFALLOFLIBERAL

CAPITALISM

2.1 |The rise of liberal capitalism

Polanyi argues inThe Great Transformation that the ‘long’nineteenth century lasting from the French Revolution to the

First World War experienced unprecedented levels of peace, stability and growth. This resulted from therise of liberal

capitalism and a worldwide expansion of economic activity.

6

Nevertheless, liberal capitalism suffered from a construc-

tion error. The way in which nineteenth‐century society and politics established and entrenched liberal capitalism

2

Michelle Everson and Christian Joerges, ‘Reconfiguring the Politics–Law Relationship in the Integration Project through Conflicts–

Law Constitutionalism’, (2012) 18 European Law Journal, 644; see also Christian Joerges and Josef Falke (eds.), Karl Polanyi: Globalisa-

tion and the Potential of Law in Transnational Markets (Hart, 2011). On processes of disembedding and commodification during global-

isation, see Mitchell Bernard, ‘The Second Great Transformation’, in Stephen Gill and James H. Mittelman (eds.), Innovation and

Transformation in International Studies (Cambridge University Press, 1997).

3

Nancy Fraser, ‘A Triple Movement? Parsing the Politics of Crisis after Polanyi’, (2013) 81 New Left Review, 119.

4

E.g. European Commission, ‘White Paper on the Future of Europe: Reflections and scenarios for the EU27 by 2025’(White Paper)

COM(2017)2025 final.

5

On the distinction between internal and external perspectives, see Herbert L.A. Hart, The Concept of Law (Oxford University Press,

2nd edn, 1994), 55.

6

Eric J. Hobsbawm, The Age of Empire, 1875–1914 (Vintage, 1989), 62.

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