Ch. 3: From the Great
Transformation to Global Free
Market
John Gray (Excerpted from Gray, “From the
Great Transformation to the Global Free
Market,” in False Dawn: The Delusions of
Global Capitalism, The New Press, 1998)
1

“The origins of the catastrophe lay in the
Utopian endeavour of economic liberalism
to set up a self-regulating market system”
(Karl Polanyi, The Great Transformation,
1944)
2
The Great Transformation

The Great Transformation: the creation of
free market to replace social market
– Also the title of Karl Polanyi's 1944 book about
this process, the destruction of the
“commons,” replacement by enclosures, and
the countermovement in defense of
society/social needs
3
social market vs free market

In the past, economic life in the West was
constrained by need to maintain social cohesion;
it was conducted in "social markets“
– Social markets are regulated, by social norms/values
and governments
– Today, Scandinavian are known for having social
market economies

The free market created a new type of economy
in which prices of all goods, including labor,
changed without regard to effects on society
– Free markets are deregulated & operate
independently of social needs
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The Enlightenment thesis
Enlightenment thinkers (Jefferson, Paine,
Mill and Marx) believed all nations would
eventually adopt some version of Western
institutions & values
 Diversity of cultures is temporary, a stage
on the way to universal civilization
 Traditions and cultures of the past will be
superseded by a new, universal
community founded on “reason”

5
Washington consensus
Economic policies advanced by the US
Administration and Congress as well as the DCbased IMF & World Bank
 Key elements are trade liberalization,
privatization, deregulation, etc., that are often
applied to all countries and all situations – in a
“one-size-fits-all” way that ignores local
conditions and cultural diversity
 Gray sees the Washington Consensus as the
latest manifestation of the Enlightenment thesis

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But “progress” on the way to universal
civilization has not come easily
The push for a single global free market, a
Utopia, has already produced social
dislocation and political instability on a
large scale
 Enlightenment utopias (capitalist or
communist) embody rationalist hubris &
cultural imperialism (27)

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Imperialism

imperialism: the policy of forcefully
extending a nation's authority by territorial
gain or by the establishment of economic
and political dominance over other nations
– cultural imperialism involves the extension of
Western values and norms across the world
8
The free market: myth vs reality

Free market economy – in which markets are
entirely free from social or political control – was
a myth even in the 19th century, during the era
of laissez-faire
– It was created by state coercion, and depended on
power of governments to work

The reality is that across history there have
always been a “varieties of capitalism”
– Today our “world economy” propagates new regimes
& spawns new kinds of capitalism (27)
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The central paradox of our time:
1. Economic globalization does not
strengthen the current regime of global
laissez-faire but works to undermine it
1. -and creates political countermovements
opposed to “globalization,” or the current
form of globalization, at least
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