Without careful study of the overall state of the world in human, financial, political, social and ecological terms, we cannot talk about the new global order. Economics can no longer be independent of political science, sociology, demography, technology, let alone independent of national security and ecological issues. Each part cannot be aggregated at all
The world is suffering from the disparities and disputes brought about by Brexit and Sino-US trade relations, which will inevitably lead to serious anxiety – whether we are entering a chaotic era. This month, the world will witness that the above relationship can be repaired, but it is already clear that the Brexit will happen, with or without agreement; on the other hand, even if the Sino-US tariff negotiations may be eased, the relationship between the two countries will be damaged. It will take a long time to fix as ever.
This month’s “Diplomatic Magazine” raised a question: “Who will control the world, is the United States, China, or the global order?” The article “sighs” said: “Whether the world order or its founders, you are now Crisis, the future depends on who can win the opportunity. The cold reality is that stability is no longer maintained by a single hegemony, but with deteriorating social inequality and injustice. The turmoil caused by science, immigration, climate change, competitive religion and ideology, through the game between the parties to the abundance. If you believe in astrology, then the bloody moon, earthquake, and tsunami are signals that symbolize chaos in the world.
The person who predicted the demise of the self-regulating market order was Hungarian historian, sociologist and economist Carl Polanyi. His book “The Great Transformation: The Political and Economic Origins of Our Time” was published in 1944 and was paid in the same year as the Austrian economist Hayek’s book “The Road to Serfdom.” Hayek founded the Pilgrimage Mountain Society in 1947, an outstanding society that promoted the adoption of global neoliberalism, advocating free markets, free trade, free flow of capital, the rule of law, personal freedom and democratic elections. Hayek (rather than Polanyi) is the father of the current world order.
Although the socialist experiment in economics lost after the fall of the Berlin Wall in 1989, the neoliberal order began to falter after the global financial crisis of 2008-2009, losing its growth opportunities for ten years, and facing increased social inequality. And the populist sentiments against globalization and free trade have resurfaced.
Polanyi has a foresight to point out that “the concept of self-regulating the market implies a utopia. This system will destroy the human and natural nature of society as long as it runs for a period of time; it will destroy the human body and The surrounding environment has turned into a wilderness. In short, “the market mechanism is the only indicator of human destiny and its natural environment … will lead to the annihilation of society.”
Polanyi’s paper is based on four important insights.
First, the market economy is “embedded” in society, and society itself is embedded in nature. Claiming that the market is self-regulating completely defeats society and regards the market as a mechanical system in which humans and nature will become machines and gears for exploitation. Populism opposes the cruel market, and climate warming is “revenge of nature.” This shows that the “free market view” is too idealistic, at most a theory, and in the bad place it should be thrown into the historical trash can. Harmful and unhelpful ideology.
Second, in Polanyi’s view, it is an illusion to use land, labor, and capital as commodities to be exchanged, traded, and valued. Land is produced by nature and should not be seen as part of individual rights – look at GDP calculations, never counting the cost of damage to non-renewable natural resources and pollution. The labor force should not be bought and sold like a slave without human dignity. Money is simply a symbol of purchasing power generated by banks or national financial institutions. What is the true value of money when the central bank can create negative interest rates?
Third, Polanyi believes that “the social history of our time is the result of a double movement: one is the principle of economic liberalism, which aims to establish a self-regulating market; the other is the principle of social protection, guarding people and nature as a production organization. Role.” In other words, one movement promotes another reverse movement—the market creates the need for the state to regulate the market, and vice versa. This is not a matter of choosing one, but the state and the market must coexist to balance each other.
Fourth, the gold standard is the key invention, which solidifies the concept of self-regulating the market. Gold imposes “hard budget constraints” that force people and nations to live within their capabilities, but it is precisely the pain and the resulting deflation, unemployment and social crises (due to the erroneous return to the gold standard). Rebellion created conditions for the rise of fascism in the 1930s.
On the other hand, the modern central bank is a “soft budget constraint” because the central bank is required to issue more banknotes whenever the market tries to impose restrictions and individuals, companies and countries want to spend more than they can. The fact that the market has risen due to the Fed’s promise to slow down the rate hike shows that the “Greenspan Countermeasure” is widely believed. In today’s market, whenever there is turmoil, the central bank will lower interest rates or increase liquidity.
As long as central banks are willing to inject $14 trillion into the global market since 2009, and today still hold sovereign debt, equity, or even bad assets far beyond their fair share in the name of maintaining monetary and financial stability, the free market will not May exist on the reality level. If the central bankers still believe that their job is to maintain the stock market index at a stable level, then they no longer have an independent status.
Therefore, we cannot talk about the new global order without carefully studying the overall state of the world in terms of human, financial, political, social and ecological aspects. Economics can no longer be independent of political science, sociology, demography, technology, let alone independent of national security and ecological issues. The various parts simply cannot be brought together.
Polanyi is right. The 21st century is indeed undergoing a major transformation, but in fact what is happening is the “big delusion” of the order that no longer exists.