The Great Recurrence - Karl Polanyi and the Crises of the European Union

Abstract

In his seminal 1944 book “The Great Transformation”, Polanyi describes the rise and fall of liberal capitalism during the long 19th century. Many have realized 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 19th 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 elements 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.