The European Debt Crisis in France and Germany through the Lens of the 1930s: A Polanyian Reading

Goodliffe, Gabriel (2015) The European Debt Crisis in France and Germany through the Lens of the 1930s: A Polanyian Reading. [Conference Proceedings] (Submitted)

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Abstract

Introduction: In The Great Transformation, Karl Polanyi develops a critique of the nineteenth and twentieth liberal project to create a self-regulating market economy in terms of both its economic and political ramifications. This critique focuses first and foremost on his analysis of the dysfunction of the interwar gold standard, broken down in terms of its international and national articulations. Internationally, Polanyi conceived the gold standard as an institutional mechanism that created and extended the free market economic system across the globe. Politically, it constituted the anchor underpinning the Pax Britannica of the second half of the nineteenth century and, during a fleeting moment in the second half of the 1920s, the liberal Europe of Locarno. At the domestic level, the gold standard served as the policing agent of economic liberalism that went hand in hand with constitutional liberalism as the twin institutional foundations of the 19th century social order. Accordingly, the breakdown of the gold standard during the 1930s augured for Polanyi the destruction of this liberal European economic and political order. The emergence of explicitly anti-liberal political and economic regimes on the continent disrupted the international balance of power and set the stage for the conflagration of World War II. Thus, the breakdown of the interwar gold standard provided “the invisible link between the disintegration of [the] world economy since the turn of the century and the transformation of a whole civilization in the 1930s,” thereby underscoring the historic failure of “the utopian endeavor of economic liberalism to set up a self-regulating market system.”1

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