Market Reforms and Market Failures: Karl Polanyi and the Paradox of Convergence

The question economics for what is an old one for those economists who have remained outside the mainstream and who have long recognized the inability of the market to resolve social problems. The need for state intervention, it has been maintained, goes well beyond the compensation for externalities generated by the market; state intervention is and has been essential to the very maintenance of the market economy itself. The bitter lessons of the 1 930s appeared to have buried the myth of the self-regulating market economy-in particular, its ability to generate full employment. Built into this was a commitment to reduce the social and economic inequities that the market had both produced and had proven incapable of resolving. The interventionist state is now cast as the menacing state: it is said to have destroyed economic initiative; its excessive expenditures on social programs, we are told, have produced a society of dependents. We have now experienced more than a decade of laissez-faire rhetoric; bombast has replaced analysis; liberalism has been assailed not only as inherently anti-market and anti-progress, but also for undermining the moral values of society. As economic malaise and social ills are increasingly perceived to be the result of more than four decades of active state intervention in the