Although there are some points of similarity, the 2007-08 financial crisis is not tied to the same narrative as the 1929 Great Depression that Karl Polanyi analysed (1933). However, the most recent financial bust reveals the same incessant pull between proponents of laissez faire and the movement of protection of society as the Great Depression did. Indeed, “the dire consequences of the 2007-08 crisis are a testament to the power of Polanyi’s insights on the perils of the market” (Gemici, 2014, p. 2), in that one finds an adequate explanation to the crisis in Polanyi’s framework of analysis. Through such a theoretical understanding, this paper will show that the boom and bust or bubble and burst cycles of our market economies are not the result …show more content…
The 2007-08 downturn was the culmination of a boom in credit and debt (Chwieroth, 2011, p.2), as money, which was not produced for sale on the market from a Polanyian perspective, was used as such. Financial markets are thus inherently crisis prone, as money is the fictitious commodity that is sold. Money serves social functions, other than increasing wealth through self-valorisation (Watson, 2005, p. 151). When the latter occurs, the social function of money as a means of exchange is endangered. This is when crisis is triggered. The crisis is that of the value of money as a means of exchange. But it is also a social crisis, as individuals’ use of money is disrupted. Also, a lack of monetary steering exacerbates crises, according to Polanyi (Frerichs, 2013, p. 22). This is what happened in the build up to the 2007-08 crash. The US Federal Reserve implemented an “easy” monetary policy at the beginning of the 2000s and in the period leading up to the housing boom (Taylor, 2009), which was essentially a policy of spurring indebtedness (Jackson, 2009, p.10). This cannot quite be called laissez faire policy, but it is a liberal policy that encouraged the exchange of money as a commodity. This lax monetary policy encouraged excessive leverage (Carmasi et al., 2009), which exacerbated the crisis and explains the extent of the credit failure. Indeed, there seems to be a consensus in much of the literature on the causes of this crisis that the easing of monetary policy is what compounded the “borrowing binge” (Lucarelli, 2012). It must be said here that Polanyi would have seen this as an element of the laissez faire movement in the sense that it encouraged market processes. Though it cannot be called laissez faire as such because it was a result of government action, actors of the double movement can divide along multiple lines (Block, 2008, p. 18) and one class can encourage seemingly