The Rise of the Capital-state and Neo-nationalism: a Neo-Polanyian Perspective

by Oleksandr Svitych*

We are living in the times of the populist nationalist challenge to the liberal order. This challenge comes in many forms, including reactionary and progressive ones – from Marine Le Pen’s Front National in France to Jobbik in Hungary, to Manuel López Obrador’s MORENA in Mexico and Pauline Hanson’s One Nation in Australia. Nationalist sentiments have surged anew both in the “Global North” – as symbolized by Trumpism and Brexit – and in the “Global South” – as represented by aggressive nationalisms in places like India and Brazil. If we are to provide a comprehensive understanding of the neo-nationalist phenomenon, we need to transcend the culture versus economy debate and look for deeper systemic causes. This is the role that a Polanyian perspective can fulfill.
The analysis of neo-nationalism cannot be detached entirely from the processes occurring in the capitalist global economy. Political economy gives the language and the necessary analytical tools to understand neo-nationalism in the context of neoliberal globalization. In this regard, my book The Rise of the Capital-state and Neo-nationalism: A New Polanyian Moment adopts a critical political economic perspective to explore the systemic forces behind the neo-nationalist phenomenon. Broadly speaking, critical political economy problematizes taken-for-granted socio-economic and political structures and demystifies relations of power, as noted early by Robert Cox. In this book, I argue that neo-nationalism can be understood as a reaction to a renewed “great transformation,” to use Karl Polanyi’s famous term. The essence of this renewed transformation is recalibration of the nation-state from a market-limiting to a market-making one. The book’s main insight is that there is an inextricable link between free market reforms, declining state legitimacy, and identity-based mobilization.
The thrust of my argument is that an updated political economic legacy of Karl Polanyi offers insights about resurgent populist nationalism. Its root cause is the crisis of global capitalism in which the state promotes marketization through transfer of social risks onto individuals, business friendly tax regimes and assault on trade unions, and unrestricted capital mobility, among other mechanisms. Populist nationalists tap into ensuing economic anxieties and highlight the failure of the state to fulfill its social contract. They capitalize on the discontent of those who are leading increasingly insecure and precarious and take the task of defending the nation against enemies both within and outside borders. Re-discovering Polanyi today, then, offers a powerful framework to make sense of the various neo-nationalist contestations. I echo Polanyi in contending that marketization of the states and societies triggers protective reactions against economic insecurity, precarious work, and inequality. These counter movements are often reactionary, xenophobic, and violent, with people retreating into nationalism and culture.
To pursue this argument, the book makes several steps. It begins by reviewing different academic approaches to what has been described as “populism,” “radical right / left,” or “far right / left.” It also challenges the over-used term “populism” and makes an important distinction between neoliberal populism and populist nationalisms of social protection, providing evidence to illustrate the rise of these different neo-nationalisms. Next, it scales up Karl Polanyi’s double-movement thesis to explain the neo-nationalist predicament, framing the argument in terms of broader research on state transformations. While I take my starting point from Polanyi, I advocate a relation to his work that is looser, more inventive, and more empirical. In this regard, the mechanisms of change at the structural level are outlined, while paying attention to voters’ experiences and parties’ strategies. In addition, I measure the magnitude of renewed marketization through a novel data index that covers OECD countries over several decades. This index is then used to explore the linkages between state transformations and neo-nationalism.
To complement the comparative breadth of the study, four countries were selected as case studies – Hungary, Australia, France, and South Korea. In each case, I trace how the political economy context provided the background for neo-nationalist counter-movements and analyze the intersections between socio-economic transformations, their perceptions, and political strategy. To this aim, both quantitative and qualitative methods are deployed, relying on existing international surveys, secondary literature, parties’ manifestos, and ethnographic work. In tracing out the linkages between marketization and neo-nationalism, I also expose the contingency and historical specificity of the national double-movements. In this regard, my results highlight the process of uneven convergence of OECD political economies. Another common finding is that the threat of social decline accelerates xenophobic and authoritarian sentiments. There is thus inherent interaction between economic insecurity and cultural resentment.
Finally, the book evaluates the twin processes of marketization and populist nationalism against the background of the COVID-19 pandemic. I claim that the global health crisis has starkly exposed and crystallized the consequences of the renewed Polanyian transformation and associated societal reactions, including its neo-nationalist variation. The replacement of the sovereignty of the state by the “sovereignty of the market” created the conditions for this pandemic. The crisis clearly substantiated Polanyi’s insight that governing society by market alone leads to disastrous consequences. Rather than reverting to “business as usual” after a temporary dose of Keynesianism, the crisis is also an opportunity to reconsider what our economy is for and chart out alternatives to the existing socio-economic order.
Overall, the book provides an opportunity to advance the understanding of neo-nationalism that has become the new normal. By reassessing the Polanyian conceptual arsenal from a critical political economic perspective, it presents the neo-nationalist appeal as a collective coping strategy adopted by people who feel “left behind.” Neo-nationalism is on the rise because it taps into a popular demand for controlling the markets while re-asserting the power of the state. The book helps understand the inter-related nature of state, capital, and identity politicization through a broader social theoretical perspective. Not less important, I hope it helps evaluate prospects for alternatives to capitalism and the neo-nationalist struggle over belonging and meaning.
Oleksandr Svitych is an Associate Professor at the School of International Affairs, O.P. Jindal Global University. His main research interest is the relationship between markets and social stability, spanning the fields of political economy, political philosophy, and political sociology.

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