Embedded Economies, Democracy, and the Public Interest

By Champlin, Dell P.; Knoedler, Janet T. | Journal of Economic Issues, December 2004 | Go to article overview

Embedded Economies, Democracy, and the Public Interest


Champlin, Dell P., Knoedler, Janet T., Journal of Economic Issues


Over the past four decades, observers have lamented the lack of participation in democratic processes among large segments of the U.S. population. (1) This lack of political engagement seems particularly puzzling, given the growing gap between rich and poor and the preoccupation on the part of many policy makers with policies that benefit a few individuals rather than the public. Economists, political analysts, and pundits have analyzed these issues extensively, with the problem attributed either to flaws in the political system or to failings on the part of the citizenry (Winders 1999; Neuborne 2001). In this paper, we suggest an alternative, economic explanation. Specifically, we argue that the decline of democratic participation and the increased power of private rather than public interest in the formation of policy are characteristics of a disembedded economy.

We begin our argument with the concept of disembeddedness as developed by Karl Polanyi (1957a, b) and others. The purpose of this section is to present our definition of a disembedded economy. In the following section, we explain how disembeddedness results in the relegation of democracy and the public interest to the "noneconomic" sphere of social life. We then turn from the disembedded economy to a discussion of an embedded economy. Specifically, we ask whether embeddedness would result in an economy that gives primacy to the public interest, where the meaning of "public interest" is determined by the full and active participation of all members of society. Finally, we close with some comments on the current disembeddedness of the U.S. economy and future prospects for policies in the public interest.

The Disembedded Economy

A disembedded economy may be defined as one where the dominant ideology as exemplified in economic policies and doctrines is that of disembeddedness. In a disembedded economy, the economic sphere of life is considered separate from the social and political sphere, and each sphere is understood as having its own rules or laws of motion. Disembeddedness is rooted in the belief that the economic system operates according to universal, natural laws. However, a social philosophy of natural law is a necessary but not a sufficient condition for disembeddedness. What is required is the separation of the economic order from the social and political order. The essence of disembeddedness is that the economy operates according to this natural order, but society does not. The will of human beings as expressed in cultural norms or political processes is reduced to a "constraint" on the economic sphere of life. The "natural" economy has no need for overt human control and essentially runs on automatic pilot. Indeed, interference by the state or other institutions threatens the very existence of the "natural" economy.

The idea of a natural order is an old idea in western philosophy found in Aristotle's Politics and in the writings of Aquinas (Clark 1999). The concept was revived during the seventeenth and eighteenth centuries in political theories of the state. Thomas Hobbes linked the natural order to the nature of individuals as did subsequent liberal philosophers (Manicas 1987). The relationship between the natural order and human nature is described by Dell Champlin (2003) in a recent article on the natural law view of community:

   According to this tradition, human beings are natural beings before
   they are social beings. The starting point is the individual, and
   the basic question is the existence and nature of the social order.
   The primacy of the individual in this tradition stands in stark
   contrast to a cultural view of community, which begins with the idea
   that human beings are social animals. That is, in a cultural
   community, the existence of an individual existing separate from
   society would be an anomaly in need of explanation, whereas in the
   natural community, it is the existence of society that requires
   explanation. … 

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Embedded Economies, Democracy, and the Public Interest
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