The problem of contemporary capitalism is not unequal distributions of income, but unequal distributions of power – contra the 1AC’s depiction of inequality as an unfortunate byproduct of otherwise free and voluntary markets, grappling with inequality requires recognizing the constitutive nature of legally administered coercion to market transactions. The markets have not failed; they are working exactly as they are supposed to

Margaret R. Somers, “Toward a predistributive democracy: Diagnosing oligarchy, dedemocratization, and the deceits of market justice,” in The Condition of Democracy: Neoliberal Politics and Sociological Perspectives, vol. 1, eds. Jürgen Mackert, Hannah Wolf and Bryan S. Turner, Routledge 2021, pp. 62-64, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3888508.

The power of predistribution: Denaturalizing market naturalism

Market naturalism is of course a complete fiction: the market has no laws, natural or otherwise; there is no market neutrality free of power and politics; unequal income and wealth do not reflect market justice, merit, or worth; nor is there any moral justification for restricting democratic practices to that of market-conformity. No matter; with market naturalism and justice political economy produced the most formidable ideational regime of the last two centuries, one which continues to give moral credit to the wealthy while shaming the poor for moral deficiencies; to condemn government efforts to alleviate the suffering of those in need; and to legally enhance and protect the power of capital over and against that of a democratic citizenry.

Against the metaphysics of market naturalism, Polanyi ([1944] 2001) challenged the assumptions that endowed market justice with the privilege of adjudicating moral worth. His method was to reverse engineer the epistemic sleight of hand by which the market was made morally privileged precisely because it was declared free of moral contamination and political interest. Since the entire edifice rested on the nominalist naturalism of the economy, he had only to dismantle this naturalist illusion and the moral code of market justice would collapse precipitously.

Polanyi (1957) developed an alternative institutionalist political economy based on the premise that all of social life is based on institutions, coercion, and power rather than nature, voluntarism, and neutrality, and that free markets do not exist in the wild but are engineered to appear as such. His most counterintuitive and paradigm-changing argument is that actual markets are constituted by the very power, coercion, and violence abhorred and repudiated by the market naturalist ideal. Free market doctrine claims an economy made efficient and free by its liberation from government interference, but Polanyi denies that markets and governments are separate and autonomous entities. Government action cannot ‘interfere’ in the economy; government rules, rights, and legal powers are what constitute the economy in the first place. The market is itself an allocative institution of power.

What appear to be free, natural, and autonomous markets are politically engineered in at least three ways: (1) predistributive legal and political power; (2) the power to extract social wealth and convert it to private gain; (3) the power to disempower democracy.

From the myth of the stateless market to predistributive political engineering

The concept of predistribution20 conveys the Polanyian (1957) insight that primary market outcomes (wages, income, wealth), which appear to be the result of impersonal autonomous market forces (globalization, automation, the price mechanism), are in fact driven by government policies, legal coercions, and institutional powers. The concept plays on the contrast with the more familiar one of redistribution: whereas the latter focuses on government policies (especially taxation) outside the economy, predistribution exposes how government policies and legal powers actually shape the structure of markets inside the economy and influence primary market predistribution. It upends the binary that attributes politics, power, and governance to the public sphere, and freedom from power to the private. By putting law and government engineering into the heart of the price mechanism, predistribution challenges the very idea of the economy as the ‘private’ sector separate from government and law and puts an end to the myth of the stateless market.21

Examples of predistributive governance that are treated as natural to markets include copyright and patent laws that favour Big Pharma and obstruct fair competition (intellectual property law); crippling anti-union judicial rulings that have created radical asymmetries of power in waged labour and in the workplace (contract law); vigorous disabling of anti-trust law since the 1970s, leading to massive corporate consolidation (monopolies and anti-trust); financial instruments that create wealth out of legal technologies; bankruptcy laws written by the financial sector (bankruptcy law); and defanged regulatory agencies (lack of enforcement).22

A key feature of predistributive practices is that they are designed to occlude the exercise of political or legal power inside the economy and to instead appear simply to be in the nature of things. Unlike redistribution, which is aggressively contested in the open realm of government policy and legislative debate, predistribution operates inside the black box of the market, and is fiercely shielded from public scrutiny. The result is that market outcomes continue to be perceived as reflecting impersonal natural market forces. Indeed, the very novelty and unfamiliarity of the term ‘predistribution’ testifies to the successful depoliticization of primary market inequalities, making the ever increasing levels of wealth that have moved upward to the rich and super rich appear nonpolitical and simply market driven rather than as the result of predistributive power.23 Alas even much of the left tends to attribute decades of rising inequality to ‘unfettered’ and ‘deregulated’ markets rather than to politically and legally engineered ones.24

Predistribution, as a concept, echoes the pathbreaking insights of the legal realists (Block, 2013; Britton-Purdy et al., 2020; Fried, 1998; Hale, 1920, 1923, 1943; Rahman, 2016b) and American institutionalists (Novak, 2019; Veblen, 1904, 1936; Commons, 1924, 1934) who in the 1920s and 1930s argued that contra the laissez-faire free contract ideology of their day, the economy is constitutively enmeshed in legally administered coercions.25 They demonstrated how those coercions underpinned all economic transactions through the rights and capacities allocated by law to market participants, which in turn explains the relative bargaining power of labour and employers, of renters and property owners, of consumers and firms, and so on (see also Woodruff, 2014). Like legal realism, predistribution exposes the deceit that attributes power and coercion exclusively to the state, while denying the power of political and legal engineering to effect market outcomes.