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F&L Blog – Profiting from Neoliberalism

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Profiting from Neoliberalism: How the Radical Right Gains From Crumbling Public Services

by Simone Cremaschi

23.10.2025

The rise of the far right is often linked to economic decline and depopulation of “left behind regions”. But could public service cuts, as part of broader neoliberal austerity policies, play an independent role? In this blog, Simone Cremaschi cites research he and his colleagues have conducted into otherwise similar municipalities in Italy, which, for varying reasons, underwent significantly different levels of public service cuts. They found evidence that regions with steeper retrenchments recorded higher shifts in support for the far-right. Using zero-sum logic, far-right parties have been able to frame shrinking services as a problem of demand, not supply. This suggests that restoring and rebuilding public services could halt the rise of the far-right. The question now is whether mainstream parties will re-build the credibility and support to do so.

Public services across Western Europe are under strain. Years of economic stagnation, financial crises, a pandemic, and rising energy prices have left governments with record debt and soaring interest payments. As a growing share of tax revenue is swallowed by debt service, less remains for hospitals, schools, and local infrastructure. These constraints leave little room to reverse a decade of neoliberal-imposed austerity, which closed or hollowed out key public services – from rural post offices and public transport links to police stations and GP practices in major cities.

One might expect these conditions to benefit parties on the left, traditionally associated with calls for higher public spending and stronger social support. Yet a series of empirical studies I have conducted with co-authors shows that reduced access to public services – what we call public service deprivation– often fuels support for radical-right parties instead.[i] This political backlash to service cuts helps explain why these parties have made such significant inroads into mainstream politics in the past years.

We began our research in Italy, where policy debates in recent years have devoted considerable attention to so-called “inner areas” – areas marked by economic stagnation, depopulation, and isolation from essential services such as schools, hospitals, and train stations. These territories struck us as the concrete embodiment of the “left-behind places” often invoked by journalists to explain the geographic concentration of support for radical-right leaders like Donald Trump, or the Brexit referendum. This led us to ask whether the availability – or withdrawal – of public services could be driving this geography of discontent.

How Public Service Deprivation Fuels Exclusionary Politics

"public services are the primary channel through which citizens interact with the state [...] their decline strikes at the heart of the social contract. These grievances translate into a demand for solutions at the ballot box, creating fertile ground for parties that promise to restore services by reallocating them toward “deserving” locals."

We began answering this question by studying a 2010 reform that required Italian municipalities below a fixed population threshold to deliver key public services – such as policing and waste collection – jointly with neighboring municipalities. Because of an arbitrary cut-off, it created a natural experiment: some municipalities were forced to amalgamate services while others of a similar size were not. This allowed us to compare municipalities in these two groups across time and isolate the effect of reducing public services on electoral outcomes. Our results, published in the American Journal of Political Science [ii], show that this reform ultimately reduced access to essential services and, in turn, boosted support for radical-right parties such as Salvini’s League among affected voters in the years that followed.

Our analysis suggests that public service deprivation fuels radical-right support by generating grievances that resonate with political rhetoric linking declining services to immigration. When communities accustomed to reliable public provision – as is common in Italy and Western Europe – experience sudden deterioration, they develop a sense of unfairness and neglect: a perception that “their” community is no longer receiving its fair share of resources and that political elites do not care. Because public services are the primary channel through which citizens interact with the state and observe how their taxes are spent, their decline strikes at the heart of the social contract. These grievances translate into a demand for solutions at the ballot box, creating fertile ground for parties that promise to restore services by reallocating them toward “deserving” locals.

Radical-right parties have proven particularly adept at meeting this demand. In our data, we show that they increasingly mobilized the issue of public services after the 2010 reform in Italy, framing service decline as a consequence of immigration and of a state that prioritizes “undeserving outsiders” over “deserving locals.” Even though immigrants are not the primary drivers of service retrenchment, this rhetoric resonates with zero-sum thinking triggered by service cutbacks, because public services are difficult to exclude users from. Consistent with this mechanism, we find that attitudes toward immigrants worsened in municipalities affected by the reform, helping to explain why voters in these areas shifted toward parties such as the League.

How Public Services Shape Political Reactions to Economic Shocks

Public services matter not only because their decline directly pushes voters toward the radical right, but also because they shape how communities respond to other crises. Economic shocks – from import competition to de-industrialization and technological change – are well-known triggers of discontent that radical-right leaders can mobilize. When communities have long felt neglected by the state, these shocks are more easily interpreted as yet another sign of abandonment, paving the way for a radical-right turn. We document this dynamic in a study recently published in the American Political Science Review [ii].

In this study, we turn to Xylella, a plant disease epidemic that exterminated olive trees in southern Puglia (the heel of Italy’s boot) between 2014 and 2016. As with the 2010 public service reform, this epidemic created a rare natural experiment. The bacterium arrived by chance on a boat from Costa Rica, landing in the port of Gallipoli, and spread northward, killing millions of trees before containment measures halted its advance roughly 200 kilometers away – leaving neighboring olive-producing regions largely untouched. This sharp boundary gave us a unique opportunity to compare affected and unaffected areas before and after the shock – something rarely possible since most economic shocks unfold gradually and across much larger regions. Our results show that this had similar electoral effects to other economic shocks observed across the United States and Western Europe, increasing support for radical-right parties – most notably Meloni’s Brothers of Italy – across affected areas.

"When communities experience prolonged public service deprivation, they develop a community narrative of abandonment by the state and political elites."

Our analysis explains why the plant disease epidemic led to a radical-right turn by highlighting the key role of public services. Combining statistical analysis with qualitative fieldwork in the most affected municipalities, we show that the epidemic not only disrupted a vital economic sector but also uprooted community life and identities that had been built over centuries around olive cultivation and oil production. The sudden extermination of olive trees generated deep concerns about the future of these communities, heightening the appeal of radical-right narratives that frame political elites as indifferent and promise to restore the status of neglected areas. Crucially, this effect was not uniform: we find that communities with a history of poorer access to public services were significantly more likely to shift their support toward radical-right parties.

Because public services are the primary channel through which citizens interact with the state, the level of service access available to a community shapes how residents see themselves and their relationship with public institutions. Over time, collective identities become embedded in the stories people tell each other about the place where they live. These stories, passed among neighbors and across generations, form a shared lens for interpreting new events. When communities experience prolonged public service deprivation, they develop a community narrative of abandonment by the state and political elites. In the case of Xylella in Italy, areas that had internalized this narrative interpreted the epidemic as yet another instance of state neglect. This interpretation resonated strongly with radical-right messaging, amplifying the turn toward radical-right parties in the wake of the shock.

How the Radical Right Gains Across Europe

"Finding credible and popular responses to public service decline remains a key political challenge in the years ahead, but one we surely must tackle if we are to halt the continued rise of the radical right."

Rising radical-right support in response to public service cuts is not just an Italian story. Across Europe, researchers have shown that when schools or hospitals close – as in parts of Germany and Denmark – trust in the state falls and radical-right parties gain ground [iii, iv]. Another study, recently published in the American Journal of Political Science [v], finds that austerity measures across Europe – often targeting public services – boosted radical-right voting in economically vulnerable regions.

England offers a particularly telling example. The National Health Service (NHS) is one of the largest publicly funded health care systems in the world, a clear symbol of the state’s duty to care for its people and one widely supported across the political spectrum. Yet public satisfaction with the NHS is sinking to its lowest level. A key source of frustration has been the steady disappearance of local doctors’ offices: since 2013, nearly 1,700 GP practices have shut down or merged – more than a quarter of England’s local clinics.

In a new study, we find that these closures have fuelled support for the radical right. Using data on every GP practice closure since 2013, we show that voters affected by closures report worse experiences with the health system and become more likely to support parties like UKIP and Reform UK. Examining political messaging, we find that these parties have effectively connected NHS pressures to immigration in their discourse. And, indeed, the shift toward the radical right is strongest in places with higher immigration, where the narrative of “outsiders overloading the system” resonates most.

This case shows that the dynamics we uncovered in Italy are not limited to extraordinary moments such as sudden reforms or economic shocks. The crisis of the NHS has been unfolding for decades and is likely to persist, driven by rising public debt and growing demand from an ageing population. These long-simmering grievances are once again being harnessed by political entrepreneurs who link them to immigration – a strategy that continues to fuel radical-right support.

Taken together, this body of research challenges the common expectation that declining public services should lead voters to demand more redistribution and flock to left-wing parties. Instead, we find that public service deprivation often fuels support for exclusionary – radical-right – parties. Their successes threaten the rights and protections of minority groups such as immigrants. And as growing evidence shows, they also contribute to the progressive erosion of democratic norms.

Several factors limit how mainstream parties can respond to radical-right gains over public service decline. Reversing service cuts usually implies higher taxes – a remedy that remains unpopular. Credibility is another hurdle: after decades of decline, promises to rebuild public services can ring hollow when they come from parties that previously oversaw the cuts. The radical right, by contrast, offers a deceptively simple solution: reduce demand by excluding “undeserving” outsiders, often immigrants. This rhetoric has proven both powerful and persuasive. Finding credible and popular responses to public service decline remains a key political challenge in the years ahead, but one we surely must tackle if we are to halt the continued rise of the radical right.

Headshot Cremaschi

Simone Cremaschi is a political scientists studying topics in comparative political economy, political behavior, and political sociology. He works as a postdoctoral researcher at Bocconi University and the Dondena Centre.

References/Further Readings

  • [i] Cremaschi, Simone, Paula Rettl, Marco Cappelluti, and Catherine E. De Vries (2024). “ Geographies of Discontent: Public Service Deprivation and the Rise of the Far Right in Italy.” American Journal of Political Science.
  • [ii] Cremaschi, Simone, Bariletto, Nicola, and Catherine E. De Vries (2025). “Without Roots: The Political Consequences of Collective Economic Shocks.” American Political Science Review.
  • [iii] Stroppe, Anne-Kathrin. 2023. “Left behind in a Public Services Wasteland? On the Accessibility of Public Services and Political Trust.” Political Geography 105: 102905.
  • [iv] Nyholt, Niels. 2024. “Left Behind: Voters’ Reactions to Local School and Hospital Closures.” European Journal of Political Research 63 (3): 884–905.
  • [v] Baccini, Leonardo, and Thomas Sattler. 2025. “ Austerity, Economic Vulnerability, and Populism.” American Journal of Political Science 69: 899–914.
  • [vi] Dickson, Zachary P., Sara B Hobolt, Catherine E de Vries and Simone Cremaschi (2025). Public Service Decline and Support for the Populist Right: Evidence from England’s National Health Service. Working Paper.

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F&L Blog – From Berlusconi to Meloni

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From Berlusconi to Meloni: Right-wing politics and the making of Italy's neoliberal state

Daniela Caterina, Adriano Cozzolino, Gemma Gasseau, and Davide Monaco

09.10.2025

How does neoliberalism enmesh with and help fuel the far right? Below, Daniela Caterina, Adriano Cozzolino, Gemma Gasseau and Davide Monaco offer Italy as an important case for understanding the contradictions of neoliberal projects and how these intersect with far-right politics. They argue that the Italian experience—from the rise of Berlusconi in the 1990s to today’s Meloni government—is not exceptional. Rather, it illustrates broader contemporary trends by showing how neoliberalism and far-right politics are not only compatible, but often mutually reinforcing. Berlusconi’s neoliberal project contributed to the mainstreaming of far-right parties, discourses and practices, and created the socio-political dislocations that were in turn exploited by the far right. Once in power, the far right left neoliberalism largely intact, while combining it with nationalist discourses and authoritarian practices. To counter the rise of the far right in Italy and elsewhere, the authors argue that we must understand neoliberalism not as a technocratic project—but a political one. This requires presenting not only alternative policies—but a comprehensive and compelling alternative political vision both to neoliberalism and far-right authoritarianism.

Neoliberalism as a political project​

For the better part of the last forty years, neoliberalism has reshaped economies, transformed societies and states, and redrawn the political imagination across the globe. Originally promoted as a pathway to economic prosperity and individual empowerment, neoliberalism has instead deepened inequality, eroded public goods, and hollowed out democracies. 

Today, we are witnessing its long-term political consequences. Broken social safety nets, the socio-economic marginalisation of entire regions as resources concentrated in ever-larger metropolitan hubs, the dislocation of working and middle classes, and growing distrust towards democratic institutions (and politics more generally) have together created a terrain ripe for the ascent of the far right in much of the Western world—and beyond. However, far-right forces are gaining ground across the world not by overcoming neoliberalism, but by reshaping it through further and deeper exclusionary, authoritarian, and nationalist politics. Understanding how this dynamic came to pass requires examining not just abstract trends, but the concrete political projects that have enabled neoliberal transformations. One of the most significant—yet often underappreciated —of these projects is Berlusconism. Through this   prism we can grasp not only the neoliberal transformation of the Italian state, but also the intertwined evolution of neoliberalism and right-wing politics. 

To fully unpack the significance of Berlusconism, it is essential to move beyond viewing neoliberalism simply as a technocratic and abstract doctrine of deregulation and austerity. It should instead be regarded as a political project that has evolved through time, forged through complex interactions between global pressures and national responses. It does not take the form of a fixed policy blueprint, but of a dynamic process marked by ruptures, rearrangements, and contradictions. Its success hinges on powerful political alliances capable of implementing its core logics across politics, institutions and culture. 

How Berlusconism created space for the far-right

In this context, Berlusconism provides an insightful lens into the ways neoliberalism adapts to national conditions and generates space for far-right politics. In the early 1990s, Italy was gripped by structural crisis fuelled by economic stagnation, the collapse of the post-war party system, and a loss of confidence in traditional elites. Into this vacuum stepped Silvio Berlusconi—not merely a media-savvy entrepreneur, but the architect of a new kind of political-economic order. 

Launched in 1994, Berlusconi’s political project was more than just an electoral springboard—it amounted to a wholesale reconfiguration of Italy’s political economy. Drawing on media power, anti-elite sentiment, and pro-market ideology, Berlusconism reshaped the right and restructured the Italian state along neoliberal lines. It normalized once-marginal radical right forces, integrated regionalist parties into national governance, and constructed a durable coalition capable of sustaining neoliberal reforms. Though the heterogeneous nature of Berlusconi’s first government—a coalition that brought together post-fascists (Alleanza Nazionale), northern separatists (Lega Nord), and free-marketeers (Forza Italia)—posed some constraints, Berlusconism successfully created a new right-wing political space that permanently altered the structure of Italian politics. 

This emergent bloc became the lynchpin for consolidating Berlusconi’s neoliberal project. While technocrats and center-left governments had also pursued pro-market reforms during the 1990s, their efforts were often hamstrung by weak political legitimacy—a gap filled by relying on the ‘external’ legitimation provided by adhering to supranational constraints, including the EU fiscal rules. By contrast, Berlusconism fused neoliberal governance with charismatic leadership, a tighter social alliance, and broader popular appeal—making it far more stable and ideologically coherent. 

 

Berlusconism’s emergence, consolidation, and crisis

"The case of Berlusconism shows that the Italian experience should not be seen as exceptional. Rather, it illustrates how neoliberalism and far-right politics are not only compatible, but often mutually reinforcing. Neoliberalism generates the social dislocation and political distrust that the far right exploits. Meanwhile, far-right narratives help neoliberal elites to deflect blame, reassert control, and maintain the market order under a new guise."

The trajectory of Berlusconism can be divided into three defining phases: its rapid emergence (1994–95), its firm consolidation (2001–06), and its eventual crisis (2008–11). 

During the emergence phase, the first Berlusconi government only partially implemented neoliberal reforms, opting for selective tax amnesties and mild budget cuts rather than deep structural overhauls. However, the political success of uniting previously incompatible right-wing forces marked a foundational transformation. The far right—especially the post-fascist Alleanza Nazionale, the forerunner of Giorgia Meloni’s party Fratelli d’Italia—  was no longer outside the system: it had become a normalized partner in government. 

By the early 2000s, Berlusconism entered a phase of consolidation. The second and third Berlusconi governments pushed for more systematic neoliberal reforms, including widespread privatizations and labor market deregulation. These efforts occurred alongside intensified tensions—between North and South, within coalition partners, and between the government and EU institutions. Nevertheless, Berlusconism maintained its coherence by continuing to function as the gravitational center of right-wing politics in Italy, embedding its policies within a durable socio-political alliance. Berlusconism can be therefore seen as one of the political projects shaping the neoliberalisation of the Italian state. 

The 2007-08 global financial crisis sent this trajectory into freefall. The economic shocks and increasing demands for austerity from international and EU authorities exacerbated contradictions within Berlusconism itself. Caving to these pressures for fiscal discipline meant abandoning a significant part of its social base—more precarious working classes, particularly in the South—and narrowing its social bloc to unsustainable levels. This structural impasse—not just personal scandals or leadership fatigue—precipitated Berlusconi’s decline. 

The social dislocation left by neoliberalisation paved the way for the far-right to govern

In retrospect, Berlusconism held sway over Italy’s political life for almost two decades by rooting neoliberal reforms within a larger ideological and cultural framework. Its unique capacity to fuse symbolic narratives, media control, and a vision of national revival secured enduring consent for its brand of neoliberalism and cemented the foundations of its political project. Berlusconism offered a compelling political-economic agenda that resonated across class, regional, and ideological lines. By normalizing discourses and practices typically advanced by far-right forces—anti-immigration sentiment, judicial delegitimization, anti-intellectualism—it paved the way for today’s far-right actors to govern from within the mainstream. 

The case of Berlusconism shows that the Italian experience should not be seen as exceptional. Rather, it illustrates how neoliberalism and far-right politics are not only compatible, but often mutually reinforcing. Neoliberalism generates the social dislocation and political distrust that the far right exploits. Meanwhile, far-right narratives help neoliberal elites to deflect blame, reassert control, and maintain the market order under a new guise. 

Understanding Berlusconism is thus key to making sense of today’s far-right, including Giorgia Meloni’s ascendant movement and government. The political space and the social alliance carefully crafted by Berlusconi starting in the 1990s—a mix of small and medium business owners, petty bourgeoisie, and working classes frustrated with the status quo—is still the one Meloni thrives on decades later. The rise of Meloni is also inseparable from the long-running neoliberalisation of the Italian state, which created the political and economic terrain that allowed far-right support to grow. What’s more, despite its anti-establishment rhetoric, the Meloni government continues to uphold fiscal discipline and economic orthodoxy, leaving neoliberalisation largely intact while entangling it further with nationalist discourse and authoritarian practices.

Learning the lessons of Italy: the need to counter both neoliberalism and the far-right

Italy offers a key case for understanding how neoliberalism morphs amid tensions and contradictions, and how it intersects with the far right. It shows that neoliberalism is not simply a technocratic project, but a political process shaped by national alliances, crises, and ideological work. It also reveals that the far right does not emerge in opposition to neoliberalism, but often as its product and partner. 

Understanding Berlusconism as a political project—and not merely as a personal phenomenon—provides valuable insights into the molecular mechanisms through which neoliberalism reproduces itself. It allows us to see the rise of figures like Trump and Milei   not as a rupture, but as a continuation of a broader pattern already visible in places like Italy decades earlier. Finally, the Italian case offers a glimpse of the endgame behind conservative parties’ current strategies to normalize and mainstream far-right forces across Europe: a complete takeover by the radical right. 

If neoliberalism and the far right have evolved together, then they must be fought together.   This requires confronting not just policies, but the political architectures and cultural narratives that sustain them. It means creating new alliances, institutions, and alternative visions able to counter neoliberal hegemony on every front. 

Italy’s experience teaches us that political projects can be built—and unbuilt. The question now is whether we can learn from this history and construct an alternative capable of challenging the toxic convergence of neoliberalism and the far right—and all the societal threats that this entails.

Daniela Caterina

Daniela Caterina is an associate professor at the Huazhong University of Science and Technology in Wuhan, China

Adriano Cozzolino is an assistant professor of global politics at the University of Campania “Luigi Vanvitelli”, Italy

Gemma Gasseau is a postdoctoral researcher at the Scuola Normale Superiore, Italy

Davide Monaco is a research fellow on the Future of Work at the Centre for European Policy Studies in Brussels

Further Readings

  • Caterina D, Cozzolino A, Gasseau G and Monaco D (2025) A lasting legacy? A critical political economy perspective on Berlusconism and its afterlives. In: Bieler A and Maccarrone V (eds) Critical political economy of the European polycrisis. Cheltenham: Edward Elgar Publishing.   
  • Cozzolino A, Caterina D, Gasseau G and Monaco D (forthcoming) The International Political Economy of Berlusconism: Emergence, Consolidation and Crisis of a Neoliberalising Project. European Journal of International Relations.

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F&L Blog – Functional Democracy

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Functional Democracy: Polanyi's Forgotten Antidote to Fascism and neoliberalism

Janek Wasserman

11.09.2025

As Professor of History at the University of Alabama, Janek Wasserman specializes in modern Central European history and the development of economic thought, in particular, Austrian economic thought. In this short essay he traces the formation of Karl Polanyi’s ideas during his Vienna years (1919-1933), especially his theories relating to democracy, liberalism, and fascism. Prof. Wasserman puts forward that Polanyi’s pragmatic and humane proposal for a Functional Democracy – emphasizing the need for transparency and participation in economic and political decision-making – carries important lessons for today, and offers a powerful basis for rethinking economic, political, and social relations in the twenty-first century. 

Polanyi’s quest for a new, non-Marxist socialism ​

"The intervention of fascism...means the practical salvation of capitalism. It is not a return to liberal ‘laissez-faire’ but a planned economy that is led not by an anti-entrepreneurial democratic state but by ‘titans-of-industry’ capitalists themselves.”
Karl Polanyi

When Karl Polanyi emigrated from Hungary to Austria in 1919, he threw himself into the intellectual debates roiling Central Europe, infusing a distinctive blend of Christian spirituality, philosophical idealism, and liberal socialism.  He was disaffected by Communism after the failed Hungarian Revolution—and debates with his friend, the Marxist György Lukács—yet unconvinced about the efficiency or merits of free market capitalism. He argued instead for a system that honored the dignity of the individual.  

His first public Viennese intervention came during the Socialist Calculation debate of 1922. He had no interest in reigniting the dispute between free market liberals (such as Ludwig von Mises), Communists (the Bolsheviks), and the various socialists (Otto Neurath, Karl Kautsky). He agreed with liberals that a centralized bureaucracy could not solve the accounting and pricing problems of a modern economy. However, he disagreed that a capitalist economy was the only – or best – answer. A “practical” third way, pioneered by Otto Bauer, G.D.H. Cole, and Vladimir Lenin, suggested a better solution.  Building on this, Polanyi advocated for a “functional, guild-socialist-organized” form of socialism that opened space for democratic governance within the economy. This approach required democratic participation and transparency in all decisions as part of an “oversight” (Übersicht) apparatus. This functionalism necessitated a new, non-Marxist socialism.  

Morality as the common missing link between collectivist and capitalist approaches ​

Polanyi believed liberals, conservatives, and Marxists had failed to theorize an efficient and moral economy. Both liberals and collectivists were myopically focused on accounting as the basis of a functioning economy. While the former emphasized market prices and profits for decision-making; the latter stressed state statistics and production quotas. As he wrote in his essay “Sozialistische Rechnungslehre” (Socialist Accounting Theory), neither could justify their decisions based on social or moral principles: “Whether these goals are ‘theoretically’ right or wrong, possible or impossible, moral or immoral, contradictory or logical, accounting must remain indifferent (gleichgültig).” 

In Polanyi’s view, this moral agnosticism doomed both approaches as the foundation for a humane economy. A humane system must marry productive efficiency and social justice. Collectivism had failed to maximize technical output and achieve positive social outcomes, as the Bolshevik regime had already revealed. In the Capitalist model, too, technical production lagged because zero-sum competition hindered the efficient allocation and utilization of productive resources in various sectors, while the boom-and-bust nature of finance capitalism led to production gridlocks and bottlenecks. These technical failures left the common interest (Gemeinnützigkeit) by the wayside. 

The capitalist system had no means for understanding (or calculating) the social relations between people that—as opposed to prices— undergirded all economic production. Channeling the earlier Viennese reformer Josef Popper, Polanyi argued that this condition, “…contradicted the right to live that every member of society possesses.”

Centering democratic and transparent decision-making in a functional democracy ​

Polanyi’s termed his alternative the ‘functionally organized society’ (or ‘functional democracy’). Such a system would place democratic representation and transparent decision-making at the center of production and consumption decisions. Associations for producers and industries would co-exist alongside consumer societies. The political nature of these open negotiations ensured their effectiveness and ethics: “The commune is not only a political organ but the actual carrier of the higher goal of the common good.” Ongoing negotiations would assure just wages and prices, a reasonable distribution of goods and profits, an equitable allocation of productive resources, and acceptable levels of capital reinvestment. They would also engage people as active participants in economic and political processes. 

While liberals such as Ludwig von Mises objected that “functional socialism” lacked a clear executive power and remained “nebulous and vague” for Polanyi, the lack of a single basis of power was precisely the point. Functional socialism (or functional democracy) was not about naked power relations (Machtverhältnisse) but relationships of mutual recognition (Anerkennungsverhältnisse).

A need for empathy in economics ​

Polanyi saw oversight as the pathway to a transformed human order. Oversight concerned moral questions as much as material ones. Grappling with such disparate sources required empathy. As he wrote in “New Reflections Concerning Our Theory and Practice”: “Means of production are visible, tangible aspects of the external world, which are countable, measurable and externally ascertainable. The needs and hardships of another person, by contrast, we can only envision in some fashion, through mentally putting ourselves in his situation, through an empathetic experience of his needs and hardships, through entering into them within ourselves.” Only through interpersonal interactions could human beings understand one another’s needs. Administrative bodies and unions could assist with external (material) oversight, but inner (intersubjective) oversight required democratic self-organization.

How neoliberalism’s 'cruel rationality' paved the way for fascism ​

“Never and nowhere did Hitler promise to his followers the abolition of the capitalist system. Rather, the essential thrust of his program consisted in a belief in the healthy functioning of the capitalist system within the nationalist state.”
Karl Polanyi

Polanyi would later link the failures of liberal economics with the rise of fascism—the twin causes of the crises of the 1930s. His critiques of contemporaries such as Mises, Friedrich Hayek, and Walter Lippmann, not to mention classical British political economists, formed the core of his analysis of early neoliberalism, which culminated in his 1944 The Great Transformation. 

He utilized the young Marx’s ideas of alienation to critique liberal categories of goods, labor, land, and capital. In “Community and Society,” Polanyi lamented the cruelty that passed as rationality in liberal society: “Grotesque perversions of common sense take on the semblance of rationality under the way of what is supposed to be an economic law.” Labor became, “a commodity to be bought and sold, like cucumbers. That to this commodity a human being is attached is treated as an accidental feature of no substantial relevance.” The use of money exacerbated alienation, obscuring the reality of human relations behind the seemingly objective notion of value. The fetish of capital was, “the most disastrous to the emancipation of mankind,” because it effaced the accumulated human labor in capital goods.

In their quest for stability, neoliberals embraced illiberalism ​

The specter of fascism increasingly haunted Polanyi’s thoughts. He saw it as an atavistic reaction against the failed promises of liberalism, even as it entrenched capitalist relations. Polanyi associated fascism with the growing rift between liberal economics and democracy. Contemporary liberals such as Mises disparaged parliamentarianism and sided with conservatives and fascists in a quest for economic stability, thus destroying the very freedoms they claimed to support. Fascists responded to the spiritual needs that liberalism had betrayed. Politically, fascism was anti-democratic and illiberal; it supported authoritarianism and dictatorship. Economically, it opposed democratic socialism and capitalism, preferring a corporatist economy. Its “anti-capitalism” focused on finance capital (with an antisemitic stamp) rather than economic inequality or property relations. Ideologically, it emphasized ideas of race, blood, myth, and empire against reason, humanity, law, and democracy.

For Polanyi, fascism failed as a solution because it destroyed individual freedom and re-entrenched capitalism. This was his major contribution to fascist theory and an important note on modern capitalism: “The intervention of fascism in this sense means the practical salvation of capitalism, and indeed with the help of revolutionary transformations of the entire state and social system. It is not a return to liberal ‘laissez-faire’ but a planned economy that is led not by an anti-entrepreneurial democratic state but by ‘titans-of-industry’ capitalists themselves.” Polanyi saw fascism’s total subordination of the state and society to the economy as the culmination of liberal economistic fantasies. Fascism and the market fundamentalism of neoliberalism had much in common. 

Polanyi saw national socialism as capitalism rooted in a nationalist state ​

By the time Polanyi left Vienna in 1933 he had developed powerful critiques of fascism, liberalism and capitalism. Polanyi’s analysis of Othmar Spann’s universalism, the Austro-Fascist Constitution of May 1934, and National Socialism laid bare their claims of “true democracy” and anti-capitalism. For Polanyi, Spann was an intellectual pioneer whose system anticipated the Fascists and Nazis. But Spann’s corporatist system left economic control in the hands of the elites.  In  “Spanns faschistische Utopie,” Polanyi concluded, “His utopia confirms that the essence of fascism guarantees the control of property owners and managers of the means of production over the economic chamber, establishing the power of that chamber over society as a whole.” 

Polanyi made the same point about Austro-Fascism, whose leaders paid lip service to Catholic social theory yet rooted their power in capitalist economics. Polanyi disparaged the May Constitution as, “an embodiment of religious and racist fundamentalism,” and, “the arrival of theocracy.” The corporate bodies in the Austrian state had no democratic representation; everyone was appointed.  

National Socialism failed Polanyi’s test even more egregiously. Within months of gaining power, Hitler abjured attacks on the wealthy and promised an end to economic experimentation. Polanyi declared acidly in “Hitler und die Wirtschaft,” “Never and nowhere did Hitler promise to his followers the abolition of the capitalist system. Rather, the essential thrust of his program consisted in a belief in the healthy functioning of the capitalist system within the nationalist state.” Nazi leadership clearly had no interest in the “S” in the NSDAP. 

No alternative? Revisiting Polanyi's powerful call for a functional democracy ​

“[Social freedom] is based on the real relation of men to men… Being free therefore no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility.”
Karl Polanyi

Recasting Marx’s thought in a humanist vein allowed Polanyi to imagine a popular front against fascist capitalism. It opened the door to a “sphere of the personal.” In “On Freedom” Polanyi conceptualized a new theory of social freedom: “[It] is based on the real relation of men to men… Being free therefore no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility.” Our reimagined communities would not be the realm of individual freedom imagined by liberals, nor the völkisch dystopias of the fascists. They would rest on mutual dependence, empathy and social freedom.

Ninety years later, Polanyi’s lessons endure. Fascism and far-right populism pose renewed threats to the world order. Capitalist individuals and corporations once again accommodate illiberal politicians in the name of shareholder value and profit. Meanwhile, participatory democratic proposals and democratic socialism are dismissed as utopian: there is no alternative to capitalism.  

Yet as centrist political parties struggle to mobilize their eroding bases—thanks to failed neoliberal policies which offer little to most citizens—we would be wise to revisit Polanyi’s critiques, and ideas. His positive program for functional democracy is a powerful alternative to both the sclerosis of neoliberal centrism and an emboldened far-right populism.

Janek Wasserman is Professor of History at the University of Alabama.

Further Reading

  • Dale, Gareth. Karl Polanyi: A Life on the Left. New York: Columbia University Press, 2016. 
  • Polanyi, Karl. Chronik der großen Transformation. Artikel und Aufsätze (1920-1945). Edited by Michele Cangiani and Claus Thomasberger. 3 vols. Marburg: Metropolis, 2003. 

  • Polanyi, Karl. Economy and Society: Selected Writings. Edited by Michele Cangiani and Claus Thomasberger. Cambridge, UK: Polity, 2018. 

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Reading Circle Kick-off: Wendy Brown and Friedrich Hayek

Events, Publications, Uncategorized, , , , ,

We, the International Karl Polanyi Society (IKPS), the Institute for Spatial and Social-Ecological Transformations (ISSET) and the Institute for Law and Governance cordially invite you to join our reading circle on “Socioeconomics and Law.” 

This reading circle will serve as a preparatory event for an upcoming international conference, titled “Socioeconomics and Law – From Hayek and Schmitt to Polanyi and Kelsen,” that is set to take place in Vienna in the spring of 2027. At this conference and in the lead-up to this conference, we aim to engage in discussions about alternatives to the current radicalization of neoliberal thought, particularly its alignment with non-democratic and non-liberal political and legal ideologies.

To kick off our reading circle, rather than starting with Hayek´s seminal text, “The Constitution of Liberty,” we will first contextualize Hayek’s significance in shaping the contemporary alliance between anarcho-capitalists and moral traditionalists. Our initial sessions will focus on Wendy Brown’s (2019) “In the Ruins of Neoliberalism,” where she elucidates Hayek’s influence and the implications of the ongoing reinterpretation of law.

Here is an introductory text by IKPS president, Andreas Novy highlighting the role of markets and morals in Hayek’s work and the relevance of Brown’s analysis of this interconnection for current events: Novy (2025) Markets and Morals: The Reactionary Right’s Ideological Core.

The sessions on Wendy Brown’s book will take place at Vienna University of Economics and Business (WU) on the following dates from 5pm – 7pm CEST:

  • Thu, April 3rd, 2025, 5pm-7pm (chapter 1)

  • Thu, May 5th, 2025, 5pm-7pm (chapter 2) CHANGE OF DATE!

  • Thu, July 3rd, 2025, 5pm-7pm (chapter 3)

  • Tue, September 16th, 2025, 5pm-7pm (chapter 4)

  • Thu, October 2nd, 2025, 5pm-7pm (chapter 5)

Venue: WU, Building D4, room D4.3.106.

To enable international participation there is also the possibility to participate in a hybrid mode. Please register by e-mail for a link to participate online.

We are looking forward to your participation and to an exciting exchange!

Andreas Novy and Verena Madner