Disembedded markets as a mirror of society

Religion and society

The debate on modern capitalism oscillates between two basic theoretical positions: In the sociological tradition founded by Durkheim, Weber and Parsons, capitalism is viewed as a ‘modern’ society whose cohesion is secured primarily by functionally differentiated institutions, such as the nation state, rational law, autonomous science, and a culture of secularism and individualism, with markets representing only one social subsystem among others. In the Marxist tradition, on the other hand, capitalism is interpreted as a ‘commodified’ society, with disembedded markets as the very core of society, and institutions taking only a functional role vis-à-vis the dynamics of markets.

What I want to discuss in this article are the implications of this controversy with regard to the relationship between religion and society. In the sociological tradition, religion is considered the ultimate anchor of social integration, as societies are symbolically integrated entities whose cohesion depends on a symbolic self-representation of their collective identity. As Durkheim argued in his classic studies, religion can be understood as the most encompassing integrative system, reflecting the ultimate unity of society to its members and creating an interpersonal consciousness of moral obligation. At the same time, religions offer an answer to the contingencies of human existence, giving meaning to personal biographies and collective histories. There is little controversy about the key role of religion in the social cohesion of archaic and stratified societies, which Durkheim emphasized in his concept of ‘mechanic solidarity’. In functionally different and pluralist modern societies, the contribution of religion to social integration is less obvious. Nevertheless, for Durkheim as well as for Parsons (who followed him here) it was a key point that even modern societies are dependent on a common value system, which either can be interpreted as a secularized offspring of religious traditions, or directly takes a religious form (such as Bellah’s ‘civil religion’). ¹

The answer usually given by Marxists to the question of religion is very different from modernization theory, and it seems fairly clear, at least at first glance: The social cohesion of capitalist societies rests primarily on markets and the ‘law of value’ behind them, and no longer on the historical religions, whose traditional integrative functions are becoming more and more obsolete. The meaning of these statements and of the Marxist ‘law of value’ have been the subject of endless controversies. Even today, Marxists sometimes come up with the orthodox basis–superstructure model, explaining the priority of markets over society from an alleged ontological priority of ‘material’ reproduction while denunciating religion as a mere ‘superstructure’ phenomenon. I leave these positions aside here, which are under-complex even with regard to Marx’s own intentions and whose flaws have been demonstrated abundantly. ‘Material’ interests almost never occur in isolation (except perhaps in situations of extreme deprivation); they always are intertwined with symbolic and cultural framings and vice versa. A key point – here I am following the criticisms of Habermas and Honneth – is the diffuse epistemological status of Marx’s position. The Marxist theory of value aims at a political critique of capitalism and an empirical analysis of its dynamics at the same time. Marx neither discloses the normative premises of his critique, nor does he take account of the allegedly ‘objective’ historical observer position, which he reclaims for himself. These problems are related to inconsistencies in his intellectual divorce from Hegel and to unreflected Hegelian heritages in his theory (Holz, 1993).

In this article I will nevertheless try a rehabilitation of the Marxist view of capitalist markets as the very core of modern society. My starting point, however, will not be historical materialism but the Durkheimian problem of collective identity and existential security of society. From this viewpoint, I take recourse not to Marx but to Karl Polanyi and his interpretation of capitalism as a system of ‘disembedded’ markets. In the course of the historical process termed by Polanyi the ‘Great Transformation’, markets became ‘disembedded’ in spatial, social, material and temporal terms, thus exposing the fabric of society to new forces of unrest and change. Different from Polanyi’s assumptions, who expected disembedded capitalism to remain only a temporary phenomenon, the global character of capitalism revived in the second half of the twentieth century, in particular due to the rise of global financial markets, the fall of the Iron Curtain and new world-wide communication technologies. Despite the present crisis, disembedded markets have become a reality that needs to be taken account of theoretically.

Due to their encompassing nature, capitalist markets – here I will turn Durkheim’s own argument against himself – transcended their conventional ‘economic’ quality; they inadvertently grew into the functions of representing the collective unity of society and managing existential uncertainty, which traditionally had been occupied by the historical religions. Disembedded markets no longer can be conceived as a merely ‘economic’ subsystem within society but take the character of an encompassing social system sui generis. It is the universality of markets and money due to their disembedding, which explains their centrality in capitalist society, not only their alleged functions for ‘material’ reproduction. ² My point, in other words, will be that the economy should be conceptualized not only as the ‘dominant’ subsystem in a functionally different capitalist society, as Schimank (2009) did. Rather, disembedded markets take the function of a ‘self-description’ of society according to Luhmann, marking the enigmatic ‘unity’ of society beyond functional differentiation. Markets and their medium – capitalized money – not only became the most general ‘mirror’ for society to observe and reflect itself but also a key device to manage personal and social contingencies. The uncertainty generated by capitalist markets gives rise to theoretical doctrines designed to justify the rules and institutions of markets and to give ‘rational’ explanations about their functioning. Viewed from this perspective, economic theories, despite their profane appearance, are taking on traditional tasks of theology in rationalizing uncertainty.

Karl Polanyi as a theorist of disembedded markets

The above-mentioned controversy between Marxism and sociological modernization theory is almost as old as the history of sociology, nevertheless it is far from being settled today. For some time it looked so, as sociology, following the oft-cited ‘Parsonian compromise’ (Beckert, 2002a) concentrated its studies on the field of social institutions and communities, while leaving the issue of markets to economic theory. This was not an attempt to solve the problem but rather to put it aside by establishing a particular academic division of labour, which also had the side effect of preserving the predominance of Parsonian modernization theory within sociology itself. With the advent of the so-called ‘new’ economic sociology in the 1980s (e.g. Granovetter, 1985; Beckert, 2002b; Swedberg, 2003), the controversy surrounding the ‘social’ character of capitalist markets came up again. Not by chance, it developed around the concept of ‘social embeddedness’, and the functions of embeddedness to reduce economic ‘uncertainty’ which became key themes for the new current of sociological research focusing on the social structures of markets.

As is well known, the term ‘embeddedness’ had been introduced by Mark Granovetter (1985) in his seminal article. As he argued, market participants do not act as isolated rational actors but as members of interpersonal networks. Markets can work efficiently only where impersonal exchange relations are ‘embedded’ in networks which create mutual trust and reduce uncertainty, thus making cooperation in a contingent environment possible. In his analysis, Granovetter referred to the work of Karl Polanyi (1944) who, however, used the term ‘embeddedness’ only rarely; instead he spoke of the ‘submersion’ of economic exchange in social relationships:

The outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end. (Polanyi, 1944: 46)

The relationship between markets and networks and the rediscovery of the work of Karl Polanyi were subjects of intense discussion in economic sociology and history (e.g. Krippner et al., 2004; Hann and Hart, 2009; Eisenberg, 2011). ³ Granovetter’s interpretation of the term ‘embeddedness’ is narrower than Polanyi’s, as it focuses on ongoing interpersonal relations at the micro-level of market transactions instead of, like Polanyi, on institutions. For Polanyi, markets are only one beside three other basic patterns of economic reproduction (reciprocity, redistribution and the household), all of them grounded on a legitimate order which connects them with ‘the moral fabric of society’(Beckert, 2009: 41).

For Polanyi, the social embeddedness of economic reproduction was not only a historical fact but an anthropological one, prevailing in most historical societies, however, with one crucial exemption: nineteenth-century liberal capitalism, which he characterized as a ‘self-regulating system of markets’ (Polanyi, 1944: 43). This did not mean that he deemed states, institutions, communities to be unimportant in capitalism. As Polanyi emphasized, state interventions played a crucial role in liberalizing and expanding markets, and enforcing their rules. And probably he would not have contradicted Granovetter in his view that market transactions even in capitalism continue to be embedded in communities and networks. Embeddedness, however, is confined to the local or at the most national level. Due to the ‘Great Transformation’, local and national market relations, in their turn, became ‘embedded’ in larger transnational and global trade chains, giving rise to relationships of global interdependence, which were only weakly regulated and no longer subject to a common political authority. Nation states and institutions became subsystems of the global system of markets, which was governed by uncontrollable endogenous forces. As Polanyi put it, markets were no longer embedded in social relations, but social relations were ‘embedded in the economic system’ (Polanyi, 1944: 57).

For Polanyi, modern liberal capitalism was an ‘entirely unprecedented’ (Polanyi, 1944: 43) social system, a break with the fundamental conditions of human existence with devastating consequences for society and nature. While Granovetter tried to reconcile the neoclassic and the sociological view of the economic actor, Polanyi put them in strict opposition to each other, thus developing his sharply anti-liberal time diagnosis. This, however, meant only introducing a new round in the classic controversy between sociological conceptions of capitalism and Marxist (and liberal) ones on the other hand. Should we read Polanyi as a social anthropologist or as a Marxist? Is he a theorist of ‘embeddedness’, or does his point lie only in his discovery of the ‘disembedded’ nature of modern capitalism?

So far, most economic sociologists have preferred the first reading of Polanyi’s work. However, this meant, as Kari Polanyi Levitt has criticized, moving ‘Polanyi into the mainstream of socioeconomic discourse’, and obscuring ‘the radical implications of the existential contradiction between a market economy and a viable society’(Polanyi Levitt, 2013: 102). Indeed, it would be erroneous to consider the idea of the social embeddedness of markets as something original and to ascribe it to Polanyi as its inventor. In his earlier classic study on the social division of labour, Durkheim had developed the very same idea under the heading of ‘non-contractual conditions of contract’ – a concept which later, as it is well known, became an important starting point for Parsons’ sociological theory of modernity. Moreover, the idea that market economies are framed by religious and cultural values, social norms and legal institutions had been constitutive of American institutionalism (Veblen, Commons) and the German tradition of economic ‘Ordo-liberalism’ (Eucken, Müller-Armack, Röpke, Rüstow), the rise of which can be traced back to the 1920s (for an overview, see Manow, 2001). There is no need to demonstrate at length that the ideas circumscribed by the ‘embeddedness’ concept go back to a long tradition of sociological and economic thought. Identifying Polanyi with this concept indeed comes down to incorporating him into a well-established consensus.

Consequently, it appears more promising to read Polanyi ‘against the stream’, i.e. not as a theorist of embeddedness but of ‘disembeddedness’. Polanyi – to recapitulate his point very briefly – views modern capitalism as the outcome of the European ‘Great Transformation’ of the early nineteenth century, which he characterized as a process where markets became increasingly autonomous from traditional institutional and political regulations. Above all, this meant that markets, which had played never more than a marginal role in traditional societies, now became the dominant social system. The dominance of markets revealed itself in two key aspects: their self-regulation, and their universalization in spatial, social and material terms. Still under the mercantilist rule of the eighteenth century, markets were not left to themselves, as Polanyi argued, but market access, prices, product quantities, quality standards, and many other issues were strictly regulated by the local and national political authorities. By contrast, the liberal governments in the nineteenth century followed and enforced the principle of laissez-faire, allowing the markets to regulate themselves according to the signals of prices, costs and profits, and dismantling political privileges and monopolies. The increasing regulatory autonomy of markets occurred in parallel to their universalization, i.e. their expansion in spatial, social and material terms. Until the eighteenth century, markets had been highly segmented, with local markets dominating and national markets gradually growing due to the intervention of mercantilist politics. Long-distance trade mostly (with certain exceptions of the Netherlands and England) had the status of a territorial and social enclave, which the authorities sought to isolate from the rest of the country. The nineteenth century, by contrast, brought significant progress in the globalization of trade and in the removal of local and national trade barriers; transnational markets began to supersede local and national markets. ⁴ Markets became generalized not only in territorial terms but also in the social dimension. Due to the land reforms, the liberation of the peasantry and the abolition of guild regulations, local subsistence economies vanished. Increasingly, the rural and urban population was thrown onto the labour market as their dominant or sole source of existence. The commodification of labour meant an expansion of the market system in the social dimension, as the large majority of the working population now became directly subject to its rule. The same process resulted in a generalization of the material scope of markets. Traditionally, market transactions had been confined largely to finished goods and services, with labour marketable only in the form of slave trade or day labourers, and land being barred by feudal property rights. Now markets for the ‘factors’ of production – land and other means of production, free labour – developed on a large scale, subsuming the entire process of reproduction to the logic of commodification. Finally, even money itself as the medium of markets became included in the market nexus as an object of trade at national and transnational capital and financial markets, thus marking the final step in the self-regulation of markets.

It must be noted that Polanyi’s analysis in the latter points remains deficient in comparison to Marx, for whom the subsumption of the sphere of production to the commodity form had been the core point of his concept of capital. Polanyi, who showed little interest in the spheres of work and production (Spittler, 2009), confined himself largely to a critique of the commodification of labour, land and money by pointing to its ‘fictitious’ character. He predicted that the self-regulation of markets could end in nothing but a social catastrophe, and therefore must mobilize political and social counter-movements, aiming to protect man and nature from the forces of the unfettered market. Indeed, such counter-movements, including not only social democracy but also fascism and communism, did arise in the twentieth century and put an end to the liberal era of capitalism – as Polanyi thought: a definitive end. Viewed from today, Polanyi’s view has turned out to be premature. With the rise of globalization and global financial markets after 1973, even more so after the fall of the socialist system, disembedded capitalism has experienced a renaissance. Despite the present crisis it seems evident now that disembedded markets in all spheres of the economy are a more than transitory reality which needs to be taken account of theoretically.

At this point, the shortcomings of Polanyi’s approach appear. His recourse to ‘anthropological’ constants as a point of analytical reference appears problematic. Polanyi failed to confront the full complexity of the social conditions created by capitalism. He considered the disembedding of markets only negatively, as the cause of social and ecological disaster, admittedly with good reason from his contemporary background. However, the historical success of capitalism would be inexplicable without considering also its civilizing impact (Hirschman, 1977), the legal freedom of workers, and the productive and creative achievements of capitalist entrepreneurship. Polanyi’s approach hardly leaves any room for these aspects. Only in passing does he note that the self-regulating market, besides evoking social and ecological catastrophes, also ‘produced an unheard-of material welfare’ (Polanyi, 1944: 3). Likewise, Polanyi dealt with the socio-economic impact of the Industrial Revolution only superficially, without going deeper into the causal interrelations between the disembedding of markets, the rise of industrial entrepreneurship, and the development of organizations and technology. Here Polanyi clearly met his limits as a theorist of disembedding.

Disembedding and the dilemma of the self-representation of society

The notion of ‘disembedding’, of course, is not unknown to sociological modernization theorists. Going beyond Parsons, they adopted and generalized it, showing that processes of disembedding can be observed not only in the sphere of markets but also in other subsystems of society such as politics, science and art. Anthony Giddens developed his very concept of modernity around this idea, pointing to the role of money and expert systems as vehicles to ‘lift out’ social relations from local contexts of interaction and to restructure them ‘across indefinite spans of time-space’ (Giddens, 1990: 21). The most elaborate conceptualization of modern society as a ‘disembedded’ system is, without doubt, Luhmann’s system theory. Luhmann rejected the Parsonian idea of a paramount cultural value system ‘integrating’ modern society, commenting on it with subtle irony (Luhmann, 1998: 342). As he argued, modern societies are faced with the utmost complexity of the world. They can generate ‘meaning’ only in self-referential systemic operations, which are governed by functionally specified ‘codes’, such as truth, power, scarcity or love. Modern society is a world society, which is based on functional differentiation. As Luhmann himself admitted, the price of this conceptualization is that society as a totality disappears from view, to be more precise: it comes into view only relationally, via the differences between functionally specialized subsystems. As Luhmann argued, society as a whole cannot get be observed by any single observer, since observations are communicative operations, which are possible only within society, and not from any ‘external’ standpoint.

Nevertheless, as symbolically integrated entities, societies cannot do without reflecting their unity in one way or another. This requires ‘imaginary constructions of the unity of the system’ (Luhmann, 1998: 867, trans. C.D.) communicating the identity of society to itself. Luhmann calls such constructions Selbstbeschreibungen (self-descriptions). Premodern societies describe their collective identity in religious terms. Here, the self-representation paradox of society is managed by the social construction of a transcendent creator and observer of the world (Luhmann, 1998: 903). By adopting the perspective that involves God, societies can organize and rule themselves in a coherent and legitimate way. Modern societies, by contrast, develop non-theological self-descriptions, such as the ideas of nation, of class society or modernity. According to Luhmann, however, the latter are no less paradoxical than religion, as they disclaim the unity, which they are claiming, by the very fact of being observations. The observer includes and excludes himself in his portrait of society at the same time. Therefore, modern self-descriptions of society also cannot reclaim the status of scientific truth. ⁵

The epistemological dilemma, Luhmann has pointed out is fundamental to every encompassing social theory. It is not difficult to show that it is the same dilemma, which underlies the enigmatic character of religious representations. How is it possible that religious beliefs represent, as Durkheim contended, society ‘as a whole’? For Durkheim (1981), the religious sphere is characterized by the dichotomy between the ‘sacred’ and the ‘profane’, and it is only the absoluteness of this dichotomy which makes the clan gather around the religious rituals and mobilize its collective forces. Durkheim’s point can be made clearer, if we follow Habermas in combining the approaches of Durkheim and Mead and translate Durkheim’s somewhat vague concept of ‘collective forces’ into the interactionist concept of ‘collective identity’ (Habermas, 1981: 11f.). As Mead had shown, identity as a reflexive relationship develops as a result of a symbolically based interaction between at least two actors. Ego takes the perspective of alter on himself (and vice versa), thus developing an awareness of moral obligation and differentiating him/herself from alter at the same time. Mead concentrated his analysis on the individual socialization process and the emergence of personal identities. One could hypothesize that group identities develop in an analogous way: an in-group mirrors itself on the perspective of an out-group, while at the same time distinguishing itself from the latter. At the level of society as a totality, however, identity formation cannot proceed in the same way, since by definition there is no natural ‘alter’ who can assume the part of a mirror for ego. Society as a whole cannot repeat the operation of ‘taking the perspective of the other’ and thus cannot become aware of itself, just as the eye would be invisible if there were no other eyes or a mirror to reflect it.

Indeed, this is nothing but a different formulation of the epistemological dilemma, which Luhmann had referred to. It is the same dilemma, which religions respond to, and which explains the enigmatic character of their constructions. The defining characteristic of religious identities – this had been Durkheim’s point – lies in their singularity. Whereas group, ethnic or national identities mark only one among other communities of a similar kind, religious identities indicate the most encompassing community, thereby also defining the ultimate criteria for social inclusion and exclusion. Because of its uniqueness, such an encompassing identity cannot be formed via the natural process of mutual identification between individuals or groups; rather, it requires the social construction of a supra-natural collective alter. Only by taking the perspective of the supra-natural collective alter on itself, is society able to become aware of its own unity beyond the limits of individual lives. By virtue of such a construction it is able to develop a genuinely collective awareness of moral obligation. To become a force to integrate society, however, the socially constructed character of the supra-natural alter must remain hidden to the believers. It needs to be experienced as a reality that is testified by prophets and collectively performed in rituals.

Religious belief can be characterized as an act of human ‘self-transcendence’ (Joas, 1999). It breaks the rules of rational discourse in a similar way as Luhmann’s social observer does: what appears behind his constructions is nobody but himself. The critique of the religious projection had been the key message of atheistic humanism in the nineteenth century (Feuerbach, Marx, Comte, Nietzsche, Freud). It had been constitutive also of the rise of sociology as a ‘science’ of society, claiming to understand society as a secular entity independent of religious and theological traditions. However, here we are back at Luhmann’s point again: Sociological theorists fail to take account of the implicit observer position, which they reclaim for themselves in describing society as an ‘autonomous’, self-generating unit (Deutschmann, 2013b). Therefore, sociology has to acknowledge its blind spots too and to become aware of its own inability to develop a theory of society as a totality. All that it can do is to take the position of a second-order observer, taking society not as a direct object of its observations, but observing the ‘self-descriptions’ which society produces about itself. A ‘theory’ of society can be nothing but a theory of societal ‘self-descriptions’, arising in particular times and under certain historical circumstances.

And here I come back to Polanyi’s issue of disembedded markets: My argument to be demonstrated in the rest of this article is that the full significance of Polanyi’s findings can be made accessible only if we understand disembedded markets as a ‘self-description’ of capitalist world society, as a symbolic mirror which society as a whole presents to itself. There seems to be a great deal of evidence for the thesis that – contrary to Durkheim and Parsons – it is this mirror, which is replacing the historical religions and religiously legitimated institutions and civilizations as markers of encompassing social identity. The nexus of disembedded markets and the capital form of money as its medium not only embodies a historically unprecedented universal form of social unity, which actually never has been achieved even by the so-called ‘world religions’ (in particular, Christianity and Islam). It also takes at least some (not all) of the classic functions of religious symbolisms as devices to manage and cope with existential uncertainties. Moreover, it contains logical paradoxes, which to a large degree are similar to those of religious symbolisms. Therefore, it gives rise to ideologies and ‘theologies’ of the market, i.e. doctrines aiming to ‘rationalize’ and legitimate the functioning of disembedded markets.

Disembedded markets as a form of practised universality

Even disregarding the local embeddedness of markets in networks and social norms, it would be misleading to consider market exchange as a purely self-interested type of action, as many authors do with reference to Adam Smith’s often-cited remarks about the butcher, the brewer and the baker. In contrast to acts of brute or strategic egocentrism, markets are based on mutual recognition of private property rights, with money as the medium to organize commensurate individual claims. Every actor has to weigh up his possible gains with the costs he has to pay. Strategic calculation, of course, is important, however, both parties are acting strategically on the presupposition of an at least formal reciprocity of property rights. ⁶ Thus, markets even in their ‘pure’ form are not immoral, but have a ‘civilizing’ impact on society, as had already been recognized in the literature of the eighteenth century (Hirschman, 1977). It remains correct, nevertheless, that the formal recognition of property rights constitutes an only rudimentary level of morality. After the ancient idea of ‘just prices’ (iustitia distributiva) had gradually been abandoned during the rise of capitalism, the ‘justice’ of markets tended to confine itself to the principle of factual equivalence: ‘just’ prices (iustitia commutativa) are those actually emerging in formally correct market transactions (Koslowski, 1998: 22f.; Nutzinger and Hecker, 2008). This opens room for grossly exploitative exchange relationships and extremely unequal distributions of wealth, which continue to characterize the social reality of capitalism up to the present day. Moreover, the development of capitalist markets depends on the prior violent separation of workers from the conditions of their subsistence, as Marx had emphasized in his theory of primitive accumulation, and primitive accumulation is ongoing with capitalist globalization (Perelman, 2000).

Nevertheless, the moral minimalism and the material injustice of markets and money, as their medium, form only the one side of the coin, the other being their universality. Market exchange typically develops between ‘strangers’, as had been emphasized already by Marx and Weber. Just because of their relative moral indifference, markets tend to transcend boundaries between nation states, cultures and civilizations and to create relations of economic interdependence at a global scale. Capitalism had been a ‘world system’ (Wallerstein) from its outset. With the trade liberalizations of the nineteenth century and again after the Second World War, the global character of capitalism intensified further. As markets always require communication, their development grew parallel with the invention of new media of global communication such as the telegraph, the telephone and the Internet. At the same time, the emerging market-based ‘world society’ gave rise to unprecedented social polarizations and transnational economic inequalities. It would be misleading to conceptualize the nexus of disembedded markets as an emergent form of global ‘solidarity’ in a Durkheimian sense, as Münch (2011: 107) has suggested. This would mean watering down Durkheim’s strong assumptions about the institutional preconditions of contract which certainly do not apply to present-day global capitalism, despite the existence of global organizations like the UN, the WTO or NGOs, whose power over nation states continues to be weak. On the other hand, it would be similarly misleading to consider the global market nexus, as Polanyi does, as a system governed by nothing but the ‘artificial’ motive of private gain. An individual ‘profit motive’ – on this point Marx too had been much clearer than Polanyi – can arise only on the basis of money as an institutionalized social medium preceding individual actions, and coordinating them to a large degree without their conscious intent. Despite their apparent ‘egoism’, the actors are integrated into a larger social nexus due to their dependence on money – a point that is lacking in Polanyi’s analysis (Hart, 2009).

As a socially integrating device, money works in a way different from Durkheimian institutions, as had been pointed to clearly not only by Marx, but also by Weber and Simmel. The difference can be summarized in two points: first, markets and money as their medium constitute the utmost ‘impersonal’ social relation, cross-cutting locally bounded norms of solidarity and brotherhood, and undermining traditional privileges of insiders vis-à-vis outsiders (Weber, 1972: 382; 1978: 544). Second, money integrates individual interests not, like Durkheimian institutions, by subordinating them to a common moral obligation beyond private property rights. As Simmel had shown, money does not restrict individual wants and debts (as their complement), but shows an almost infinite capacity to integrate utmost heterogeneous interests, thus laying the ground for ‘individual freedom’ in the middle of society (1989: 375f.). As it integrates only via differences, it can be considered as the core of the ‘relational’ nature of modern society, which Simmel had discovered long before Luhmann. By virtue of its relational nature, the nexus of money and markets bypasses the logic of social inclusion and exclusion inherent in traditional ethnic, national or religious identities; ⁷ cool opportunism supersedes the pattern of friend and foe. Free markets are open to anybody irrespective of his/her affiliation to families, nations, religions, races, sexes. Money even overcomes the boundaries between poor and rich, as the failure of Marxism to construct a ‘class identity’ of workers has demonstrated; even criminals and terrorists cannot do without it. Thus, if there is something like an encompassing identity of modern society, the most convincing candidate to fill this function is clearly money, and not nation states or historical religions. The price for the universality of money, however, is its indifference to local standards of morality.

Not only liberals – from Adam Smith to Karl Popper and Friedrich Hayek – have emphasized the universal nature of markets, but also the classic authors of sociological theory. An often neglected author in this context – apart from Marx, Weber and Simmel, whom I have already mentioned – is George Herbert Mead. Mead’s considerations are particularly interesting from our point of view, since they concentrate on comparing religion and the economy as two basic ways of human universality. As Mead emphasized, ‘Each of them becomes universal in its working character, not universal because of any philosophical abstraction involved in them’ (1934: 289). Looking at them closer, however, the universality of markets and of religion differ in important aspects. The economic process is more ‘superficial’ and apparently ‘materialistic’ in his characterization, whereas religious cults require the individual to take the ‘inner attitude’ of the other believers, understanding their existential needs and helping them to save their soul. However, the economic attitude is much easier to communicate between strangers than the religious one:

It is quite possible to understand anybody who comes to you with something of value which you want to get; if he can express himself in commercial terms, you can understand him. If he comes to you, however, with this particular religious cult, the chances are very great that you cannot comprehend him. (Mead, 1934: 296)

Moreover, the economic process, the longer it continues, tends to overcome its superficiality, as it requires the participants to communicate with each other, to identify with potential customers and suppliers and to anticipate their needs. Mead’s conclusion is that the potential of markets to create a universal social nexus is higher than that of religion. Whereas religions often had been sources of warfare between groups and nations, the economic process can bring ‘a closer and closer relationship between communities which may be definitively opposed to each other politically’ (p. 282). ‘It has been the most universal socializing factor in our whole modern society, more universally recognizable than religion’ (pp. 295–6). Markets and money transcend the boundaries of religious communities, moreover they represent a form of universality that is working in practice, beyond abstract theological or philosophical reasoning.

The superior universality of markets and money explains to a large degree the attitude of rivalry and mistrust markets have met from churches at almost all times (Weber, 1972: 352–3, Simmel, 1989: 306). The rivalry manifests itself in the subversive influence, which markets exert on religiously legitimated social orders. This applies to the internal structure of such orders as well as to their external boundaries. Markets open new channels for social mobility and social advancement, allowing individuals to free themselves from the constraints of their inherited status, or to escape poverty or oppressive religious or political regimes via transnational migration, while at the same time exposing them to the risks of failure, exploitation and marginalization. It has become almost a commonplace of social theory that markets, solely by virtue of their global character, have become a key factor in ‘individualization’. The dynamics of individualization, in turn, puts religious and national communities under pressure to adapt and to make themselves compatible with the regime of disembedded markets.

Capital as a device to manage uncertainty

So far, I have dealt only with the social disembedding of markets and their consequences. To put the religious quality of the disembedding process into full perspective, however, we have to go one step further and to analyse the impact of material disembedding. According to the definition suggested above, material disembedding means the extension of the market nexus from finished products or services to the conditions of reproduction, including land, the produced means of production, labour, and finally money as the medium of markets itself. With material disembedding, the phenomenon of ‘fictitious commodities’ (as Polanyi called it) emerged. I will leave the issues of land and money aside here and concentrate on labour. Labour, or, to be more precise, labour power, indeed is a ‘fictitious’ commodity, however, not only because it is not being ‘produced’ for sale and cannot be removed in situations of lacking demand, as Polanyi argued. Rather, the commodity character of labour power is dubious also from its output side, as sociologists of organization and work showed a long time ago.

Different from the material ‘factors of production’, humans are endowed with ‘creative’ capacities to generate something new. ⁸ Under capitalism, money became a private property title on labour, and, hence, on these potentials. ⁹ While the capacities of machines, plants, technical systems, even computers, are basically calculable, it is impossible to give an exhausting definition of the capacities of labour, since such a definition would have to include not only all inventions of the past and present, but also of the future. With the extension of markets to the factors of production, the counterpart of money in markets no longer consists only of a definable quantity of goods and services. Money became an entitlement not only on what actually had been produced, but also what could be produced via the organized employment of labour. As money now allowed its owner to rule immediately over the capacities of labour, the economic process developed an ‘imaginary’ dimension (Beckert, 2011). Mobilizing the creative capacities of labour in ever-new ways, therefore, became a key challenge for capitalist entrepreneurs and managers. The capitalist polarization of capital and labour generated a field of intense competition, with workers struggling for subsistence and entrepreneurs competing to exploit the creativity of labour with the aim of profit (Baumol, 2002). The capitalist growth regime, however, does not exhaust itself in a Darwinist struggle for survival. The stick of competition worked in combination with the carrot of new chances for social advancement due to the relatively open structure of capitalist classes. Therefore, not only self-employed entrepreneurs, but also qualified employees showed a personal drive to gain and to perform extraordinarily, thus safeguarding the profitability of capital.

For Marx, the extension of the power of money to the potentials of free labour had been the key point of his definition of capital. By controlling the creative capacities of labour, money itself takes on the character of a ‘capacity’ (Vermögen in German) that is bound to grow and accumulate. Since the creativity of labour is basically indefinable, the property claim embodied in the capital form of money can never be redeemed finally, but only in a never-ending process. The aim of the capitalist is, as Marx put it, ‘not the single profit but only the restless determination to gain’ (Marx, 1988: 168, trans. C.D.). Since money in its capital form is bound to grow, the need for a continuous increase in the supply of money and credit arises too. This is the point of departure of the modern system of politically guaranteed private credit safeguarding the accumulation of capital from the monetary side (Ingham, 2004; Paul, 2012).

Not by accident, the disembedding of markets following the ‘Great Transformation’ was accompanied by an unprecedented ‘growth explosion’ of the economy. Between 1820 and the present the world economy grew at a pace many times faster than in any former period during the last two thousand years (Maddison, 2001). Growth, instead of stationary reproduction, became the dominating pattern of economic development. What is vital for capitalist growth is not simply higher ‘productivity’ in the sense of an increasing per capita output of a given set of products and services, but innovation (Baumol, 2002). Capitalist growth is based on the continuous invention of new products, services, technologies, logistic concepts and the concomitant elimination of conventional ones – ‘creative destruction’, as Schumpeter called it. Following Schumpeter, recent research has emphasized the irregular character of the innovative process, characterized by uncertainty, technological leaps and industrial revolutions. Typically, business cycles start with ‘radical’ innovations, which are based on path-breaking inventions, leading to a period of diffusion and incremental improvement, until the technology reaches a stage of consolidation and institutionalization, with its inherent potentials gradually exhausting. The crystallization of ‘old’ technologies, in turn, creates room for new radical inventions giving rise to a new cycle (McCraw, 1997; Freeman and Louca, 2001).

An important factor influencing the dynamics of cycles is the communication of inventions via technological visions, paradigms and utopias. Examples are the utopia of unbounded individual mobility, preceding the development of the automobile, the vision of globalized communication, which inspired the invention of the Internet, or the utopia of eternal youth and health driving the progress of bio-technologies (Dosi, 1982; Sturken et al., 2004). The circulation of such utopias is not confined to narrow expert networks, but tends to spread to the public, linking the expert scene with the broader society. Charismatic entrepreneurs and business leaders, such as Henry Ford, Bill Gates or Steve Jobs, play a crucial role in the communication of visions. Comparable to religious prophets, they spark hopes, rouse confidence and point the way to progress. The mobilization of the public is a decisive factor in making the innovation an economic success. Innovative visions and paradigms work like self-fulfilling prophecies: Visions that may appear utterly phantasmagorical in the initial phase (consider only the idea of the airplane a hundred years ago), may become a realistic undertaking, if the protagonists are successful in winning a critical mass of relevant actors to ‘believe’ and to invest into the project (Lampel, 2001). The accumulation of capital thus prepares the ground for the emergence of ever new innovative ‘myths’. Such myths are developing in all arenas of the economy, including not only production, technology and organization but also consumption, where the rise and fall of fashions and ever new ‘imaginations’ is a widely discussed phenomenon (Deutschmann, 2008, 2012; Hirschle, 2012). Capitalist myths, like religious ones, can mobilize collective forces and literally ‘move mountains’ if they are successful. Different from the fixed character of religious myths and rituals, however, capitalist myths tend to exhaust themselves and therefore have to be generated continuously anew, thereby creating new economic and social realities while destroying existing ones. Thus, the material disembedding of markets turns out to be a temporal one too, as complexity takes a temporal form. The cyclical time of pre-modern economies is superseded by a dynamic pattern, pointing to an open future and giving rise to a condition of permanent uncertainty and change.

Consequently, it would be a short cut to consider the capital form of money merely as a means of rational ‘calculation’, as Weber did. Rather, capital is determined to appropriate and mobilize the creative capacities of labour, thus laying the ground for the innovative dynamics of capitalism. Despite all programmes to ‘rationalize’ the organization of firms, the generation of innovations and their success can never be rationalized completely, but depends on contingent conditions. Profits are a premium primarily not for the rationality, but for the creativity of workers and entrepreneurs. Capital challenges and destroys existing structures while opening new futures via innovative projects, which in turn make capital grow in the case of success. As a means to control the contingencies of the innovative process, capital embodies the possibly strongest of all utopias: Individual command over everything that mankind can do. Indeed, it is the ‘absolute means’ in Simmel’s terms, whose reach extends far beyond the ‘economy’ as a functionally differentiated subsystem, since even the non-economic subsystems of society are always needing to be ‘financed’ (Schimank, 2009).

Not only as a universal social nexus, but also as a device controlling human creativity, capital represents a powerful rival to religion. For sociologists of religion, the control of existential uncertainties always had been a key characteristic of religious belief systems. ¹⁰ Without doubt, the owner of capital does not experience a degree of existential security that is as encompassing as the confidence coming from religious belief. Despite bio-technology’s promises to the contrary, capital does not offer a cure for the contingent and finite character of individual life, and it does not compete with religion in promising the rewards of heaven. However, for the owners of capital, it is an all the more so reliable means to attain almost all rewards that are relevant on Earth, such as material welfare, health, social status, individual freedom – rewards which, of course, always had been vital for religious believers too (Weber had emphasized this point). Moreover, capital controls contingencies not only via the inner faithful acquiescence to God’s will, as religions do, but by active mastery of the outer world. As Priddat (2013: 76f.) puts it, heavenly transcendence is shifted to the Earth, now taking on the pattern of never ending this-worldly progress (see also Gross, 1994 and Nelson, 2001, for similar views). The result is a re-enchantment of the economy, which runs counter to Weber’s diagnosis. It puts religious promises in the shade and tends to downgrade the divine creator to a weak surrogate of the true creator: man himself.

Rationalizing and legitimizing the unknowable: theological functions of economic theory

As a self-description of society, the capital form of money represents something indefinable. Disembedded markets are a black box, which as a totality cannot be observed by any observer. In this respect, the capital form of money not by chance shows parallels with religious symbolism, which also points to a transcendent, unknowable world. In both cases, therefore, a characteristic paradox can be observed: The difference between the sign and the object of signification vanishes. The sign seems to be what it signifies, as if the sign warning of the dog were to bite itself. The economic reproduction process as a totality is no less opaque than God as the basis of all being; hence, the capital form of money tends to amalgamate with its object in a way that is similar to religious formulas. Just as God is not only an abstract idea, but is present in holy scripts, rituals and relics, capitalized money not only ‘symbolizes’ wealth, but is wealth. Despite its immaterial character, it must be treated like a numinous ‘substance’ to be transferred in precise quantities from one bank account to the other. Like religious representations, disembedded money can be qualified as a ‘cipher’ (Luhmann, 1992: 33), i.e. symbolism representing and hiding its object of signification at the same time. A further common characteristic of disembedded money and religion is their dependence on ‘trust’ and ‘belief’. As shown above, religious belief is based on an idealized projection of a collective counterpart of society, allowing individuals to identify with this counterpart and to arrange their interpersonal relations as members of one community. Likewise, the worth of intrinsically worthless money cannot be secured without an idealized projection called ‘trust’. ‘Metallistic’ approaches of monetary theory, seeking to base the value of money on a visible ‘substance’ like gold or silver, have proven to be relics of economic superstition. When he accepts payment, the seller does not place his trust in something or somebody, but solely in the notion that the other actors are trusting too (Ganssmann, 2011; Paul, 2012) – a type of trust that appears similarly unconditional like the trust in God.

In other words, money as a self-description of society is no less numinous than religious belief, as had been seen clearly already by Marx in his well-known analysis of the ‘fetishist’ character of the value form. In practical social life, therefore, the need arises to cope with the contingencies of markets and to develop ‘rational’ explanations of the market process. Beyond everyday knowledge, scientific doctrines are required which not only make market processes appear predictable, but also deliver ‘rational’ arguments to legitimate their results. Viewed from this perspective, the function of economic theory to construct rational models about an indeterminable reality is comparable to that of theology. Economic science certainly does not constitute the ‘religion’ of modern society, as Nelson (2001) contends. Nelson misses the important distinction between money and capital as ciphers generated in the market process itself, and the scientific reflection of these ciphers, developing only at a secondary level. Economic science is not a religion by itself, but its status resembles that of a theology of disembedded markets, as its function is to reconstruct the contingent realities of markets in a way that displays them as coherent, rational and legitimate. It is no longer merely a theory about a particular subsystem of society but comes close to what Berger and Luckmann (1966) have called a ‘symbolic universe’, i.e. an ultimate system of meaning giving legitimacy and coherence to an opaque reality. Without such a reconstruction, markets could not work in social practice, just as traditional societies could not work without the basic legitimacy provided by holy scripts and the detailed governance of the religious and theological authorities. As Nelson notes, the role of economic experts in advanced capitalist societies too is not confined to that of scientific advisors, which they claim to be officially. Rather, the role, which they adopt, actually is often primarily a preaching and morally persuasive one. ¹¹

How can economic science master the delicate task of bridging the hiatus between the contingent reality of disembedded markets and the demand of the public for ‘rational’ explanations? In the history of economic thought, three basic approaches can be distinguished which I can outline only briefly here:

As a first possibility, economic theory could refer directly to its own theological and metaphysical legacy. In the Christian-Stoic tradition the economy had been viewed as a part of a larger cosmos created and ruled by God. ‘Oikonomia’ originally meant the governance of human affairs by divine providence (Koslowski, 1998; Agamben, 2010). How God governs the world could be known, of course, not by scientific inquiry, but only by revelation. Since the late Middle Ages, however, the interpretation of divine providence gradually changed: It shifted from a view of God as an omnipresent ruler to that of a mere ‘legislator’, leaving man increasing freedom to regulate his own affairs within the social and natural laws instituted by himself. Still in the physiocratic school of the eighteenth century (Turgot, Quesnay), economic governance was understood as the application of metaphysically based ‘laws of nature’ to human reproduction. At first sight, Adam Smith’s liberal conceptualization of self-regulating markets seemed to be free from such theological or metaphysical premises. However, recent researchers (Koslowski, 1998; Hill, 2001; Vogl, 2010; Priddat, 2013) have argued that Smith’s basic concept of the ‘invisible hand’ of markets cannot be understood without recourse to his background of deist theology. Smith did not attempt any rigorous theoretical explication about the working of the ‘invisible hand’; instead he confined himself to a large variety of empirical illustrations. It seems legitimate to conclude that he at least implicitly relied on the idea of a divine creator in the background, synthesizing individual interests in a way that enhances the general welfare. ¹² The option of framing economic theory theologically had also been taken up by the above-mentioned German School of ‘Ordo-liberalism’ with its strong roots in Lutheran theology (Müller-Armack, 1958; Röpke, 1958; Rüstow, 2001; see Manow, 2001). Divine providence comes in here, however, in a way different from Smith’s approach: Not via the spontaneous working of the invisible hand, but via the power of a strong state, controlling the contingencies of markets by setting tight rules of ethical conduct and fair competition. The management of uncertainty as a problem of economic theory is delegated here to religion and theology in their assumed capacity to guarantee ethically based economic order. The problem of this position does not lie only in its difficult relationship with the secularism of modern political democracies. It also tends to ignore the reality of disembedded markets and to overestimate the economic steering power of the nation state.

Conclusion

In the Marxist tradition, capitalism is defined as a ‘commodified’ society, with disembedded markets representing not only a subsystem of society, but its very core. The ultimate justification for this position lies – as I tried to show – not in a ‘materialistic’ approach, but in the universality of markets, which emerged historically from the ‘Great Transformation’ analysed by Karl Polanyi. Disembedded markets inadvertently grew into the function of an encompassing ‘self-description’ (Luhmann) of society, thereby taking the function to represent the utmost general level of collective identity, which Durkheim focused on in his classical studies of religion. Following Polanyi, I distinguished between spatial, social, material and temporal dimensions of disembedding. In the spatial and social dimension, markets define the identity of capitalist world society – an identity, however, at the very minimum level of civilization, leaving room for grossly unequal and exploitative social relationships. Political, social and religious institutions continue to play an important role in embedding and mitigating these inequalities at the local and national level. While making them viable by embedding them in local collective identities, the same identities tend to revive relationships of inclusion and exclusion and to disrupt the universal nexus of markets. In the material and temporal dimension, the capital form of money takes on the function of a cipher for the creative-destructive capacities of labour, thereby becoming the key to managing vital mundane contingencies and giving rise to permanent transformations of established forms of production and opening societal time horizons. As a self-description of society, the capital form of money represents a reality that is basically unobservable. Therefore it is characterized by paradoxes which in many (not all) aspects are similar to those of religious symbolism. Seen from this viewpoint, the function of economic theory comes close to that of a theology of disembedded markets, attesting rationality and legitimacy to a reality that is opaque.