Embedded Economies, Democracy, and the Public Interest

Abstract

Over the past four decades, observers have lamented the lack of participation in democratic processes among large segments of the U.S. population.! This lack of political engagement seems particularly puzzling, given the growing gap between rich and poor and the preoccupation on the part of many policy makers with policies that benefit a few individuals rather than the public. Economists, political analysts, and pundits have analyzed these issues extensively, with the problem attributed either to flaws in the political system or to failings on the part of the citizenry (Winders 1999; Neuborne 2001). In this paper, we suggest an alternative, economic explanation. Specifically, we argue that the decline of democratic participation and the increased power of private rather than in the formation of policy are characteristics of a disembedded economy. We begin our argument with the concept of disembeddedness as developed by Karl Polanyi (1957a, b) and others. The purpose of this section is to present our definition of a disembedded economy. In the following section, we explain how disembeddedness results in the relegation of democracy and the to the noneconomic sphere of social life. We then turn from the disembedded economy to a discussion of an embedded economy. Specifically, we ask whether embeddedness would result in an economy that gives primacy to the interest, where the meaning of public interest is determined by the full and active participation of all members of society. Finally, we close with some comments on the current disembeddedness of the U.S. economy and future prospects for policies in the interest.