Financialization, Class Interests, and Karl Polanyi’s Protective Response David A. Zalewski Providence College zalewski@providence.edu Abstract: Many observers expected a stronger countermovement against neoliberalism following the Great Recession. This paper argues that such a protective response failed to materialize because the financialization process has aligned the preferences of labor and rentier classes. The result has been weaker support in democracies for expansionary monetary and fiscal policies during the early stages of recessions, which further lowers aggregate spending by increasing uncertainty. Thus, reversing the culture of financialization may be a necessary condition for preventing and responding to financial crises. Keywords: Karl Polanyi, double movement, financialization, financial crises, macroeconomic policy JEL Classification Codes: B52, E02, E61 A revived interest in Karl Polanyi’s notion of the double movement emerged after the Great Recession began in December 2007. Polanyi ([1944] 2001, 140) describes this process as a persistent tension in democratic societies between groups attempting to establish self-regulating markets and others rebelling against the social dislocations resulting from them. Since capitalists require reliable supplies of land, labor, and money to produce efficiently, they commodify these resources. Fred Block (2008, 3) describes how this is accomplished: “Since the market acting alone cannot produce these things in correct and sustainable quantities, the state must manage the supply and demand for these critical inputs to the production process.” However, people whose livelihoods are threatened by free markets may also seek relief through government intervention. According to Block, the phase of the double movement that dominates depends upon the relative opportunity, power, and capacity of opposing groups to influence politicians. Because financial