ABSTRACT
The “compromise of embedded liberalism” is one of the most powerful metaphors in the international relations literature, offering a compelling story about the political foundations of international organization in the second half of the twentieth century. The compromise was not a grand decision sealed by a treaty, but rather an ongoing process first evident in the actions of state officials during the 1940s. The metaphor is based on the work of Karl Polanyi, who described the emerging postwar order of the 1940s as a “great transformation” because of the reassertion of social control over the market. Polanyi observed that every economy is socially embedded. When the attempt was made under nineteenth-century laissez-faire to allow the market to be self-regulating, or “disembedded,” society protected itself in a “double movement” in which the expansion of the market was countered by society (Polanyi, 1944: 131). In John Ruggie’s extension of Polanyi’s idea, the essence of the postwar system was that “unlike the economic nationalism of the 1930s, it would be multilateral in character; unlike the liberalism of the gold standard and free trade, its multilateralism would be predicated on domestic interventionism” (1982: 209). In this compromise between international openness and the domestic welfare state, liberalism continued, but it was “embedded” in the domestic social order.
