Why Karl Polanyi Still Matters

It's a ripe moment to dust off "The Great Transformation" and its anthropological
critique of "self-regulating markets."
| by David Bollier



Image by Barbara Kruger.
As President Obama and his lieutenants scramble to try to prevent a major
economic meltdown and social catastrophe, we have had little time to come to
terms with a shattering reality: the free market as a public philosophy is dead.
Unfolding events are discrediting some deeply rooted assumptions about American
politics and policymaking. The neoliberal worldview a vision of deregulation,
privatization, free trade, limited government and few public services is
collapsing.
A line of thinking that began with conservative economist Friedrich Hayek, gained
cultural currency through Barry Goldwater, Ayn Rand and corporate America, and
was actualized as a political program through Ronald Reagan, Milton Friedman,
the GOP and centrist elements of the Democratic Party, is now facing a reckoning.
The dominant philosophy of economics and governance of the past generation is
being exposed as a utopian dream. It is properly seen as a political agenda that
caters to investors and corporate managers, and quietly depends upon significant
government interventions and subsidies.


Who can seriously talk about a free market and freedom to choose when
taxpayers are being forced to pay trillions of dollars to prop up an ideological
fantasy? The impending nationalization of the banking industry dismissed as a
fringe idea only weeks ago has now been embraced by the likes of Alan
Greenspan, Senator Lindsay Graham, George Will and Paul Krugman.
But heres the odd part: Everyone seems to regard all the bailouts and likely
nationalizations as a kind of ideological interlude. Embarrassing, yes, but a cause
for a new public philosophy? Hardly. Once the government cleans up the toxic
assets, we will presumably be free to resume our normal free market worldview
and ways of thinking.
A rude awakening is surely in store for us. While public attention is understandably
focused on the emergency measures needed to save the economy, Im wondering
why there are so few conversations about the post-neoliberal political vision.
We need to enlarge the scope of political conversation to include such questions as:
How shall we re-integrate market forces into society so that they can be
constructive and not disruptive and yet go beyond the traditional (ineffective)
regulatory schemes for restoring trust and lending? In the emerging post-neoliberal
environment, what new and better ways can we devise for blending government,
markets and the commons? Could the decentralized participation of the Internet be
leveraged to enable greater self-policing of markets, greater transparency in
transactions, and greater trust among consumers, investors and taxpayers?
It may take months or years for the shell-shock of our current crisis to abate and for
intelligent dialogue to resume, but when that occurs, I recommend that we
resurrect the conversation that Hungarian economist Karl Polanyi initiated with his
book, The Great Transformation: The Political and Economic Origins of Our Time.
Polyanis timing was unfortunate. His book was published in 1944, just as the Cold
War was getting underway. As neoliberal capitalists squared off against Marxist
communists, few people saw the value of a humanistic vision of economics and
society. The relevance of anthropology and pre-modern societies to the industrial
age was seen as marginal.
Yet that is precisely what I find so appealing about Polanyi and what makes him so
relevant today: He understood that the modern market economy is a special,
historically rooted form of social organization. It is not a natural, universal system
for organizing societies, as its champions assert. It is, in fact, an historical
aberration in the long sweep of human history one that has produced many
benefits, to be sure, but it has also introduced deep structural tensions that always
threaten to overwhelm human societies.
Prior of the rise of the market as an ordering principle for society, politics,
religion and social norms were the prevailing forces of governance. Land, labor and
money itself were not regarded chiefly as commodities to be bought and sold. They
were embedded in social relationships, and subject to the moral consideration,
religious beliefs and community management.
When the Great Transformation occurred, Polanyi argued, markets became
regarded as autonomous forces in their own right. The presumption was that
market forces should organize all of society. We have been dealing with its
consequences ever since.
The basic dilemma is that the free market cannot self-regulate itself. A laissez-faire
economy is, in fact, planned. It necessarily needs government management and
social control. In addition, because markets treat nature as essentially limitless and
human beings as commodities, they are always pushing human societies and nature
to the breaking point. Invariably, crises erupt that require societal interventions.
The relentless imperatives of markets cannot prevail indefinitely against the
irreducible needs of human beings and nature.
We are in such a moment of crisis right now. As Fred Block writes in a 2001 essay
about The Great Transformation, one might say that disembedding the market
[from society] is similar to stretching a giant elastic band. Efforts to bring about
greater autonomy of the market increase the level of tension. With further
stretching, either the band will snap representing social disintegration or the
economy will revert to a more embedded position.
In Europe, Polanyi held that the disembedding of markets from society led to the
Great Depression and then fascism. In the United States, FDRs New Deal took a
more benign path. He re-conceptualized how markets and society would wield their
respective powers, saving capitalism from itself. One wonders how the Obama
administration and the American people will deal with the latest iteration of this
recurrent tension.
For starters, we will need to begin to accept that society has compelling and
legitimate reasons to subordinate the workings of the market. The wreckage of the
free market is all too evident right now. This stems partly from the relentless
imperative of markets to commoditize everything; in the case of the banking sector,
it was the securitization of subprime mortgages and other risk-spreading securities.
This dynamic goes back to the original fiction of treating land, labor and money as
commodities. As Polanyi points out, these are actually fictitious commodities in
the sense that they are not truly discrete products. Land and human beings have
their own sovereign dynamics apart from their treatment as market commodities.
Treating them as mere commodities creates some dangerous pressures as when
too much carbon is emitted into the atmosphere or people are thrown out of work
because they are redundant.
The big cultural project of our time is learning to accept the reality that nature has
its own needs and limits, that human beings are not fungible units of labor, and
that even money is a social creation based on social trust and governance. The
entire neoliberal worldview of ceaseless progress through technological
innovation and material consumption deserves some deep re-examination as well,
if only because the carbon-based, consumption-driven economy will otherwise
destroy the earth. We are reaching inherent limits.
Polanyi is too rich a thinker to summarize fully here, but suffice it to say that he is
worth reading for his critique of self-regulating markets, the embeddedness of
markets in society, and the importance of the non-market gift economy based on
social reciprocity and sharing. There are several nice introductions to Polanyi. One
is an introduction to The Great Transformation written by Fred Block. Another is
the Wikipedia entries for Polanyi and for The Great Transformation. You can also
consult the websitie for the Karl Polanyi Institute of Political Economy at Concordia
University in Montreal.
A parting quotation by Polanyi helps explain why he has so much to say about the
commons in a time of neoliberal enthusiasm and crisis: The social history of our
time is the result of a double movement: The one is the principle of economic
liberalism, aiming at the establishment of a self-regulating market; the other is the
principle of social protection aiming at the conservation of man and nature as well
as productive organization.