OUTLINE

Part II: Self Protection of Society

Chapter 11:Man, Nature and Productive Organization
 Self-regulating market
 Double movement
- Economic Liberalism
- Social Protectionism
Chapter 12, 13: Birth of the Liberal Creed
 Laissez-faire
 Anti-Liberal Conspiracy
 Social Classes
Market Economy
controled, regulated and directed by market prices
derived from the expectation that human beings behave
to achieve maximum money gains
There should be markets for all elements of industry not
only for goods but also for labor, land and money
There must be no intervention with the adjustment of
prices to changed market conditions
 Double Movement
The market was expanding continuously but this
movement was met by a countermovement by checking
the expansion of market in definite directions.
Counter movement was incompatible with the self-
regulation characteristic of the market and the market
system itself.
It was more than the usual defensive behavior of a
society when faced with a change. It was a reaction
against the dislocation of fabric of the society due to the
market system.
Double Movement
Market was expanding

Protectionist, Interventionists Policies

 Double Movement II
The movement was so strong that it could destroy the
organization of the society created by the market.
Robert Owen:
“If market economy was left to evolve according to its own
laws, it would create great and permanent evils.”
The counter movement tried to check the action of the
market in respect to labor and land. This was the main
function of the interventionism.
At the same time, productive organization was under
threat because enterprises industrial, agricultural or
commercial were affected by changes in the prices.

This is a paradox for Polanyi because not only human

beings and natural resources but also the organization of
capitalist production itself had to be protected from the
devastative effects of the self-regulating market.
 Double Movement III
Double movement is the action of two
organizing principles in society.

Economic Liberalism

Principle of Social Protection

 Economic Liberalism
aims the establishment of a self-
regulating market.
relies on the support of the trading
classes.
Uses largely laissez-faire and free
trade as its methods.
 Social Protection
aims the protection of man and nature
as well as production organization.
relies on the varying support of those
group of people who most immediately
affected by the destructive action of the
market. (Primarily working and landed
classes, but not only them)
uses protective legislation, restrictive
associations and other instruments of
intervention as its methods.
The Birth of the Liberal Creed
According to Liberalism, the root of all evil is the
intervention into the freedom of employment, trade and
currency practiced by the social, national and
monopolistic protectionism. The alliance of trade unions
and labor parties with monopolistic manufacturers
frustrate the economic liberty. If there is no intervention,
system creates material welfare automatically.
Liberals blamed the interventions for the problems of the
third quarter of the 19th century.
 Laissez-Faire
stand for the 3 classical principles
Labor should find its place on the market.
(labor market)
Creation of money should be subject to
an automatic mechanism.
(gold standard)
Goods should be free to flow country to
country without preference or obstacle.
(free trade)
 Laissez-Faire II
Polanyi claims that there was nothing natural about
laissez-faire.
Free market could never emerge merely by allowing
things to take their course.
For ex: Cotton manufacturers
Laissez-faire itself was enforced by the state.
For a typical utilitarian, economic liberalism was a social
project which should be implemented for the greatest
happiness of the greatest number.
Laissez-faire was not a method to achieve a thing but it was
the thing to be achieved.

Opposite of interventionism = Laissez-faire

Economic liberalism ≠ Laissez-faire
Market system and intervention are not mutually
exclusive terms.
Before this system is established, economic liberals call
for the intervention of the state in order to establish it
and once established in order to maintain it.
Laissez-faire is an objective, aim of the economic
liberalism. But even radical liberals know that sometimes
laissez-faire is inapplicable to advanced industrial
conditions.
If the needs of self-regulating market are incompatible
with the demands of laissez-faire, the economic liberals
turn against laissez-faire and prefer regulation and
restriction.
 Anti-Liberal Conspiracy
According to Liberals, the responsible for our ills was not
the competitive system and the self-regulating market but
the interference and interventions into market system.
Interventionist legislations, policies were the result of
purposeful action of the opponents of liberal principles.
They accuse the interventionist (collectivist) movements
as an effort to prevent liberal movement. This is the myth
of the anti-liberal conspiracy.
According to Polanyi, these counter-movements appeared
due to the broad range of the vital social interests affected
by the expanding market mechanism.
Behind these movements, there was no prejudice or
ideological forces to be anti-liberal.
These movements sometimes can be supported by the
economic liberals themselves.
Different parties from various ideologies and different social
classes put into effect almost the same policies at the same
time period.
 Social Classes
Class interests don’t have essentially economic nature.
The motives of human behaviors are not determined by
the needs of material satisfaction.
Social recognition is more relevant than purely economic
matters in class behavior.
The interests of a clas refer to rank, status and security.
Interventionist measures simply responded to the needs
of an industrial civilization which market cannot cope
with.
For Polanyi, in order to see the comprehensiveness of the
protectionist movements, we have to get rid of the
obsession that only sectional never general interests are
effective in these movements.
The market threatened not the economic but social
interest of the different group of people.
People from different classes joined these movements
unconsciously.
Karl POLANYI - The Great Transformation

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