The Great Transformation: The Political and Economic Origins of Our Time
by Karl Polanyi
In "The Great Transformation," Karl Polanyi explores the profound consequences of a self-regulating market economy on society and the environment. He argues that allowing markets to dictate human and ecological fates leads to societal disintegration, as commodifying labor undermines human dignity and social structures. Polanyi critiques the utopian aspirations of economic liberalism, asserting that the pursuit of a self-adjusting market results in social dislocation, poverty, and the erosion of community bonds. Central to his thesis is the assertion that the market is not a standalone entity but deeply intertwined with social relations. He contends that economic systems are governed by social motives rather than mere self-interest. The rise of fascism, in Polanyi's view, was a reaction to the failures of liberal capitalism, as societies sought to protect themselves from the market's destabilizing forces, often at the cost of democratic freedoms. Polanyi also critiques the gold standard's role in exacerbating nationalism and contributing to global conflicts, illustrating that efforts to create a borderless economic landscape often yield the opposite result. Ultimately, he emphasizes the need for societal regulation of the economy, highlighting that ignoring this interconnectedness leads to crises that threaten both human welfare and the environment. His work serves as a critical reflection on the relationship between economy, society, and the moral imperatives that should guide economic practices.
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...To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society. For the alleged commodity, "labor power" cannot be shoved about, used indiscriminately, or even left unused, without affecting the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man's labor power the system would, incidentally, dispose of the physical, psychological, and moral entity of "man" attached to the tag. Robbed of the protective covering of cultural institutions, human beings would perish from the the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rovers polluted, military safety jeopardized, the power to produce food and raw materials destroyed...
Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness.
the organization of labor is only another word for the forms of life of the common people, this means that the development of the market system would be accompanied by a change in the organization of society itself. All along the line, human society had become an accessory of the economic system.
the selfish gladly consoled themselves with the thought that though it was merciful at least it was not liberal;
In the half-century 1879–1929, Western societies developed into close-knit units, in which powerful disruptive strains were latent. The more immediate source of this development was the impaired self-regulation of market economy. Since society was made to conform to the needs of the market mechanism, imperfections in the functioning of that mechanism created cumulative strains in the body social. Impaired self-regulation was an effect of protectionism.
Robert Owen’s was a true insight: market economy if left to evolve according to its own laws would create great and permanent evils.
Freedom’s utter frustration in fascism is, indeed, the inevitable result of the liberal philosophy, which claims that power and compulsion are evil, that freedom demands their absence from a human community. No such thing is possible; in a complex society this becomes apparent. This leaves no alternative but either to remain faithful to an illusionary idea of freedom and deny the reality of society, or to accept that reality and reject the idea of freedom. The first is the liberal’s conclusion; the latter the fascist’s.
Yet the victory of fascism was made practically unavoidable by the liberals’ obstruction of any reform involving planning, regulation, or control.
Enclosures have appropriately been called a revolution of the rich is against the poor. The lords and nobles were upsetting the social order, breaking down ancient law and custom, sometimes by means of vio¬lence, often by pressure and intimidation. They were literally robbing the poor of their share in the common, tearing down the houses which, by the hitherto unbreakable force of custom, the poor had long regarded as theirs and their heirs'. The fabric of society was being disrupted; desolate villages and the ruins of human dwellings testified to the fierce¬ness with which the revolution raged, endangering the defenses of the country, wasting its towns, decimating its population, turning its over¬burdened soil into dust, harassing its people and turning them from decent husbandmen into a mob of beggars and thieves.
Poverty was nature surviving in society; that the limitedness of food and the unlimitedness of men had come to an issue just when the promise of boundless increase of wealth burst in upon us made the irony only the more bitter.
The root of all evil, the liberal insists, was precisely this interference with the freedom of employment, trade and currencies practiced by the various schools of social, national, and monopolistic protectionism since the third quarter of the nineteenth century; but for the unholy alliance of trade unions and labor parties with monopolistic manufacturers and agrarian interests, which in their shortsighted greed joined forces to frustrate economic liberty, the world would be enjoying today the fruits of an almost automatic system of creating material welfare. Liberal leaders never weary of repeating that the tragedy of the nineteenth century sprang from the incapacity of man to remain faithful to the inspiration of the early liberals; that the generous initiative of our ancestors was frustrated by the passions of nationalism and class war, vested interests, and monopolists, and above all, by the blindness of the working people to the ultimate beneficence of unrestricted economic freedom to all human interests, including their own. A great intellectual and moral advance was thus, it is claimed; frustrated by the intellectual and moral weaknesses of the mass of the people; what the spirit of Enlightenment had achieved was put to nought by the forces of selfishness. In a nutshell this is the economic liberal’s defense. Unless it is refuted, he will continue to hold the floor in the contest of arguments.
The most recent global financial crisis reminded the current generation of the lessons that their grandparents had learned in the Great Depression: the self-regulating economy does not always work as well as its proponents would like us to believe.
In reality, the part played by fascism was determined by one factor: the condition of the market system.During the period 1917-23 governments occasionally sought fascist help to restore law and order: no more was needed to set the market system going. Fascism remained undeveloped.In the period 1924-29, when the restoration of the market system seemed ensured, fascism faded out as a political force altogether.After 1930 market economy was in a general crisis. Within a few years fascism was a world power.
The outstanding discovery of recent historical and anthropological research is that man's economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end. Neither the process of production nor that of distribution is linked to specific economic interestsattached to the possession of goods; but every single step in that process is geared to a number of social interests which eventually ensure that the required step be taken. These interests will be very different in a small hunting or fishing community from those in a vast despotic society, but in cither case the economic system will be run on noneconomic motives.
The traditional unity of a Christian society was giving place to a denial of responsibility on the part of the well-to-do for the conditions of their fellows. … To the bewilderment of thinking minds, unheard-of wealth turned out to be inseparable from unheard-of poverty. Scholars claimed in unison that a science had been discovered which put the laws governing man’s world beyond any doubt. It was at the behest of these laws that compassion was removed from the hearts, and a stoic determination to renounce human solidarity in the name of the greatest happiness of the greatest number gained the dignity of secular religion.
the role of managing fictitious commodities places the state inside three of the most important markets; it becomes utterly impossible to sustain market liberalism’s view that the state is “outside” of the economy.
Workers, farmers, and small business people will not tolerate for any length of time a pattern of economic organization in which they are subject to periodic dramatic fluctuations in their daily economic circumstances.
