Karl Polanyi

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The extensive writings of Austro-Hungarian intellectual, educator and socialist, Karl Polanyi (1886-1964) attracted renewed attention with the advent of globalisation in the 1990s when his distinctive insights into the destructive impact of the market mechanism on society and on the eco-system vividly articulated the experiences of many around the world. Polanyi had received his intellectual formation in the cauldron of ‘Red Vienna’ in the inter-war period where he worked as a senior editor of Der Oesterreichische Volkswirt, the most important economic and financial weekly of the German-speaking world, closely observing and commenting on the momentous events of the period. Vienna, with its strong labour movement, socialist municipality and consumer co-operatives, awakened in Polanyi an interest in guild socialism, and he immersed himself in active debates on the feasibility of a socialist economy. In the pages of the most important social science journal in the German-speaking world he argued with the eminent liberal economist Ludwig von Mises who held that socialism was not only undesirable but impossible. Friedrich von Hayek, later to be seen as the father of neoliberalism, attended the private seminars of von Mises in Vienna in the 1920s and spread the individualist, anti-interventionist and anti-socialist ideas of the latter in the English-speaking world when he was appointed to a chair at the London School of Economics in 1931. Von Hayek’s seminal and highly influential work The Road to Serfdom was published in 1944 the same year as Polanyi’s major work The Great Transformation. Polanyi had moved to England in 1933 where he worked in the Workers Education Association and moved in Christian Left circles. Polanyi was later to be quoted as saying that the socialist experiments led by the Austrian social democrats in Vienna in the 1920s were ‘one of the highpoints of western civilization’[1] and the city was the seedbed of many of the key ideas that were to shape the rest of the 20th century, including social democracy and neoliberalism. As Block and Somers write: ‘Despite being much less well known than other major economic thinkers, Karl Polanyi provides us with the most incisive intellectual apparatus available to understand the actual workings and consequences of market economies.’[2]

Market society

At the heart of Polanyi’s appeal, therefore, is his searing critique of the destruction wrought by handing over the running of society to the self-governing market. At a time when the left, following the collapse of ‘real existing socialism’ in 1989-91, was being seduced by claims that liberating the market was the route to better social outcomes, Polanyi’s writings offered a liberating alternative view that seemed to explain far more accurately what many experienced taking place around them, namely the destruction of communities, of livelihoods and of the natural environment. Polanyi saw that, while markets are necessary, they ‘are also fundamentally threatening to human freedom and the collective good’, thus challenging the prevailing neoliberal orthodoxy driving globalisation and the liberalisation of markets. Furthermore, Polanyi’s writings drew attention to the fact that the so-called free market cannot ever exist and what is claimed to be a free market is actually a set of political, legal and cultural arrangements ‘that mostly disadvantage the poor and the middle class and advantage wealth and corporate interests’. In essence, then, free market ideology sidelines politics and reduces the agency of social struggle to shape society.[3]

The major themes being derived from Polanyi’s thought can be summarised as follows:

  1. Market society: A central argument of Polanyi’s classic work The Great Transformation, is that the British industrial revolution introduced a novel system whereby society was made to obey the self-governing mechanisms of the market. What was created therefore was a market system which ‘must be allowed to function without outside interference’ and which was a catastrophe for society, especially for workers and for nature. This ‘produced the typical strains and stresses which ultimately destroyed that society’, he argued, as he saw the utopian experiment of running society according to the dictates of the market as the ultimate cause of both fascism and of war.[4] He gave the term ‘market society’ to the system that resulted, namely a society run according to the needs of the economy, rather than an economy that serves social needs.
  2. Social destruction: This entirely new relationship between economy and society that emerged meant that ‘instead of economy being embedded in social relations, social relations are embedded in the economic system’,[5] which ‘required that the individual respect economic law even if it happened to destroy him’.[6]
  3. Fictitious commodities: Central to the creation of this market society was the treatment of land, labour and money as if they were commodities allocated a price to be bought and sold in the marketplace. But this ‘commodity fiction disregarded the fact that leaving the fate of soil and people to the market would be tantamount to annihilating them’.[7]
  4. Double movement: Polanyi identified a spontaneous countermovement to check the inroads of market forces which emerged from both the left and the right from the end of the 19th century as regulations around public health and factory conditions were introduced, social insurance established and public utilities and trade associations set up. This pragmatic self-protective response, Polanyi saw as ‘the principle of self-protection aiming at the conservation of man and nature as well as productive organization’.[8]
  5. Social integration: In his research into the economy-society relationship in societies prior to the British industrial revolution, Polanyi identified three mechanisms whereby the economy was embedded to serve social needs: reciprocity (free exchange within communities), redistribution (a central power redistributing goods) and exchange (within locally based markets).

21st century relevance

With growing social struggles in the early 21st century to protect nature, decent working conditions and social protections against the inroads of market mechanisms, these ideas of Polanyi took on a new resonance and began to be widely referenced. Many could identify with the counter-movement, seeking the regulation of the market by state actions. However, particularly since the economic and financial collapse of 2008, the ability of the new populist right to capture swathes of public opinion and become major political forces in many stable western democracies challenges this picture of a progressive path toward overcoming market society. Indeed, as Polanyi recognised, the double movement during the inter-war period also resulted in the rise of fascism which seemed to offer stability and protection to those whose livelihoods were destroyed. This undermines any easy conclusion that what Polanyi sought was simply taming capitalism’s excesses, as social democrats tend to read him. Instead, it forces a deeper consideration of Polanyi’s core commitment to an alternative future beyond capitalism consistent with the trajectory of a Great Transition,[9] thus making his work very relevant to transitioning to a low-carbon society.  


If disembedding the economy from society is highly destructive, then the central task facing us is to remembered the economy in society. Polanyi spent the last period of his working life as part of a team of economic anthropologists at Columbia University researching how throughout history the market was embedded to serve society. This research found that everywhere there existed a mixture of reciprocity, redistribution and exchange within local economies.[10] Reciprocity required strong community relationships to exist within a group and finds expression today in what is often called the ‘gift economy’; it is a daily experience of anyone who lives in an intentional community. Redistribution requires some measure of central power to collect into and distribute from a centre, and is best known in our times in various forms of the welfare state though Polanyi’s team found it occurred ‘on all civilizational levels, from the primitive hunting tribe to the vast storage systems of ancient Egypt, Sumeria, Babylonia, or Peru’.[11] It can also take place in smaller groups, such as the Greek estate, the Roman familia or the medieval manor. The third form, exchange, requires a system of price-making markets through which the exchange takes place and is best known today in local farmers’ or craft markets, to be distinguished from the market mechanism.

Embedding the economy

Embedding the economy in society constitutes the second part of the double movement. While much attention has been paid over recent times to what are seen as various manifestations of it in the contemporary world, less attention has been paid to the first part of this double movement, namely the ‘conscious and often violent intervention on the part of government which imposed the market organisation on society for noneconomic ends’, which he regarded as a ‘utopian experiment’.[12] While he believed in the early 1940s that this imposition and the massive social and economic dislocation that it inflicted were on the wane, since the neoliberal turn in the 1970s society has experienced yet again the violent intervention by the government imposing the market organisation on society for noneconomic ends, ends which have much more to do with private profit-making than with social wellbeing. However, in seeking to move beyond this, Polanyi eschewed equating socialism with state power over the economy and society, the dominant view during his time as the Soviet Union institutionalised a highly statist model. Instead, the task that Polanyi sets himself is restoring the fullness of society – its institutions, its culture and values – to guide the economy. For Polanyi, socialism is the attempt to build an economic system that will allow a society of rich human relationships to flourish which requires a break with allowing private acquisition to be the main incentive for production. If capitalism gives priority to the market and communism to the state, Polanyi’s conception of socialism gives priority to society, and particularly to community. Yet, within market society we have the denial of community:

Malnutrition for some amidst the affluence of others, unforced idleness[13] for some amidst the voluntary idleness of the leisured few, lack of opportunity for education and training for some alongside the monopoly of an expensive class education for others, become equivalent to deliberate wrong-doing and crime. It is on account of this denial of community that our society is in process of being destroyed. [14]

Achieving community

Achieving community requires ‘a transformation of society through a change in the economic system’ by abolishing the private ownership of the means of production. Instead ‘the means of production must be owned by the community’ so that the people as a whole have responsibility for the productive system rather than this responsibility being limited to its private owners while the rest of society has no such responsibility. People as a whole must participate in ‘the massive economic adjustments needed to make an international community possible today. The ultimate reason for the helpless drift of the world towards destruction is the denial of community within the nations expressed in the retention of the capitalist system’. What we need to work for is an international community based on local communities that control their means of production.[15]

For Polanyi therefore, it is not the state that acts to defend society but, rather, society itself through its self-organising democratic institutions. Therefore, the free associations of workers, of neighbours, of those in need assume the highest level of responsibility ‘one that only presents itself to the truly free’. This, then, is self-organisation in a classless society, with no passing of responsibilities on to other entities. But this ‘leap into freedom’ is not the end but only the beginning: ‘Freedom through social knowledge can never mean a specific state of affairs; rather, it is a programme, a goal which is constantly re-establishing itself. The history of humanity will not have reached its final goal with socialism; humanity’s history will, in its true sense, only begin with it’.[16]

In the final letter he wrote before he died, Polanyi expressed this life-long vision: ‘The heart of the socialist nation is the people, where collective existence is the enjoyment of a community culture. I myself have never lived in such a society.’[17] The challenges posed by climate change and the struggles to transition to a low-carbon future now provide an opportunity to make such a society a reality.

References

  1. Congdon, Lee (1990): ‘The Sovereignty of Society: Polanyi in Vienna’, in Kari Polanyi-Levitt, ed.: The Life and Work of Karl Polanyi, Black Rose Books: 78-84, quote at p. 81.
  2. Block, Fred and Margaret R. Somers (2014): The Power of Market Fundamentalism: Karl Polanyi’s Critique, Harvard University Press, p. 218.
  3. Block, Fred and Margaret R. Somers (2014): The Power of Market Fundamentalism: Karl Polanyi’s Critique, Harvard University Press, p. 8, 9.
  4. Polanyi, Karl (2001): The Great Transformation: The Political and Economic Origins of Our Time, Beacon Press [first published 1944], p. 257.
  5. Polanyi, Karl (2001): The Great Transformation: The Political and Economic Origins of Our Time, Beacon Press [first published 1944], p. 60.
  6. [4] Polanyi, Karl (2001): The Great Transformation: The Political and Economic Origins of Our Time, Beacon Press [first published 1944], p. 89.
  7. Polanyi, Karl (2001): The Great Transformation: The Political and Economic Origins of Our Time, Beacon Press [first published 1944], p. 137.
  8. Polanyi, Karl (2001): The Great Transformation: The Political and Economic Origins of Our Time, Beacon Press [first published 1944], op. cit., p. 138.
  9. When the New Economics Foundation published a report on how to redesign the economy to address systemic challenges by 2050 it called it The Great Transition ‘as a deliberate echo’ of Karl Polanyi’s The Great Transformation, since his work offers ‘a balance between the market and the non-market; the private and the public; the individual and the community’. See The Great Transition, NEF, 2009, p. 1. The German Advisory Council on Global Change (WBGU) an advisory body to the German Chancellor, also explicitly describes its work on climate change as the Great Transformation ‘not least with reference to Karl Polanyi’s Great Transformation to describe an all-encompassing transition’. See WBGU: World in Transition: A Social Contract for Sustainability, Berlin, 2011, p. 83.
  10. Polanyi, Karl (1968): ‘The Economy as Instituted Process’, in George Dalton, ed.: Primitive, Archaic and Modern Economies: Essays of Karl Polanyi, Anchor Books: 139-74.
  11. Polanyi, Karl (1968): ‘The Economy as Instituted Process’, in George Dalton, ed.: Primitive, Archaic and Modern Economies: Essays of Karl Polanyi, Anchor Books: p. 152-58.
  12. Polanyi, Karl: The Great Transformation op. cit., p. 258.
  13. I wonder if the word ‘unforced’ in this text is a mistake either of Polanyi himself or of its transcription, and whether it should read ‘enforced’.
  14. Polanyi, Karl (2018): ‘Community and Society: The Christian Criticism of our Social Order’, in Michele Cangiani and Claus Thomasberger, eds: Karl Polanyi: Economy and Society, Selected Writings, Polity [written in 1937]: 144-53, quote on p. 149.
  15. [15] Polanyi, Karl (2018): ‘Community and Society: The Christian Criticism of our Social Order’, in Michele Cangiani and Claus Thomasberger, eds: Karl Polanyi: Economy and Society, Selected Writings, op. cit., pp. 147 and 153.
  16. [Polanyi, Karl (2018): ‘On Freedom’, in Michael Brie and Claus Thomasberger, eds: Karl Polanyi’s Vision of a Socialist Transformation, Black Rose Books [written in 1927]: 298-319, quotes on pp. 315, 316.
  17. [17] Polanyi Levitt, Kari (1990): ‘Karl Polanyi and Co-Existence’, in Kari Polanyi Levitt, ed.: The Life and Work of Karl Polanyi, Black Rose Books: 253-63, quote on p. 262.