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In this classic work of economic history and social theory, Karl Polanyi analyzes the economic and social changes brought about by the "great transformation" of the Industrial Revolution. His analysis explains not only the deficiencies of the self-regulating market, but the potentially dire social consequences of untempered market capitalism. New introductory material reve In this classic work of economic history and social theory, Karl Polanyi analyzes the economic and social changes brought about by the "great transformation" of the Industrial Revolution. His analysis explains not only the deficiencies of the self-regulating market, but the potentially dire social consequences of untempered market capitalism. New introductory material reveals the renewed importance of Polanyi's seminal analysis in an era of globalization and free trade.


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In this classic work of economic history and social theory, Karl Polanyi analyzes the economic and social changes brought about by the "great transformation" of the Industrial Revolution. His analysis explains not only the deficiencies of the self-regulating market, but the potentially dire social consequences of untempered market capitalism. New introductory material reve In this classic work of economic history and social theory, Karl Polanyi analyzes the economic and social changes brought about by the "great transformation" of the Industrial Revolution. His analysis explains not only the deficiencies of the self-regulating market, but the potentially dire social consequences of untempered market capitalism. New introductory material reveals the renewed importance of Polanyi's seminal analysis in an era of globalization and free trade.

30 review for The Great Transformation: The Political and Economic Origins of Our Time

  1. 5 out of 5

    W. Littlejohn

    I foolishly took it upon myself to read not only the assigned chapters, but the whole of Polanyi's magnum opus, and for the past few days have been lost in the labyrinth of 19th-century poor laws and monetary policy in the Weimar Republic. But this book was immensely profitable, if I may borrow a market-based metaphor. In particular, three of Polanyi's simplest, most commonsensical contentions were extremely illuminating to me and greatly bolstered my ability to criticize capitalist orthodoxy. The I foolishly took it upon myself to read not only the assigned chapters, but the whole of Polanyi's magnum opus, and for the past few days have been lost in the labyrinth of 19th-century poor laws and monetary policy in the Weimar Republic. But this book was immensely profitable, if I may borrow a market-based metaphor. In particular, three of Polanyi's simplest, most commonsensical contentions were extremely illuminating to me and greatly bolstered my ability to criticize capitalist orthodoxy. The first, on page 48, is Polanyi's contention that the concept of man that Adam Smith and the economists after him put forth, of man as naturally engaging in trade and barter to further his economic interest, is pure invention. Far from being a simple description of man's nature, it is thoroughly unnatural. Man is, and throughout history has been, primarily motivated not by individual economic interests, but by social interests. His economic decisions, as well as all other decisions, were determined by his need to preserve his social status, and to conform with accepted social norms, because man is fundamentally a social being. As soon as you state this truth, it becomes blindingly obvious. Even two centuries of market dominance have been unable to overcome human nature in this respect--when we look around at what motivates people's buying and selling choices, even in the modern West, the chief factor is clearly not economic interest, but social status. Why on earth do women spend hundreds of dollars on brand-name clothing that is no more useful than nearly identical clothes that sell for a tenth the price? Why do men spend thousands of dollars on sleek sports cars to drive on crowded city roads? Clearly not economic interest, but desire for social status. The same applies to much of what drives the housing market and other huge chunks of the global economy. Marketing experts know better than to listen to the claim that man trades primarily for his economic interest; it's about time professional economists woke up to the fact as well. Second is Polanyi's argument that land, labor, and money are of course not commodities at all--they are "fictional commodities." Land and labor are simply part of the basic fabric of natural human existence; only if they are torn completely away from their natural foundations can they begin to function as commodities, but even then, nature will continually re-assert itself, and the market will never gain uncontested mastery over them. Money is naturally merely a tool to facilitate exchange; to exalt it beyond this is to subject it to dangerous pressures which it cannot bear. Of course, it is not impossible to argue that to treat these as commodities is, all in all, an advantageous innovation, but Polanyi insists that economists be honest and recognize it as an innovation. Classical economics must renounce its absurd claim to be simply an objective description of the way the world works (which is how Christian conservatives justify submission to it) and acknowledge that it is rather a bold and dangerous prescription for how to make the world work. Third is Polanyi's argument on p. 164 and following that a society may be destroyed and misery may increase even when economically, every one is doing better and better. This pokes a big hole in the last defense of free-market capitalism--that, in the end, it benefits poor and rich alike, by causing the wages and economic prosperity of all to increase. Far more destructive to human well-being than simple economic privation, Polanyi argues, is the destruction of the social structures and norms which give human existence stability and meaning. Of course, this destruction also has economic consequences, because, as capitalism advances and individual "prosperity" increases, the social support systems that will protect each member of society in case of crisis disappear; the individual is left to his own resources, which, though they may have been augmented by economic progress, are insufficient for the task. This observation of Polanyi's is intensely relevant to the current world situation, where capitalist industry is taking complete control of Third World countries, often with devastating social consequences. Anti-capitalists lament the deprivation, poverty, and exploitation of the common people, while defenders of capitalism insist that, on the contrary, statistics show that these people's incomes and economic prosperity are growing. The capitalist defense may be partially true, but the whole truth is much worse than the anti-capitalist lament; the people of Kenya, Bangladesh, or Vietnam may have a higher income, but with the result of the destruction of the fabric of society, of all in man that cannot be commodified, the result, in short, that C.S. Lewis calls "the abolition of man."

  2. 5 out of 5

    Naeem

    I wouldn't think of reading this book without a guide. Because Polanyi is an impossible read -- more difficult than Marx (he doesn't have Marx's love of language or Marx's humor), more difficult than Hegel (he doesn't have Hegel's pointed sense of knowing that his prose is torturing the poor reader). If you have ever tried to read Aristotle, then you have some idea of how Polanyi writes -- tear-duct vaporizing dry. But you get something here you won't get in hegel or marx (in part because he is I wouldn't think of reading this book without a guide. Because Polanyi is an impossible read -- more difficult than Marx (he doesn't have Marx's love of language or Marx's humor), more difficult than Hegel (he doesn't have Hegel's pointed sense of knowing that his prose is torturing the poor reader). If you have ever tried to read Aristotle, then you have some idea of how Polanyi writes -- tear-duct vaporizing dry. But you get something here you won't get in hegel or marx (in part because he is building on them). What you get is this: the claim that markets and "socialism" are simultaneous in their emergence. Not markets against socialism, but markets AND socialism -- from the beginning and always. The bold claims is that without socialism (of various types) a pure market society couldn't exist for more than 20 years. Markets would destroy the very elements they thrive upon -- human beings. What we get from Polanyi is that the temporal separation of "stages" that the Scottish Enlightenment figures (Smith, Hume, Ferguson, etc.), hegel, and marx deployed, is replaced in Polanyi by the "overlaps" of stages. The past, present, and future coexist in simultaneous determinacy. Its a revolutionary move. There is more. Much, much more. The Great Transformation is a book that one reads over and over through a lifetime. Its mix of theory, history, and wisdom is unparalleled in any other book I have read. Hegel's and Marx's theoretical insights are deeper and perhaps more precise. But Polanyi is superior -- I believe -- in one important dimension: he treats the "third world" with reverence, as a fount of knowledge, as a living resource. (His honoring of the third world comes across more in other works -- see, Primitive, Archaic, and Modern Economies: Essays of Karl Polanyi; Trade and Market in the Early Empires; and Dahomey and the Slave Trade: An Analysis of an Archaic Economy. I mention all this about Polanyi because the current popular heir to his work is Naomi Klein's excellent The Shock Doctrine. So read Klein, then get your hands on some secondary literature on Polanyi. You might start with chapter 5 of my book with David Blaney International Relations and the Problem of Difference. Or you could start with a short and excellent overall sketch in The Economic Thought of Karl Polanyi: Lives and Livelihood, by James Ronald Stanfield.

  3. 5 out of 5

    E. G.

    Foreword, by Joseph E. Stiglitz Introduction, by Fred Block Note on the 2001 Edition Author's Acknowledgments --The Great Transformation: The Political and Economic Origins of Our Time Notes on Sources: 1. Balance of Power as Policy, Historical Law, Principle, and System 2. Hundred Years' Peace 3. The Snapping of the Golden Thread 4. Swings of the Pendulum after World War I 5. Finance and Peace 6. Selected References to "Societies and Economic Systems" 7. Selected References to "Evolution of the Market Patt Foreword, by Joseph E. Stiglitz Introduction, by Fred Block Note on the 2001 Edition Author's Acknowledgments --The Great Transformation: The Political and Economic Origins of Our Time Notes on Sources: 1. Balance of Power as Policy, Historical Law, Principle, and System 2. Hundred Years' Peace 3. The Snapping of the Golden Thread 4. Swings of the Pendulum after World War I 5. Finance and Peace 6. Selected References to "Societies and Economic Systems" 7. Selected References to "Evolution of the Market Pattern" 8. The Literature of Speenhamland 9. Poor Law and the Organization of Labor 10. Speenhamland and Vienna 11. Why Not Whitbread's Bill? 12. Disraeli's "Two Nations" and the Problem of Colored Races Index

  4. 5 out of 5

    David M

    I read this a few years ago. I've been thinking about it again after reading Streeck's stunning How Will Capitalism End? Maybe the key concept here is embeddedness (https://en.wikipedia.org/wiki/Embedde...) Capitalist society relies on pre-capitalist social formations to sustain itself. The market on its own is an insufficient foundation for the spiritual and social bonds that constitute a people (as opposed to just an aggregate of individuals). Thus (it may follow) the total triumph of capitalism w I read this a few years ago. I've been thinking about it again after reading Streeck's stunning How Will Capitalism End? Maybe the key concept here is embeddedness (https://en.wikipedia.org/wiki/Embedde...) Capitalist society relies on pre-capitalist social formations to sustain itself. The market on its own is an insufficient foundation for the spiritual and social bonds that constitute a people (as opposed to just an aggregate of individuals). Thus (it may follow) the total triumph of capitalism will also be its dissolution. Contra most Marxists, the end of capitalism does not require a revolutionary subject to take its place. Just the opposite, capitalism will deteriorate after it has eliminated all opposition. Chaos reigns. * This book was actually published the same year as Road to Serfdom. Polyani > Hayek ( > Marx? to me, that seems like an open question; at the moment it almost seems equally radical to call for a new New Deal as a second Bolshevik revolution ) http://prospect.org/article/karl-pola... 'Hayek contended in The Road to Serfdom that even democratic forms of state planning were bound to end in the totalitarianism of a Stalin or a Hitler. But 70 years later, there is not a single case of social democracy leading to dictatorship, while there are dozens of tragic episodes of market excess destroying democracy. ' TRUTH. What starts with 'free' markets does not end in freedom.

  5. 4 out of 5

    Larry Lamar Yates

    Polanyi understood economics more realistically than most economists, and understood that economics does not stand alone, but exists within a larger social institutional context. I know that sounds a bit stiff. But until you get it, you will suspect that economists don’t know something you don’t. You might even believe in the “almighty market” as something that exists outside of culture and politics, like the revolutions of the planets. Economics is always, like religion or politics, something w Polanyi understood economics more realistically than most economists, and understood that economics does not stand alone, but exists within a larger social institutional context. I know that sounds a bit stiff. But until you get it, you will suspect that economists don’t know something you don’t. You might even believe in the “almighty market” as something that exists outside of culture and politics, like the revolutions of the planets. Economics is always, like religion or politics, something we create together in response to the world we live in. The people in this book are, among other things, creating a new economics. But the reality is that every society, every day, for better or worse, is creating its own new economics.

  6. 4 out of 5

    Mehrsa

    Just re-read this book from start to finish and I could not believe how relevant it is. This may be the most important book written this century. While some parts are obviously outdated, his thorough takedown of neoliberalism, myths of colonization and money are essential. The fact that we’re still only reading Adam Smith or Marx is a tragedy.

  7. 5 out of 5

    Randal Samstag

    Polanyi’s book traces the history of the rise of industrial civilization in England from 1795 through the Great Depression. The book was written during World War II, but it remains as important as ever to us since the “Reagan / Thatcher Revolution” has resurrected the illusions of an earlier age of naive worship of the free market. Now that we are in the midst of our Great Recession, perhaps we are in a better position to appreciate his comprehensive critique of liberal economic theory, the theo Polanyi’s book traces the history of the rise of industrial civilization in England from 1795 through the Great Depression. The book was written during World War II, but it remains as important as ever to us since the “Reagan / Thatcher Revolution” has resurrected the illusions of an earlier age of naive worship of the free market. Now that we are in the midst of our Great Recession, perhaps we are in a better position to appreciate his comprehensive critique of liberal economic theory, the theory of laisser-faire that arose in the nineteenth century with David Ricardo and subsequent thinkers. It would be fair to say that the entire “science” of economics is founded upon the illusions that Polanyi exposes, since his principal thesis is that economic life is not the base of human society but “embedded” in it. Polanyi’s critique is as applicable to the Marxist as the Liberal tradition to the extent that Marx took over from Ricardo the notion that economic life is primary to society and not the other way round, as Polanyi insisted. Polanyi’s thesis is based not on a Keynesian or Marxist critique of capitalism, but on a more profoundly basic analysis of the very idea of a self-regulating market; the idea (illusion) developed by the founders of the Liberal school: Ricardo, Malthus, Burke, and Mill. One of its offshoots is the libertarian tradition, which in the United States is essentially coeval with the tradition of the Austrian school in economics. For a detailed review look here:(http://notesfrommylibrary.wordpress.c...).

  8. 5 out of 5

    Joel

    The principle point made by this book is that the attempted transition from a market embedded in society to a society embedded in a self-regulating market resulted in the collapse of 19th century civilisation, in the form of global conflict and economic recession. Polanyi asserts that free markets, whereby labour, land and capital become fictitious commodities, result in massive social dislocation. Socialism exists to counter this, giving a 'double movement', as recognisable now as in 1944. In h The principle point made by this book is that the attempted transition from a market embedded in society to a society embedded in a self-regulating market resulted in the collapse of 19th century civilisation, in the form of global conflict and economic recession. Polanyi asserts that free markets, whereby labour, land and capital become fictitious commodities, result in massive social dislocation. Socialism exists to counter this, giving a 'double movement', as recognisable now as in 1944. In his opinion, the establishment of the free market is not an inherent part of human nature, but rather a human invention, which can, and must, be extensively controlled and regulated. A truly free market could never exist, as it would destroy man and nature within a very short amount of time, which it requires to function. This is the inherent contradiction of unrestrained capitalism. This book attempts to answer a big question: how did we get to where we are? An intricate answer, such as this profound question requires, is never going to be an easy read. However, Polanyi's writing style is at best obfuscatory and at worst unreadable. The examples employed seem especially obscure to the modern reader, and the book requires prior knowledge of 19th century British politics and world events. For this reason, my rating is lower than one might expect, as I agree ideologically with his conclusions, which remain relevant to the modern world, particularly in the light of the recent financial crisis, and the massive state intervention in markets it requires.

  9. 5 out of 5

    ἀρχαῖος (arkhaîos)

    I have to admit that I took fifty-one weeks to finish this. The effect of that is that my take on it is somewhat disjointed. Hence no proper review. The four stars (3.5 really) are because the author presents some excellent historical analysis and pulls that together to synthesize extremely original ideas of economic development. I'm surprised we don't see more references to Polanyi's theories. I did have some concerns with his choice of historical events. As is often the case, he has chosen thos I have to admit that I took fifty-one weeks to finish this. The effect of that is that my take on it is somewhat disjointed. Hence no proper review. The four stars (3.5 really) are because the author presents some excellent historical analysis and pulls that together to synthesize extremely original ideas of economic development. I'm surprised we don't see more references to Polanyi's theories. I did have some concerns with his choice of historical events. As is often the case, he has chosen those which support his arguments over other obvious events. Of course, he is not the first to do this. Over all, the history is sound. The book is worth reading reading as it demonstrates that there are their options to the left/right analyses to which we are accustomed to. Marx is not the only voice on the left.

  10. 5 out of 5

    Andrew Fairweather

    I had never read this book in its entirety, but in fragments... and that was years ago. I remember thinking it was interesting at the time... years later, one of my favorite writers recommended it as *the* book to read for anyone interested in wrapping their head around the socio-economic national shift we might as well call the "populist" turn. My god, I couldn't agree more. This is a very important book. Polanyi's basic argument is that the tenets of the free-marketeers rely upon strange assump I had never read this book in its entirety, but in fragments... and that was years ago. I remember thinking it was interesting at the time... years later, one of my favorite writers recommended it as *the* book to read for anyone interested in wrapping their head around the socio-economic national shift we might as well call the "populist" turn. My god, I couldn't agree more. This is a very important book. Polanyi's basic argument is that the tenets of the free-marketeers rely upon strange assumptions—one, that all human societies have been "barter" societies (that mankind is many things, but is, in essence "economic" first and foremost)—two, that the process of barter benefits both parties concerned. Against this, Polanyi holds that most societies (for millennia) have been basic on values such as reciprocity rather than barter, and that the nature of mankind is social rather than to seek economic advantage. The greatest blows to a person in society are the ones which damage the social standing of the members who live in it... not necessarily those which require a member to relinquish potential individual gains that the member may make. Of course, we must bear in mind that Polanyi is *not* saying that economic issues are not important, and that the only thing of any consequence are social issues. He's saying that people who advocated for free markets (non-interventionalist regulatory policies) were unique insofar as they were the first in the history of all peoples to "invariably accord precedence" of the economic over the social, believing that ideal social conditions would follow clement economic ones. Essentially, they separated the economic from the social sphere by raising it up as the fulfillment of the greatest duty of one to oneself as a person whose sole task was to seek the greatest amount of gain. Before the advent of classical economics, no school of thought had separated the economic from the social. The historical "soil" in which this outlook took root was the system of enclosures practiced by landowners whose privatization of property uprooted countless families who had been tied to the land for centuries. Gradually, the feudal social fabric had been upset to the degree that laborers and land began to be looked upon as free agents, or, "commodities," another strange interpretation of classical economics, one which was certainly novel. Polanyi refers to these "commodities" as "fictitious commodities" since nothing was done to produce them—this truly radical interpretation of commodities did two things—one, it, in a way, freed members of a village or state from the bonds (social and topographical) which held them to the land, and, two, it completely upended communities, creating an absurd world of alienation and disintegration. Truly, I am neither cute nor unique when I reiterate what many others have said—the greatest revolutionizing force in recent history has been the spread of capitalism. Furthermore, Polanyi holds that if left unchecked, this great revolutionizing force of free markets not only destroys the bonds of society which help members understand their place within it, but destroys the planet. Though these forces hold within them a great deal of revolutionary potential, they are untenable. Polanyi goes so far as to say that they are antithetical to the nature of mankind. Writing during the Second World War, Polanyi does not see facism and socialism as aberrations from the natural purity of market societies, but as countermoves against the inherently dehumanizing currents of capital which know neither moral bounds nor limits which would satiate its demands for growth... growth, which, if left unchecked, is of benefit to a very small ratio of "winners" as its disregard of rights guaranteed by social bodies (like the state) is in correlation with its infinite appetite for gain. In its course, this "growth" would destroy us all. As a result, countermoves such as socialism and fascism must be understood as efforts to remove fictitious commodities like land and human labor from the market, bringing them back into social orbit. In this way, capital, which initially seeks freedom from authorities like "the Crown" eventually must seek protection from "the People." Does this sound familiar? According to Polanyi, this is precisely why despite universal suffrage in America, we still seem to be powerless against the owners of capital. Polanyi sees our future as either the complete destruction of society and the planet in a quest for unfettered gain of the few (free market capitalism) a cynical move towards the elimination of freedom due to our disaffection towards it, fostering, instead, a caricaturesque assertion of the social (fascism) or taking back the market in the name of the People subordinating it to the Democratic principle (socialism). I'll stop here—there are many other angles to talk about Polanyi's masterpiece. Many historical points are made throughout the work which serve to reinforce his argument. I'll leave these to the reader. For now, let me take this opportunity to encourage everyone to read this extremely important and (though written roughly 70 years ago) relevant piece. It will clearly illustrate the choices we must make in what seems to me to be a particularly urgent hour of decision.

  11. 5 out of 5

    Chelsea Szendi

    Reading this book was a truly enjoyable experience. It was also more than a little uncanny that the moment in which Polanyi wrote (the book was first published in 1944) resonates so strongly with today, inasmuch as we are still in thrall to the utopian vision of the free market. On Adam Smith's vision of Economic Man, Polanyi writes: "In retrospect it can be said that no misreading of the past ever proved more prophetic of the future." That misreading lingers. While Polanyi's analysis of the natu Reading this book was a truly enjoyable experience. It was also more than a little uncanny that the moment in which Polanyi wrote (the book was first published in 1944) resonates so strongly with today, inasmuch as we are still in thrall to the utopian vision of the free market. On Adam Smith's vision of Economic Man, Polanyi writes: "In retrospect it can be said that no misreading of the past ever proved more prophetic of the future." That misreading lingers. While Polanyi's analysis of the nature of the origins and implications of the struggle between the market and society remains as incisive as ever, I cannot be assured by the optimistic note upon which he tries to close. He remarks in conclusion that "the worst of the transformation is already behind us." This is perhaps only true for the United States and Europe; rural China is still undergoing a Great Transformation (Professor Guobin Yang of Barnard brought this to my attention), and feeling the friction. Also, the ecological effects of industrialization everywhere have hardly been addressed, let alone resolved, and may prove to be the absolutely insurmountable limit to the market (and the survival of society).

  12. 5 out of 5

    Meru

    I really didn't like this book, mostly because I felt that it was poorly formulated and based on a lot of incomplete examples. Every time Polanyi tried to prove something he'd give 4 examples of random indigenous populations in which the event occurred. All of his examples seemed like exceptions rather than base cases for a rule, and his strange statements like "previously to our time (the 1940s/Industrial Revolution period in general) no economy has ever existed that, even in principle, was con I really didn't like this book, mostly because I felt that it was poorly formulated and based on a lot of incomplete examples. Every time Polanyi tried to prove something he'd give 4 examples of random indigenous populations in which the event occurred. All of his examples seemed like exceptions rather than base cases for a rule, and his strange statements like "previously to our time (the 1940s/Industrial Revolution period in general) no economy has ever existed that, even in principle, was controlled by markets" made me question if we were even living in the same world. Because of this I wasn't able to accept any of his statements, even when they seemed logical, and the book generally fell flat.

  13. 4 out of 5

    DoctorM

    Polanyi's "Great Transformation" is a classic of economic history in its older, political-economy mode, and a book too often forgotten in an era where economics is seen as a kind of physics, a discipline about ineluctable mathematical laws. Polanyi looks at the social consequences of unfettered capitalism in early 19th-c. England and at the way British society, through relief schemes and workhouses, tried to cope with a world where workers were expected to behave as mere inputs. A fine work, wel Polanyi's "Great Transformation" is a classic of economic history in its older, political-economy mode, and a book too often forgotten in an era where economics is seen as a kind of physics, a discipline about ineluctable mathematical laws. Polanyi looks at the social consequences of unfettered capitalism in early 19th-c. England and at the way British society, through relief schemes and workhouses, tried to cope with a world where workers were expected to behave as mere inputs. A fine work, well-written, and frightening in its depictions of what "all that is solid melts into air" and "creative destruction" can mean in the absence of social constraints on the market.

  14. 4 out of 5

    Eric

    "The transformation. . .: for the motive of subsistence that of gain must be substituted. All transactions are turned into money transactions, and these in turn require that a medium of exchange be introduced into every articulation of life. All incomes must derive from the sale of something or other. . . But the most startling peculiarity of the system lies in the fact that, once it is established, it must be allowed to function without outside interference. . . . ". . . Machine production in a "The transformation. . .: for the motive of subsistence that of gain must be substituted. All transactions are turned into money transactions, and these in turn require that a medium of exchange be introduced into every articulation of life. All incomes must derive from the sale of something or other. . . But the most startling peculiarity of the system lies in the fact that, once it is established, it must be allowed to function without outside interference. . . . ". . . Machine production in a commercial society (the only kind that can have it, because machine production is necessarily 24/7)involves no less a transformation than that of the natural and human substance of society into commodities. . . nothing less will serve the purpose: obviously, the dislocation caused by such devices (i.e.the whole apparatus of the market economy)must disjoint [humanity's:] relationships and threaten [our:] natural habitat with annihilation." HEY MARXISTS! HEY NEOCONS! HEY, GREENS! Polanyi is saying (I got this wrong in my first post, before I finished and re-read, that the market society (which we call "the economy") which has nearly eaten up the whole world, is an inevitable result of mechanized mass production. The dehumanization of everyone-- turning humans into "consumers" is another necessary result. Makes no difference if you call it "socialism" or "capitalism" Thus, Polanyi makes an interesting companion to Lewis Mumford's notion of "the Megamachine".

  15. 5 out of 5

    Dylan

    The ideology of economic liberalism is a bankrupt utopia. Private enterprise, "sound" currency, libertarianism, deregulation--the still familiar ideas that originated with Malthus, Smith, and Ricardo are shown here to be based wholly on fictions that defy the evidence of all human history. Among those fictions are that: * the motive of economic gain governs all "rational" social behavior--conclusively disproved by mountains of ethnographic evidence from all over the world; * human labor, land, and The ideology of economic liberalism is a bankrupt utopia. Private enterprise, "sound" currency, libertarianism, deregulation--the still familiar ideas that originated with Malthus, Smith, and Ricardo are shown here to be based wholly on fictions that defy the evidence of all human history. Among those fictions are that: * the motive of economic gain governs all "rational" social behavior--conclusively disproved by mountains of ethnographic evidence from all over the world; * human labor, land, and money are actually "commodities" produced for sale--an obvious falsehood in each case (just look at non-market societies) * and the world is strictly divided into economic and political spheres--this contradicts our actual experience of society, as a world of continuous human interaction. Despite their absurdity, these fictions were nonetheless enforced by the liberal state in the midst of the industrial revolution, eventually supplanting traditional economic practices all over Europe (and beyond) and leading predictably to social chaos and suffering for the most vulnerable classes. According to Polanyi, industrialization seemed to proceed independently of any ideology; the fictions of economic liberalism merely filled this ideological vacuum, becoming the axioms of economic life for a century. By the close of the 19th century, these fictions increasingly gave way to the social reality (as Polanyi sees it), and social protections against destructive market forces were widely implemented. The transformation the title refers to was the overall social outcome of those protective measures that he claims culminated in the interwar period, decisively ending the era of the self-regulating market, and giving rise to the New Deal, Fascism, and Stalinism. A conventional teleology of progress is disappointingly apparent in Polanyi's conception of industrialization (Weber has a much more disinterested approach), and he makes it explicit in the final chapter. Writing in 1944, he predicts that a balance will be found between the traditional ideals of peace and freedom on the one hand and the "demands" of industrial civilization on the other. The only alternative he saw was total surrender to industry--in short, Fascism. Polanyi's faith in progress looks more than a little ridiculous now. I guess this is what people mean when they refer to "the post-war dream." He envisioned the development of a post-liberal society. He could not imagine that in a few decades we would in fact be living in a neo-liberal society based on the resurrected image of the same utopia that he was certain had already passed. Yet, for the same reason that his prognostications are now useless, his insight into the theory and practice of economic liberalism is now more relevant than ever. The fictions of the market may now be approaching a breaking point once again.

  16. 4 out of 5

    James Culbertson

    When I was in graduate school, I read Michael Polanyi's Personal Knowledge: Towards a Post-Critical Philosophy (1958) and was impressed with the way in which he argues that positivism gives a false account of knowing. Having had to endure the righteous fundamentalism of positivist professors as an undergraduate, it was wonderfully refreshing to encounter a book that, in a few pages, was able to dismantle thoroughly the positivist view of knowing. (I realized later that these folks had only read When I was in graduate school, I read Michael Polanyi's Personal Knowledge: Towards a Post-Critical Philosophy (1958) and was impressed with the way in which he argues that positivism gives a false account of knowing. Having had to endure the righteous fundamentalism of positivist professors as an undergraduate, it was wonderfully refreshing to encounter a book that, in a few pages, was able to dismantle thoroughly the positivist view of knowing. (I realized later that these folks had only read Wittgenstein's Tractatus (1922) and never had gotten to his later book, Philosophical Investigations (1953).) Polanyi was a polymath, who made important theoretical contributions to physical chemistry, economics, and philosophy. Only recently, however, did I discover that Michael had an equally talented brother, Karl, the political economist. Like his brother, Michael, Karl Polanyi set out to show that one of the beliefs of his time was in fact just a belief and not a law of nature. Just as Michael set out to dethrone positivism as the only view of knowledge, Karl set out to delegitimize the utopian view of the market. His arguments in this regard are pertinent to the current position of America's right, that lower taxes on business and less regulation in the market place will naturally lead to prosperity for all. "Karl Polanyi’s The Great Transformation is a farrago of confusions, absurdities, fallacies, and distorted attacks on the free market," wrote Murray N. Rothbard as the opening sentence of his unpublished essay "Down With Primitivism: A Thorough Critique of Polanyi" (2004). The sentence goes to the heart of Polanyi's position: the rejection of the free market as an incontrovertible universal force of nature like gravity whose action benefits everyone. For Polanyi, the free market is a theoretical construct that is helpful in examining certain sorts of economic behavior. Most interesting to me was Polanyi's analysis of the early 19th century's laissez-faire economic liberalism based on three classical tenets: A Labor Market--labor should find its price on the market; The Gold Standard--the creation of money should be subject to an automatic mechanism; and, Free Trade--goods should be free to flow from country to country without hindrance or preference [ch. 12]. Polanyi demonstrates that laissez-faire would never have come into existence on its own. It was in fact, like socialism, a "product of deliberate state action."

  17. 4 out of 5

    Michael Burnam-Fink

    Karl Polanyi sadly passed away before his writing could find its natural format, a 100+ tweet thread beginning with "It's Time For Some Game Theory..." This book is nominally an account of the development of laissez faire capitalism, and a rebuttal to the arguments of Ludwig Von Mises that free markets naturally develop in the absence of political intervention, with a kicker about capitalism's responsibility for the rise of fascism (the book was published in 1944). What this book is is a rambling Karl Polanyi sadly passed away before his writing could find its natural format, a 100+ tweet thread beginning with "It's Time For Some Game Theory..." This book is nominally an account of the development of laissez faire capitalism, and a rebuttal to the arguments of Ludwig Von Mises that free markets naturally develop in the absence of political intervention, with a kicker about capitalism's responsibility for the rise of fascism (the book was published in 1944). What this book is is a rambling series of vaguely linked essays and tangents, with a few sparkling epigrams buried in a mass of economical-historical mush. Polanyi is vague about his timeline, switching the exact period under study repeatedly through the book, which hinders comparisons of pre-transformation 18th century England with various policy innovations in the 19th century, and mature capitalism in the 20th. The thread, as much as I can follow it, is that pre-modern people always distinguished between domestic production, which was limited by traditional feudal and guild structures to protect livelihoods, and production for foreign trade, which was used to exploit any community foolish enough to let it in. Through the 19th century, Britain enacted a series of reforms that destroyed the old order, ushering in a period of dramatic capitalist growth based on promises of profit for the bourgeois, and the lash of hunger to motivate workers. More broadly, classical liberalism can never work, because three key commodities: land, labor, and money, are "fictitious", and under pure free market influences immediately collapse into some sort of disastrous singularity. Labor is human life, land is nature, the gold standard a false idol, and these things must be protected from society and vice versa. As evidence for this, Polanyi puts forth the masses of regulatory laws that followed laissez-fair reforms. Even in the absence of a program, Chartist or Marxist in ideology, people instinctively realized that market logic was corrosive, and restricted pure market functioning. Liberty is built on society, and society is a matter of submitting to limits. I'm intensely frustrated. I mostly agree with Polanyi politically, but he connects evidence to argument in a way that feels entirely opaque. This may be a foundational work in economic history, but it reads with all the relevance of last centuries flamewars. The basic dyad of the debate between capital and society remains, but the contours and points of argument have shifted so rapidly this book feel archaic.

  18. 4 out of 5

    Bill Bogert

    I came to this from a Marxist orientation, wanting to understand the roots of John O' Connor's ecosocialism. One of the books that changed how I think. Though I disagree with its implicit dismissal of working class struggle

  19. 5 out of 5

    Peter

    A fascinating book. Read for a seminar; detailed notes follow. Ch. 1: Polanyi argues that the emergence of a “peace interest” explains the 100-year peace, which lasted from 1815-1914. (7) The peace interest became effective because it made the balance of power system serve its cause by providing social organs capable of dealing with internal forces active in the area of peace. (17) In the first part of the 100-year peace, the Holy Alliance organized a reactionary peace against the forces of Napo A fascinating book. Read for a seminar; detailed notes follow. Ch. 1: Polanyi argues that the emergence of a “peace interest” explains the 100-year peace, which lasted from 1815-1914. (7) The peace interest became effective because it made the balance of power system serve its cause by providing social organs capable of dealing with internal forces active in the area of peace. (17) In the first part of the 100-year peace, the Holy Alliance organized a reactionary peace against the forces of Napoleonic upheaval. (17) In the latter part of the 100-year peace, the new economy, driven by "international finance and the national banking systems allied to it", provided the peace interest. (17-18) Haute finance provided the link between the “political and economic organization of international life.” (18) The economic system was the driver. “Only a madman would have doubted that the international economic system was the axis of the material existence of the race. Because the system needed peace in order to function, the balance of power was made to serve it. Take this economic system away and the peace interest would disappear from politics.” (18-19)  Ch. 2: One cannot understand the disintegration of the economy without understanding the role played by the gold standard, which Polanyi sees as both an economic institution and a social mechanism. (21) In the immediate aftermath of WWI, the world sought a return the system that they believed had maintained peace previously. However, they failed to understand that the previous system had both political and economic components that were mutually reinforcing; neglecting the political, the economic could never function fully. (22-23) The conservatism the 1920s therefore gave way to the revolutionary 1930s, driven by the impending collapse of the international economic system. (24) Although countries transformed themselves in different ways, there common belief in the gold standard. “Belief in the gold standard was the faith of the age." (26) Currency became "the pivot of national politics” (25) and the “snapping of the golden thread was the signal for a world revolution.” (29)  To understand the upheavals of the 1920s and 1930s, Polanyi argues that we must look back to 19th Century England and the roots of market society. (32) I: Satanic Mill Ch. 3: In the 19th Century, a “ crude utilitarianism combined with an uncritical reliance on the alleged self-healing virtues of unconscious growth” to engender the "catastrophic dislocation of the lives of the common people.” (35) Polanyi recapitulates the story of enclosures in 17th Century Britain to show how economic liberalism errs when it judges history based solely on economic (and not social) terms. (35-36) He shows how the Tudors and Stuarts used the power of the Crown to regulate the rate of economic change to make it socially bearable — balancing the common man's needs of “habitation” with the entrepreneur’s desire for “improvement” of lands -- a fact that would be invisible to those who see no government role in economic life. (39-40) This was the Crown’s last achievement, as it ceded power to constitutionalism and parliament — in essence, government led by the industrial and commercial rulers. (41) Because the capitalists were the victims of state policy during the enclosure period and they now ruled, the real nature of the crisis associated with the Industrial Revolution remained invisible. (41) The Industrial Revolution, like a far more severe version of the earlier enclosure period, wreaked havoc on the habitation of the common people. (41)   Polanyi argues that “an avalanche of social dislocation” followed, accompanied by a “vast movement of economic improvement. Both of these were the result of a new institutional mechanism — whose dangers were never overcome — that was beginning to act on Western society. The history of the 19th Century, therefore, “consisted largely in attempts to protect society against the ravages of such a mechanism.” (42) The new mechanism was the market economy. (42) The nature of the market economy cannot be understood without appreciating the impact of the machine on commercial society (43) because “Machine production in a commercial society involves…transformation…of the natural and human substance of society into commodities.” (44) Ch. 4:  The idea that a market economy could organize the entirety of economic life was historically unprecedented before the 19th Century. (45) Adam Smith was wrong. Division of labor stems from inherent differences; “the alleged propensity of man to barer, truck, and exchange is almost entirely apocryphal.” (46) To see the problems with Adam Smith’s argument, you need to connect economic history with social anthropology and look back farther into the past. (47) Max Weber was right; man as a social being has changed little if at all throughout history. “The necessary preconditions of the survival of human society appear to be immutably the same." (48) Man’s economy is submerged [embedded] in his social relationships.” (48) Ch. 5: The principle of barter differs from the principles of reciprocity, redistribution, and householding in that it is capable of creating its own specific institution: the market pattern. (59-60) This is the key point: the control of the economic system by the market means that society is run "as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic systems.” (60) It was naive to imagine that the transformation of markets into a powerful self-regulating system was the result of any inherent tendency. Rather, the transformation of markets into a self-regulating system resulted from mechanization (itself an artificial phenomenon). (60) Polanyi discusses the origins of trade, distinguishing between local, internal, and external markets, and showing the role of the state in creating ro regulating them. (63-66) Safeguards surrounded early local markets to protect society. (65) Internal markets were created by state intervention. (66) Local and internal markets were separated to protect local markets and local institutions. (67-68) The mercantile system tore down these barriers in the name of establishing national markets. (68-69) The state then had to intervene again to protect towns from monopoly and competition. (69) “The ‘freeing' of trade performed by mercantilism merely liberated trade from particularism, but at the same time extended the scope of regulation.” (70) Thus, at the dawn of the Industrial Revolution the economic system was embedded in the social system.  Ch. 6: Before the Industrial Revolution, markets had never been more than “accessories of economic life.” (71) A fundamental assumption underpinning the market economy is that production and distribution of goods is determined by price alone. (72) “Self-regulation implies that all production is for sale on the market and that all incomes derive from such sales.” (72) There must, therefore, be markets for labor, land, and money, whose prices are called, respectively, prices, wages, rent, and interest. (72) In a true market economy, there can be no intervention into markets. (72) But this is an impossibility because land, labor, and money are “fictitious commodities”. (75) To prove his point, Polanyi shows heavy state involvement in each of these three “fictitious commodities”. (72-74) To include land and labor in the market mechanism subordinates society to the market — therein lies the peril. (75) Allowing the market mechanism to direct the fate of human beings and the natural environment “would result in the demolition of society.” (76) The changes wrought by machinery — and the factory system in particular — forced the extension of markets to land, labor, and money with calamitous results. (78-79)  The result was what Polanyi calls a “double movement” — “the extension of the market organization in respect to genuine commodities was accompanied by its restriction in respect to fictitious ones.” (79) The gold standard became the aegis by which commodity, capital, and currency markets expanded. (79-80)   Ch. 7: Late 18th and early 19th Century English folk resisted the creation of a market for labor until its absence was seen as a great evil than its existence. Yet the economic advantages it brought were more than offset by the social destruction it wrought. New types of regulation within the market mechanism itself had to be created to protect the people. Trade unions, factory laws, and the like were adapted to the market mechanism, but because they interfered with its functioning, they ended up destroying the system. (81) The introduction of the allowance system under the Speenhamland Law of 1795 established the “right to live.” (82) This had disastrous consequences: people were compelled to sell their labor, but their labor was deprived of its market value and pauperization resulted. (84, 86) Polanyi chronicles the transition from Speenhamland (pre-market economy), to the decade following the Poor Law of 1832 (transition to market economy), to the ascendancy of the market economy with the establishment of a labor market in 1834. (86-87)   Industrial capitalism as a social system did not exist before 1834. As soon as it emerged, however, a series of protective measures sprang into being, leading to the fatal conflict with self-regulation of the system. (87) Intellectually, the debates over the Poor Law and Poor Law Reform Act created a new generation of thinkers who turned their attention to the laws governing complex societies. (88)  Ch. 8: The Speenhamland system, short-lived though it was, had profound effects on society. (90) Polanyi provides a history of the Code of Labor (informal and formal) in England, dating to the 17th Century. The Statute of Artificers and the Poor Law were the two components of a Code of Labor initial. The Poor Law was administered locally and rested on the principle of enforced labor through workhouses. (91-92) Speenhamland reversed this system with its “right-to-live” and outdoor (meaning outside of workhouses) relief. (92) At the same time, the Act of Settlement was repealed to allow labor mobility in support of the growing needs of the Industrial Revolution. (93) This laid the foundation for a collision. Observers at the time struggled to understand why the numbers of poor were increasing and failed to connect this development to the growth of trade in manufacture. (94-95) “Speenhamland precipitated a social catastrophe” because its economics did not make sense and its policies resulted in unforeseen disastrous effects for the people it was meant to help. (102) The repeal of Speenhamland was the work of the newly-emerged English middle class. (105) The resulting divide between the working class and the owning class fractured society still further. (106-107) “Out of the horrors of Speenhamland men rushed blindly for the shelter of a utopian market economy.” (107) Ch. 9: Pauperism was a mystery until the early 19th Century.  Ch. 10: Polanyi charts the rise of “naturalism”, which he cites as one of the founding bases of political economy. (118-128) He argues that Ricardo and Malthus misinterpreted Speenhamland’s results; the two men saw in it the workings of an “iron law of wages”. (128-129) …"The foundations of economic theory were laid down during the Speenhamland period, which made appear as a competitive market what actually was capitalism without a labor market.” (130) Polanyi credits Robert Owen with being the only man at the time who understood what was happening to society, pointing to the consequences arising when men are “left to their natural progress." (133-134) Owen called for state interventions to protect the people from the ravages of the market, but “he did not, at that time, foresee that the self-protection of society for which he was calling would prove incompatible with the functioning of the economic system itself.” (135) II. Self-Protection of Society Ch. 11: Polanyi restates his “double movement” argument (136-137) and proposes to show how the crisis of the early 20th Century grew out of “the clash of the organizing principles of economic liberalism and social protection….and the conflict of class.” (140)   ***Ch. 12: Economic liberalism only emerged in the 1830s, when its three classical tenets came into being: a labor market; the gold standard; and free trade. (141) Crediting French thinkers of the middle of the 18th Century with these ideas is ridiculous. “Not until the 1830s did economic liberalism burst forth as a crusading passion and laissez-faire become a militant creed.” (143) Polanyi covered the emergence of a labor market in detail when discussing the Speenhamland Law and its antecedents/consequences. On currency, he argues that it was not until the Panic of 1825 that currency become a tenet of economic liberalism, with the result that the gold standard came to be seen as desirable/necessary. (144) Acceptance of international trade arose from the notion that it was a necessary precondition of continued industrial growth. (144) Polanyi argues that these three tenets had to be secured together, or the whole system would fail. (144) In so doing, he argues the impossibility of the system.     He again argues against “naturalism” on the grounds that “laissez-faire itself was enforced by the state." (145) Administrative measures came to be more important than Parliamentary acts. (146) “The road to the free market was opened and kept open by an enormous increase in continuous, centrally organized and controlled interventionism.” (146) In an amusing paradox, Polanyi argues that while laissez-faire was planned, restrictions on it emerged spontaneously (naturally?). (147) He notes that Lippmann, Mises, and other champions of economic liberalism offer a similar account of the double movement, but interpret the failure of the system differently. The economic liberals believe the system has been hobbled by interventionism. Polanyi argues that the system failed because it was a fundamental impossibility; even if interventionism dealt the system fatal blows, it the was natural emergence of interventionism that showed the system unworkable in the first place. Polanyi introduces the staying power of economic liberals, who can argue that any difficulty arising from the system can be attributed to its flawed or incomplete implementation. (149) Yet he argues that economic liberals can muster no evidence in support of a concerted effort to thwart their initiatives. (151) In this, he relies on his notion that interventions into the economy emerge spontaneously, not as part of some organized counter to economic liberalism.  Ch. 13: Polanyi argues that class interests are of limited explanatory value because “The fate of classes is more frequently determined by the needs of society than the fate of society is determined by the needs of classes." (158-159) In other words, society is the right unit of analysis, not classes. He also argues that class interests are primarily of a social nature, not an economic nature. (160) “The classes and groups which intermittently took part in the general movement toward protectionism after 1870 did not do so primarily on account of their economic interests.” (160-161) The spread of the market was both advanced and slowed by the actions of class forces, though in the latter instance the motivation was social not economic. (162)  Ch. 14: Polanyi explores how interventions emerged to protect man from the market. Again, he looks to Owen as the exemplar because Owen “insisted on the social approach” and “refused to accept the division of society into an economic and political sphere.” (178) Polanyi compares the English and Continental experiences with social protection and finds them broadly similar, with a time lag. (182-186)  Ch. 15: He argues that labor and land are inseparable, but separating them is what the market economy tried to do. (187) Land became essential as a means of supporting industrialization; free trade enabled food production abroad to feed urban workers. Thus, “planetary interdependence sprang into being.” (190) This, to the profound detriment of colonial peoples. (192) “Opposition to mobilization of the land was the sociological background of that struggle between liberalism and reaction that made up the political history of Continental Europe in the nineteenth century.” (194) The need to control access to a nation’s own food supply and raw materials was one of the principal lessons learned by Europeans after WWI. Thus, state interventions restricted the free functioning of the market in land. Ch. 16: Polanyi indicts the gold standard. The risk of falling prices created short-term problems for businesses and led them to seek interventions. (201) Polanyi argues that commodity money — i.e. the gold standard — is incompatible the industrial production, because the latter relies on contracts, the prices of which can fall and lead to business failures. (202) Commodity money was essential to foreign trade, but unworkable domestically. (203) “Central banking reduced the automatism of the gold standard to a mere pretense.” (204) In monetary matters, the theoretical separation of the economic and political spheres falls apart completely. (204-205) How is central banking anything but political? “In no field was the breakdown of market economy as abrupt as that of money…the final failure of the gold standard was the final failure of market economy.” (208-209) Charismatic leadership and autarchic isolationism emerged to fill the void.  Ch. 17: Polanyi offers the United States of the 1890s-1930s as further proof of his double movement thesis. (210-211) New national units emerge, along with new national currencies — facts unfathomable to economic liberals. (212) Polanyi again emphasizes that monetary policy — as opposed to labor or land policies — was the most important factor integrating the nation. (213) People took great interest in what was happening to the value of national currency. (214) Internationally, currency and the nation became inseparable. (215) It became increasingly obvious that “political instruments had to be used in order to maintain equilibrium in world economy.” (217) Ch. 18: The same basic strains — unemployment, tension of classes, pressure on exchanges, and imperialist rivalries — unified historical experience around the (Western?) world from 1879-1929. (218) Polanyi recapitulates his argument on 227. III. Transforsformation in Progress Ch. 19: “The root problems of market society reappeared: interventionism and currency. They became the center of politics in the 1920s. Economic liberalism and socialist interventionism turned upon the different answers given to them.” (239) As the economic and political systems faced paralysis, fascism emerged. (244) Ch. 20: Polanyi describes the rise of fascism. “Fascism, like socialism, was rooted in a market society that refused to function.” (248) It was only coincidentally linked with national and counterrevolutionary movements in Europe in the 1920s. The condition of the market system determined the role played by fascism. (250) Ch. 21: Another recapitulation. (258) Polanyi also argues for the maintenance of freedom, which he believes is possible in an industrial society, but only if people strive for it/prioritize it. (264) He sees a “moral obstacle” in the way as long as planning, control, and regulation are attacked as being “unfree”. (265) In concluding, Polanyi offers a choice between liberalism on the one hand, which he has shown to be an impossible failure, and fascism or socialism on the other hand. He favors socialism in the Robert Owen mold. (268) 

  20. 4 out of 5

    Charles J

    The Great Transformation, published in 1944, is an ambitious book. It attempts two huge tasks. First, to refute the free market ideology, sometimes called market fundamentalism, represented at that time by men such as Ludwig von Mises, and now by the entirety of globalized neoliberal capitalism. Second, to explain the history of the nineteenth century through an economic lens that also purports to explain both World War I and World War II. Mostly, the book is a failure. It overshoots in its crit The Great Transformation, published in 1944, is an ambitious book. It attempts two huge tasks. First, to refute the free market ideology, sometimes called market fundamentalism, represented at that time by men such as Ludwig von Mises, and now by the entirety of globalized neoliberal capitalism. Second, to explain the history of the nineteenth century through an economic lens that also purports to explain both World War I and World War II. Mostly, the book is a failure. It overshoots in its criticism of the free market, and falls short on its claims of historical explanation. Karl Polyani’s prescriptions are, moreover, vague and worthless. There is some truth in this book, but it is buried beneath too much dross. Polanyi managed to synthesize a very broad set of knowledge, not only economics, but also history and anthropology, into a coherent theory. He claimed to be a socialist, but what he meant by that was not any form of ideological socialism, but simply that society should subordinate the market to larger shared goals. His theory was offered to show the path to the optimal society, especially in times of rapid change. Quite a few of Polyani’s specific historical and anthropological claims have, it appears, been disproved—that’s the flaw in tying your theory to objective past facts, rather than, like most economic theories, to abstractions. That does not obviate, however, his basic philosophical claims, with which I generally agree—but which are only a small part of his book. Polanyi plays in roughly the same space as Wilhelm Röpke did in A Humane Economy, but Röpke, with his “economic humanism,” had a far more subtle understanding of human nature and how it relates to economic matters. Unlike Röpke, who called for balance with a default toward free human action, Polanyi ultimately falls into the morass of utopian, government-mandated social planning that has always proved to be a cure worse than the disease. Social planning that hobbles the unfettered free market is both possible and desirable, but to achieve real human flourishing, it has to be done with far finer tools, and with a far more virtuous ruling class and compliant ruled class, than Polanyi and other left-leaning social thinkers suggest. He begins by outlining the “Hundred Years’ Peace,” from the Congress of Vienna to World War I. Polanyi ascribes the peace to four interlocking mechanisms creating “a new organization of economic life”: the balance-of-power system; the gold standard; the self-regulating market; and the liberal state. Collectively, these created the “market society”; and of these, the most important was the gold standard. It, as implemented by those who controlled “high finance” and benefitted from the peace and from the market, is what made the others possible, and when it shuddered, then died, so did the peace. Not that Polanyi likes the gold standard; quite the contrary. It was slavish adherence to the gold standard in the service of gain by men of power that, for a time, allowed the other three to flourish—at the same time, suppressing normal social pushback to limit the reach of the market into society. It was the breakdown in the gold standard that revealed the rot that had grown underneath, and what we got was chaos, then fascism. Much of the book is a detailed exploration based in history and anthropology. For example, Polanyi steps backward in time to discuss enclosures of the commons in England, to make the point that enclosure was necessary, but the rate of change was just as important as the change itself, making the ultimate change “regenerative” rather than “degenerative” (even though it still had high costs). Slowing change down was what the Crown did under the Tudors and Stuarts, without getting due recognition from later historians and economists. Only from the Industrial Revolution onwards did the ideology of the self-regulating market, “an economy directed by market prices and nothing but market prices,” reject governmental regulation of the speed and substance of such major economic changes, which had always been the norm. Polanyi argues that this self-regulating market was an entirely new thing in human history, the “Great Transformation” of the title, and that market prices around the globe until that time played a clearly subordinate role in transactions between people. Adam Smith lied to us when he said that man interacted through a “propensity to barter, truck and exchange one thing for another.” Rather, in the past, “man’s economy, as a rule, [was] 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.” His aims were “reciprocity,” “redistribution,” or “householding,” and Polanyi uses anthropology to argue that societies, until the modern era, revolved their economies around those principles. (This is “substantivism,” contrasted with the “formalism” of neoclassical price-based profit maximizing.) Now, however, society is embedded in the economy, rather than the reverse, and we are not the better for the switch. For Polanyi, any economy is not a freestanding framework within which we operate. Rather, the economy is a manifestation of, and should serve, social relations. This is true in the narrow sense, that a friction-filled or low-trust society results in a poorly functioning economy. But that is far less important than the broader sense, that social goals, in short, human flourishing, are the proper object of the economy. Other goals, such as maximizing GDP, or obtaining low transactions costs, or honoring an abstract freedom to enter into contracts, should be subordinate or oppositional. I think that Polanyi understates the degree to which simple desire for getting more material things, as cheaply as possible, drives and has always driven human beings. It is not for nothing that the Tenth Commandment says “Thou shalt not covet,” among other things, goods and houses. He also ignores the argument that “social standing, social claims, social assets” can be fit into a framework of individual utility maximization tied to a free market. Still, he goes into great detail, bouncing from Aristotle to the Trobriand Islanders to the claim that medieval local markets were “not the starting points of internal or national trade,” which was purely the top-down creation of the modern state. Then he turns to his biggest objection to the self-regulating market, that in it everything must be treated as a commodity. Everything must have a market price. Polanyi rejects treating everything as commodity—and he frames much of his book around the commodification, in the Industrial Revolution and after, of land, labor, and money, which for him are not real commodities, because they were not produced for market use, but factors that pre-exist market commodities, and they are therefore not subject to the same rules as market commodities. Only the ongoing action of the state makes possible their treatment as market commodities, which is what Polanyi means when he claims that “laissez-faire was created and enforced by the state.” But, like enclosure, in the modern economy, such commodification is probably inevitable. Therefore, the state should manage these three items for the benefit of society, not with an eye to perpetuating a fiction of a spontaneously-arising market in them. For Polanyi, unfettered commodification demolishes society, as well as the natural world, and the solution is government intervention, which, in a democratic society, is demanded by those adversely affected by unfettered commodification. Polanyi famously described this process as “double movement.” Those insisting on commodification move toward markets in everything; the move toward ever more smoothly functioning price markets is deliberate, not some natural process, as men like Mises would have it. Because of the pernicious resulting effects, social movements spontaneously arise to address those effects, and part of their response is to limit the commodification. In Polanyi’s telling, the entire history of nineteenth-century British politics is of pushback against the grinding of the commodified market. Without the double movement, a totally unfettered market would result, and it would not be a libertarian paradise, but a disaster, with social alienation, poverty, political unrest, and environmental catastrophe. When the double movement fails, as shown historically in slavish adherence to the gold standard, which overrode democratic concerns about social harms, we got fascism. The gold standard, though, was merely an earlier manifestation of what we today call globalization, or the “Washington consensus,” or “Thomas Friedman’s fever dreams,” and in practice Polanyi’s arguments apply to today’s variations just as much as they do to British monetary orthodoxy of the 1920s. This is where Polanyi’s prophecies have relevance today—not in that fascism is coming, but in that the double movement is a natural and desirable reaction to what we see today as neoliberal capitalism. No doubt Polanyi would see a lot of value in Bernie Sanders. Polanyi’s writing is difficult, requiring much prior knowledge of obscure nineteenth-century British politics, and too often offers sonorous statements with little practical application. “It should need no elaboration that a process of undirected change, the pace of which is deemed too fast, should be slowed down, if possible, so as to safeguard the welfare of the community. Such household truths of traditional statesmanship, often merely reflecting the teachings of a social philosophy inherited from the ancients, were in the nineteenth century erased from the thoughts of the educated by the corrosive of a crude utilitarianism combined with an uncritical reliance on the alleged self-healing virtues of unconscious growth.” Sure. I agree. Most people probably do, except for ideologues. But what are the practical applications? The last part of the book, in which Polanyi tries to tie his general principles to the first half of the twentieth century, is not successful. I frankly had great trouble understanding his arguments, but they appear to revolve around the idea that World War I resulted from the pressures arising from maintaining a global self-regulating market, and fascism resulted from economic chaos, that itself resulted less from World War I and more from public dissatisfaction resulting from suffering caused by attempts to remain on the gold standard (which were made in a desperate attempt to retain the wholly self-regulating market in all its nineteenth-century glory). Also in there is the idea that the freezing of the market economy arising from and after World War I created fear among all sectors of society, who collectively realized that complete paralysis would be fatal, and so therefore turned to fascist leaders making promises, although Polanyi does not tell us what, in this context, those promises were (perhaps because he was writing so close in time to the events he describes). He does say that the “fascist solution of the impasses reached by liberal capitalism can be described as a reform of market economy achieved at the price of the extirpation of all democratic institutions, both in the industrial and in the political realm.” Polanyi, a man of the Left married to a Communist, fails to distinguish between very different “fascist” systems. (No surprise, although it is only mentioned in passing, Polanyi thinks that the Soviet Union’s replacement of the market economy was “an amazing success.” He does not seem to realize that the Soviet Union precisely fits within his own definition of fascist.) Polanyi seems to use fascism as an all-purpose term for non-democratic regimes that are not liberal in nature, that is, are not devoted to maximizing individual autonomy, neither in market transactions nor otherwhere. Which is not a bad definition, if over-general, but it is an error to say that such a regime is inherently undesirable (and even he notes that the Allies’ ideological adherence to the unfettered free market made them assume falsely that their enemies could not have a well-functioning economy). If Polanyi followed the courage of his convictions, he would admit that many such a regime could fit precisely within what he claims to desire, since democracy is only one means to the double movement. But he never admits that, and, I suppose, the noisomeness of the most prominent so-called fascist regimes in his own time probably masked this obvious conclusion. He imported as an unstated premise his own bias that the double movement must be left-democratic, but the reality is that every place Polanyi uses the word “democratic” it could be deleted without changing his arguments in the least. Nor was Polanyi good at prognostication. Polanyi thought the self-regulating market was over; he even seems self-congratulatory. He uses phrases like “Looking back from the rapidly declining heights of a worldwide market economy. . . .” and “Undoubtedly, our age will be credited with having seen the end of the self-regulating market.” Nope. Quite the contrary, as books from Andrew Yang’s The War on Normal People to James Bloodworth’s Hired have recently discussed. He was just wrong, and simply because the double movement seems to be on the rise, as shown by some ferment in the United States, and even more by European events such as Brexit and the rise of Viktor Orbán, does not mean that the self-regulating market is not going to come out on top again. Polanyi thought, and desired, . . . . [review completes as first comment.]

  21. 4 out of 5

    Bill

    I've been fortunate to read this book with a group of doctoral students, otherwise I would probably be still trying to wade my way through it. Polanyi is not an easy read, but the thoughts he elucidates to challenge his readers are worth the effort. His basic thesis is that a "free market" economy (one which lacks governmental controls and regulations) is not only impossible to achieve, but undesirable as well. His assertion is that a truly free market could not exist for any length of time witho I've been fortunate to read this book with a group of doctoral students, otherwise I would probably be still trying to wade my way through it. Polanyi is not an easy read, but the thoughts he elucidates to challenge his readers are worth the effort. His basic thesis is that a "free market" economy (one which lacks governmental controls and regulations) is not only impossible to achieve, but undesirable as well. His assertion is that a truly free market 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." Free markets cannot be achieved because of what he terms "embeddedness." The economy is submerged, or deeply embedded in the social context and relationships within that context. A truly free market must be disembedded to be fully self-regulating. Polanyi also suggests that free markets are undesirable...unregulated, unrestrained greed ultimately leads to abuse of those in vulnerable positions within society. What is needed according to Polanyi? Regulations which are designed to protect the vulnerable from abuse and corruption is a good starting point. Thanks Polanyi. But a healthy dose of integrity among political leadership would also go a long way. My thoughts? Economic structures are merely tools. Capitalism can be used for evil, as well as for producing good. Socialism, also a tool of those who wield power, can be used for both good and evil. It is not the system which needs regulation, but those who operate the system. In the absence of a way to transform the inner hearts of man, there will always be a need for regulations.

  22. 5 out of 5

    Jeff Rowe

    This was written in 1944? Really? Because it works pretty well in today's global economy even though it focuses upon the collapse of the global system in 1914. Some books take one idea and build an ironclad case around it. This book, on the other hand, is chock full of ideas. Overflowing in fact. So many ideas that they can't all be proven, but that's okay. The author trods a novel middle ground in his reasoning that's neither Communist, nor Capitalist which was refreshingly new to me. The idea This was written in 1944? Really? Because it works pretty well in today's global economy even though it focuses upon the collapse of the global system in 1914. Some books take one idea and build an ironclad case around it. This book, on the other hand, is chock full of ideas. Overflowing in fact. So many ideas that they can't all be proven, but that's okay. The author trods a novel middle ground in his reasoning that's neither Communist, nor Capitalist which was refreshingly new to me. The idea is that the free market is embedded in, and consequently a tool of society. But the free market is assumed to be entirely independent of social structure in order to function properly and society is merely a small adjunct. This dooms it to failure, as with all radical utopian schemes that aim to regulate society automatically. Because people in society will not sacrifice their lives for the ideal of the free market when the automated control it provides makes their lives worse. Nor should they. But there's much, much more. Like the balance of power in the world, the role of international finance in promoting peace, and the well deserved death of the gold standard. A really great book full of ideas to help you understand the world.

  23. 4 out of 5

    Brenda

    Quote from Thomas Frank: "Because of what's going on in the economy, this election is basically a referendum on what kind of nation we're going to be and what kind of democracy we're going to be. I'd like to recommend the literature of what's wrong with capitalism — how if you let it just run unregulated, it will self-destruct like it's doing right now, and it will drive millions of people into bankruptcy and kick up unemployment. People haven't written about that in a long time because we've bee Quote from Thomas Frank: "Because of what's going on in the economy, this election is basically a referendum on what kind of nation we're going to be and what kind of democracy we're going to be. I'd like to recommend the literature of what's wrong with capitalism — how if you let it just run unregulated, it will self-destruct like it's doing right now, and it will drive millions of people into bankruptcy and kick up unemployment. People haven't written about that in a long time because we've been living in a state where we thought those problems had been solved, and now it turns out they haven't been. The classic book on that subject is called The Great Transformation by Karl Polanyi. It's not the easiest thing to read, but it's the classic indictment of pure, laissez-faire, 19th-century style economics. I get a big kick out of it."

  24. 5 out of 5

    Hana

    I discovered Polanyi's work through a provocative essay on The Market as God in which religious commentator, Harvey Cox writes: "Since the earliest stages of human history, of course, there have been bazaars, rialtos, and trading posts—all markets. But The Market was never God, because there were other centers of value and meaning, other "gods." The Market operated within a plethora of other institutions that restrained it. As Karl Polanyi has demonstrated in his classic work The Great Transfor I discovered Polanyi's work through a provocative essay on The Market as God in which religious commentator, Harvey Cox writes: "Since the earliest stages of human history, of course, there have been bazaars, rialtos, and trading posts—all markets. But The Market was never God, because there were other centers of value and meaning, other "gods." The Market operated within a plethora of other institutions that restrained it. As Karl Polanyi has demonstrated in his classic work The Great Transformation, only in the past two centuries has The Market risen above these demigods and chthonic spirits to become today's First Cause." Bumping this tome up the list for serious summer reading.

  25. 5 out of 5

    Andrew

    Karl Polanyi's claims that the spirit of liberal capitalism will be extinguished by a more modern and humane socialism sound like so much wishful thinking now. But he's quite right about the market system being nothing natural, and about the violent tumult and human misery engendered by free markets reinforced and perpetuated by the modern state. All of that being said, I'm not really familiar with a lot of the history of early 19th Century England-- which is the critical example that Polanyi us Karl Polanyi's claims that the spirit of liberal capitalism will be extinguished by a more modern and humane socialism sound like so much wishful thinking now. But he's quite right about the market system being nothing natural, and about the violent tumult and human misery engendered by free markets reinforced and perpetuated by the modern state. All of that being said, I'm not really familiar with a lot of the history of early 19th Century England-- which is the critical example that Polanyi uses to illustrate his "great transformation." A worthy read, but in this day and age, not an especially radical or illuminating point of view, and far from the most effective critique of the liberal state that I know.

  26. 4 out of 5

    Laura

    In this absolutely marvelous book--his magnum opus--, Karl Polanyi analyzes free-market ideology in an absolutely brilliant and accessible way. It is unfair to say that this book is prophetic. As he was arguing with the founder of modern economics, the author was going on far more than intuition. (Karl Polanyi was the intellectual rival of the founder of modern neoliberalism--that is, of the man who later became economic adviser to Margaret Thatcher and Ronald Reagan.) It is, however, the best cr In this absolutely marvelous book--his magnum opus--, Karl Polanyi analyzes free-market ideology in an absolutely brilliant and accessible way. It is unfair to say that this book is prophetic. As he was arguing with the founder of modern economics, the author was going on far more than intuition. (Karl Polanyi was the intellectual rival of the founder of modern neoliberalism--that is, of the man who later became economic adviser to Margaret Thatcher and Ronald Reagan.) It is, however, the best critical analysis you could possible ask for on the origins and nature of free market economics. I recommend it very, very highly to anyone interested in the topic.

  27. 5 out of 5

    Sarah

    As far as I know, Stiglitz was in diapers when Polanyi wrote the Great Transformation, so I don't know why he is listed as an author. I have the original edition of this book and it is a timeless economics classic and has yet to be surpassed in breadth and depth by any current economic theorist. Also, Polanyi is about as sexy as economics gets.

  28. 5 out of 5

    Michael

    That there is no hand of providence guiding the markets towards grace. That no one in the political sciences can write, and that professors educated at harvard yet pontificate elsewhere are worms.

  29. 5 out of 5

    Rishi

    Te underlying philosophy is that if development harms people right now, than don't do it; i.e., the ends don't justify the means, something I agree with very strongly.

  30. 5 out of 5

    Vrinda Agarwal

    Read this book for class - tried to at least skim most of it but we kind of jumped around so I mainly read: - Foreword - Introduction - Chapter 6 (The Self-Regulating Market and the Fictitious Commodities: Labor, Land and Money - Chapter 11: Man, Nature, and Productive Organization - Chapters 12-13: Birth of the Liberal Creed - Chapter 21: Freedom in a Complex Society So granted, I don't have a super comprehensive understanding of the book, but I think I grasped his key concepts and thesis. I hope to c Read this book for class - tried to at least skim most of it but we kind of jumped around so I mainly read: - Foreword - Introduction - Chapter 6 (The Self-Regulating Market and the Fictitious Commodities: Labor, Land and Money - Chapter 11: Man, Nature, and Productive Organization - Chapters 12-13: Birth of the Liberal Creed - Chapter 21: Freedom in a Complex Society So granted, I don't have a super comprehensive understanding of the book, but I think I grasped his key concepts and thesis. I hope to come back to this book later and actually read through the chapters I skipped over. Essentially, in this book Polanyi critiques the conception of the "self-regulating market" and argues that market liberalism is inherently flawed because it attempts to "disembed" social and political aspects of society from the economic and commodify land, labor, and purchasing power. He argues that this process is impossible because as the market expands, we see that civil society pushes back against market liberalism to protect their own social and political interests. He also talks about a lot of other stuff, like how "laissez-fare was planned; planning was not" (147), and the relationship between states, markets, and the rest of society. Overall, I thought this was a brilliant book. You can see connections to his arguments everywhere in modern society and history, and his understanding of the relationship between the state and markets seems to extend a lot further than that of traditional economists. The only thing I was a bit confused about (and this could be because I just didn't grasp his argument that well) is his conception of freedom, and how he gets out of the "either free-market liberalism or fascism there is no in-between" issue. Or maybe socialism / using the states and democratic principles to take back the markets is the way he sees this issue being resolved? Definitely will have to re-read but overall I thought this book was fantastic and really enhanced my understanding of societal and economic structures!

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