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September 18, 2007


Nick Nejad

I'd like to first comment on a few things said or mentioned. With regards to the idea of turning labor and land into "commodities". A favorite quote of mine is that "it is better to be approximately right than precisely wrong". Well, the idea that people can be turned into commodities is precisely wrong. To put in perspective, a true commodity in the business sense means the production of a good with no distinguishable qualities from one or another. Not all goods turn to commodities- some goods differentiate, ie Ipods, Coke, etc. But anyway, Polyani seems to make the common economist fallacy of overgeneralizing by treating every one of us to be the same, as if our choices and our intellect play no part in a market economy, we are all just mechanized and replaceable, capable of producing the same amount of value of goods. This is far from the truth, and that is why people will never just be commodities. A similar thing can be said with land, where some areas are simply worth more or less than others.

Second, Polyani mentions the ideas of guilds as a way to protect from turning labor into a commodity. I just wanted to mention some anecdotal evidence by looking at the guilds that exist today, so to speak: medicine and lawyers. Both groups are still trying to maximize their economic interests.

Third, Polyani seems to describe capitalism before WWI as failing, but that is a naive statement. The period from 1875-1914 saw some of our countries greatest growth, and on a long time horizon one cannot deny that capitalism has been a great overall success.

So now, on my opinions of Polyani. Stephen Deng quoted Polyani as saying:
“A self-regulating market demands nothing less than the institutional separation of society into an economic and political sphere.”
And Kinzie also said:
"Man is concerned with his well-being and will be greedy and selfish to secure it, but man also has the capacity to understand that other beings have the same concern and could both help each other to that end."

I agree with both statements. Capitalism may allow for an excess of human greed, which causes some people to become wealthy beyond any reasonable means. But the mass of people, and hence the lower to average income, will always control the power to vote and hence regulate tyrannic greed. The problem is that the political field can also be heavily swayed by money, allowing the wealthy to hold much more power than their numbers suggest. My favorite recent example is with the inheritance tax, and how easily it passed by without any of us caring. There was a tax that did justice for our society, and only hurt the ultra-wealthy,while benefiting everyone else in society- yet none of us complained when it got repealed. I think the perfection lies in separating the two and keeping them independent. It makes good sense to incentivize people to be greedy and work hard towards securing their self-needs in the field of economics, but their also should be the counter-force of the masses in politics able to object when the environment leads to too much inequality.

Nadia Barhoum

Karl Polanyi represents one of the first from the branch of moral economists. In The Great Transformation he posits society and markets at polarities. He believes that society is an organic whole in which human relations are governed by norms and social networks. The market society only works to destroy this social fabric—a destruction which he thinks is irreparable and will create a double movement. The double movement is the simultaneous progression of the market society and the constant fight against the commodification of certain (abstract) goods. The creation of the internal market came about first with the introduction of long-distance and local trade. Neither of these markets was very competitive and neither employed the price mechanism, thus states worked to create its own national markets. Polanyi’s deeply political idea about state-led market creation counters the ideas and commonly held neoclassical belief that market creation is a natural process in society. However, Polanyi poses a different interpretation of market creation: it is a violent, destructive process that is unnatural. In constructing this greater market, three fictions must be created with the help of the state. These fictions are the commodification of land, labor, and capital. The commodification of labor ultimately leads to the degradation of human society and a grounding of social relations in modernity. Polanyi questions this idea of progress that is pursued almost blindly without questioning its consequences within society. Polanyi also idealizes primitive society in a way that detracts from his overall argument, saying that society post-market society is destroyed. Why not search for a societal alternative that looks to the future rather than the past which incorporates certain positive aspects from market society to renew social ties within communities (e.g. Zapatista movement)?

Hye Jin Lee

Polanyi argues that any thing that is functional to producing profit is a commodity. I agree his argument of money commodity and its control of by the central bank. Monetary relation is certainly necessary for stable foreign currency and for the national market. However, as Nick said it is precisely wrong and Nadia pointed out as degradation of human beings, labor in my opinion, is not commodity. Free labor, land, and money are components of productive society but when they ceased to exist, political action was necessary, and protectionism set in. Political force was used to regulate the imperfect self-regulation of market internationally. Political regulation is certainly necessary for the protection of the market since free economy cannot exist without politics. Polanyi writes that “political instruments had to be used in order to maintain equilibrium in world economy (217)” What does treating as commodities exactly mean? It is to focus on profit and welfare of country more than their humane characteristics and peace of nation as a whole. Simply treating individuals as commodities not only destroy the equilibrium of economy but also is deadly to future of human beings. It is to seek freedom and peace that righteously regulates political economy in union with individual rights to speak as he/she wishes and opinions. It is in this unity that economy and politics come to form a functional government for well-being of every one in society with individuals being conscious of the political realm that they live in.

Stephanie Loville

It is no doubt that as Kinzie points out, the market economy and the nation-state developed simultaneously and are still inextricably linked. Polanyi makes this the basic assumption from the begining of the text. I think the crux of his argument deals with the problems that arise as these economic affairs and decisions (which in the case of the market are determined by the mechanism of what Adam Smith would refer to as the invisible hand)are crossed with the social implications for the state.
He makes the distinction between real comodoties and comoditites like labor and land. Dealings with the latter enter into the realm of morality and also have major inplications for the social setting. While a self- regulating economy is to dominate social affairs the problem is quite apparent. How can an economy run by an impartial mechanism with no moral conscience , through its distribution of labor (human capital) have the power to determine entire social make-up of a society?
This is not sensible nor would it be conducive to maintaining a peaceful society. Polanyi suggests that the is a need for the government to ensure that people are protected and not exploited by the economic system to a certain extent. This can be done not by interventing in economic affairs BUT by making sure that the government is able to offer social relief. (For example the, FDR's New Deal Legislation providing social security and welfare programs for the people, when the economy was is turmoil.
As a solution, I agree with the first coment posted by Yu. I feel that the government should act more out of a sense of moral obligation and responsibility, similar to the way that it did during FDR's presidency. Only this time, with the increasing phenomenon of globalization, I think that it would be important to enter this with the mindset that there will inevitablly be open boarders and international cooperation is the key. Global politics should seek this responsibility morally to the people. An impartial market system does not always have the capability of effectively making the life changing decisions that it does (for several the market system determines social class and standard of living. The market system is not able to make the relationships nor conscious decisions to decide ultimately the have and and the have nots since it cannot look at all of the factors involved. Nor does the market system alone oofer any solutions to compensate for the inequities that are inevitable and that are sure to lead to social disorder. It if sor this reason that politics and economics benefit from and MUST to some degree be interlocked.

Vaclav Burger

The Great Transformation, by Karl Polanyi, talks about a less that just self-regulating market that makes the order of society unstable. The instability has to do with the largely capitalistic market, which is going to be restructured into either socialism or capitalism. But, even though the people who were benefiting wanted a change, I just don’t see the equality that Polanyi talks about; just as my peers have mentioned. I do not think I have ever heard of a kind economy or a nice economy because these would just not have the strong foundations necessary to survive. I understand that it is not the greatest thing to have the alternative, an economy built with people dieing and the foundation being tainted with war and blood, but at least that economy will have some strength to survive.
Unfortunately, the alternatives of socialism and capitalism have in history seen the Soviet Union and Nazi Germany as examples of what is bad in the world. Polanyi wants to have an economy built on freedom, but I do not ever think that man will be true to his task by creating more freedom. Rather, it is up to society to produce leaders and entrepreneurs that will take it upon them to be great leaders and gain the respect of their people. I will use the popular example of America’s exportation of democracy to Iraq. This came with the cost of war, but the war was that of an economic need for oil. This creates a problem in Polanyi’s as my peers have mentioned because some freedom is being destroyed and my point on leaders holds true to our current president who has been losing public support since his election..

Amitha Harichandran

Polanyi argues that “ to allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demolition of society” (76). He believes that by allowing the commodification of labor and land would lead to destruction of man as it is essentially robbing the “protective covering of cultural institutions” (76). He believes that this market economy resulted in a sort of double movement, in which society experienced both a expansion as well as a constraint within fictitious commodities. Polanyi believes this double movement allowed society to protect itself from the “perils inherent in a self-regulating market system” (80). As others pointed out, this led to the rise of Fascism and Communism in the post World War I era.
It is impossible to separate economy from society, however in order for tension to be avoided it is necessary that the government take the necessary steps to protect the people against the market. As Jennifer points out, it is essential that “human rights are prioritized over economic interests.” This calls for a change, as Yu pointed out, in the morals of society, making it essential for people to realize the common goal of freedom over personal greed.

Christy Fox

I agree with Vaclav Burger that Karl Polanyi linked the market economy with social instability. Polanyi argued that the lassez-faire system was an expected outcome of the economy’s direction during industrialization and the beginning of the market economy. Social instability, on the other hand, was a spontaneous movement in response to the socio-economic disparities of the market economy. Which area deserves control of commodities, politics or economics? Well, which came first, the modern political state or the modern economy?
Polanyi actually argues that they emerged simultaneously because one depended on the other. The modern state needed a market economy to gain political strength and the market economy needed a strong modern state to flourish. So, who get's priority?
It is no secret that the market economy produces many evils therefore; government should legitimately step in to prevent the negative externalities to effect society. Although, as Polanyi suggests, societal reactions to the market economy were spontaneous, they were a natural response. In order to maintain control, governments should guide economies to limit social instability.

Pierre Mouillon

Karl Polanyi’s book “The Great Transformation” takes a different view of the economic system, different to the views of, as an example and especially, Adam Smith.
This different view argues, that economies are made and grown not because society is gaining for maximizing material things, instead, but because society itself. People are not trading things, because they want to make money, they are trading because of their social status within society. For Polanyi, the society’s economy is based on the three terms reciprocity (generates the society status), redistribution (generates the redistribution of labor) and housekeeping (generates the accumulation of goods). The result is, for Polanyi, that “instead of economy embedded in social relations, social relations are embedded in the economic system” (60).
This is an important view in order to understand Polanyi’s famous “double movement”. As other authors, so does Polanyi argue that “land, labor and money are essential elements of the markets” (75). But for Polanyi, it is a fiction that these three “commodities” are being self-regulated within a market. Without any policies (thus, in a self regulated market), the greed of the people would destroy society, if there wouldn’t be something regulating these things. Thus, with a growing market and a growing economy, society would also need a growing regulator, thus more policies regulating the market. Thus, “society protected itself against the perils inherent in a self-regulating market system” – and so, the double movement is the common growth of free economy with social regulating policies in order to support this system.

Thomas York

A number of comments above note Polyani's issues with self-regulating markets and more extreme solutions (Adriana's and Kinzies' redistribution), while others note that Polyani's analysis of "freedom" in a complex economy (Vaclav) doesn't yield "freedom" in an economy, thanks to the problems with continued market economics.

But while I first found Polyani's objectives somewhat confusing and seemingly outlandish, I believe that many of Polyani's objectives have already been accomplished in many real and effective ways. He's not clear over how exactly to remove land, labor, and capital from the grasp of pure market capitalism, but I think you can maintain an incentive-based economy while subordinating market economic logic (when necessary) with laws and regulations.

His fundamental thesis, that the logic of the market economy does not coincide with sociological, political, and moral logic holds a great deal of truth.

Even analysis of a city like Berkeley or San Francisco can yield areas of law where his logic is applied to subordinate economic logic and strengthen sociological, political, and moral logic...

Land - Programs like rent control can mitigate the terrifying logic of pure market economy. Should the price of an apartment rise and fall monthly according to the market, such that most people are constantly evicted and searching for new apartments? In a perfect market economy, this makes complete sense. The "perfect" sense of the economy means that these people would instantly find an apartment of a given size at the price they were willing to pay. The costs of moving would be negligible. But in a "real" economy, these are serious problems that aggravate the problems associated with poverty. Rent control subordinates the logic of the market and imposes a moral and ethical logic.

Labor - Minimum wages, OHSA regulation, firing / hiring regulations and standardized working hours all subordinate the logic of the market for a (in this case, at least) superior ethical logic. If the market's logic were allowed to completely dominate, there would be either a complete dominance of firms, who could fire any workers that get uppity and pay the lowest possible wage, even if it isn't livable, or a complete dominance of unions, who would force wages higher and higher, destroying productivity economic growth. In the real market, regulations for both side of labor / management are necessary to escape the destruction of pure market logic.

Finance - The imaginary commodity Polyani discusses as finance is what we now call "the interest rate." We have subordinated market logic in this sense by giving control of this factor to a specialized political group - the Treasury - who have a specific mandate, full employment. The market economy's logic is this sense might be stable prices, as was the case during the gold standard era, which Polyani notes as a cause of the ills of his age.

Anthony Yates

Polanyi’s key points are not just relevant; they are pressing issues in today’s society. The class really seems to have identified these major points. Labor, land, and money are clearly not “commodities,” and an effective self-regulating market economy, a system based on considering them in this way, is thus impossible.

He stresses the importance of a government which is socially conscious in its regulation of the economy. The market economy is often blind to the social atrocities it commits, as in the case of England in the Industrial Revolution, the conditions of the common man during which he describes as, “awful beyond description,” and expands to say that “human society would have been annihilated but for protective counter-moves which blunted the action of this self-destructive mechanism.” Polanyi here characterizes the terrible consequences of a market economy on the daily life of the citizens, and makes it clear that only through government intervention can these be averted. And the weight of the social problems it creates must not be underestimated; to this he would refer the poster above, who writes “...the period from 1875-1914 saw some of our countries greatest growth, and on a long time horizon one cannot deny that capitalism has been a great overall success.”

Through the reconciliation of the “Double Move,” the eventual goal of Polanyi is freedom. But this is an elusive quality in itself, and Polanyi even speculates that “on the more fundamental level the very possibility of freedom is in doubt.” He argues that while compulsion and power are the antithesis of freedom, they are necessary at a certain level to keep society running. Therefore, it is in how we apply these regulatory measures which will determine if we will attain true freedom; the path Polanyi recommends is good, but one from which it is easy to stray, a fact he clearly recognizes.

Serena above makes an important point above; Polanyi’s freedom can easily be perverted by external motives such as economic gain. However, to call Polanyi’s solution paradoxical is not quite right either. The so-called “freedom” the United States is imposing upon Iraq by forcefully applying its democratic principles is not “creating more abundant freedom for all”---it is oppression, compulsion, and all else which is contradictory to Polanyi’s vision of freedom.

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