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September 18, 2007


Tessa Berman

One of the most striking things one notices in reading The Great Transformation today, is the applicability of Karl Polanyi’s analysis of the ‘political economy’ to events and processes which took place between his lifetime and the present. Given Polanyi’s astute identification of underlying sources of conflict in his lifetime, it is surprising that upon reading his work, few have recognized the solutions provided within Polanyi’s problematization of the constructs of the modern international economy.
The goal of ‘productive efficiency’ as one which may be attained through the commodification of land and labor is the fundamental element in need of redress in the modern economy. Polanyi’s dubbing of these as ‘fictitious commodities,’ hits the nail on the head in that neither land nor labor can truly suit the definition of a commodity as ‘exchangeable’ as each is a unique and non-renewable entity. Nonetheless, subsequent thinkers have continued to view each in terms of ‘resources,’ to the detriment of both, as neither can be comfortably condensed into a production equation short of assigning it a monetary (and similarly fictitious) value. By extension, the feature of modern economics most in need of reform in order to bring it into accordance with (and generally appease) political objectives is the calculation of productivity in purely economic terms.
In this reform, it does not suffice to replace measures of GDP with measures of ‘human well-being’ as adopted by the UN and other international institutions; we must go further, and reexamine the supposed foundations of liberal economics, the invisible hand itself. Contrary to his misquoted legacy, Adam Smith did not recognize the sovereignty of the market mechanism, and indeed never imbued it with the ‘natural laws,’ and personhood more broadly designated of humans. Nevertheless, modern ‘neoliberal’ economics, allegedly ‘evolved’ since Adam Smith’s time, quite clearly equates human and market well-being, the most obvious evidence of which is the personhood corporations enjoy in developed countries and the consequent weighing of people and profits on the same scale.
The conditions of the market which Polanyi denounces are the same issues which inspired the creation of the Political Economies major at Berkeley, and the anomaly most in need of reform, namely, the separation of human existence into various sectors-- politics, economics, civil society, etc.-- serves to inspire disjointed and ineffective policies which merely aggravate the dislocations caused by such policies in the past.

Dave Koken

The process that Polanyi refers to as the “double movement” is the key concept in understanding the conflict he describes between political necessity and economic logic. Polanyi argues that the state essentially planned for, or created, the market system which currently exists and represents the “great transformation” from previous naturally occurring economic systems. However, at the same time, liberal states have developed in such a way that they must maintain a responsibility to their people and protect them from the potential commodification of their land and labor. In this way, he shows that the state performs two opposite functions; following accepted economic logic by advocating free trade, while simultaneously pursuing politically necessary policies that seek to mitigate the dehumanizing effects of market economics.

I think it is fair to assume that individual’s preferences will continually change (advocating for more social protection in some eras and less in others) and, perhaps, this is what Polanyi means when he describes the spontaneity of social protectionism in the double movement. If this is, in fact, true, than the current system will cause a perpetual battle over where to draw the border between political necessity (responsibility of state to citizens) and economic logic (state’s pursuit of greater wealth through free trade).

It is important to note, as many other students have, that the origin of this conflict lies with the states narrow focus on achieving material wealth. If the state’s economy was geared more toward social gains rather than material accumulation, there would be little need for spontaneous state intervention to protect society.

Therefore, in order to escape this reactionary cycle, it seems logical to have the state actively intervene and guide economics. However, this type of thinking likely is what led to the movement toward completely governmental-controlled economic systems like communism and fascism. So it seems the best approach for building upon Polanyi’s insights may be some variation of Keynesian economics. The government’s gentle steering of the economy toward more social aims could be precisely what is needed to clarify the border between political necessity and economic logic.

Andrew Epstein

Where Polanyi is inherently correct is that modern society, with a self regulating market, does have the tendency to commodify things that are not commodities. Polanyi staunchly disagrees with the argument of Smith claiming that every person is entitled to “sell” their ability to be laborers. He argues that labor, land and money which are intrinsically linked to a self regulating market can in fact only be used as factors to an industrial world and not as items that can be produced. Polanyi argues the factor that is the most confusing, money, which is produced, is actually just a “purchasing power in the hands of its owners” and thus a means of buying in the market rather than a factor of production. (71)
The confusion over what Polanyi calls these, “fictitious commodities” and the growing inconsistencies between the state and its people led to a tension in early 1900's which Polanyni calls the “double movement.” Basically, by discussing land and more importantly labor as commodities the state was limiting the ability for people to excel in what was deemed a self regulating and liberal free market society. Thus the citizen is kept at bay by an economic system that is manufactured to see them succeed. What Polanyi fears and what ends up happening is the wealthy are able to capitalize on the market while the poor are not which continues to widen the gap between rich and poor.
I agree with Polanyi in thinking that a state regulated market will ensure the safety of its citizens throughout society. Citizens should be ale to socially and economically attempt to better themselves through the free market but the government can be used as a tool to aid them through this process. I also agree with Christina's point of the government's ability to perpetuate “fair competition and a reasonable distribution of wealth,” however who is to say what is “fair” and “reasonable”? Polanyi I think would argue that the government has the ability to make these distinctions but I see this as the flaw to an ideally strong argument of government regulation.

Krista Ellis

Polanyi’s main argument is the end of Smith’s ‘invisible hand’ and lassiez-faire economics, so that markets are actively created by the government. Polanyi argues that markets have the ability to destroy societies when wages and prices cannot adjust to supply and demand fast enough. Government must then “alter the rate of change, speeding it up or slowing it down as the case may be.” Polanyi then argues that while a liberal economy was planned, the reaction to it (government regulation) was not planned (‘double-movement’). Polanyi’s insights to manage the border where economic logic (free market) meets political objectives (government regulation to stop the economic system from taking over the social system) involve the construction of an international cooperative system. Furthermore, the reaction to the negative effects of the free market led to the rise of socialism and fascism. England’s capital accumulation and economic dominance pre-WWI meant that all other countries were at a disadvantage relative to England that a free-market alone could not correct. From this disadvantage came the reaction against ‘free-market’ solidified in socialism and fascism; the government taking on the responsibilities of redistribution or even market creation. The best way to build on Polanyi’s insights is to first, recognize the need for government and private management of the economy; a legal system, a monetary system, a banking system to set the boundaries of an economic system while still allowing for the concepts of supply and demand to function. Second, form an international system of cooperation that would help stabilize the economy. The gap left by England after WWI, while the US was still somewhat isolationist, led to the global impact of the Great Depression. The European Union comes closest to the realization of Polanyi’s insights; one market, one monetary system, open borders for trade, a legal framework, created institutions (such as the European central bank), and cross-border infrastructure. The European Union’s success has been clear, especially seen in the constant rise of the Euro to the Dollar.

Elisabeth Miller

Polanyi's main arguement can be summed up by the quote "Nineteenth- Century civilization was not destroyed by the external or internal attack of Barbarians....It disintegrated as the result of ..the measures which society adopted in order not to be, in its turn, annialated by the action of the self-regulating market." (257) At the end of world war 1, many were dissilusioned about liberalism and, as others pointed out, turning to facism and communism as alternatives. Polanyi does not feel that the market itself is entirely bad, but it cannot be left to itself to distribute equality. He says that this notion of self-intrest proposed by Smith is actually the exception to the rule in history, and that societies that didn't rely on the self-regulating market were better off. This does not mean that we are completly doomed. " Within the nations we are witnessing a development under which the economic system ceases to lay down the law to society and the primacy of society over that system is secured." (259) This does not imply any particular governmental institutions, it can happen in democratic, authoritarian or even "in a fashion yet utterly unforseen" (259) What is needed to happen is that " land, labor and money" need to be removed from the market. By this Polanyi means that they need to be determined by external forces (the governement) in the goal of advancing social intrests. I completely agree with Polanyi that land labor and money need to be determined outside of the market, but I am unsure whether it would be effective in our society. I don't think the current president is capable of detrmining what the interests of soiety are, and what is fair. For that matter I don't believe that any one person, can acheive that task. Like others have said, maybe some sort of international delegation could be put to the task. Overall Polanyi was inspiring, but I don't know how his ideas can be applied yet.

Julia Lohmann

As Norris and others pointed out, Polanyi sees the free market not as a naturally evolving phenomenon, but as the result of the implementation of various government policies. This artificially produced state led to the reactionary rise of protectionism, as people appealed to the government for protection from the market’s ruthless ‘self-regulation.’ However, he believed that welfare only impedes the working of the market, making the consequences worse in the long run. His was a much more large-scale solution, addressing both the economic and the political consequences that he felt were plagueing society.
Polanyi wrote The Great Transformation at a time when either fascism or socialism seemed to be the only options for government, but he recognizes the inherent conflict between the economic and political institutions in each system. He feels that fascism adheres too strongly to economic growth at the expense of democracy, while socialism does the opposite, putting too much emphasis on political freedom and too little on the economy. Nevertheless, he chooses the lesser of the two evils, and feels that true economic and political liberation can only be realized in a socialist state.
He advocates turning the laissez-faire system on its head, to have the free market society replaced by democratic control of both political and economic institutions. His ideal society is one in which socialism transcends the self-regulating market, making it subordinate to democratic society, and achieving progressive change not through, but in spite of the capitalist structure.
Although many others have already spelled out how he wishes to change the economic system, little attention has been paid to what he advocates on the political level for human rights, which I found to be one of the most compelling points of his argument. As he calls for economic reform, he also advocates political liberation, as he feels that the “right to non-conformity is the hallmark of a free society.” His strong belief in the rights of the individual led him to propose that as economic integration is realized, increased freedom must also occur at the political level to alleviate the suffering and inequality caused by the previous laissez-faire system. He calls for an international society to free the people not only from the tyranny of the flawed free market system, but also, and equally important, from the dictatorship of the political elite.

Allison Moore

Polanyi asserts the definition of land, labor, and money as commodities is a fiction, created by the market to allow its very own existence. Polanyi notes that since land cannot be created, that labor is a power inherent in persons, and money is merely a token of exchange, the treatment of those resources as commodities is not only fictional, but destructive. Does experience, however, confirm that statement. Polanyi himself notes, that in the Soviet Union the “suppression of the market economy by co-operative methods” regarding land, is one society which decommodifies land. Yet despite this, the former Soviet Union has had trouble feeding itself and making its land productive. Despite possessing rich soils, the Soviets were a dismal failure.

The development of economic liberalism was a body of thought that provided justification of a new set of public policies that facilitated transformation of land, labor, and capital into the “fictitious commodities” of a self-regulating system. Land, labor, and capital were not in fact produced for sale. Nor did the available quantity of land, labor, and capital disappear inconsequentially when relationships of supply and demand produced low input prices. This issue was, of course, particularly acute in the case of labor and led to the dismal conclusions of classical economics. Polanyi describes how, in spite of the threat to social order, the philosophy that came to be called “laissez faire” was “born as a mere penchant for non-bureaucratic methods . . . [and] evolved into a veritable faith in man's secular salvation through a self-regulating market”. Polanyi describes this evolution of British thought from the humanistic approach of Adam Smith, who wrote in a time of “peaceful progress”, through Malthus's acceptance of poverty as part of the natural order, and on to the triumphant liberalism of the more prosperous 1830s. What is important is that a set of recommendations about public policy was transformed into widespread acceptance as the laws of a natural order.

Polanyi recommends a future where society is placed above economy. Social institutions determine life, not supply and demand. What must be asked is “How does society evolve when it is a mold forced upon its members?” In a liberal world, the coercion of government should not be used to impose culture. The idea of the civil society, a sphere separate yet influencing government, is the liberal answer. Spontaneous evolution of that civil society takes place, where old institutions are discarded and new ones erected to fill gaps created by change.

Jason Edwards

I personally had a hard time with this read. However from what I can muster, I saw Polanyi’s insights to be very interesting, yet I did not think I obtained enough info from the text to answer this question. This is due to the fact that I have always thought that there is no border between economic logic and political objectives, I’ve always seen them as having the same goals and logic from the beginning of the US history, so I did not see why it would be any different in 1944. However, after reading Noah’s post I see where the distinction is supposed to lie. Noah wrote, “Labor, land, and money cannot be allowed to take the form of commodities, they must be regulated by the government and in so doing the economy will be subordinated to society subsequently eliminating personal gain as the predominant social incentive.” I see this to be about 80% true. I say only 80% because I guess that I am just not a very optimistic person and do not trust anyone who has ever work for the Government. Nonetheless, when it comes to answering the question “what you think is the best way to build on Polanyi's insights to manage the border where economic logic meets political objectives?” I believe the best way to do it would be to put people in power who would not exploit other people or treat humans as cash crops. However this would be impossible since I believe humans naturally become reedy with the more power they obtain. So I am actually at a lost for words when it comes to this questions, unless I want to use the forbidden word “revolution.”

Jazmin Segura

In The Great Transformation, Polanyi argued that the development of the modern state went hand in hand with the development of modern market economies and that these two changes were inexorably linked in history. His reasoning for this was that the powerful modern state was needed to push changes in social structure that allowed for a competitive capitalist economy, and that a capitalist economy required a strong state to moderate its harmful effects. For Polanyi, these changes implied the destruction of the basic social order that had existed throughout all earlier history, which is why he emphasized the greatness of the transformation.
Moreover, Polanyi explored a double contradiction within market-dominated societies: the first between labour and capital, and the second between the capital and nature. These conflicts intersect because ‘labor and land are no other than the human beings themselves of which every society consists and the natural surrounding in which it exists’. (p. 72) The capitalist buys both raw materials and labor (nature and man). Machine production in a commercial society involves, in effect, no less a transformation than that of the natural and human substance of society into commodities. the dislocation caused by such devices must displace man’s relationships and threaten his human existence.
Therefore, he also presented his belief that the self- regulated market economy had no long-term future, not because of the distributional consequences (increasing inequality) but because the harshly utopian nature of the self-regulated market gave rise to a spontaneous counter movement, even among those enjoying increased material prosperity. Society is vital to humans as social beings, and the SRM was inconsistent with a sustainable society.
Therefore, I have to agree with Allison and Professor Delong that civil society must be taken into consideration when deciding the limits of a self regulating market. Indeed, sociological and political logics have to bee seriously taken into consideration when dealing with the economy. In fact, Polanyi’s argument is so relevant today as we move into a more globalize economy. Outsourcing allows for multinational corporations to treat labor as a commodity but even worst as a ‘cheap’ commodity. This system today is not much different than the industrial towns of England where “the laboring people had been crowded together in new places of desolation”. Hence, to avoid another downfall like WWI or the Great Depression we must pay attention to the social and politic logics and integrate them into the economic logic. The end result should be a more progressive society.

Jelena Djukic

There were a lot of good comments defining the economic logic and political objectives. I really like the comment posted by Ziwei simply stating that “the intersection between political and economic logic with regard to land, labor and money being treated as “fictitious” commodities”. I believe that Polanyi implies that the tensions rise from the poor understanding and treatment of these terms in practice. He claims that the labor and land cannot be treated simply as commodities for a few problematic reasons. It is not proper to treat labor as commodity because labor does not represent the final product which main aim is to be sold, rather it represents a tool for production of a certain commodity. Therefore, treating labor as commodity leads to dehumanization, which regards to problem with political logic. (In my opinion this is where the socialism found most of its support; from revolting and mistreated working class). Another issue is treatment of land as commodity, which is inappropriate because it rests on social aspects
In my reading of Polanyi, he seems pessimistic about the ability of market to be self-regulated and this is the main source of rising tensions. He does not believe that the economy can manage itself, and therefore it needs government to intervene to some degree. He believes that the economic and political logics have to function well together and compliment each other in order for a country to be prosperous. Therefore, it is impossible to treat labor, land and money simply as commodities. They cannot be treated as commodities because they do not represent a final product of one’s production but rather tools to produce certain commodities, which are than sold. The mistreatment of these leads to tensions and imperfect functioning of economies. Polanyi also brings up Russia and France as examples of places where these tensions occurred leading to the overthrowing of tsar and governments. Simply treating human labor as commodity is dehumanizing and will lead workers to revolt, and similar goes with land.
At the beginning of the XX century the market economy left to self-regulation failed to lead to prosperity, and this gave basis to various movements to be critical of it. Therefore, after the WWI the world is experiencing the rise of the two powerful ideologies, fascism and socialism.
Fascism: in the chapter twenty Polanyi claims that the fascism “was a political movement that responded to the needs of an objective situation, at the same time the degenerative character of the fascist solution was evident”. In my understanding the fascism occurred as a solution for the failure of the market economy to self-regulate itself in prosperous manner for everyone. The movement came to exist as a result of both the Versailles Treaty and WWI, but more importantly failure of market economy. The followers of this movement were those who rejected the ability of market economy to lead to prosper or those who found themselves in worse economic situation as a result of the mall functioning of the self-regulating market economy. The idea proposed by the fascist movement was to “revitalize the economic system” and “reeducate people in order to denaturalize the individual and make him unable to function as the responsible unit of the body politic”. This movement required major changes in both economic and political systems, and believed that only that can lead to prosperous society. Example: Hitler gained support from the German nation mainly because the blame for poor economic performance of the nation was put on the failure of the market economies. He convinced the nation that he had the solution to this problem.
Socialism: as Polanyi claims is “the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society”. Therefore for those industrial workers who believe that the production should be regulated directly and markets be useful. From economic stand point, socialism does not recognize the private property or private money gains. The movement leads to many conflicts between employees and employers because of their divergent economic interests. The movement was found appealing through out Europe, especially Eastern Europe.
Therefore, it seems that both fascism and socialism were more appealing alternatives for falling capitalist system and the situation the world was in at the post World War One period.

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