« Web Assignment 4: Kristen Durham's Page: George Orwell's Dilemmas | Main | Web Assignment 5: Kristen Durham: Polanyi's Well-Governed Market »

September 18, 2007


thomas wheat

The best way to build on Polanyi's insights to manage the border where economic logic meets political objectives, is to point out some of the many problems in his argument:

Polanyi has made a number of arguments trying to undo the foundations of classical economics. The basis for these arguments is that primitive man, in village life, did not barter, exchange or make profit. Social factors, asserts Polanyi, made the world work. The economy, moreover, is a product of social embeddedness, flowing from social factors. In India, Polanyi blames the coming of the market system for famine, despite a lack of statistics or proof. Polanyi, while noting that the works of liberal pamphleteer Thomas Paine caused a riot, he does not stop to consider that this could be an underlying social change for market forces. Liberalism itself may not have been a complete proponent of a self-regulating market as Polanyi asserted, and also itself evolved as a theory. With the example of the USSR, Polanyi goes beyond advocating the fulfillment of man's highest ideals in the Russian Revolution, he actively promotes the Stalinist propaganda that the Ukrainian peasants that were killed in the purges were actually fascist saboteurs. When it comes to society, Polanyi rejects the liberal idea of not using force to create institutions. The ideals of Christianity are exposed as outmoded by Polanyi, through Robert Owen's philosophy and later in his conclusion. Tragically, by reinvigorating the church and appealing to humanitarian concerns, Polanyi could create a basis of support for his program, but the half-Nitzscheianism of Owen precludes this alliance. Throughout his conclusion, Polanyi does pay lip service to freedom, in his attempt to win over his audience. Yet his credibility is damaged, as betraying statements regarding the Soviet Union shows.

Beth Dukes

Many students have eloquently addressed Polanyi’s dilemma in regards market economies: that they require the inclusion of land and labor as commodities but that “To include [land and labor] in the market mechanism means to subordinate the substance of society itself to the laws of the market” (75). I understand his argument to be that capitalism fails as the market mechanism attempts to privatize these social institutions. He furthers that this failure is what led to the creation of Socialism and Fascism as alternative systems to “economic liberalism”. He seems to be advocating that in order to reconcile this dilemma, we cannot let the market mechanism to run rampid, and that economic institutions must somehow be reconciled with their moral and political implications. So the question then becomes: how?

While I disagree with Julia that Polanyi advocates socialism directly, I agree that he definitely draws from it, and its foil, fascism, in order to show that as there are social and political causes of economic trends, there ought to be social and political considerations within an economic system. He explains that economists can miss the point of historical trends by purely “judging social events from the economic viewpoint” (35-36). Thus, I tend to agree with Andrew, David, and Krista (to name a few) who see Polanyi’s reconciliation as a state-regulated market, with minimum wages, unions, overtime, and national parks—the whole shebang.

However, I’m not sure that Polanyi would be entirely satisfied with the results of these regulations today. Sure we have all the regulations Polanyi advocates in modern America, but have they really helped integrate social considerations into economic processes? Thinking about the large number of American companies who choose to avoid such considerations (and their corresponding regulations) by manufacturing abroad, hiring and maltreating undocumented workers, and meeting their bottom lines by whatever means possible, I don’t really think so.

Therefore, I think the best way to “manage the border between economic logic and political objectives” is not to just ostensibly subject the former to the latter, but is to marry the two, so that political objectives and economic logic can become one. This solution goes beyond state-managed markets, because it also encompasses the idea of market-managed states; that is to say that as these two elements are married, it is their interplay which becomes paramount in social considerations, not just the consequences of one or the other.

Madeleine Dale

In The Great Transformation, Polanyi argued that a market that a self-regulated market cannot and should not exist because the effort to essentially commodify land and labor was a political movement that would eventually result in revolution and the destruction of the market system. Labor especially cannot be commodified because labor is not a good, it is a service provided by workers and you cannot commodify a human without creating tension or backlash. Commodifying human beings is a modern political disaster because land and labor are not commodities because they are not produced and sold, they are a means to production that is necessary to the services within a market economy. Polanyi believed that a healthy economy should correspond with an increased standard of living and prosperity among people. The problem Polanyi sees is that a self-regulated market does not take into account personal (and thus political) repercussions, restraints or demands. An purely economic system has no way of being understanding of human necessity, which is the ultimate reason that communism and fascism arose as a response to the problems that liberalism and market economies created. The solution to Polanyi’s problem is perhaps a sort of global system somewhat like the European Union or even the United Nations that could help communicate and alleviate the economic pressures that are being placed on an increasingly socio-political world.

Nathaniel S. Aylard

The best way to build upon Polyani’s insights to mange this border between economic logic and political objectives is to overcome the myth that the market is “self-regulating” which operates and exists naturally aside our social and political spheres. Holding to this belief that the market operates on its own and does not require outside influence is what drove “the Great Transformation”. Fascism and Socialism arose not because of revolutionary impulses embedded within their philosophies but because of the inevitable failure of the market. On the first page of chapter one he states “the idea of a self-adjusting market implied a stark utopia” giving the sense that this objective is unattainable (3). In other words, the governments of the world created their own folly trying to reconstruct the 19th century world of the market. They tried to reemploy the gold standard in the belief that everything would automatically readjust while pursuing a level of protectionist policies at the same time. Polyani called this “double movement” which Dave previously developed, understanding that the market is not a naturally occurring phenomenon.
Thus, we are back to our originally position that society needs to overcome or “transcend the self-regulating market” (242). I found Noah’s comment about human nature to be selfish is the underlying problem. It is the market that requires us to be selfish which in turn makes us think that this feature of human behavior is natural. However, Polyani points out how easily this idea of human behavior changed as the “condition of the market system” fostered the rise of fascism. This is the result of the “economy being embedded in social relations” and not the other way around (60).
So, if the problem lies within the belief that the market is a self-autonomous body that requires limited intervention, we simply need to reconcile with the fact that the market is our own creation (historically the state). Thus, we should be able to use democratic means to pursue our ends. The question then is what are our goals?
a) At the individual level, greater equality of access to necessary goods is on the top of my list. Necessary goods include access to healthcare, food, housing, etc but are not limited these given every individual wants different ends. Thus, problems may arise because of majority rule.
b) At the domestic level, Polyani’s argument for governments to get out of their head that markets self-regulate goes much further. For instance, trade unions have been on the rise such as the South African Development Community. Krista previously noted the EU but I would like to note an important shift in the developing world, in particular South Africa. It seems the Washington Consensus (ie shock therapy for imposing markets) is under attack not creating the growth so desired. The need for state intervention to direct investment, ensure social wellbeing, amongst other goals has been rising. Thus, the need to step away or above markets and direct the pattern of obtaining their goals is becoming necessary.
c) Finally, internationally the system looks like it is has begun this process of transcendence. Currencies are moving to floating exchange rates, the rise of new supra-national structures appear to be changing the organizing principle of the system, and international institutions are being used to cope with the problems of the market.
Maybe, just maybe, the world will transcend the myth of the market. Show me that New Deal…

Andrew Gurwitz

In The Great Transformation, Polanyi argues that the rise of socialism and facism can be traced back to the forced imposition of the market economy on society based on the misunderstanding of land, labor, and money as commodities. That it is politically impossible to treat land, labor, and money as commodities highlights the a basic conflict between economic logic and political necessity.

The vision of the utiopian self-regulating market economy is a myth. It is manufactured as part of economic and political goals and consistently burdened by a double movement, where each movement of the market is matched by regulation. It is never and will never be allowed to exist. The market economy is an obstacle to freedom and peace as it is a product of unnatural development and, as Ziwei noted, "The history of mankind provides little support for [Adam Smith's] notion, and that prior to the creation of the self-regulating market, people relied on the systems of reciprocity, householding, and redistribution in order to exchange goods." The market economy restricts freedom by restricting all societal activity to the market and forcing the perception of land, labor, and money as commodities.

Polanyi argues that true, accepted planning, regulation and control, like in his classical example of the Trobriand Islands, is the only way to esure freedom. That "the passing of the market economy can become the beginning of an era of unprecedented freedom>" Where we must not pretend that regualtion does not exist and we are governed by an "invisible hand" of self-regulation, but where political objectives, "custom and law, magic and religion" cooperate to regulate to economic logic to pursue and ensure peace and freedom.

Vaishnavi Jayakumar

Throughout the book, Polanyi’s narration of social conditions in Europe converge repeatedly to the same thread: that although excessive state intervention (such as the Speenhamland Law, which prevented the creation of a labour market in England) deprives workers of maximising utility in the market, “market economy if left to evolve according to its own laws would create great and permanent evils.”
I was particularly taken with Polanyi’s description of land, labour and money as being traded as “fictitious commodities”. As a critique of liberalism, the term encompasses a host of meanings but most importantly the political, cultural and social affliations that the three items possess to our society. Polanyi used the concept of embeddedness to explain this and as previous classmates have reiterated, the market economy falsely achieves an efficiency based on the commodification of these non-commodities.
Polanyi’s solution to managing this border between economic logic and political necessity is controlled state intervention. He suggests that even in self-regulating economies, states should play an interventionist role to avoid inflation or deflation, to provide relief during periods of unemployment and to maintain continuous food production that is protected from fluctuations in the market. While I agree with Thomas above that Polanyi’s diatribe against liberal economies seems excessive to those of us groomed to revere the market as the ultimate economic unit, I feel that the time frame in which he was writing this required a strong attack on liberalism in order to consider state intervention as a serious option. His criticism of markets in India is extremely valid and portends India’s imminent closing up and socialist policies that were revolting against the social inequalities wreaked by the market system.
Building on his insights into state intervention, I think state governments need to observe the movements of the market closely. The ideal balance of state intervention is when the market is allowed to operate most freely with the least amount of social inequities. During downward cycles, the government should step in and ameliorate public discomfort, but correspondingly limit involvement in positive upward cycles.

Rikus Pretorius

The expropriation in regards to the means of production is the fundamental basis by which fascism operates. Polany argues that the subsequent failure of the modern capitalistic economic system is what ushered in this new wage of ideology. This capitalistic economic system developed due to a bilateral introduction of a powerful modern state and the attempt to turn natural resources and labor into commodities. Polany argues that is method of production is unsustainable because it will eventually lead to the destruction of natural resources and the market economy. Following the collapse of the capitalistic system many people blamed the Laissez faire method of market economy for the downturn in economic output and saw light in a socialist and fascist ideology.
Looking at our present day economy the truth is glaringly obvious in regards to the inverse relationship between economic efficiency and global political stability. The rise in globalization and the continued improvement of production methods and weapons technology compounds immense pressure on nations of political superiority. The methodology of making a quick buck at the expense of people and the environment is the force that continues to promote the idea that we can not sustain ourselves. This deficiency to regulate our own economic and political agendas is the source of radical movements that followed WWI and will continue to emerge in present day society.

Morgan Brewer

In The Great Transformation Karl Polanyi wrote of the collapse of the nineteenth-century civilization that was based on four specific institutions: the balance-of-power system between the Great Powers; the international gold standard, the self-regulating market; and the liberal state.(The Great Transformation, Page 3) Here we have the foundation of the capitalistic society of the time. The split that Polanyi discusses in The Great Transformation is the different between economic logic and political necessity, but, when looking specifically at what destroyed the pre-World War I liberal world, these two terms can be simplified to more basic ideas. Economic logic is quite mathematical and naturally, due to the nature of economics (the allocation of scarce resources), treats everything merely as a resource (something to be used). Thus economic logic is nothing but the idea that one uses what is at one’s disposal however they see fit, in order to get what they want. Usually, this goal is money in one form or another. Political necessity in this context, to me, is more of a social necessity. When humans and the environment are treated strictly as resources without any further thought, life will not be able to exist for very long. Thus there is a need for the people to protect themselves from the application of pure economic logic, as exists in a self-regulating market. Communism and fascism are two extreme methods for the people to not have to protect themselves from a market, but are unnecessary.
I believe that Polanyi’s idea of a reconstruction of the international system would work to manage the border between economic logic and political necessity, but feasibility is another issue. In order for such a large scale change to take place there would have to be some extraordinary event, or chain of events, to spark the transformation. As far as protecting society from a self-regulating market today, I believe that democratic governments are on the right track with specific policies regarding the harsher effects of out current accumulation of wealth, but we are still drawing on limited resources in order to create a profit. The international market has somewhat backed off of using labor to the extent that it was in the past, but is still draining environmental resources faster than they can generated. If the international community, both economic and political, were to focus more on sustainability and less on profits, the border between economic logic and political objectives would become blurred while simultaneously protecting the people and environment.

Arsalan Mahtafar

Karl Polanyi, whom is best characterized as an economic historian, tracks the development of methods of goods distribution and resource allocation. He first begins with a criticism of Adam Smith, in which he explains that the self-interested, profit-maximizing “economic man” which is described by Smith is not a historical reality. Throughout history, most societies relied on the methods of redistribution or planning to achieve their socially desirable balance of resource allocation. He then continues by pointing out the fact that the “market system” was by no means the most “natural” or even the most common method of distribution of goods and services. In other words, human nature is incongruent with the market system. In fact, Polanyi points out; the market system has been historically imposed on societies by governments and systems of administration.
Polanyi then proceeds by criticizing the market and classical liberal theory. According to classical liberal theory, the market is the most efficient mean for resource allocation. Although Polanyi acknowledges this point, he does not believe the market is the most “socially desirable” method for the distribution of goods and services. Polanyi draws a very insightful analogy to prove his point. He says: Britain’s rapid industrialization was the most “efficient” method for achieving modernity. However, the pace of the process was so grand, that it caused hundreds of thousands of people to become displaced, and to live under crude conditions. He points out that although the end (becoming industrialized) was desirable; the means (rapid pace and poor social conditions) was undesirable. He concludes that a desirable end does not necessarily justify the means, as in Britain’s case, industrialization could have been carried out at a slower pace and had caused less social devastation. The market, by analogy, does distribute goods and services quite “efficiently,” but at the same time, it devastates the society.
Polanyi then continues by identifying the vices of the market system, namely the “comodification” of land and labor. Polanyi believes the market has reduced all relationships to monetary transactions, which in turn has led to damage of the fabrics of society. This damage was the main cause of the collapse the liberal system and the pre- World War I liberal world, and the reason for the rise of socialism and fascism as alternatives.

Kieran M. Duffy

I agree with the last two posts. Polonyi argues that state intervention, and controls are neccesary to control and manage economic borders of the economy. He explicitly states this with arguably one of the best examples in world history--the 100 years of peace that ensued before WWI after the Congress of Vienna. This peace, while it did come at the sacrifice of liberal ideals such as freedom of speech, and several others lasted because of Balance of Power politics led by Metternich. When the free market economy runs wild and does not take social, and politcal interests into consideration, and the free market economy is too free, bad things happen such as revoltion and revolt, and people search for alternatives such as fascism, and marxism as better alternatives becasue they do take social aspects into consideration. A good exmple of good government intervention that worked out well is the cooperation between the Wilson administration and big steel during WWI when they fixed prices to make things affordable

The comments to this entry are closed.

From Brad DeLong

Brad DeLong's Schedule

Search Brad DeLong's Website


About Brad DeLong