The Routledge Handbook on Karl Polanyi 1032373849, 9781032373843

Citation preview

“Karl Polanyi made seminal contributions to political economy, social theory, and anthropology, as well as providing a running commentary on the epochal changes that were unfolding in his time. This collection of essays explores his ideas on a multitude of topics—fascism, science and technology, institutionalism, and all points in between. Comprehensive in coverage and expertly curated, this is a welcome addition to the burgeoning literature on Polanyi’s life and work.” Gareth Dale, Reader in Political Economy at Brunel University, London “This collection of articles by leading Polanyi scholars transcends disciplinary boundaries. By addressing the wide range of issues that preoccupied Polanyi over a lifetime, readers will also discover their remarkable coherence. Throughout his writings, Polanyi insisted upon the societal consequences of disembedding the economy from society. Today, the urgent need to rethink the relationship between the economy, society and nature, draws upon the work of Karl Polanyi. This handbook is not only a major contribution to Polanyi scholarship; it is major contribution to an intellectual counter-movement to the dominant paradigm.” Marguerite Mendell, Director of the Karl Polanyi Institute of Political Economy, Concordia University, Montreal “This handbook is a timely contribution to ongoing debates of putting the economy in its place. It compiles contributions by renowned scholars debating key Polanyian concepts as well as exploring Polanyian insights for better understanding contemporary political economy. A must-read for scholars researching ongoing multiple crises and societal transformations.” Andreas Novy, President of the International Karl Polanyi Society, WU Vienna University of Economics

THE ROUTLEDGE HANDBOOK ON KARL POLANYI

Karl Polanyi is one of the most influential social scientists of our era. A report of the United Nations Conference on Trade and Development (UNCTAD) begins by noting that we are in a “Polanyi era”: a time of dangerously unregulated markets, where the greatest need for decisive political action is matched by the least trust in politics. This handbook provides a comprehensive account of recent research on Polanyi’s work and ideas, including the central place occupied by his thinking on the relationship between economics and politics. The stellar line-up of contributors to this book explore Polanyi’s work reflecting the intrinsic interdisciplinarity of Polanyi’s approach to understanding our society, its place in history, its fundamental dynamics, and its contradictions, as well as the methodological issues he raises. The handbook broadly follows a chronological structure beginning with influences on Polanyi, his formative experiences, and early works. A significant section is dedicated to Polanyi’s seminal work, The Great Transformation, and its impact. Further sections also look at Polanyi’s wider influence, on various disciplines and methodological debates, and his ongoing relevance for present-day issues including debates on populism, neoliberalism, and low carbon transitions. This handbook is a vital resource for students and scholars of economics, politics, sociology, and other social sciences. Michele Cangiani, Università Ca’ Foscari, Venezia, Italy Claus Thomasberger, University of Applied Sciences, Berlin, Germany

THE ROUTLEDGE HANDBOOK ON KARL POLANYI

Edited by Michele Cangiani and Claus Thomasberger

Designed cover image: (photo by Claus Thomasberger) Work […] is not a commodity (Sculpture by Paul Landowski, 1937, International Labor Organization, Geneva) First published 2024 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2024 selection and editorial matter, Michele Cangiani and Claus Thomasberger; individual chapters, the contributors The right of Michele Cangiani and Claus Thomasberger to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-032-37383-6 (hbk) ISBN: 978-1-032-37384-3 (pbk) ISBN: 978-1-003-33674-7 (ebk) DOI: 10.4324/9781003336747 Typeset in Times New Roman by codeMantra

CONTENTS

List of contributors xi Prefacexv PART 1

Polanyi’s early training

1

1 Károly Polányi’s Hungary János Gyurgyák

3

2 On the edge of Austro-Marxism Diego De Bernardin Stadoan

22

3 The socialist calculation debate and the problem of modern civilization Claus Thomasberger

33

PART 2

The ‘Great Transformation’

47

I

In theory

49

4 Polanyi and neoliberalism Bob Jessop

51

5 Twenty-first-century capitalism between embeddedness and disembeddedness: Karl Polanyi and beyond Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima vii

62

Contents

  6 Antinomies of the ‘double movement’: From Polanyi to the Polanyi debate Eren Duzgun   7 Markets, protectionism and self-regulation: A key to the ‘Great Transformation’ Hannes Lacher II

Its history

73

86

99

  8 The League of Nations’ programme ‘Financial Reconstruction of Austria’ and Polanyi’s economic and political theory Maria Markantonatou

101

  9 The World Economic Crisis of the 1930s. Polanyi’s analysis of the Great Depression, and the current global crisis Kari Polanyi Levitt

113

10 Observing the transformation. Polanyi’s writings in the interwar period Michele Cangiani

125

11 Polanyi’s unorthodox contribution to the study of fascism Kris Millett and Sang Hun Lim

137

12 Karl Polanyi and the ‘international civil war’: The analysis of a lucid witness and interpreter of his time Francesco Soverina

148

13 Karl Polanyi’s idea of co-existence: War and peace in the international frames of politics and economy in the interwar period Chikako Nakayama

160

14 After World War II: Universal capitalism or regional planning? Claus Thomasberger PART 3

Historical and anthropological studies

170

183

15 Polanyi’s anthropological insights: A comparative-holistic approach185 Justin A. Elardo viii

Contents

16 Karl Polanyi and the study of the ancient Mediterranean and western Asia David W. Tandy 17 Karl Polanyi on money Jérôme Maucourant

196 206

PART 4

Methodology and political philosophy

217

18 Freedom and socialism Michael Brie

219

19 Polanyi versus Hayek. The problem of freedom and democracy in the market society Paula Valderrama

232

20 Marx and Polanyi: A philosophical encounter Hüseyin Özel

243

21 Polanyi reads Marx Michele Cangiani

253

22 Polanyi’s institutionalism between the lines Sabine Frerichs

266

23 Karl Polanyi’s institutionalist approach and its contemporary value for the social sciences Giorgio Resta 24 How theories shape, and are shaped by history Chaitawat Boonjubun and Asad Zaman 25 Making interdependence Übersichtlich: Reading Polanyi through a (neo)republican lens Louis Mosar PART 5

Current problems and debates

278 290

299

311

26 Where Polanyi is more relevant than ever: Social justice and technical productivity in scientific knowledge production Emrah Irzik and Gürol Irzik ix

313

Contents

27 Chronicler of the interregnum. Karl Polanyi and the War in Ukraine Florin Poenaru

325

28 The double movement in the Global South: Critiques, extensions, and new horizons Geoff Goodwin

335

29 The ecological thought of Karl Polanyi and his contribution to ecological economics Federico Zuberman

349

30 Karl Polanyi in the transition to a low-carbon and biodiverse society Peadar Kirby

361

31 Ecosocialist freedom through participatory democratic planning Pat Devine

373

Index

383

x

CONTRIBUTORS

Chaitawat Boonjubun is a Postdoctoral Researcher in Social Policy at the University of Helsinki, at the Unit of Social Research, the Tempere University, Finland. Michael Brie is Chairman of the Scientific Advisory Board of the German Rosa Luxemburg ­foundation, Berlin. Michele Cangiani was an Associate Professor of Economic Sociology, Universities of Bologna and Ca’ Foscari Venezia, Italy. Diego De Bernardin Stadoan, PhD, Universidade Estadual de Campinas (UNICAMP), has carried out research at the Universidade Federal do ABC, campus of São Bernardo do Campo, Brasil. Pat Devine is an Honorary Research Fellow at the University of Manchester, UK. Eren Duzgun is an Assistant Professor of political science at the University of Cyprus in the ­Republic of Cyprus. Justin A. Elardo is a Professor of Economics at Portland Community College in Portland, OR, USA. Sabine Frerichs is Professor of Economic Sociology at the Vienna University of Economics and Business, Austria, and presently Scientific Director of the International Institute for the Sociology of Law and Research Professor at the Ikerbasque Foundation, Spain. Geoff Goodwin is a Lecturer in Global Political Economy at the University of Leeds, UK. He previously taught at the London School of Economics, University of Oxford, and University College London, and was a Research Associate at FLACSO-Quito. János Gyurgyák is Founder, Editor-in-chief and Director of Osiris Publishing Company (Budapest ‒ osiriskiado.hu). xi

Contributors

Emrah Irzik is an adjunct Instructor at Babeş-Bolyai University, Romania. Gürol Irzik is Professor of Philosophy at Sabanci University, Turkey. Bob Jessop is Emeritus Professor of Sociology at Lancaster University, England. Peadar Kirby is Professor Emeritus of International Politics and Public Policy, University of Limerick and education coordinator at Cloughjordan Ecovillage, Ireland. Hannes Lacher is an Associate Professor in the Department of Politics at York University, ­Toronto, Canada. Sang Hun Lim is the Dean of the Graduate School of Public Policy and Civic Engagement, Kyung Hee University, Seoul, South Korea. Raphael Jonathas da Costa Lima is Professor of Sociology at the Department of Multidisciplinary Studies at Universidade Federal Fluminense, Brazil. Maria Markantonatou is an Associate Professor of Political Sociology at the Department of Sociology, University of the Aegean, Lesvos, Greece. Jérôme Maucourant is an Assistant Professor at Jean Monnet University, Saint-Etienne, France. Kris Millett has a PhD in Sociology and Anthropology from Concordia University, ­Montréal, Québec, Canada. Cristiano Fonseca Monteiro is Professor of the Department of Sociology at Universidade ­Federal Fluminense, Brazil. Louis Mosar is a PhD Researcher in social and political philosophy at the KU Leuven, Belgium. Chikako Nakayama is a Professor of Global Studies at Tokyo University of Foreign Studies, Japan Hüseyin Özel is Emeritus Professor of Economics at the Department of Economics, Hacettepe University, Ankara, Turkey. Florin Poenaru is a Lecturer in Sociology and Anthropology in the Department of Sociology and Social Work, University of Bucharest, Romania. Kari Polanyi Levitt is Emerita Professor at McGill University, Montreal, Honorary PhD of the University of the West Indies, Jamaica, and recipient of the Order of Canada. Giorgio Resta, PhD, Pisa, is Full Professor of Comparative Law at Roma Tre University (Italy), where he currently holds the position of Vice-Rector for International Relations.

xii

Contributors

Francesco Soverina, PhD in International Studies, was Researcher at the Istituto Italiano per gli Studi Storici, and Professor-Researcher at the Istituto per la Storia della Resistenza e dell’Età ­Contemporanea, Italy. David W. Tandy, PhD Yale, is Professor of Classics Emeritus and Distinguished Professor of Humanities Emeritus at the University of Tennessee (USA) and Visiting Research Fellow at the University of Leeds (UK). Claus Thomasberger is Professor of Economics and Foreign Economic Policy at the University of Applied Sciences, Berlin, Germany, where he lectured until 2017. Paula Valderrama has a doctoral degree in Political Philosophy from the Free University in Berlin. She is a member of the executive committee at the Karl Polanyi Institute of Political Economy. Asad Zaman is currently engaged in the project of decolonizing the social sciences, to envision and realize alternatives to market societies. He has taught at leading universities around the globe. Federico Zuberman is Agricultural Engineer and Master in Social Economy, Coordinator of the Periurban Agroecological Production Technique (Associate Degree) at National University of Hurlingham, Argentina, researcher and teacher at National University of General Sarmiento, and teacher at National University of Tres de Febrero.

xiii

PREFACE

1 This Handbook explores theoretical achievements and political reflections of one of the most influential social scientists of our time, Karl Polanyi. His seminal book, The Great Transformation, is listed among 20th-century classics. Leading intellectuals around the world refer to him as a source of inspiration. The topicality of his thought is evident in the numerous areas in which it is an unmistakable point of reference, and from the very fact that it is subject to different i­nterpretations – different in that they express alternative positions on our present and our future. What meaning does Polanyi’s oeuvre have for us? What do we do with him today? The 2016 report of the United Nations Conference on Trade and Development (UNCTAD) begins by noting that we are living in a “Polanyi era”: a time of dangerously unregulated markets, where the greatest need for decisive political action is matched by the least trust in politics. It is not just a question of trust, one might add, but it is true that the problem of the relationship between economics and politics occupies an important place in Polanyi’s thinking. We need to understand our society, its place in history, its fundamental dynamics, and its flaws, in order to be able to intervene consciously on the functioning and transformation of its institutions. Clarifying the importance of this principle for Polanyi is a purpose of this Handbook; his political philosophy is closely related to his analyses of the historical process and to the methodological issues he raises about social sciences. In the “Introduction” of The Livelihood of Man, Polanyi (1977: xliii) is keen to warn the reader about the present relevance of his research on societies of the past, as it involves questioning the economic science, which is an expression of our own economic system. This he deems necessary “to enlarge our freedom of creative adjustment, and thereby improve our chances of survival”. Polanyi early revealed key features of neoliberalism. Today, after the triumph of the neoliberal transformation and the economic, political, and ecological crisis to which it has led, the motive of the interest in Polanyi seems likely to be the feeling that we are heading towards an impasse again, after the one he analysed regarding Europe in the 1930s. Indeed, our society risks an entropic drift, insofar as it is unable to master the relationship between its economic system and human and natural environment. What alternatives do we have? Which ones exist, not only on theoretical maps, but also in reality? The more serious the crisis, the more necessary is knowledge, and the more animated is the struggle in the field of ideology. It is therefore no wonder that Polanyi is interpreted in different, even contrasting ways. xv

Preface

2 The purpose of the Handbook is to offer an image as complete and documented as possible of Polanyi’s thought. Basic information on his entire work is supplied, including rarely, if ever, considered writings. We do not claim, however, that the Handbook covers the full scope of Polanyi’s work and all the questions it raises, also given the intrinsic interdisciplinarity of his approach and the different orders of problems he proposes. A further factor of complexity is the relevance of the political and scientific context: both that of Polanyi’s times and that of present times. We will, of course, refer to the current literature. However, we sought to avoid (1) a discussion limited to a few themes of Polanyi’s reflections; (2) the reduction of Polanyi’s concepts to generic formulas, abstracting from their contextual meaning, or to a mere pretext for specialized discussions; (3) a style of writing that is difficult for non-specialist readers. Most of Polanyi’s writings are not only inter-disciplinary: they also aim at transcending the purely academic debates and speaking to a broader public. In the last years, they have been appreciated by social scientists and political activists primarily for the powerful criticism of unrestrained capitalism that can be found in The Great Transformation (TGT). These readings provide important insights. However, they too often neglect that Polanyi’s magnum opus is only the culmination of a lifelong research process that began before the First World War in Budapest, continued in the interwar period in Austria and England, and in the US and Canada after the WWII, until his death in 1964. During his life, Polanyi gave countless lectures, wrote hundreds of articles (more than 250 alone for the magazine Der Österreichische Volkswirt) and published other books besides TGT. One task of the Handbook is to present his oeuvre as a whole within which The Great Transformation too is to be placed.

3 The categories that Polanyi develops in TGT and that dominate recent discussions play, of course, a central role in the contributions to the Handbook. Nonetheless, we have chosen not to start with these, but with highlighting the Hungarian and Austrian background of Polanyi’s formation, the political fault lines and the theoretical debates in which the young Polanyi was involved. Few of those who draw on Polanyi’s categories are familiar with the work he produced in the decades preceding his writing TGT at Bennington College. Therefore, in Part One of the Handbook, “Polanyi’s early training”, three chapters provide a glimpse of the political and theoretical vicissitudes in which Polanyi was involved in his early years. The starting point is Budapest. Polanyi was convinced of the formative influence the years he spent in Hungary had on his life and intellectual development. Long after his emigration from Budapest for political reasons, he wrote in a letter: “the literary and pedagogical work accomplished in […] the Hungarian period forms the real background of my life and thought” (cited in Dale 2016: 1). The subsequent chapters focus on the two debates in which Polanyi was directly involved after his arrival in the ‘Red Vienna’: one was that animated by the Austro-Marxists about the socialist society to be built, concerning both the ideal to strive for and the political strategy to implement it. The other, regarding Socialist Calculation, was started by Ludwig Mises, one of the fathers of contemporary neoliberalism; this debate, in which Polanyi intervened early, influenced his thinking far more than is usually acknowledged. Central theoretical insights of TGT are the subject of Part Two. In the first contribution, some key concepts and the discussions that its interpretation has provoked in recent decades are traced in detail. The “commodity fiction” category, to begin with: Polanyi explains labour, nature, and

xvi

Preface

money as “fictitious commodities”, differing from ordinary commodities by the very fact that even in a modern capitalist-market economy they are not produced for sale. The role is then considered that this issue plays in recent debates over the neoliberal tendency to privatize and commodify more and more areas of social and natural life. The following chapter deals with Polanyi’s “embeddedness/dis-embeddedness” dichotomy, which focuses on the relationship between economy and society, and reveals the unique structure of modern capitalist market civilization compared to all other types of society known in human history. The category of “double movement” is the focus of the third contribution in this Part: the efforts to expand the market system, the resulting often destructive effects on humans and nature, and the interventions of society to protect itself against them. The fourth chapter, which concludes the First Section of Part Two, regards the general meaning of TGT as an analysis of the roots, modalities, and results of the crisis of the liberal civilization of the 19th century. This reading of TGT highlights Polanyi’s criticism of neoliberalism and the often-overlooked radicalism of his thought. While the First Section of Part Two concerns some central theoretical nodes of Polanyi’s book, the Second Section addresses more specifically historical events of the transformation. The Great Transformation, as mentioned above, is not an isolated work, but grounds on Polanyi’s numerous studies and publications during the preceding two decades. Many aspects that are briefly summarized or merely implicit in TGT can only be understood in their full significance if Polanyi’s analyses of the key events of the interwar period are considered. Significant here is first of all Polanyi’s assessment of the economic and financial crises in Austria and the League of Nations programme “Financial Reconstruction of Austria” after the First World War. This is followed by an examination of his interpretation of the roots, characteristics, and course of the World Economic Crisis of the 1930s. His analyses not only are crucial for the argumentation in TGT, but also allow interesting comparisons with the current global crisis. A treasure to be discovered are hundreds of articles Polanyi wrote in the interwar period, principally for Der Österreichische Volkswirt, but not only. There, Polanyi investigates in detail the economic and political course of the “great transformation”, especially regarding the corporative institutional arrangement in Britain and the New Deal reforms. No less significant are Polanyi’s studies of fascism – a topic central to TGT’s concluding chapters, but already dealt with systematically in the 1930s. The transformation of international relations is another theme Polanyi continuously addresses in the interwar period. “Of all the great changes witnessed by our generation, none may prove more incisive than that which is transforming the organization of international life”, he states (2018: 231) at the beginning of an essay that appears shortly after TGT. The interpretation of the relationship between “internal” and “external” conflicts, which finds its striking expression in the concept of “international civil war”, forms the core of the first of the chapters dealing with this issue. A second contribution is devoted to Polanyi’s idea of “co-existence”. What would be the conditions for maintaining peace in the face of increasing global tensions? The Second Section of Part Two concludes with a chapter on the alternatives opening after the Second World War: return to the obsolete liberal world order, now under US leadership, or transformation towards a multipolar world – an alternative relevant not only in Polanyi’s time but also today. Part Three deals with historical and anthropological studies Polanyi carried out prevalently after his appointment to Columbia University in 1947. There, the contact and collaboration with scholars of institutionalist orientation allowed him to acknowledge and more fully practise his own institutionalism. The research directed by him led to the publication of Trade and Market in the Early Empires (1957), a collection of essays marking a turning point in the comparative study of economic systems.

xvii

Preface

The first chapter of this Part explains the relevance of anthropological theory to better define and support Polanyi’s critical method, which allows him, first of all, to demonstrate the specificity of market and capitalist society compared to any other. This theoretical achievement includes Polanyi’s methodological innovation: his social-institutional and holistic “substantive” approach as opposed to the “formalist” one influenced by orthodox economics. The debate between scholars adhering to these two tendencies continued – as the following chapter explains – also regarding ancient social and economic history. Recently collected evidence has been adduced to support neo-institutional readings of ancient economies; such interpretations are based on a conception of the economy in which specific features of the market system are generalized. However, the same evidence can also be interpreted as consistent with Polanyi’s thesis opposing the modern market organization to ancient trade and production as “embedded” in non-economic institutions. The qualitative, radical break marked, in Polanyi’s view, by the market-capitalist system is explained regarding money in the third Chapter of Part Three. In pre-modern societies, money had various forms and functions, each time determined within a given social system; as “currency”, it was instrumental with respect to exchange relationships variously organized and aimed. With the development of capitalism, money became “all-purpose money”, a commodity within the market system, and itself an end.

4 Even if Polanyi dealt, as we have seen, with very different questions over the decades – ­reflecting current problems both nationally and internationally – there is a common thread connecting his research work through all his life: the problem of freedom. Already in the 1920s, in a letter to a friend (2006 [1925]: 317), he thus summarized the question: “How can we be free, in spite of the fact of society? And not in our imagination only [...] but in reality”. Not accidentally, the title of the last chapter of TGT is: “Freedom in a Complex Society”. The concept of individual freedom is the central category in Polanyi’s social philosophy, from which springs his notion of democratic socialism. This is, at the same time, the basis on which he developed his own methodological perspective. In the first Chapter of the Part Four, “Political philosophy and methodology”, the connection between Polanyi’s search for the conditions of freedom in modern societies, his conception of the relationship between community and society, and his reflections on socialist alternatives is explored. The subsequent chapter confronts Polanyi’s thinking with that of his great opponent, Friedrich Hayek. Not only did both live in Red Vienna during the same period, emigrate to the Anglo-Saxon world in the early 1930s, and publish their respective best-known works in 1944, but both also have in common the question of how individual freedom can be preserved in a modern, complex society. It is precisely at this point – and not simply, as is usually assumed, on the question of the efficiency of economic planning – where their judgements differ. Whereas Hayek advocates market competition as an indispensable precondition of freedom, Polanyi considers the market system, according to the chapter’s central message, as ultimately incompatible with personal freedom and responsibility. Two chapters follow, which address the ever-discussed relationship between Polanyi and Marx. The first argues, by drawing out connecting lines and differences, that linking the insights of both is essential for understanding the respective conceptions, especially concerning human existence and its tendency to degradation and disintegration in modern times. The second, which gives a detailed analysis of Polanyi’s highly interesting but too rarely considered articles and manuscripts of the interwar period, demonstrates how significant Marx’s works were as sources for Polanyi’s xviii

Preface

political philosophy. The author shows what surprising affinities become apparent when they are related to each other on the general-abstract theoretical level, where capitalism is analysed in terms of a specific “form of society” characterized by the institution of a self-referential economic system. Thus, Karl Polanyi’s peculiar perspective on the economy as an “instituted process” and its relevance for the social sciences comes into focus. In the subsequent chapter Polanyi’s institutional approach is examined. Its closeness is shown to the ‘old’ institutionalism, which flourished in the US in the first half of the 20th century: its contrast, instead, with the ‘new’ ­institutionalism – ­particularly in economics. While sociology and economics are the focus of this chapter, the following one considers the enduring relevance of comparative institutional analysis from the perspective of legal theory and economic history. The importance is emphasized of Polanyi’s approach as an intellectual tool to oppose the “economist bias” and the colonization of law and other social sciences by market-fundamentalist approaches. The next chapter continues the examination of conventional social theories by addressing the question of how the process of social transformation and the causal factors contributing to changes can be understood. Too often in contemporary social and economic theories, the adverse effects of these changes on different classes are minimized, with the consequence that policies crafted in the light of misleading understandings have fatal consequences in social reality. Polanyi’s approach, which highlights the influence of theoretical notions, whether right or wrong, on social reality and its transformation, provides analytical templates for incisive qualitative and historical analysis, allowing us to counter the rational calculation of human behaviour that dominates modern social sciences. The final chapter of this Part returns to the idea of freedom by reading Polanyi’s vision of social freedom through a (neo-)republican lens. An analysis of the resonances between Polanyi and (neo-)republicanism supports the argument that a (neo-)republican reading of Polanyi can be fruitful for both sides: (a) (neo-)republican considerations can help strengthen Polanyi’s conceptualization of freedom; (b) (neo-)republican authors can benefit from the Polanyian opposition between democratic freedom and market freedom. According to Polanyi’s democratic approach, the ideology of market freedom can even reach the point of negating “the reality of society” as organized by historically specific institutions. By limiting responsibility to the realm of direct personal relationships, the constraints imposed by the capitalist market system tend to be ignored or at least undervalued. Besides, the modern “discovery of society” (TGT, Chapter 10) implies a conception of freedom through “overview” (Übersicht), i.e. a control of social organization involving informed and responsible individuals. While Part Four evidences the connection, in Polanyi’s approach, between his critical methodological attitude and his political philosophy, Part Five, “Current problems and debates”, refers to both these achievements as inspiring regarding our present concerns. Given the variety of issues Polanyi dealt with, it is not surprising that his arguments are present in a wide range of debates. We had to select and limit the discussions in this Handbook to a few topics that seem central to us. The first theme is the connection between the self-referential market system, science, and technology. Polanyi’s warnings about the incalculable consequences of technological development driven by market competition are of the utmost importance today, especially in view of the role of nuclear technology, genetic engineering, the internet, artificial intelligence, etc. Under these conditions, counter-initiatives against the universalization of intellectual property rights such as Open Technoscience appear to be all the more important. Another subject is the structural transformation of international relations, characterized by the rise of Asia, the growing importance of Africa and the crisis of the unipolar world order under xix

Preface

US leadership. The war in Ukraine is the latest expression of tensions that, much like in Polanyi’s time, are associated with such fundamental changes, in which new rising forces on regional and global levels are challenging the existing power structures. This turns the attention in the direction of the Global South. “My work is for Asia and Africa, for the new peoples”, Polanyi wrote in 1958 (Karl Polanyi Archive, Con 30 Fol 02) in a letter to a friend expressing the hope that his ideas would inspire the peoples fighting for their liberation from the colonial yoke. The chapter dedicated to this theme explores the question of how far the double movement can be understood as an ongoing historical process that, even if it takes on different forms depending on the social context, is indispensable for understanding the transformation of the Global South. The three concluding chapters address from different angles one of the major problems of our time, a decisive one for the future of modern industrial civilizations: the ecological devastation or the dangers that industrial societies based on the commercialization of nature cause for living conditions on our Planet, and what consequences result from this for the idea of a socialist transformation. “Industrialism is a precariously grafted scion upon man’s age-long existence. The outcome of the experiment is still hanging in the balance. But man is not a simple being and can die in more than one way” (Polanyi 2018: 198). The first of the three chapters discusses the contribution Polanyi’s institutional approach can make to discussions within the framework of ecological economics. The second contribution focuses on the insights that Polanyi’s reflections provide for the transition to a low-carbon and biodiverse society. The final chapter turns to Polanyi’s overarching question of the perspectives of freedom in modern societies and discusses the question of how the pursuit of social wellbeing and the recognition of planetary boundaries could be achieved through participatory democratic planning.

*** We are grateful to all contributors to this book for their efforts and fruitful exchange of ideas. May this worldwide collaboration count as a minimal sign towards a future of peace and greater ability of mankind to face its own problems consciously and responsibly, as Karl Polanyi hoped. Finally, a sad note. Daniel Tompkins, Emeritus at Temple University, Philadelphia, was part of the team when we started working on the Handbook. His intention was to contribute a chapter on Polanyi’s scholarship at Columbia University, relating the historiography of antiquity to Polanyi’s thought. A fatal illness interrupted Daniel’s work, causing his death on June 10th, 2023. We admire him as a scholar and as a person, and we remember his enthusiasm, his wide-ranging intellect, and his commitment. July 14th, 2023 Michele Cangiani and Claus Thomasberger

References Dale, Gareth. 2016. Karl Polanyi. A Life on the Left. New York: Columbia University Press. Polanyi, Karl. 1977. The Livelihood of Man. Harry W. Pearson, ed. New York, San Francisco, London: Academic Press. ——— 2001 [1944]. The Great Transformation. Boston: Beacon Press. ——— 2006 [1925]. “Letter to a Friend”. In Karl Polanyi in Vienna, Kenneth McRobbie and Kari Polanyi Levitt eds. Montréal: Black Rose Books. ——— 2018. Economy and Society. Selected Essays. Michele Cangiani and Claus Thomasberger, eds. ­Cambridge: Polity. Polanyi, Karl, Conrad M. Arensberg and Harry W. Pearson, eds. 1957. Trade and Market in the Early ­Empires. Glencoe, IL: The Free Press & The Falcon’s Wing Press.

xx

PART 1

Polanyi’s early training

1 KÁROLY POLÁNYI’S HUNGARY János Gyurgyák

Introduction What I became I became in my homeland. Hungarian lives have given meaning to my life. When I erred, others paid for it here. The good I have strived for, should be realized here. What little I have given to the world, should come home, wrote Polányi in one of his late publications (1986b: 194). To what extent can this statement be regarded as an exaggeration or an expression of nostalgia, or as a formal lap of honour in tribute to his native land? To what extent were later Polányi’s scientific achievements determined by the intellectual and political experiences he had in Hungary as a young man? These are the questions I intend to answer.

Budapest at the turn of the century Budapest was without doubt one of the beneficiaries of the Austro-Hungarian Compromise (Ausgleich) of 1867: the Hungarian capital changed from being a small city of local significance to the second most important city of the Austro-Hungarian Monarchy. Of course, German remained the most important language of the Empire’s institutions – most prominently in the army – and Vienna remained the seat of the central bank and joint ministries (defence, foreign affairs and the treasury). On the other hand, the importance of the Hungarian capital also grew significantly, since the greater part of the Empire (52%) was within the boundaries of the Kingdom of Hungary; furthermore, Hungary played a significant role in the political and economic expansion into the Balkans. The leading role Budapest played in the areas of banking, finance, manufacturing, food production and railway construction is unquestionable. The construction of the rail network was also of decisive importance for Hungary’s modernisation because it made the development of trading connections with the other half of the Empire possible. Károly Polányi’s father, Mihály Pollacsek, was assigned a role in railway construction. Between 1850 and 1900 the rail network in this part of the Monarchy increased from 176 to 17,245 kilometres. Among the capitals of Europe, Budapest was second only to Berlin in undergoing the most rapid growth in its population during the period around the turn of the century: from 280,000 in 1869 to 880,000 in 1910, thanks to bourgeoning



3

DOI: 10.4324/9781003336747-2

János Gyurgyák

opportunities and to a large scale – chiefly internal – immigration. In 1870, out of every 1,000 residents 633 had not been born in the city and a mere 46% of its population professed Hungarian to be their native language. The proportion of Jews in Budapest became increasingly significant, reaching 23% in 1910. Budapest, which transformed into a global city within the space of two generations, became the flagship of the country’s industry and modernisation. A true period of Gründerzeit prevailed in the city, which attracted all manner of active Austrian, German, Jewish and Hungarian capital, as well as workforce from the Hungarian peasantry and nationalities from around the Empire, principally Slovaks. Polányi’s father, Mihály Pollacsek, had trodden this exact path.

The family In one sense, the story of the Pollacsek-Polányi family could be said to have been a typical one during the Monarchy’s period of modernisation. On the one hand, they came from the peripheral parts of the country and were regarded as foreigners due to their ethnicity. On the other, they were an exemplary model of the Hungarian Jewry’s rapid rise and assimilation. Examples of this in Hungary were industrialists such as the Hatvany-Deutsch family owning a sugar company, the Weiss family (steel works) and the Wodianers and Ullmanns, both of them bankers, who used their economic power to enhance their social prestige. At the time in Hungary this meant rich families acquiring noble titles, while their growing wealth enabled them to purchase land; in fact, they often adopted the customs and habits of Hungarian families from the noble/ gentry ranks. In this regard, the story of the Polányi family is atypical since their elevation into the ranks of the haute bourgeoisie was brought to a halt by Mihály Pollacsek’s bankruptcy; his erudite and outstandingly talented children were, therefore, forced to take a different path. Instead of consolidating their wealth or regaining their old economic status, they opted to hone their intellectual skills. Furthermore, for most of them, this implied a rejection of bourgeoiscapitalist values and the adoption of left-wing socialistic ideals. From a social-historical perspective, the Polányi children followed a similar course to György (Georg) Lukács, the son of a wealthy banker. Károly Polányi’s paternal grandfather, Adolf Pollacsek Sr, (1820‒1871) and his wife, Zsófia Schlesinger (1826‒1898) had the considerable means to rent the Ungvár mill (in today’s Uzhhorod, Ukraine), one of the largest industrial facilities in Ung County bordering Galicia. The names themselves demonstrate their Polish-Galician (Pollacsek) and Silesian (Schlesinger) origins. Zsófia Schlesinger gave birth to six children (Clementin, Károly, Lujza, Vilma, Teréz and Mihály). Károly Pollacsek (1859–1928) is worthy of note, because he took part in almost every venture of his brother Mihály, in the capacity of a legal advisor. Károly Polányi was an intern in their law firm during his university years, and later worked there as a lawyer until the outbreak of the First World War. The fledgling lawyer, at least up to this point, had the opportunity to follow a much more traditional career path. However, this wasn’t his choice. Two names are worthy of note from the extended family, who played an important role in the intellectual development of the Polányi children. Above all, Lujza Pollacsek’s son Ervin Szabó (1877‒1918), who was the legendary director of the Budapest Metropolitan Library (today the Ervin Szabó Library) as well as a prominent figure of Hungarian Marxist thought and syndicalism. Vilma Pollacsek’s son Ernő Seidler (1886‒1938) was one of the founders of the Hungarian Communist Party and the commander of the Red Guard in Budapest during the Hungarian Soviet Republic of 1919. There can be no proper understanding of the Pollacsek-Polányi family without

4

Károly Polányi’s Hungary

this duality. On the one hand, an amazingly rapid acquisition of wealth, the adoption of the bourgeois lifestyle and mentality, as well as rapid acculturation and assimilation; on the other hand, an interruption caused by bankruptcy, a disillusionment with the bourgeois-capitalist existence, and a radical intellectual confrontation with that reality. The income from the aforementioned mill in Ungvár gave Károly Polányi’s father, Mihály Pollacsek, the financial means to study at the Eidgenössische Technische Hochschule in Zurich. He began his career as a railway engineer for the Swiss state railways. In the early 1880s he moved to Vienna, where he designed rail lines for the capital’s Stadtbahn and was the author of several books on this theme. The history of the maternal side of the family is no less interesting. Mihály Pollacsek met Cecile (Cecilia) Wohl, a native Russian speaker, in Vienna, where she was working in a jewellery shop in Taborstrasse. Cecile’s best friend in the city was Anna Klatschko, whose husband, Samuel Klatschko, ran a patent office there, and at the same time built up close ties with the émigré Russian revolutionaries, including Trotsky and Radek. Klatschko and the Russian revolutionary spirit had a significant influence on the entire Pollacsek family, including, of course, Károly. Even at the end of his life, Polányi was fascinated by Klatschko’s personality: “He was the kindest man I have ever known” – he wrote (Duczynska 1971: 763). This influence may have led to Polányi joining the organisation called Socialist Students, founded in 1902 by his close relatives (Adolf Pollacsek, Ernő Seidler and Ödön Pór), when he was still at secondary school. There is no accurate information about what he did there and whether or not he participated in the group’s book publishing programme (publishing the works of Kropotkin, Lavrov, and Faure) or in the group’s activities of workers’ education. Cecile’s father, Alex Wohl, an ‘enlightened’ rabbi from Vilna, was the author of historical works in Russian and a Russian-language Jewish prayer book. Mihály Pollacsek and Cecile Wohl married in Warsaw in 1881; their first children were born in Vienna: Laura in 1882, Adolf in 1883, and Károly (Karli, Karlicsku) in 1886. The family then moved to Budapest, where their fourth child, Zsófia (Sophie) was born (1888), as well as their last two children: Mihály Lázár (1891) and Pál (1893); the latter was mentally disabled and died in 1904. Cecile Wohl (commonly known in Budapest as Mama Cecil or Tante Cécile) was a person with a thirst for knowledge, well-read and very erudite. In contrast to her father, who had a strictly puritanical and bourgeois mentality, Cecile followed a kind of anarchistic way of life. She organised an intellectual salon on a weekly basis in their elegant palace on Andrássy Road and then in their apartment on Ferenciek Square, where the cream of the radical Budapest intelligentsia of the time met. In his memoirs, one frequent guest, Oscar Jászi, remembers this salon as being influenced by Nietzsche and Marx and that the hostess of the salon was “brilliantly witty but very often femininely superficial. Sometimes she performed real acrobatics in the midst of the ever-changing ideological formulae” (Jászi 1982: 559). In 1912, Mama Cecil also started a Women’s Lyceum in Budapest with the participation of writers and painters (such as Endre Ady, Béla Balázs, Frigyes Karinthy, Dezső Kosztolányi, Róbert Berény and Dezső Czigány) and turned her attention to graphology. She was also fascinated by psychoanalysis; she had been one of Sándor Ferenczi’s patients and wrote herself about psychoanalysis (Kunst und Psychoanalise). In 1906 she gave a lecture on the Russian Revolution at a meeting of the social democratic Vorwärts cultural association for workers. Albeit in a much-reduced form, in the interwar years she continued running her intellectual salon, which was visited by the crème de la crème of Hungarian literature, from Attila József to Gyula Illyés. Henrik Vámos remembered Mama Cecil as a “notoriously youthful and pacifist fighter, a free-thinking hero and the mother of all

5

János Gyurgyák

revolutionaries” (National Széchényi Library – NSZL – fond 212). In his speech at her funeral (5 September 1939) Aladár Sós said: We were very young then, but you were always the youngest among us; your desire for knowledge and your thirst for culture was the keenest. You were not only interested in the events of science and art but you were also interested in us. In your motherly bias and talentseeking zeal, you saw something in each of us: promise and value. You reminded me of the strong, intelligent and stalwart mothers of great Russian novels, combined with the subtlety and liveliness of your extraordinary spirit. (NSZL – fond 212) It undoubtedly meant a lot to the Polányi children that they were able to meet members of the Hungarian intellectual elite on a weekly basis, so they experienced the radical Hungarian and Central European left-wing intellectual culture almost as a natural part of their lives. Mihály Pollacsek continued in Budapest and other parts of Hungary what he had started in Switzerland and Vienna: he designed and built railways. In 1887, the legendary Minister of Trade, Gábor Baross, launched his large-scale transport reform plans, including favourable financial conditions for the designers and builders of the much-needed railway lines. Soon after this provision was issued, Mihály Pollacsek made Budapest his home. He drew up the plans for important Hungarian railway lines together with the Berlin-based company Soenderop et  al. as the main contractor. Being a member of the board of directors and the supervisory board of the joint-stock company set up for the constructions, he closely interacted with famous politicians, MPs, financiers and bankers. Thanks to these extensive business enterprises, the Pollacsek family was able to lead a bourgeois lifestyle. The healthy state of their finances is demonstrated by the fact that their first apartment was at 2 Andrássy Road, the most prestigious boulevard in Budapest, favoured by the elite. Their place of residence is also a telling example of social segregation in Budapest at the time since those born into the aristocracy resided elsewhere, mainly around the National Museum and in the Castle District of Buda. A photograph of the Polányi apartment on Andrássy Road shows the family’s luxurious, bourgeois-aristocratic lifestyle (the large painting in the living room depicting the children; expensive tapestries on the walls; elegant furniture, etc.). Mihály Pollacsek did not follow the strategies of the biggest Jewish industrialists and commercial magnates of the time as he did not adopt a Hungarian name, seek to acquire a noble title, write and speak in Hungarian with his colleagues and children, convert from the Jewish faith: but he didn’t try to get his children to do the same. In his lifestyle, work ethic and approach to life he did not emulate the aristocracy, nor even the middle-class gentry, but rather chose to follow the stricter industrial middle-class path. His children finally acquired hungarianised names on 29 September 1904. This is most probably not a random date: Mihály Pollacsek was seriously ill at the time and must have wanted to settle his affairs relating to his children before his death. However, the exact date that the family converted from the Jewish faith to Calvinism is not yet known, but it certainly occurred later, since Jewish faith can be read both in Károly Polányi’s university report book at the end of 1904 and in Mihály (Michael) Polányi’s school report in 1908. In respect to his children’s future, Mihály Pollacsek did the most astute thing a father can do by providing all the funds necessary for their education. Their upbringing was not a strictly religious one but instead enlightened and rational. Home tutors and governesses were engaged to teach the children. In addition to German used within the family and Hungarian learnt from their environment, the children were also required to speak English and French, as well as to continue their 6

Károly Polányi’s Hungary

Latin and ancient Greek studies, which were mandatory. Accepting the norms of the time, and haute bourgeoisie habits, domestic servants were also a natural prerequisite in running a household for the Pollacsek family. It is also exactly known when the family’s financial downfall took place, since on 24 December 1899 the capital’s newspapers reported that Mihály Pollacsek’s liabilities had reached half a million crowns (a huge amount at the time), leaving him insolvent. There are not sufficient data to establish exactly why this happened; it can only be speculated that it was caused by the major construction crisis starting in 1899. The family legends also tell of a flood that washed away the railway embankments under construction, and it is also often mentioned that Pollacsek “paid everything back to the last penny”. Unfortunately, due to the lack of data, this can neither be verified nor rejected. What is clear is that the Budapest papers covered the story of the family’s movable property being auctioned off in 1900. These were items of relatively low value compared to the half a million Mihály Pollacsek owed. He most probably made some kind of financial arrangement as he remained active after 1900, albeit as an employee of various companies. Most of the time he undertook work in Germany. Even though the family had to leave the palace on Andrássy Street, they were still able to maintain the semblance of a middle-class lifestyle, moving to a flat – 5 Ferenciek Square and then to 4 Bécsi Street, both in the city centre. The assumption that Pollacsek was never able to psychologically process his bankruptcy is not without foundation, and it may well have contributed to his early death at the age of 42 (12 January 1905). The funeral was so moving for the children that they were still exchanging letters about it decades later. The enduring closeness between the Polányi siblings, especially between Laura, Karl and Michael, was undoubtedly influenced by the early death of their father. “My dear little sister, we are cordless Siamese twins” – Karl wrote in a letter to Laura (NSZL – fond 212). In a letter to Michael – who throughout his life was much more critical than him of Marxism and especially in his condemnation of the Soviet Union – he noted how ignorant their Anglo-Saxon critics were by insisting on a conflict between them based on their differences of opinion, while overlooking how strong and unbreakable their fraternal ties, their shared family and Hungarian memories were.

Schools Mihály Pollacsek’s financial fall had an impact on Karl Polányi’s schooling. He completed the first two years of an eight-year secondary school as a private student (one of the private teachers was his relative, Ervin Szabó) but in his third year (1898‒1899) he entered the Main Secondary School of the Royal Hungarian Teacher Training Institute, colloquially known as the Model Secondary School or ‘Trefort’. This school was undoubtedly one of the best educational institutions in Budapest at the time, where graduating university students completed their teaching practice. The teaching staff was made up of the best teachers of the time, who published scientific books and were the authors of the secondary school textbooks used at the time. The school library’s holdings comprised 10,000 volumes as well as Hungarian and foreign scientific journals. Getting into the Model Secondary School was considered an outstanding opportunity for both teachers and students. Every year the school published a detailed yearbook (Badics ed. 1904); so almost everything is known about Karl’s (and later Michael’s) studies. For example, it is known exactly what he read in the original Hungarian, German, Latin and Ancient Greek, as well as what he learnt in physics and mathematics. Polányi’s school report also shows that in addition to the basic subjects, he studied French, philosophy, art history, calligraphy and shorthand. It is even recorded in the school report how many centimetres Polányi grew each year (for example, from 155 cm to 160 cm in his fifth year) and how many pull-ups on the horizontal bar he was able to do at the 7

János Gyurgyák

beginning and end of the year (15 and 20, respectively, officially making him the second strongest boy in the class). Polányi was always among the top students in his class and after his father’s bankruptcy he became eligible for the Ármin Brüll scholarship (320 crowns compared to the annual tuition fee of 140) based on the votes of the council of the Israelite community. After Karl graduated in 1904, his brother Michael also received the same scholarship until he completed his own studies. In Trefort, it was rare for ‘children with a modest financial background’ to be granted a scholarship of such a high amount; therefore, both Karl and Michael would have had to demonstrate exceptional abilities. Karl Polányi was also the president of the school’s literature self-study group, and, revealing much about his oratory skills, “he gave an enthusiastic opening speech” at the ceremony on 15 March 1903 reciting Sándor Petőfi’s poem Egy gondolat bánt engemet (One Thought). (Badics 1904). Then, at the funeral of Elizabeth Queen of Hungary on 19 November 1903, he delivered the ceremonial speech imbued with a spirit of patriotic enthusiasm. Polányi’s 1903 class consisted of 21 students: seven Catholic, four Lutheran, two Reformed and eight of the Jewish faith. In regard to occupation, approximately half of the students’ parents were civil servants, while the other half were private officials, licensed agricultural producers, independent traders and tradesmen (Pótó 1982: 20). In autumn 1904 Polányi enrolled in the Faculty of Law at the Royal University of Budapest (today Eötvös Loránd University, ELTE) and studied tuition-free from the first term. It is not clear why Polányi did not instead apply to the humanities faculty that at the time would have been more in line with his interests. It may have been that his father wished him to study law, or that Polányi’s uncle, the legal advisor Károly Pollacsek, was really behind this decision, or indeed that Polányi’s choice was influenced by financial factors and career opportunities. One of his best friends and an intellectual rival at the time, Georg Lukács, noted in a letter that “Karli” deserved a Nobel Prize because he had helped one of his aristocratic students, “whom he trained in his spare time”, to pass his end-term exams (Lukács 1981: 22). Lukács was also somewhat jealous of Polányi’s oratory success, ranking him intellectually alongside Ernst Bloch and Georg Simmel. Since Polányi’s university report book has been preserved in his estate, it is also known exactly what subjects he studied: constitutional and legal history, early Hungarian history, national economics, modern history, criminal law, politics, jurisprudence. Several things transpire from the document (Leckekönyv. School report. NSZL, fond 212). First, Polányi enrolled in courses at the Humanities Faculty, attending lectures on historical subjects that interested him, but he clearly avoided specialised legal subjects. Second, he passionately prepared for all his lessons, which is demonstrated by the descriptions in his report book such as “very diligent” and “excellent”. In 1907 Polányi spent a term at the University of Vienna, where he also attended the economics lectures of the AustroMarxist Carl Grünberg. He received his doctorate on 26 June 1909 at the Franz Joseph University of Kolozsvár. Polányi ‒ like Georg Lukács ‒ completed his doctorate under the bourgeois radical thinker, Bódog Somló. Even at this time his outstanding talents were obvious to his contemporaries. For example, Lukács wrote in his diary that their mutual friend Leo Popper’s faith in “Karli” was aprioristic, while his own faith in him was only a posteriori (Lukács 1981: 22). In October 1907 the members of the Catholic Saint Emeric Student Association announced a boycott of the lectures of Gyula Pikler, professor of law, who was a well-known free-thinking evolutionist; in reaction to this the students who supported him engaged a fist fight to get lectures resumed. As a Pikler’s student, Polányi took part in the conflict: this is why he was forced to finish his studies at the University of Kolozsvár.

8

Károly Polányi’s Hungary

The Galileo circle The above episode at the university related to ‘academic freedom’ played a decisive role in the formation of the Galileo Circle, raising questions about the autonomy of teachers regarding the content and method of their teaching. It was Gyula Pikler who suggested that the movement be called the Galileo Circle. The other decisive factor in the group’s founding was that other, larger organisations (University Circle, Saint Emeric Circle, Gábor Bethlen Circle) had already been available for Christian students with a traditional vent, but many students, mostly those of Jewish origin, were averse to these as they regarded them as ‘reactionary’ and ‘clerical’, while they also kept their distance from the Zionist Makkabea Circle since the beliefs of its adherents were in sharp contrast to their own largely materialistic, atheistic or simply irreligious free-thinking views. In 1908, students who occasionally gathered together during the ‘Pikler prank’ considered establishing an independent association; however, the legislation in force at the time prevented them from doing so within the tight deadline they had and so they turned to the president of the Society of Social Sciences, Oscar Jászi, who suggested the Hungarian Association of Freethought as a possible parent organisation for the students, while recommending to them Karl Polányi. The association initially had reservations about Polányi because of his “excessive gentlemanly manners, sophisticated style and elegant attire”, but they soon accepted him as a leader recognising both his gifts of oratory and organisational skills (Csunderlik 2017). Polányi saw the Galileo Circle as an excellent opportunity to demonstrate his talent and to realise his long-standing dream of introducing – at least in part – the Russian student movement model to Hungary. He became the circle’s first president and leading figure. He actively participated in establishing the organisation’s statutes and rules of conduct, writing its first manifesto, editing its magazine Szabadgondolat (Freethought) and organising the Galileo Circle Library book series. It was in the latter that Polányi’s translation of the first three chapters of Ernst Mach’s Die Analyze der Empfindungen (The Analysis of Emotions) was published. Polányi’s introduction to the book shows that Mach was important to him since he replaced dogmas, traditions and authorities with practice, experience and expediency. As Polányi writes (1986a: 240), “What cannot be verified by experience should not even be thought about”. Polányi played a major role in keeping the Galileo Circle away from party politics and, following the Russian example, bearing on its banner the notions of moral commitment, individual devotion, a willingness to help, self-education and selflessness, summed up in the slogan “to learn and teach”. The ultimate goal set by the circle was the social liberation of Hungary. It is known exactly when and what kind of lectures Polányi gave in the circle (Worldview and Politics, Intellectual Movements of the Present, Evaluation of Intellectual Life, Theory of Social Movements, State of Public Affairs in Hungary, Origin and End of Religion, How a Savage Thinks, Clericalism, The Task before Hungarian Intellectuals, Science and the Class Struggle, Secondary Schools and Culture, School and Science, The Task of the Student Body, Towards the Second Era of Social Science, The Development of Modern Capitalism, The Critique of Historical Materialism, Bolshevism and Manual Workers, The Internationale, etc.) and what seminars he led (Pikler, Mach, Hegel, Oppenheimer, Marx) (www.adt.arcanum.com). Conducting lectures on such topics, he visited workers’ associations, trade unions and workers’ homes in the outer districts of the city. Summer seminars were organised for secondary school pupils. After his presidency, he became the chairman of the workers’ education committee of the Galileo Circle, which organised social science and political lectures, and basic education for workers. This provided Polányi with a wealth of experience for his later teaching workers in Vienna and England.

9

János Gyurgyák

The circle started with 256 members, that soon grew to over a thousand. In the year it was established, 1908, most of the Galileists were medical students (36%), law students (24%) and technical university students (20%) (Csunderlik 2017: 151). The Circle was divided by different world views: the Polányi-led core of the circle was formed by the adherents of Mach and Avenarius. In the first few years of the circle the evolutionists, following the Darwin-Spencer line of thought, were still present, as well as Bergsonists and Marxists. Anyhow, the greatest influence upon the circle was exerted by domestic bourgeois middle-class radicalists (Oscar Jászi, Paul Szende); indeed, the circle was given two rooms in the premises of the bourgeois radical Society of Social Sciences in the city centre. Galileists were, then, able to read magazines subscribed to by the Society, meet the bourgeois radical leaders who frequented this venue and listen to their lectures. And vice versa: Jászi and his followers regarded the Galileo Circle as an important youth organisation and a source of recruitment. The Galileist generation, according to Jászi, “could lead Hungary out of the Balkans and into Western Europe” (Jaszi 1923: 40). Polányi was later given an important position in the bourgeois Radical Party, led by Jászi. The periodical Szabadgondolat, as well as the other activities of the circle, increasingly addressed issues concerning the bourgeois radicals, such as anti-capitalism, anti-clericalism, anti-militarism, anti-alcoholism, suffrage, international issues, the women’s movement, land reform. Polányi’s freemason activities were also related to the Galileo Circle. In 1911 the Archimedes Lodge was founded with the express purpose of bringing together in one association those old Galileists, who would otherwise have been lost to ‘progressive’ movements after graduating. Polányi was admitted to the Archimedes ‘chain of brotherhood’ relatively late, on 5 December 1913, and exempted from paying tax as a “brother of limited means”. Polányi later moved to the Martinovics Lodge, led by Jászi. In the first half of 1914 he gave several lectures on the importance of freethought in the various lodges, but after that his activities almost completely ceased and he did not get beyond the status of ‘apprentice’ until he immigrated to Vienna, where an attempt to resurrect the radical freemason lodge wasn’t very successful. There are no data on whether or not Polányi continued his association with the freemasons after moving to England. Polányi and the Galileist presidents who followed him invited renowned foreign progressive speakers to Budapest, including Max Adler, Eduard Bernstein, Auguste-Henri Forel, Robert Michels, Wilhelm Ostwald, Werner Sombart and Émile Vandervelde. Polányi also had a significant role in making 15 March, the first day of the Hungarian Revolution and War of Independence of 1848‒1849, into the celebratory day of the Galileo Circle. The ceremony always followed the same pattern: a keynote speech, delivered by the president of the circle or a famous guest, after which the Marseillaise was sung and revolutionary poems by Petőfi and other poets were recited. The highlight of the evening was the recital of a poem written for this occasion by the poet Endre Ady. In his 1913 speech at the annual celebration, Ady claimed that When the Galilei Circle was founded, its members perhaps did not realise that they were taking on a grandiose task, compared to which perhaps even the mission of the young Russian students would have been seen as easy as a song or as a daredevil’s despair. (Szabadgondolat Nov. 1913: 337‒338) At the end of the First World War the circle had become highly politicised and radicalised; the slogan “to learn and teach” was replaced by “let’s speak Russian, let’s act in Russian”. Ilona Duczynska, who was later to become Polányi’s wife, and Tivadar Sugár printed anti-war leaflets, while Duczynska smuggled the Zimmerwald anti-war appeal of the revolutionary socialists into Hungary, and, moreover, plotted to assassinate the incumbent prime minister, István Tisza. The 10

Károly Polányi’s Hungary

operation was called off by Duczynska because Tisza resigned. The government didn’t tolerate the circle’s radicalisation, dissolved it on 12 January 1918 and confiscated its archives. The reorganisation and the recovery of the office only took place on 24 October, not long before the Aster Revolution, led by Count Mihály Károlyi, which gave rise to the First Hungarian People’s Republic (Nov. 16, 1918 – March 21, 1919). At the end of November 1918, after the Party of Communists in Hungary was founded, Bolshevism became the main issue for the Circle, with a debate on it organised by Polányi (Szabadgondolat Dec. 1918). At the end of his life, Károly Polányi again turned his attention to the Galileo Circle. The leitmotif of his writings on this subject is self-reproach. In a letter to Oszkár Jászi he wrote: The Society of Social Sciences, and later the Radical Party, could not do anything without young people. I was never a politician – I didn’t have the talent for it, nor an interest in it. Thus, no one saw the revolutionary potential of the Galileo Circle. This was the reason for the failure in October. I cannot shift the responsibility to anyone else. (27 October 1950. NSZL, fond 212) This is, however, a major overstatement. First of all, Polányi played an important role in the history of the Circle, despite the fact that the term of office of its presidents was limited to one year. Second, although the circle was not a party-political institution, the majority of its members were involved in politics, with some leaning towards bourgeois radicals or social democrats, and not just in the period after 1917 but also before the First World War. Third, the potential and the course of the October Revolution (and then the proletarian dictatorship) were determined by greater historical powers, far beyond the forces of a few hundred Galileists. Polányi’s self-recrimination that the Circle did not seek or barely sought to engage with the nationalities, the peasantry and the workers is also exaggerated. And finally, the politically sensitive Hungarian university students – similarly to the politicised Hungarian public – were divided into two distinct groups along the achievements of the Revolution of 1848 and the Compromise of 1867. Polányi’s opinion about the government parties, which supported the compromise, and about the opposition parties of 1848 was scathing: “Government and opposition are products of a single system and a single storm will knock down the rotten tree along with all its odious, poisonous fruits” (Polányi 1986a: 117). In his last letter to Polányi, on 5 November 1950, Jászi writes that he overestimated the circle in both a positive and negative sense: The Galileo Circle suffered from the same disease as Hungarian society. It was a group full of slogans, far removed from real life, which later succumbed – for the most part – to the ideology of [Béla] Kun and [Mátyás] Rákosi. (NSZL, fond 212) In this poignant letter, Jászi also clarifies that while Polányi basically followed the line of historicism, he could not imagine decent politics without the rehabilitation of natural law. Although not completely without foundation, in his writings remembering the Galileo Circle Polányi placed too much emphasis on the continuity of its ideology, stating, for example, that the way in which the circle was connected to politics had remained unchanged between 1908 and 1919 (Polányi 1986b: 188). In reality, there was a huge and stark difference between the Galileo Circle before 1914 and after 1917: from a scientific, non-political to a radical leftist, highly politicised organisation. Finally, Polányi’s premise that the membership of the Galileo Circle was “proletarian” or “intellectual proletarian” and even the “better-off petty bourgeois elements avoided it” is 11

János Gyurgyák

certainly an overstatement, not supported either by the list of members, which shows where they resided, nor by the education and housing costs of the students at the time, which on average came to 1,500 crowns per year. Poorer students had to constantly work in order to fund and continue their studies, yet this was still a far cry from the conditions endured by the proletariat at the time. On the basis of the list of members it can be tentatively concluded that a bourgeois, lower-middleclass or rural petty bourgeois origin seems to have been much more common among the circle’s members than a proletarian one.

Secretary of the national civic radical party The idea of founding a bourgeois radical party, which had been proposed to no effect several times, was raised again at the end of 1913 upon the initiative of Oscar Jászi. The Party was officially founded on 6 June 1914, with a ceremony where Polányi expressed his greetings to Endre Ady, who was unable to attend the event. The newly formed party’s demands and goals included the eradication of “feudalism” and “clericalism”, the establishment of universal suffrage, radical land reform, the secularisation of church property, the “genuine” implementation of the law of 1868 on nationalities, as well as the setting up of an independent customs territory and the economic independence of Hungary. In these two short periods – from the end of 1913 until the outbreak of the First World War, and from the last year of the war until his departure from Vienna in 1919 – Polányi was directly engaged in political activity like never before or after, even imagining to pursue a political career. His political writings at the time elaborated ideas and clarified some issues, within the framework set by Jászi, of whom he spoke enthusiastically: “Let our Reichdeutsch friends learn that the greatest statesman in Hungary is not ‘der Tisza’ [i.e. the premier István Tisza] but Oszkár Jászi” (letter, 8 January 1915. NSZL, fond 212). This enthusiasm later waned somewhat, but a kind of ‘squabbling’ friendship and mutual respect remained between the two men until the end of their lives. Polányi was given an important role in the starting party, as its secretary and one of its most important leading speakers. His tasks included building up the party’s rural organisations, although he had little success in this area. A letter he wrote to Michael Polányi clearly shows his mood at the time, implying a tendency to overestimating his role in the party: I have reinforced the party and now I am running it. […] These days I am, perhaps, Jászi’s most confidential man in the party. Everything is imputed to me. Not only in work, but in terms of moral leadership as well. […] Jászi works a lot. He has proved to be the best of our people. But perhaps I am the hero when it comes to action. (27 June 1914. NSZL, fond 212) Despite Polányi’s positive approach, in reality the process of building up the party was lacking in several ways. First of all, its foundation upon the threshold of the outbreak of the First World War was late. Second, the party was mainly made up of intellectuals who were doctrine-driven, rigidly adhering to the Party’s principles, thereby reducing its social basis. Third, there were few radicals in Hungary who were able to accept the almost transitory nature of the party in that it was to represent radical bourgeois politics until the presumed right time to establish socialism in Hungary. Later, after emigrating, Jászi himself was critical about the party, calling it the biggest blunder of his life. The party-political articles Polányi wrote in 1918 were aimed at overcoming this temporary nature of the party. He sought to prove that bourgeois radicalism superseded Marxist socialist and social-democratic theories, which were considered obsolete (Polanyi 2016: 174‒180). 12

Károly Polányi’s Hungary

The Radical Party’s break from the social democrats was also largely caused by the latter’s turning away from internationalism at the outbreak of the First World War. Polányi argued that there was only one reality and one society: the one in which people were living; thus, the transformation of the country and the world, the elimination of income without work and the establishment of a “society based on work” had to be implemented there and then with radical reforms by “hand- and head-workers” and it would be a mistake to wait for the coming of a “foggy Zukunftstaat”. Polányi also claimed that only these radical reforms would be able to protect the country from revolutionary upheavals. Third, he stated that the radicals did not attribute as vital an importance to the abolition of private property as the social democrats and especially the Bolsheviks did; he argued that the production of a surplus was impossible without individual initiative and risk. Fourth, he claimed that radicals did not agree with socialists in attributing a distinguished role to the proletariat. In contrast, Polányi believed that the whole movement needed to be subordinated to the leadership of “intellectual workers”, since the ethic needed to be mastered by people and this would not be successfully implemented either through class struggle or the self-imposed dictatorship of the factory workers. The elements of these radical reforms were constituted by taxes on land, property, wealth, and a radical reform of public administration and suffrage (Polányi 1986a: 167‒175). According to Polányi, these ideas for reform came from Henry George, H.G. Wells, Josef Popper-Lynkaus and Rudolf Goldscheid. During the First World War Polányi served as a lieutenant, though not as a combatant at the front but as a serving officer at the logistics department. Apart from a few letters he wrote to Jászi and family members, almost nothing is known about him during this period, nor about the wound that led to him being sent home at end of 1917. All that is known is that he always kept the works of Shakespeare and the Bible with him. Hence, his gradual disillusionment with mechanical materialism, militant atheism and radical anticlericalism can be dated to this period. In his note on “Hamlet” (1954), he theoretically elaborated the problems that preoccupied him when he served in the army: “Hamlet does not wish to die; he just hates to live”, from which he drew the following conclusion: “Life is Man’s missed opportunity”. At the end of 1918, during the Aster Revolution, it seemed as if some of the bourgeois radical political objectives had been achieved, while others had already become obsolete since at this time a new notion and political practice appeared on the scene that made everyone adopt a stand: Russian Bolshevism. Polányi immediately realised its relevance: he organised a debate on Bolshevism, which went on for several days in the Budapest University, and he edited a special issue of the periodical Szabadgondolat on Bolshevism. Published in this issue was Georg Lukács’ highly influential article “A bolsevizmus, mint erkölcsi probléma” (Bolshevism as a Moral Problem), in which he expounded on the dilemma of the social democrats and the communists in regard to the Bolshevist experiment (Szabadgondolat Dec. 1918). Jászi condemned the idea of a dictatorship of the proletariat, since in his opinion no individual or class had the right to impose a dictatorship upon anybody else. In contrast to this, Jenő Varga, who later became Stalin’s economic advisor, believed that a new discipline of production, not based on coercion, could come into being in Bolshevism. Varga added that if all of this did not happen in Russia, it could happen in England, a civilised and cultured country. Polányi’s position was similar to Lukács’. First, in his view, the old socialist parties ceased to be socialists when they supported the war. Second, the only ones who tried, at the time, to achieve socialism were the Bolsheviks. Third, the Bolshevik party was formed in the spirit of the internationalism, democracy and socialism, but, at the same time, it effectively renounced all three by adhering to the idea of peoples’ right of self-determination, i.e. to nationalism, and moreover, by embracing the idea of dictatorship and even of war communism: in other words, by advocating 13

János Gyurgyák

that the “debauched system of capitalism” should continue, unchanged. Fourth, the ideology of socialism based on the proletariat had failed, both because of the proletariat’s role in the war and because it was not they who paved the way for the Russian revolution but the intellectuals, until then regarded as Mitläufers. Polányi drew the final conclusion that the problem was not with Bolshevism but with socialism, and that the only thing that would remain from socialism would be trade unions, just like nothing else remained of Christianity but the Catholic Church. Polányi had an ambivalent relationship with Bolshevism, Communism and the Soviet Union throughout his life: he was their harsh and sometimes merciless critic, and at the same time felt an almost magnetic attraction and deep affinity towards them. In another early article, “Polgárháború” (Civil War) (2016: 95‒98), Polányi predicted where building up the communist system and its power mechanism would lead: “violence, coercion, intimidation, the overstretching of political power, terror”. According to him, communists expected socialism to be implemented through these elements. He asserted, instead, that socialism could not afford to deviate from the path of democracy, since that was not merely a form of government but an ideal way of life for society. No doubt, then, that the dictatorship of the proletariat had to be rejected. At the end of the First World War, Polányi’s worldview markedly changed in two respects. First, he shifted his focus from social determinism to faith, the role of the individual and individual effort. At the memorial ceremony held for Ady in February 1919 he couldn’t have expressed this fundamental change more clearly, by mentioning the fact that he and his contemporaries only gave credence to the reality of society and to social laws, while individual opinion and individual desire did not matter. They supposed that individual lives depended on the course of society’s development, thus seeing capital, labour, crises, the class struggle, etc. as the key concepts. “Believers” attitude is the opposite: I change and with that everything changes in the world, and if the others also change, the whole world has changed. […] No amount of science can alter this but can only confirm the truth that birds are able to fly not because of the law of gravity but in spite of it, that trees grow their leaves not according to the principle of economy but according to the principle of creative abundance, that society reaches ever-higher intellectual levels not because of material interest but in spite of it, and that human faith, strength and self-sacrifice are not determined by the downward gravitating force of material interests but lead us ever higher thanks to the sacred spirit that defies it. (Polányi 1986a: 228‒229) It was also at this time that social cooperation as a guiding principle – one of the central concepts of his later work – appeared in Polányi’s thinking. The main question was “how to replace the method of aimless struggle with the conscious cooperation of humanity” and how constructive ideas can prevail in society instead of the socially destructive forces of pure interest and bigotry. One of Polányi’s main ideas also appeared in an embryotic form in his writings of 1918‒1919, when he claimed what a mistake it had been to see only a production system in human society and only the automatic operation of economic factors in human history (Polányi 1986a: 201).

Polányi’s first years as an emigré in Vienna Polányi left Budapest for Vienna to undergo a medical treatment at the beginning of June 1919, i.e. during the Hungarian Councils Republic, whose prominent figure was the foreign minister

14

Károly Polányi’s Hungary

˚ éla Kun of the Communist Party. After the proclamation of the proletarian dictatorship, Jászi adB vised the members of the Radical Party that they should neither take on political responsibility nor sabotage the government. In various memoirs there are accounts, albeit contradictory, on ­Polányi’s role. According to Lee Congdon (1991: 218–219), Polanyi offered his collaboration to the Commissars of production, despite of his disagreement with the goals of the dictatorship, and even more so with its practices. On the other hand, in a note by the Free Trade Union of Old Galileists about 64 Galileists and their role in the communist republic, no activity is mentioned regarding Polányi (Pótó 1982: 81). Besides, Jászi intervened with the Austrian ministry of foreign affairs as early as in May to ask Otto Bauer for Polányi’s right of asylum. However, Polanyi’s decision to stay in Vienna also depended on the fact that already on the first of August an anti-communist government had come to power in Budapest, whereby – as he points out (1937: 29) – “the feudal nobility regained political control”. More is known about the tumultuous first years of Polányi’s emigration in Vienna than the later, more consolidated years, thanks to Jászi’s diary. Jászi provided an almost daily account of Polányi’s condition, as well as of their common work. It is recorded, for example, that Polányi had his surgery in the Ottakring Clinic, after which his condition improved, and that he found some tranquillity in Hinterbrühl near Vienna, in a resort called Helmstreitmühle, inhabited by Hungarian emigrants. He was also struggling with other problems. While Jászi believed that Polányi’s “ailment” was imaginary, he really did suffer from depression, of which he gave an accurate account of in a letter to Richárd Wank in 1929: When we met I was dreadfully ill, mentally ill, and the victim of a melancholy that had gradually been increasing since I was twenty years old. There is nothing more abominable than this disease. Agonising, continuous, senseless internal excitement is one of its elements. The other is a poisoned feeling of life, an inner malady of sorts, like some infernal mental nausea. The third is a narrowed-down sense of self-awareness and compulsive thinking in which one can only see a palm-sized white spot, around which nothingness revolves and swirls. (NSZL, fond 212) Polányi’s illness suddenly disappeared, very probably thanks to his marriage to Ilona Duczynska in 1922 and to the birth of their daughter Kari in 1923. When Oscar Jászi took over the editorship of Bécsi Magyar Újság (Hungarian News in Vienna) in June 1920, he offered Polányi a secretarial job, but it soon became obvious that the two men were not able to work together as effectively as previously in the Radical Party. Polányi’s illness hindered him in his work. Furthermore, he had begun to distance himself from Hungarian affairs and daily politics. Jászi notes in his diary that “Poor Karli can’t stand editorial work and has collapsed. […] What’s more, his editorial performance is just average” (Litván ed. 2001: 284). Thus, from mid-1922 Polányi only wrote for the newspaper as a freelance editor, primarily submitting theoretical and far-flung articles on foreign policy. From his articles it can be reconstructed who the most read and studied authors were: Tolstoy, Laozi, Buddha, Carey, Oppenheimer, Dühring, Wells, the physiocrats, Rudolf Steiner, Spengler and Kautsky. It was at this time that Jászi wrote A kommunizmus kilátástalansága és a szocializmus reformációja (The Hopelessness of Communism and the Reform of Socialism – never published) and discussed it daily with Polányi, whose major concern was the reasons for the failure of non-Marxist, liberal socialism, and the possibility of reworking this system of thought. Providing a glimpse of one of his later, central ideas, he wrote the following to Jászi:

15

János Gyurgyák

Liberal socialism is doomed when, outlining the natural law-based foundations of economic order, it fails to determine the place of moral postulates in a normal society, which it treats as if they played the role of a one-off, unrepeatable act of legislation regulating the just order of the economy in perpetuity, and it regards the resulting society as nothing other than a liberal economy, which keeps the other (intellectual and moral) forces and values in pre-established harmony. This primacy of the economy can no longer be rectified with any kind of holy water. (7 January 1920. NSZL, fond 212) He continues his train of thought thus: if the economy is the single objective structure of society with politics, institutions, etc. being only its functions, then it is not clear how this unique objectivity could have been adjusted and by whom, and then it disappears again into nothingness. According to Polányi, therefore, a new ideology must be provided to replace the old ones. However, only the outlines and fragments of this ideological system are known, conveyed in certain articles and letters. The most important of these is “Hívő és hitetlen politika” (Believing and Unbelieving Politics) (Polanyi 2016: 99‒107, originally 1921). While unbelieving politics seeks to achieve results without changing people, believing politics envisions general progress through the development of individuals. Two branches of unbelieving politics developed: the reactionary and the Marxist. According to both, human nature is immutable, but they differ in their conclusions. There are also two branches of believing politics: liberal socialism and guild socialism. These ideologies hold that man can be changed since without this no political and social institution can ensure the achievement of its goals. In a world dominated by unbelieving politics, socialism, in Polanyi’s view, represents instead a moral goal, implying that the fundamental task is to strive to realise the fullness of human freedom and solidarity. In this time Polányi was concerned with three things. First, Marxist socialism, that has simplified and narrowed down the original values of socialism. Second, the Russian Revolution, which he observed critically, albeit with sympathy since he believed that the Bolsheviks were continuing the mission of Peter the Great, namely that they were attempting to open to Western civilisation by using the tools of despotism. Third, what fascinated him was the relationship between democracy and socialism. In relation to this he concluded that democracy was the sine qua non of socialism.

Polányi and Hungarian politics In early 1924 Polányi joined the editorial board of Der Österreichische Volkswirt. This represented a highly significant change for him, allowing him to broke away from Hungarian politics and intellectual public life. However, two brief periods must be mentioned when Polányi again became interested in Hungarian affairs, and perhaps it would be fair to say that his wife, Ilona Duczynska, had a decisive role in this. The first time Polányi returned to Hungarian affairs was in London, in July 1943, when he and his wife joined the New Democratic Hungary Movement of the former leader of the First Hungarian Republic, Count Mihály Károlyi. Polányi, as a socialist, and Ilona Duczynska, a communist, obviously joined Károlyi’s movement and not the Free Hungarians, the organisation of the former Horthyists. They weren’t even members of the Club of Hungarian communists in London, although they kept in touch with it. Indeed, the couple made express efforts to temper the antagonism between Károlyi’s and communist organisations. This was not a mere tactical political issue for Polányi, who in March 1943 published an article (1943) where he asserted – although proving to be utterly mistaken – that the Soviets would not disseminate Bolshevism in Europe but rather democratic consolidation. 16

Károly Polányi’s Hungary

Jászi, who by then had moved to the United States, supported Polányi’s participation in the Károlyi movement. He wrote: I believe it is important for you to discuss the situation with Károlyi and to try your best to bring him back to reality. […] This is because the main problem is not (as you yourself wrote) that Hungary will end up falling under the Soviet sphere of influence (this is all but inevitable) but rather if in this sphere of interest Hungary will still be able to maintain a Western character and the best of our humanist soul. I am concerned that Károlyi has no sense for this problem. (18 August 1943. NSZL, fond 212) After the Germans occupied Hungary, the Hungarian Council in Britain, the leading body for Hungarian emigrants to England, was formed in April 1944; however, the British did not regard it as an émigré government. Károlyi’s movement had four representatives in the association (Ilona Duczynska, Karl Polányi, Zoltán Kellermann and Endre Havas). Polányi was expressly regarded as having been delegated to serve in the association as the representative of the American group, i.e. that of Jászi and his circle, although he had no specific mandate for this. It must be noted that Polányi and Duczynska somewhat exaggerated their political role. In January 1945 they wrote a letter to Károlyi saying that he should either return home to get directly involved with Hungarian politics, thus consolidating the left-wing there, or draw the necessary conclusions and resign from politics. Outraged, Mihály Károlyi responded by writing that he had no desire to ever again discuss his political plans with the Polányis. However, Polányi and Károlyi continued their correspondence; indeed, on June 23, 1948 Károlyi, in his capacity as the Hungarian ambassador in Paris, suggested to Gyula Ortutay, the minister of education, that Polányi – who, as he said, demonstrated “pro-Soviet leanings” and “in his own way has shattered people’s faith in the present Western European system” – should be recalled home to fulfil some kind of independent research position. Based on source material, it can clearly be established that Polányi himself was not against the idea of returning home. However, in Hungary, and indeed in the entire region, there was no question of the country undergoing a process of “finlandisation”, i.e. “limited economic and cultural independence”, “windows left open to the West” and “a clear-sighted, self-sacrificing and tenacious people’s democracy”, as Polányi naively thought at the time. (Letter to Oscar Jaszi. Jul. 13, 1944. NSZL, fond 212.) On the contrary, in Hungary the merciless Stalinist logic of power prevailed. In 1945 a study of extraordinary importance by Polányi was published in The London Quarterly of World Affairs and, the following year, in the Budapest magazine Új Magyarország (New Hungary) (Polányi 1946). He postulated that the war had brought about the demise of the earlier three economic-social forms (liberal capitalism, world revolutionary socialism and rule by race). In addition, he argued that the failure of these economic-social forms would lead to an increased role of regional planned economies and, furthermore, that it would take the Soviet Union only some half dozen five-year plans to overtake America’s industrial production and standard of living. However, Polányi, a man with a positive and hopeful disposition who always assumed that everybody was well-intentioned, was again doomed to disappointment. Jászi, far more realistic and pessimistic in nature, saw this well in advance and wrote to Polányi: “This window will be soon smashed without the very active cooperation of what Lippmann calls the Atlantic democracies” (28 July 1944. NSZL, fond 212). Following this he repeatedly cautioned Polányi about his unrealistic hopes and expectations saying: “The Bolsheviks will collaborate with anyone they can use” (29 September 1945. NSZL, fond 212). In his letter to Polányi on 4 March 1947 he drew up the final inventory: 17

János Gyurgyák

The Hungarian Republic hurtling towards Soviet dictatorship will equally shatter your hopes and my hopes, unless you have managed to find a slightly more comforting theory of a compromise. I myself am unable to. (NSZL, fond 212) The Polányis’ return back to Hungary eventually came to nothing. Indeed, Károlyi himself soon became an emigrant, while Jászi was never to return home. The next time Polányi resumed ties with Hungary was in the years directly after the Hungarian Revolution of 1956. The revolution surprised him, indeed filled him with admiration. He wrote to his brother Michael: 1956 reconquered me for Hungary. More than that: it gave me a mother country. […] I admire the fighters of October, I am proud of Gimes Miklós, son of my own Galileist friend. They have redeemed Hungary, a non-people, from Ady’s ‘szégyenkaloda’ (stocks) of history. (21 October 1959. NSZL, fond 212) In the same letter, he stressed that for him 1956 was not important from the perspective of power politics but rather because of the moral values that the populists and the revisionist communists represented, and upon which an independent Hungary could be built in the future. In two unpublished studies (“Hungarian Lesson”, “Covert External Rule and Socialist Economy” (NSZL, fond 212.) he also discussed the damaging effect “covert external rule” had upon Hungary and how impossible it made the running of a socialist economy. Despite his admiration for the revolution and repudiation of the Soviet intervention, Polányi made overtures to the Kádár regime: indeed, at a time when a great many of the revolutionaries were still in prison. On 21 November 1960 he left the Hungarian Writers’ Association Abroad “in protest against the hurtful behaviour they demonstrated to writers at home” (NSZL – fond 212), i.e. after the great majority of writers in Hungary had taken an oath of loyalty to the system and the leadership of the Association had vehemently disapproved of it. In 1963, a year before his death, he and Ilona Duczynska visited Hungary, where he published his Hazánk kötelessége (Obligation of Our Homeland), setting out his allegiance to the system (Polanyi 1963). In describing his return home, he pointed out “the promising picture of a reviving country” and “the amazing speed in the growth of the Soviet Union’s economy”, that “terrified America”, while expressing his hope that, living up to its calling, the Hungarian youth could be of help to socialism in the coming ideological match. Polányi’s last gesture in Hungarian politics was the anthology The Plough and the Pen. Writings from Hungary, 1930–1956 jointly edited with Ilona Duczynska (Duczynska an Polanyi eds 1963), presenting the Western public with collected short stories and poems of Hungarian populist and reform communist writers, thus facilitating the promotion of Hungarian literature abroad – though slightly reducing Hungary’s much richer literary tradition.

Summary In his last letter to Jászi, Polányi summed up the most important component in his life’s work: You and I grew into men before the great change. There are only a few such men now: they embody the benchmark of the West, they are the platinum units of historical values. Those who came after us exaggerated or belittled, overstretched or discounted the ideals of the nineteenth century. (27 October 1950. NSZL, fond 212) 18

Károly Polányi’s Hungary

Actually, the generation to which Polányi belonged (Ady, Jászi, Lukács, Mannheim, Koestler, etc.) thought about the world in universal concepts. Despite their heated debates, they were driven by a common, inextinguishable leftist desire to make the world better. Moreover, to borrow Polányi’s own words, they saw their very selves in their views, which gave them their calling and bound them to their fate (Letter to Oscar Jászi, 30 June 1921. NSZL, fond 212). It stemmed from such universal, multidisciplinary thinking and wish to change the world that the members of that generation were roaming on the borderlands of politics, science, ideology, religion and art. Polanyi was passionately interested in politics throughout his life, but he was actively involved in it especially in the first, Hungarian half of his life. In general, as an intellectual advocating politics on an ethical and conceptual plane, he was repeatedly disappointed. An important experience of people of Polanyi’s generation during their youth and a determining factor in the path they chose in their lives was their anti-capitalist left-wing stance. Polányi clearly expressed this in a letter to one of his old Galileist friends, Zsigmond Kende: I am radically anti-capitalist, and a critic of a market-driven society. Socialism understood in this sense encompasses a whole period, indeed centuries of world history: the humanisation of industrial civilisation as far as it is possible. (3 December 1963. NSZL, fond 212) In the 20th century, this left-wing stance was presented with a serious challenge by the advent of Bolshevism. It was at this point that Polányi’s thinking diverged from Jászi’s and that of his brother Michael: the disputes they later had were mostly connected to this. Karl harboured a greater hatred of capitalism than the others, due to the historical events he had witnessed, to the influence of Samuel Klatschko and Ervin Szabó, and presumably also to his father’s bankruptcy. This is why he was more inclined to play down the irredeemable actions of ‘existing socialism’, i.e. Russian Bolshevik policies and Hungarian communism, as manifested during the period of the Hungarian Soviet Republic and the Moscow trials (Polanyi 1922). A strange duality can, therefore, be observed: a rejection on principle in tandem with an almost magnetic attraction. In contrast, Jászi became a staunch anti-communist, while attempting to revive ‘natural law’; moreover, since the freedom of the individual was paramount in his thinking, he had to make concessions to the notions and practice of capitalism. Despite their differences, both Polányi and Jászi sought a new socialist path, in which the subject, individual initiative, faith, enthusiasm could be attributed a greater role. In this regard, they acknowledged Marx’s achievements, though being disillusioned with determinist and teleological thinking, whether evolutionist or Marxist. Polányi’s relationship with politics was also problematic from a different perspective, as he viewed it from above and from the outside, rejecting its primarily power-based aspect and despising the often shallow, down-to-earth and compromising nature of daily politics. This was another difference between Polányi and Jászi. Besides, while the latter was stirred by general principles and conditions, Polányi was excited by specific historical phenomena and the processes of change. Another important feature of this period was that Polányi’s articles, studies and letters were original, full of ideas and theoretically sensitive, but at the same time they tended to be disjointed and often scatty, while the conclusions he reached were not thoroughly considered. In fact, he tended to combine intellectually soaring and brilliant propositions with illusory ideas. Referring to one of the essential elements of his friend’s way of thinking, Jászi wrote: “I find your successes a cause for joy especially as I vividly remember those hours in the Viennese coffee house when I tried to bring your soaring thoughts back down to Earth” (23 February 1948. NSZL, fond 212). The following quote by Polányi illustrates the fact that he was aware of his lack of organisation 19

János Gyurgyák

and his habit of always seeking new paths: “If we wish to assess the alternatives of the future, we must overcome our natural tendency to follow in the footsteps of our fathers” (NSZL – fond 212). Perhaps the best example of this theoretical sensitivity and original approach is the article written when he was twenty-four, in 1910: “Nézeteink válsága” (“The crisis of our ideologies”. Polanyi 2016: 83‒85), where he explains that the first era of capitalist society, which focused on competition and the individual, has passed. According to him, this first era would be followed by the second stage, which would restrict competition and focus on collectiveness; socialist views would prevail and thus socialism would return to bourgeois society. It transpires from his answer to a circular question published in a periodical in 1922 that he regarded socialism as the way of the future but only if it was free of the intellectual superstition of determinism and the material superstition of national welfare (Az európai kultúra jövője [The future of the European culture]. Tűz [Fire], 13/2/1922). In answer to the question asked at the beginning of this study – To what extent were Polányi’s views determined by his early years and by his encounter with Hungarian politics? – it can be concluded that those years were indeed decisive for him and clearly delineated the framework of his thinking: his relentless search for the truth, his critical idealisation of the Russian revolution, leftism as a defining framework of reference, his indisputably anti-capitalist and anti-market stance, and finally his quest for humanist and democratic socialism. At the same time, Polányi’s later elaboration of the “grand theory” undoubtedly required his encounters with Red Vienna and British society history and his studies of English history and classical capitalism. All this, combined with his Hungarian experiences, enabled him to elaborate his views and organise them into a system. His ideas opened up new horizons and continue to exert their influence today.

Bibliography Aulenbacher, Brigitte, Markus Marterbauer, Andreas Novy, Kari Polanyi-Levitt and Armin Thurnher, eds. 2020. Karl Polanyi. The Life and Works of an Epochal Thinker. Wien: Falter Verlag. Badics, Ferenc, ed. 1904. A Magyar Királyi Tanárképző-Intézeti Gyakorló-Főgimnázium Értesítője. (Bulletin of the Hungarian Royal College’s Grammar School). Budapest: Franklin. Congdon, Lee. 1976. “Karl Polanyi in Hungary, 1900‒1919.” Journal of Contemporary History 11/1: 167‒183. ——— 1991. Exile and Social Thought: Hungarian Intellectuals in Germany and Austria, 1919‒1933. Princeton: Princeton University Press. Csunderlik, Péter. 2017. Radikálisok, Szabadgondolkodók, Ateisták: A Galilei Kör Története, 1908‒1919 (Radicals, Freethinkers, Atheists: The History of the Galileo Circle). Budapest: Napvilág. Dale, Gareth. 2016. Karl Polanyi. A Life on the Left. New York: Columbia University Press. Dalos, György. 1984. A Cselekvés Szerelmese. Duczynska Ilona Élete. (The Lover of Activity. The Life of Ilona Duczynska). Budapest: Kossuth. Duczynska, Ilona. 1971. “Polányi Károly. Jegyzetek az Életútról” (Polányi Károly. Notes on the Course of Life). Magyar Filozófiai Szemle 5–6: 763. Duczynska, Ilona and Karl Polanyi, eds. 1963. The Plough and the Pen. Exeter: McClelland and Steward. Duczynska, Ilona and Horváth Zoltán. 1971. “Polányi Károly és a Galilei Kör” (Károly Polányi and the Galileo Circle). Századok 105/1: 89‒104. Gyurgyák, János. 1982. Polányi Károly Élete és Életműve. II. 1919‒1964. Szakdolgozat. (The Life and Works of Károly Polányi II. 1919‒1964. Unpublished dissertation). Budapest: ELTE. ——— 1986. Polányi Károly. Karl Polanyi 1886‒1964. Bibliography. Budapest: Fővárosi Szabó Ervin Könyvtár. Hajdu, Tibor. 2005. “Polányi Károly a Londoni Magyar Antifasiszta Mozgalomban” (Károly Polányi in the Hungarian Antifascist Movement in London). Múltunk 50/1: 246–254. Jaszi, Oscar. 1923. Magyariens Schuld ‒ Ungarns Sühne. Revolution und Gegenrevolutions in Ungarn. München: Verlag für Kulturpolitik.

20

Károly Polányi’s Hungary Jászi, Oszkár. 1982. “Emlékiratok” (Memoirs). In Litván György and Varga F. János, eds., Jászi Oszkár Publicisztikája (Oscar Jaszi’ Journalism). Budapest: Magvető. Litván György, ed. 2001. Jászi Oszkár Naplója (Oscar Jaszi’s Diary). Budapest: MTA Történettudományi Intézete. Lukács, György. 1981. Napló‒Tagebuch (1910‒1911). Das Gericht (1913). Budapest: Akadémiai Kiadó. Mendell, Marguerite and Daniel Salée, eds. 1991. The Legacy of Karl Polanyi. Market, State and Society at the End of the Twentieth Century. Basingstoke: Macmillan. NSZL – National Széchényi Library Budapest. Fond 212. Polanyi Papers. Polányi, Károly. 1945. “Universal capitalism or regional Planning?” The London Quarterly of World Affairs 10/3: 86–91. Now in Karl Polanyi 2018: 231–240. ——— 1963. “Hazánk Kötelessége” (Obligation of Our Homeland). Kortárs VII/12: 1843‒1844. ——— 1986a. Egy Gazdaságelmélet Küszöbén. Cikkek és Tanulmányok, 1907‒1919 (On the Threshold of an Economic Theory. Articles and Essays). Budapest: ELTE. ——— 1986b. Fasizmus, Demokrácia, Ipari Társadalom. Társadalomfilozófiai Írások (Fascism, Democracy, Industrial Society. Social Philosophical Writings). Budapest: Gondolat. Polanyi, Karl. 1922. “Der Geistesgeschichtliche Hintergrund der Moskauer Prozesse.” Die Wage 25/29: 393‒397. (Now in Polanyi 2005, 66–70). ——— 1943. “Why Make Russia Run Amok?” Harper’s Magazine 186/March: 404‒410. (Now in Polanyi 2018, 215–225). ——— 1954. “Hamlet.” The Yale Review XLIII/3: 812‒820. ——— 2005. Chronik der Großen Transformation Band 3. Ed. by Mchele Cangiani, Kari Polanyi-Levitt and Claus Thomasberger. Marburg: Metropolis-Verlag. ——— 2014. For a New West. Essays, 1919‒1958, Giorgio Resta and Mariavittoria Catanzariti eds. ­Cambridge: Polity Press. ——— 2016. Karl Polanyi. The Hungarian Writings. Ed. by Gareth Dale. Manchester: Manchester University Press. ——— 2018. Economy and Society. Selected Writings. Cambridge: Polity Press. Polanyi-Levitt, Kari, ed. 1990. The Life and Work of Karl Polanyi. Montréal: Black Rose Books. Polanyi-Levitt, Kari and Kenneth McRobbie, eds. 2000. Karl Polanyi in Vienna. The Contemporary Significance of the Great Transformation. Montréal: Black Rose Books. Pótó, János. 1982. Polányi Károly Élete és Életműve. I. 1886‒1919. Szakdolgozat (The Life and Works of Károly Polányi. I. 1886‒1919. Unpublished dissertation). Budapest: ELTE. Tömöry, Márta. 1960. Új vizeken Járok: A Galilei Kör Története (I’m on New Waters: The History of the Galileo Circle). Budapest: Gondolat Kiadó. Vezér, Erzsébet, ed. 1986. Írástudó Nemzedékek. A Polányi Család Története Dokumentumokban (Intellectual Generations. The History of the Polányi Family in Documents). Budapest: MTA Filozófiai Intézet ‒ Lukács Archívum.

21

2 ON THE EDGE OF AUSTRO-MARXISM Diego De Bernardin Stadoan

Polanyi’s ‘Austro-Marxist’ Vienna Karl Polanyi moved from Budapest to Vienna to undergo medical treatment in June 1919. The end of World War I had brought with it profound political changes in Hungary: the immediately following nine months – as Polanyi recalls after several years (1937: 29) – were “divided between a democratic and a Communist revolution.” When, the First of August, the Hungarian Councils Republic fell and the reactionary government of Miklós Horthy came to power, he decided to stay in Vienna, where many of his compatriots at the time took refuge: among them, also Ilona Ducszynska, whom he married in 1923. In the post-war Austrian capital – commonly known as ‘Red’: Rote Wien (Öhner 2020) – where he lived until 1933, Polanyi defined fundamental and permanent features of his theoretical method and his political vision. Vienna, although by now only the capital of the small Austrian Republic and no longer the heart of the vast Austro-Hungarian Empire, was still the splendid seat of scientific and artistic achievements. The military defeat of the Empire in the Great War had resulted in the fall of the Habsburg monarchy and the disintegration of the multinational state into its national elements. From the ashes of the Empire, in its western and German-speaking part, the Austrian Republic had arisen, officially proclaimed in November 1918. In March 1919 a coalition government was formed, in which the Social Democratic Party (SDAPÖ: Sozialdemokratische Arbeiterpartei Österreichs). The SDAPÖ, inspired by Otto Bauer, who had just obtained its leadership, had won the support of the relative majority of a population deeply marked by the sacrifices, sufferings, and horrors of war. When the Soviet Republics in Hungary and Bavaria were proclaimed, respectively on 21 March and 7 April 1919, the leadership of the SDAPÖ resisted pressure from the Communist Party of Austria (KPÖ), which aimed at establishing a dictatorship of the proletariat of Bolshevik type also in Austria. The blocking of the insurrection attempts of 15 April and 15 June, led by the KPÖ, was carried out by the Social Democratic ministers Julius Deutsch (Defence) and Matthias Eldersch (Interior). The initiatives of the SDAPÖ, which had an efficient organizational structure since the founding congress in Heinfeld (1888–1889), were articulated with the theoretical activities of AustroMarxism since its inception. Austro-Marxism was an intellectual movement that arose in the early 20th century in Vienna, structuring itself as a school of social research. Among the personalities DOI: 10.4324/9781003336747-3 22

On the edge of Austro-Marxism

who contributed to its foundation, there were – in addition to Otto Bauer, who studied the political dimension of historical processes – Karl Renner, who was interested in legal-administrative issues, Rudolf Hilferding, engaged in the analysis of new forms of development of capitalism, and Max Adler, scholar of philosophical and sociological problems. What united the activity of these intellectuals, belonging to different fields of knowledge, and cemented the Austro-Marxist group, was their adherence to the materialist conception of history and in general to Karl Marx’s approach to the study of social processes. For the exponents of Austro-Marxism, theory was essentially a heritage of ideas and concepts, to be kept alive as much through the constant study of the new phenomena resulting from capitalist development, as through the continuous critical confrontation with other tendencies of modern knowledge, such as the work of Ernst Mach and the Austrian School of Economics. The Austro-Marxist group was based on some nuclei of intellectuals. In 1903 the Zukunft association was born, within which the basis of what would later become the vast and widespread social democratic pedagogical structure developed in the form of a first workers’ school. In 1904 the first number of the Marx-Studien appeared – volumes edited by Max Adler and Rudolf Hilferding with variable periodicity. In 1907 the journal Der Kampf was founded, which allowed exponents of Austro-Marxism to clarify and reinforce an original theoretical and political tendency with respect to that of the German Social Democratic Party (SPD), then led by Karl Kautsky. Thanks to its hegemonic position within the Second International, the SPD influenced all European socialism of the time. From the outset, the SDAPÖ constituted the point of reference for the theoretical activity of the Austro-Marxist group. The idea of engaging in the task of defining the political strategy of the working class by grounding it on social research implied the need to avoid dogmatic statements, deterministic conjectures and teleological inclinations. On the other hand, faced with the crisis in which Marxism found itself following the revisionism promoted by Eduard Bernstein, the AustroMarxist group reacted, defending Marxist theory as the guide of working-class practice. This attitude led the Austro-Marxists not only to study the transformations taking place in capitalist society starting from the Marxist perspective, but also to define a revolutionary action strategy of the working class. The construction of socialism remained the goal of the social struggle; that is, the action of the SDAPÖ was not to be reduced to the mere representation of workers’ interests within the existing society. On this point, the Austro-Marxist group did not always remain cohesive: its intellectuals remained unanimous in their judgments on fundamental political questions only up to World War I, while later, in many respects, they followed different paths. In the new republican context, Bauer and Adler elaborated a political vision that put the safeguarding of the autonomy of the proletariat against the bourgeois bloc in the foreground, to build the social hegemony of the working class. Renner and Hilferding, on the other hand, shared in part with the jurist Hans Kelsen a statist political conception, which thought of the transition to socialism in an evolutionary way, as a continuation of the trends operating in capitalism of those years, under the stimulus of the political activism of the working class. The theoretical elaboration of Bauer and Adler maintained a decisive role concerning the general direction and the most important choices of the political action of the SDAPÖ: the goal of the transition to socialism, while respecting democratic legality. In the first post-war period, in Austria as in other European countries, the political situation was characterized by the prospect of an imminent radical change in the social system. In much of Europe, the strength and historical protagonism of the working class reached their peak. In that context, Bauer and Adler supported a conception of transition to socialism based on the antagonism of social classes (Adler 1919; Bauer 1920), which differed both from the Bolshevik line of dictatorship of the proletariat, considered inadequate to the Austrian social conditions, and from 23

Diego De Bernardin Stadoan

Kautsky’s theorization of the need for a coalition government, judged abstract, and dogmatic. In the coalition government presided over by Renner, the social democratic ministers undertook to implement the project of socialization of the economy, which they considered as the “way to socialism” (Bauer 1919). According to this project, the proletarian revolution had to take place in a general framework of institutional continuity, because Austria was characterized by high levels of economic rationalization, social complexity, and urbanization. That is, it had to proceed in a gradual and selective way, starting from the large enterprises of the key sectors of the economy, which had to be socialized, and could have been so also thanks to the material conditions already posed by historical development. The parliamentary action of the SDAPÖ, always supported by widespread popular participation, would have guaranteed the legitimacy of the process of democratization of the economy. The construction of socialist democracy would have allowed the full realization, political and economic, of the freedom of the individual. Both social democratic political initiatives and the theoretical trajectory of Austro-Marxist intellectuals profoundly influenced the development of Polanyi’s thought. In Vienna – he writes in a letter of Christmas 1925 to his friend Richard Wank – “I have matured into a man.” During these years – he continues (2006 [1925]: 317) – my ideas on social issues have found passionate expression. The social sciences, activity, but above all the possibility of freedom of thought on social issues. How can we be free, in spite of the fact of society? And not in our imagination only, not by abstracting ourselves from society, denying the fact of our being interwoven with the lives of others, being committed to them, but in reality, by aiming to make society as ‘übersichlich’ as a family’s inner life is, so that I may achieve a state of things in which I have done my duty towards all men, and so be free again, in decency, with a good conscience. The proximity to the Austro-Marxists helped Polanyi to orient his thought in a democratic and socialist direction: distancing him both from the Marxism of the Second International – centered on the philosophy of history, determinism and economism (Polanyi 1919) – and from the political action of the Bolsheviks in revolutionary Russia (Polanyi 2005 [1922]). Inspired above all by the ideas of Bauer and Adler, he conceived the transition to socialism as the extension of democracy from political institutions to the economy and all spheres of social life, and as the construction of the primacy of social self-organization and personal responsibility. These elements of Polanyi’s intellectual world, which had grown in the years he spent in Vienna, remained constant and central to his thought, giving unity and coherence to his vast and apparently heterogeneous work of the following decades. In Vienna, Polanyi felt he was in a completely new and effervescent situation, capable of stimulating the development of his thought, even if, in his works, the influence of previous experiences remained constant, indeed prevailing at the beginning. For example, the influence of Ernst Mach’s epistemology, characterized by empiricism combined with the constructive function of knowledge.1 Many Hungarian intellectuals had taken refuge in Vienna after the reactionary turn in their country: among them was also his friend Oszkár Jászi, with whom Polanyi worked, continuing to discuss with him the question of the relationship between socialism and democracy. Jászi introduced Polanyi to the editorial board of the Hungarian-language newspaper Bécsi Magyar Ujság (Magyar News in Vienna), for which he wrote many articles, before joining, in 1924, the editorial board of the weekly Der Österreichische Volkswirt.2 Among the works published by Polanyi on the Bécsi Magyar Ujság, two articles on Guild Socialism should be mentioned (2016 [1922], 2016 [1923]), whose best-known theorist was the historian of the labor movement G.D.H. Cole. In an 24

On the edge of Austro-Marxism

attempt to outline the features of a non-statist socialism, which he was pursuing in Vienna, Polanyi benefited from the works of Cole (e.g. 1920, mentioned by Polanyi), embracing the proposal to combine the democratic rule of law with economic self-management, the in order to guarantee to every individual the possibility of participating in the definition of the general interest and of political choices. The alteration of the “balance of class forces” (Bauer 1923, 1924) – obviously in favor of the ruling class – began to manifest itself already in the elections of October 1920, when the Christian Social Party (Christlichsozial Partei) obtained a relative majority, wresting it from the Social Democrats. The SDAPÖ decided to withdraw from the government coalition to devote itself to carrying out a vast reform program at the municipal and regional level, where it retained the majority, with a view to regaining it at the national level as well. This political strategy found its grandest expression in the ‘Red Vienna,’ where the broad and successful initiative of the Social Democratic administration, headed by Mayor Karl Seitz, concerned mainly tax policy, social security, public housing, education, health care and public transport. Closely related to this reform initiative was the attempt, also successful, to realize a vast politicization of the population, to obtain a widespread participation in political life. A dense network of cultural and sporting initiatives developed, in which the workers’ associations played a prominent role. In the note “Speenhamland and Vienna,” attached to The Great Transformation, Polanyi recalls with admiration the results of the initiatives promoted by the socialist leadership in the Austrian capital during the 1920s. According to him, a substantial unemployment benefit, the guarantee of comfortable housing, the wide availability of social services, a trade union movement capable of controlling the labor market, the diffusion of education and active participation in political life had allowed for a remarkable level of security and “an unexampled moral and intellectual rise of […] the working class.” He points out that such policies, established by “a social municipality,” were “bitterly attacked by economic liberals,” as they were “incompatible with the mechanism of the market economy” (Polanyi 2001 [1944]: 299, 298).

Socialist democracy and economic efficiency The achievements of Red Vienna, as an aspect of the political initiative promoted by the AustroMarxists, inspired in Polanyi the ideal of a society based on the broad and conscious participation of the population in social institutions; a society in which democracy and economic efficiency would feed on each other. As for the type of social organization of the economy capable of allowing the optimal use of available resources, the contrast between Polanyi and the liberal economists of the Austrian School of economics was clear. Ludwig von Mises (1920/1921) stated that only in a free market is it possible to calculate costs such as to allow the optimal distribution of limited resources among the possible uses, with a view to satisfying individual needs. Thus, only the independent economic action of each individual and the corresponding price system would guarantee the rationality of the economic system. Polanyi refutes Mises’ theses in the essay “Sozialistische Rechnungslegung” (1922), addressing the problem of economic rationality from another perspective. The “productivity” of the economic system, he argues, must be ensured not only from the point of view of formal economic rationality, but also from the social point of view, that of the public utility of production. Both “technical” and “social productivity” are limited and distorted in the capitalist economy. This mode of production, addressed as it is to private monetary profit, has an “organic indifference” to “social utility” and “lacks the sensory organ to detect […] the repercussions of the production process on community life” (ibid.: 405). Optimizing the use of available natural and social resources could instead be within the reach of a democratically and functionally 25

Diego De Bernardin Stadoan

organized socialist economy. The conception exposed in this essay is further explained two years later by Polanyi (1924), also referring to the ideas of G.D.H. Cole, to respond to a further critical intervention by Mises (1924). An important source of these works, in which Polanyi distances himself from the liberal image of a market populated by free producers and sovereign consumers, were the opening chapters of Marx’s Capital, to read which he returned in Vienna, after a period of relative disinterest. In controversy with liberal economists, he outlines a model of cooperative associations of conscious producers and consumers, as the foundation of democratic and socialist society. The prerequisite for the development of the latter remains the abolition of private property of the means of production and therefore of class antagonism. As we know from the notes of Felix Schaffer (1963–1965) – then a student of economics in Vienna, later a professor of economics at the University of Victoria, New Zealand – from 1923 Polanyi organized with some students, in his home on Vorgartenstrasse, a seminar on the socialist economy and Guild Socialism, which he considered similar to the conception of “functional democracy” proposed by Bauer, as overcoming the limits of “parliamentary democracy” through the “Austrian Revolution” (Bauer 1923). Polanyi quotes Bauer in an article that appeared in Der Kampf, where he exposes his version of the ‘functional’ organization, which would ensure both the efficiency of the economic system and integral democracy (Polanyi 2018 [1925]). There is indeed, in his view, a strict interdependence between the degree of “living democracy” and the availability of information needed for an efficient organization, at different levels and in various sectors of social life, such as a factory or a neighborhood, but also an industrial branch or the whole society (Cangiani 2012–2013: 44–45). He maintains that socialist society had to be based on free interaction – that is, unconstrained by class divisions – between subsystems, distinguished according to their function, and rooted in the different social roles performed by individuals: as producers, consumers, residents of a neighborhood, political subjects, etc. In functional socialism, self-organization would have allowed both individual and social needs to manifest themselves and to be placed in relation to the conditions of their own satisfaction, to the “painfulness of work” in the first place. The stipulation of “agreements” would have made it possible to resolve the conflicts between the various subsystems. Functional socialism would allow individuals to direct not only political development, but also social production, and, therefore, to enjoy full, ‘positive’ freedom. According to Polanyi, functional socialism would allow for the formation of the “overview” guaranteeing the “internal” understanding of the qualitative aspects of the economic process, that is, the real needs and the pain of work. On the other hand, “administrative” planning, carried out by a centralized bureaucracy, is capable only of “external” understanding, concerning the knowledge of the quantifiable elements of the production process, that is, the factors of production and demand: then, the rationality of the economic system remains limited. The functionally organized socialist society, on the contrary, would favor the “transparency” of social relations, economic problems and choices regarding the production process. This type of socialism, built on the basis of personal responsibility, would thus have an efficient economy, capable of satisfying real human needs, while the fatigue and sacrifices of work would be minimized, also by employing the most advanced means of production. The tendential realization of economic efficiency, Polanyi thought, requires that the social system be based neither on class division nor on pre-established hierarchies, that is, on institutionally dominant interests, capable of obscuring the general interest. In “functional” socialism, the broad and conscious participation of the population, in the various seats of social power, would allow the formulation of the “general will” and its operation at the level of decision-making processes, so that the limits of the existing formal democracy would be overcome. 26

On the edge of Austro-Marxism

Polanyi, in the article quoted above (2018 [1925]: 41), notes that “technical and economic concentration and centralization within capitalism” entail a growing need for an overall and aware organization, that is, the possibility of facing “the overview problem (Übersichtsproblem).” However, the development of Polanyi’s thought diverges significantly from the evolutionary theoretical position, then defined and defended by Renner (1924) and Hilferding (1927), who see the State as the subject of the transition to socialism. Polanyi’s intellectual development proceeds in the same direction as Adler’s theoretical construction, which had many points of contact with Bauer’s theses. Responding to the critical considerations of Hans Kelsen (1920), Adler formulates his conception on the basis of the Marxist assumption of the existence of an overall capitalist social system, characterized by the class domination of the bourgeoisie, of which the state is an integral part. In his conception, the transition to socialism means the overcoming of “political democracy” – that is, of the social form in which the democratic rule of law is part of a class society – in the direction of a social system organized on the principle of “social democracy,” where the will of a state governed by the democratic rule of law would be formed according to the interest of a homogeneous people (Adler 1922). “Social democracy,” the construction of which belongs to the organized working class, would ensure both order through autonomy and the formulation and realization of volonté générale as the conscious socialization of human life (Adler 1926; see also Marramao 1980; Cangiani 1998: 133–135; on Kelsen-Bauer debate, see Scott 2021). Like Adler, Polanyi also proposes the transition to a “positive” freedom, as mentioned above. The 1927 manuscript “Über die Freiheit” (“On Freedom”) remains fundamental for understanding his political philosophy and in particular his conception of “socialist freedom.” In his view, “modern freedom,” in its ‘negative’ sense, as the set of civil rights, must be safeguarded, together with the generalization of political rights. But this is not enough, because the capitalist economy, which arose in the womb of Western history, remains a form of unfreedom, in the sense that the relevant decisions are taken fundamentally starting from the impersonal forces of the market. In order to allow that the choice – in the meaning of the ‘subjective’ theory of value of the founders of the Austrian School of Economics, Carl Menger and Friedrich Wieser – also include the aspects relating to the public utility of production, it would be necessary to overcome “the historic laws of the capitalist economy, which operate as the natural laws of the present society.” They are, in other words, laws that are perceived, and therefore operate as “laws of nature,” despite being cultural realities – “spiritual realities” in Polanyi’s expression (2018 [1927]: 16). Overcoming the current form of social organization of the economy, in which people “cannot become masters over the law of value (the law of the accumulation of capital)” (ibid.: 19), should lead to a further stage of freedom: the “social freedom,” understood as the conscious and responsible participation of individuals in socialization.3 This conception, Polanyi maintains, “is a specifically social one” (ibid.). Its implementation requires the diffusion of the ability to identify social problems and to face them in an informed and responsible way. Such an ability would allow people to democratically govern industrial society. In this sense, the full political and economic realization of the modern promise of individual freedom requires an increase in the general educational level of the population, within the framework of a democratic and socialist society.4 Polanyi agrees with Renner on the importance of the democratic rule of law. In Renner’s interpretation, the departure of capitalism from the competitive market and the parallel accentuation of the centralization of capital and conscious organization bring with them the growth of the tasks of the public administration. In the new phase of capitalism, the class struggle therefore manifests itself as a conflict between the economy, in which capitalist interests continue to dominate, and the democratic institutions of the state, in which the power of the working class tends to assert itself (Renner 1917, 1924). Polanyi shares with Renner the idea of the opposition between economics 27

Diego De Bernardin Stadoan

and politics as an expression of the conflict between classes, combining it, however, with Adler’s and Bauer’s critique of statism and with Bauer’s thesis, that the economic situation depends above all on the dynamics of the balance of class forces. Furthermore, Bauer (1924) found that the democratic way of transitioning to socialism was becoming increasingly impracticable. Polanyi too realized early on that political conservatism and social counter-revolution were prevailing. This is evident, for example, from his comment on the failure of the 1926 general strike in Great Britain5: an institutional restructuring, led by the ruling class, would have allowed the reproduction of capitalism in forms other than the current liberal one.

Toward the transformation of capitalist society In Vienna, in addition to cultivating political ideals, Polanyi devoted himself to analyzing the developments of social reality. Attentive to the significant changes of his time, he observed the development of fascism and its variants in Italy, Austria and Germany.6 In an important essay (2018 [1935]), Polanyi interprets fascism as a political movement based on a philosophy characterized by the denial of modern individual freedom and its remote Christian roots. Furthermore, he notes that fascism has as its goal the preservation of the capitalism and the annihilation of democracy, and it, therefore, constitutes the epochal alternative to socialism. In 1933, due to his notoriously anti-fascist and socialist orientation, Polanyi had to move from Vienna to London, also in order not to jeopardize the entire editorial staff of the weekly Der Österreichische Volkswirt, of which he had been member of the editorial staff since 1924 and co-director since 1927. The situation of the editorial group, in fact, had become increasingly difficult, as the authoritarian turn and the rise of fascism were imposing themselves in Austria. Since the October 1920 elections, the Christian Social Party had always maintained government power, implementing an increasingly counter-revolutionary policy, even though the Social Democrats had continued to gain votes, until they regained a relative majority in the 1930 parliamentary elections. After the collapse of Creditanstalt, the most important Austrian bank, the Christian-­Social leader Ignaz Seipel had offered SDAPÖ the possibility of participating in a coalition government, which the Social Democrats, on 19 June 1931, refused. The main instances of control of the state apparatus therefore remained in the hands of the Christian Social Party, which, in the context of the crisis that began in 1929, was moving dangerously toward authoritarianism. In May 1932, the government led by Engelbert Dollfuss was formed. Dollfuss was the new leader of the Social Christian Party and a supporter of political rapprochement with fascist Italy. The Austro-fascist regime was officially born on March 15, 1933, when Chancellor Dollfuss, after suspending Parliament, began to govern by decree, resurrecting an emergency law of 1917, therefore prior to the Republican Constitution. Step by step, Dollfuss restricted civil rights and eliminated democracy, excluding the working class from the exercise of political power, through the progressive suppression of its instruments of struggle. On 23 January 1934, for example, the circulation of the Arbeiter Zeitung, the newspaper of the SDAPÖ, was prohibited. Against this authoritarian turn, on February 12, 1934, popular protests broke out in some cities, which were bloodily repressed by the united forces of Heimwehr paramilitaries, the police, the gendarmerie and the federal army. In Vienna, a desperate insurrection, organized by the Republikanischer Schutzbund, in which Polanyi’s wife Ilona took part, was bloodily put down by the armed forces of the reactionary bloc. The Schutzbund (League for the Defense of the Republic) was the paramilitary organization of the SDAPÖ; founded in 1923, it was now operating clandestinely, since Dollfuss had outlawed it on March 31, 1933. Dollfuss took the opportunity of the failed insurrection to outlaw all parties, except the Patriotic Front (Vaterländische Front), established by him in 28

On the edge of Austro-Marxism

May 1933, and to promulgate, on May 1, 1934, the new Constitution, based on a clerical-fascist project of corporatism, interestingly analyzed by Polanyi (1934). This concludes the process of abolishing political democracy that began the year before. From 1919 to 1933, Austro-Marxism was constituted in an original way with respect to the other tendencies of contemporary Marxism, as an attempt to trace a third way between revolutionary Bolshevism and the reformism of the SPD. In Red Vienna, after World War I and the establishment of the Republic, the Austro-Marxist program of building socialism was centered on the idea that democracy, now conquered in the political sphere, should also be extended to the economy. With the defeat of the working class and the end of democracy, even the precious Austro-Marxist tradition – as a systematic attempt to theoretically interpret and politically transform social reality in the sense of human emancipation – ceased to exist, at least as an influential political group. Zwischen zwei Weltkriegen? (Between two world wars?), written in exile by Bauer (1936), is an extreme, illuminating theoretical contribution of Austro-Marxism. The book reflects on the defeat of that democratic project, without denying the analytical approach on which it was founded, indeed showing all its value. According to Bauer, an essential aspect of the contemporary social system is the contradiction between the political constitution and the social organization, between the equality of civil and political rights and class domination, based on the capitalist economy. This contradiction had developed with the worsening of the economic crisis and the class struggle, leading to the “crisis of democracy,” and “of socialism.” In several countries, the democratic institutions, which had allowed the political affirmation of the working class after World War I, were more or less radically suppressed. Polanyi’s ideas, in the new conjuncture of the 1930s, characterized by the “great transformation,” continued to be very similar to Bauer’s. In 1933 Polanyi settled in England, where his various activities continued to revolve around the central axis of his thought, consisting of concern for human freedom and interest in social reality. His position was formed, theoretically and politically, on the margins of Austro-Marxism,7 during the years spent in Vienna.

Final summary In Red Vienna, where he lived decisive years for his formation, Polanyi shared numerous theoretical and political aspects with the Austro-Marxist intellectuals, especially with Bauer and Adler. As far as the theoretical interpretation of capitalism is concerned, the constant commitment to social research and the attention to historical transformations led both Austro-Marxists and Polanyi to distance themselves from the dogmatic and teleological inclination present in the Marxism of the Second International. Both, influenced by Mach’s epistemology, embraced an ‘empirio-criticist’ attitude, grounded on Marx’s theory. Obviously, the group could not be perfectly homogeneous; for example, a partial convergence of Renner with the positions of revisionism and Kelsen has been mentioned above. With respect to the transformation of social reality, Polanyi shared with the Austro-Marxists the idea that the full political and economic realization of the modern promise of individual freedom required the overcoming of capitalism, therefore of class division and the formation of institutionally dominant interests. Instead, “socialist freedom” had to be organized – for Polanyi as well as for the Austro-Marxists – through a full democracy, based on the widespread and informed participation of people in the management of political and economic institutions, which would have allowed the tendential realization of the general interest. This conception of the transition to socialism required, on the one hand, a considerable pedagogical effort, intended to raise the moral and intellectual level of the population. On the other hand, it entailed the intensification of 29

Diego De Bernardin Stadoan

democracy and its extension from political to economic institutions and to all spheres of society. Overall, this position appeared to be an alternative to both the Bolshevik proposal of the dictatorship of the proletariat and the reformist program of the SPD. The theory and politics of the Austro-Marxists and Polanyi were not entirely isolated in the Europe of the first years after the Great War. In addition to the already mentioned G.D.H. Cole, we can cite, for example, the English historian Richard H. Tawney, advocate of the re-establishment of the primacy of politics and culture over the economic function, overturning the primacy the economy holds in the “acquisitive society” (Tawney 1920). Polanyi maintained personal relationships with both Cole and Tawney in England, where the idea of ‘industrial democracy’ had originated (Webb 1897). A closeness to Polanyi’s ideas can also be found in John Hobson’s reflection (1917) on “democracy after the war.” Toward the end of the war, Bertrand Russell (1918), in turn, analyzes several possible “roads to freedom,” among which that of Guild Socialism seems to him preferable. The pre-eminence of the economy and organized economic interests is considered by the Czechoslovakian philosopher and sociologist Josef L. Fischer (1977 [1933]) as the fundamental cause of the crisis of democracy. According to Fischer, also influenced by Austro-Marxism, democracy, without its socialist extension to the economy, would have remained limited, at best, to the formal right to vote and the clash of interest groups over the distribution of the social product. Therefore, in his opinion, a change of the social system as a whole and in its fundamental characteristics was needed: in contrast to this need, for him as for Polanyi, the fascist reaction led to the abolition of democracy. Finally, among the numerous possible theoretical and political correspondences, let us remember here at least “the complementary convergence of Antonio Gramsci and Karl Polanyi” (Burawoy 2003).

Notes 1 Polanyi translated into Hungarian the first three chapters of Mach’s 1886 Die Analyse der Empfindungen. – with a Preface (Polanyi 2016 [1910]: 45–48). 2 See Gyurgyák 2006, and, in the present volume, Chapter 1. 3 See Chapters 18, 21, 31 in the present volume. 4 In Vienna too, like before in Budapest and later in England, Polanyi devoted himself to adult education (see Mendell 1994). 5 “Der englische Generalstreik” and “Probleme des englische Generalstreik,” Der Österreichische Volkswirt, respectively May 8 and 29, 1926. Now in Polanyi 2002: 71–88. See Chapter 10 in the present volume. 6 See in particular three articles Polanyi wrote just before moving to England: 1933a, 1933b, 1933c, or ­immediately after: 1934. 7 Gerald Mozetič (1983) includes Polanyi among the authors “on the margins of the Austro-Marxist theory” in the anthology he edited.

References Adler, Max. 1919. Demokratie und Rätesystem. Wien: Brand. ——— 1922. Die Staatsauffassung des Marxismus. Wien: Volksbuchhandlung. ——— 1926. Politische Oder Soziale Demokratie. Ein Beitrag zur Sozialistischen Erziehung. Berlin: E. Laub. Bauer, Otto. 1919. Der Weg zum Sozialismus. Berlin: Freiheit. ——— 1920. Bolschewismus Oder Sozialdemokratie? Wien: Volksbuchhandlung. ——— 1923. Die Österreichische Revolution. Wien: Volksbuchhandlung. (The Austrian Revolution. London: Parsons, 1925). ——— 1924. “Das Gleichgewicht der Klassenkräfte.” Der Kampf 17: 57–67.

30

On the edge of Austro-Marxism ——— 1927. “Was Ist Austromarxismus?” Arbeiter-Zeitung, 3 November, 1–2. “What Is Austro-Marxism?” In Austro-Marxism, Tom Bottomore and Patrick Goode, eds. Oxford: Clarendon Press, 1978, 45–48. ——— 1936. Zwischen Zwei Weltkriegen? Der Krise der Weltwirtschaft, der Demokratie und des Sozialismus. Bratislava: Eugen Prager. Burawoy, Michael. 2003. “For a Sociological Marxism: The Complementary Convergence of Antonio Gramsci and Karl Polanyi.” Politics & Society 31/2: 193–261. Cangiani, Michele. 1998. Economia e Democrazia. Saggio su Karl Polanyi. Padova: Il Poligrafo. ——— 2012–2013. “‘Freedom in a Complex Society.’ The Relevance of Karl Polanyi’s Political Philosophy in the Neoliberal Age.” International Journal of Political Economy 41/4: 34–53. Cole, George D. H. 1920. Guild Socialism Re-Stated. London: Parsons. Fischer, Josef Ludvik. 1977 [1933]. La Crisi Della Democrazia. Torino: Einaudi. (Krize Demokracie. Praha: Karolinum, 2005). Gyurgyák, János. 2006. “Karl Polanyi and Oscar Jászi at the Bécsi Magyar Újság.” In Karl Polanyi in Vienna, Kenneth McRobbie and Kari Polanyi Levitt, eds. Montréal: Black Rose Books, 319–324. Hilferding, Rudolf. 1927. Die Aufgaben der Sozialdemokratie in der Republik. Berlin: SPD. Hobson, John A. 1917. Democracy After the War. London: George Allen and Unwin. Kelsen, Hans. 1920. Sozialismus und Staat. Leipzig: Hirschfeld. ——— 1922. Der Soziologische und der Juristische Staatsbegriff. Tübingen: J.C.B. Mohr. ——— 1923. Hauptprobleme der Staatsrechtslehre. Tübingen: J. C. B. Mohr. ——— 1924. “Otto Bauers Politische Theorien.” Der Kampf 17/2: 50–56. (“Otto Bauer’s Political Theories.” Transl. by Alan Scott. 2021. Thesis Eleven 165/1: 79–86). Marramao, Giacomo. 1980. “Tra Bolscevismo e Socialdemocrazia. Otto Bauer e la Cultura Politica Dell’austro-Marxismo.” In Storia del Marxismo Vol. 3/1, Eric J. Hobsbawm et al., eds. Torino: Einaudi. Mendell, Marguerite. 1994. “Karl Polanyi and Socialist Education.” In Humanity, Society and Commitment, Kenneth McRobbie, ed. Montréal-New York: Black Rose Books, 25–42. Mises, Ludwig von. 1920/21. “Die Wirtschaftsrechnung im Sozialistischen Gemeinwesen.” Archiv für Sozialwissenschaft und Sozialpolitik 47: 86–121. ——— 1924. “Neue Beiträge zum Problem der Sozialistischen Wirtschaftsrechnung.” Archiv für Sozialwissenschaft und Sozialpolitik 51: 488–500. Mozetič, Gerald, ed. 1983. Austro-Marxistische Positionen. Wien: Böhlau. Öhner, Vrääth. 2020. Das Rote Wien. Berlin: Walter de Gruyter. Polanyi, Karl. 1919. “Weltanschauungskrise.” Neue Erde 31–32: 458–462. ——— 1922. “Sozialistische Rechnungslegung.” Archiv für Sozialwissenschaft und Sozialpolitik 49/2: 377– 420. English translation, with a Preface by Johanna Bockman: “Socialist Accounting.” Theory and Society 45/5, 2016: 385–427. ——— 1933a. “Die Geistigen Voraussetzungen des Faschismus.” Der Menschheitskämpfer VII/1: 5–8. ——— 1933b. “Austria and Germany.” International Affairs XII/5, September: 575–589. ——— 1933c. “Gegenrevolution.” Der Österreichische Volkswirt XXV–1/20: 457–459. (Reproduced in Polanyi 2002: 186–192). ——— 1934. “Corporative Austria: A Functional Society?” New Britain 2/51: 743–744. ——— 1937. Europe To-Day. London: WETUC. ——— 2001 [1944]. The Great Transformation. Boston: Beacon Press. ——— 2002. Chronik der Großen Transformation, Band 1, Michele Cangiani and Claus Thomasberger eds. Marburg: Metropolis-Verlag. ——— 2005 [1922]. “Der geistesgeschichtliche Hintergrund des Moskauer Prozesses.” In Id., Chronik der Großen Transformation, Band 3, Michele Cangiani, Kari Polanyi Levitt and Claus Thomasberger, eds. Marburg: Metropolis-Verlag, 66–70. ——— 2006 [1925]. “Letter to a Friend.” In Karl Polanyi in Vienna, Kenneth McRobbie and Kari Polanyi Levitt, eds. Montréal: Black Rose Books, 316–318. ——— 2016 [1910]. “Preface to Ernst Mach’s the Analysis of Sensations.” In Id., Karl Polanyi. The Hungarian Writings, Gareth Dale, ed. Manchester: Manchester University Press, 45–48. ——— 2016 [1922]. “Guild Socialism.” In Id., Karl Polanyi. The Hungarian Writings, Gareth Dale, ed. Manchester: Manchester University Press, 118–120. ——— 2016 [1923]. “Guild and State.” In Id., Karl Polanyi. The Hungarian Writings, Gareth Dale, ed. Manchester: Manchester University Press, 121–122.

31

Diego De Bernardin Stadoan ——— 2018 [1925]. “New Reflections Concerning Our Theory and Practice.” In Id., Economy and Society. Selected Writings, Michele Cangiani and Claus Thomasberger, eds. Cambridge: Polity Press, 41–50. ——— 2018 [1927]. “On Freedom.” In Id., Economy and Society. Selected Writings, Michele Cangiani and Claus Thomasberger, eds. Cambridge: Polity Press, 15–40. ——— 2018 [1935]. “The Essence of Fascism.” In Id., Economy and Society. Selected Writings, Michele Cangiani and Claus Thomasberger, eds. Cambridge: Polity Press, 81–107. (Originally in Christianity and Social Revolution, J. Lewis, K. Polanyi and D.K. Kitchin, eds. London: Gollancz, 359–394). Renner, Karl. 1917. Marxismus, Krieg und Internationale. Stuttgart: Dietz. ——— 1924. Die Wirtschaft als Gesamtprozess und die Sozialisierung. Berlin: Dietz. Russell, Bertrand. 1918. Roads to Freedom: Socialism, Anarchism and Syndicalism. London: George Allen & Unwin. Schaffer, Felix. 1963–1965. Memoirs. Karl Polanyi Archiv, File 29–9. Partial English translation: Id., “Vorgartenstrasse 203: Extracts from a Memoir.” Translated by Kari Polanyi Levitt, in Karl Polanyi in Vienna, K. McRobbie and K. Polanyi Levitt, eds. Montréal: Back Rose Books, 2006, 328–346. Scott, Alan. 2021. “The Kelsen-Bauer Debate on Marxist State Theory and the Equilibrium of Class Forces.” Thesis Eleven 165/1: 72–100. Tawney, Richard H. 1920. The Acquisitive Society. New York: Harcourt, Brace & Co. Webb, Sidney and Beatrice. 1897. Industrial Democracy. London: Longmans, Green & Co.

32

3 THE SOCIALIST CALCULATION DEBATE AND THE PROBLEM OF MODERN CIVILIZATION Claus Thomasberger

Introduction To define any particular treatise as the starting point of the “socialist calculation debate” would remain arbitrary. Enrico Barone’s 1908 article “The Ministry of Production in the collectivist state” (Barone 1935) was certainly a landmark, but other writings of the Pareto school would have to be mentioned as well. Otto Neurath’s “Durch die Kriegswirtschaft zur Naturalwirtschaft” (Neurath 1919) and Otto Bauer’s “Der Weg zum Sozialismus” (Bauer 1976) played key roles at least In Austria. Ludwig Mises’s essay “Economic Calculation in the Socialist Commonwealth” (Mises 1935), published in 1920 in Max Weber’s “Archiv für Sozialwissenschaft und Sozialpolitik,” appeared in a crucial moment of European history and marked the beginning of the most heated period of the debate. Karl Polanyi (2016c) was one of the first to respond, doing so in the same journal in which Mises’ piece had been issued, even before the latter published the more detailed exposition in the book Socialism (Mises 1951). Mises (2002a) replied and Polanyi (2018d) let follow a second article, long before Friedrich Hayek and the so-called neoclassical socialists Oskar Lange, Abba P. Lerner and H.D. Dickinson intervened. Polanyi was one of the first to respond, even though he had no training in economics at the time; he had moved to Vienna only a year earlier and was still in poor health. Certainly, Ludwig Mises and Karl Polanyi had come to know and appreciate each other personally in 1919 (cf. Hülsmann 2007, 343). However, this had been at a moment when Polanyi was still living in Budapest and working for the Hungarian government. And there is no evidence that they ever met again in Vienna or elsewhere.

The crisis of civilization The debate between Mises and Polanyi is mostly interpreted as a dispute about the feasibility of a socialist economy. Mises is then sketched as an author who declares a socialist economy to be unrealizable, while Polanyi is supposed to defend the possibility of functional socialism (cf. Rief 2022; Dale 2016; Bockman 2016; Dale 2010; Becchio 2007; Mendell 1990). However, such an interpretation hardly does justice to the motives and considerations of Mises, Polanyi and their contemporaries. In reality, Mises’ and Polanyi’s concern is a much broader and



33

DOI: 10.4324/9781003336747-4

Claus Thomasberger

more significant problem: the perspectives of 19th-century European civilization and the freedoms it had made possible. Mises’ worries are that a socialist revolution would destroy the foundations on which the achievements of modern liberal civilization are based.1 Polanyi, on the other hand, in “Red Vienna” sees a window of opportunity for a truly socialist transformation. It is only this background which explains the attention that the debate received in the first half of the 1920s in continental Europe. Recall that the destabilization of the European-led world order had already begun after the turn of the century. The successes of decolonization movements were shaking the European Empires. In the fall of 1905, barely six months after the defeat of the Russian fleet by Japan, a general strike, called in St. Petersburg, swept large parts of the country. The first Soviet convened, and Russian Tsar Nicholas II felt compelled to promise a legislative assembly of elected representatives. The consequences were immediately felt in Austria. On November 2, thousands of Viennese workers marched along the Vienna Ringstrasse, leading to bloody clashes with the police. Emperor Franz Joseph felt obliged to introduce universal suffrage for men just one day later. The World War (1914–1918) had further weakened the monarchies. In Germany, workers’ and soldiers’ councils took power in several cities in October 1918. On November 9 of the same year, the republic was proclaimed in Berlin and the emperor was forced to abdicate. In Vienna, too, Emperor Karl had no choice but to renounce “any share in the affairs of state.” Polanyi summarizes the atmosphere in “Red Vienna” in his 1919 essay “Ideologies in Crisis” as follows: “An extraordinary revulsion at the capitalist system has taken hold of all people with souls that can feel and brains that can think. In a sense, people have already decided that capitalism should not continue to exist” (Polanyi 2018a, 264). Mises, albeit from the opposite perspective, confirms Polanyi’s judgement when in 1922 he introduces his book with the words: The socialist idea dominates the modem spirit. The masses approve of it, it expresses the thoughts and feelings of all; it has set its seal upon our time. When history comes to tell our story it will write above the chapter ‘The Epoch of Socialism’. (Mises 1951, 25) From the liberal perspective – in Austria as in other defeated countries – the situation at the end of the war looks highly threatening. “The dominant emotion felt by the neoliberals,” Slobodian describes, “was not hubris but anxiety. They expended all of their efforts in attempting to design fixes to stabilize what they saw as a precarious arrangement” (Slobodian 2018, 19). In the perception of most liberals, after the World War the continued existence of capitalism in Europe itself is threatened. “They felt that their civilization was in decline, or even about to be destroyed” (Dekker 2016, 3), as Erwin Dekker characterizes their fears. What Mises perceives as a threat, Polanyi sees as a unique chance for a socialist transformation. If Mises had really been convinced that socialism was infeasible, it would hardly have appeared to him as a threat. There is no danger from something that is impossible to implement. On the contrary, Mises’ fear is based on the conviction that what Bolshevism was trying to establish could become reality. Mises feels threatened precisely because he regards socialism as a possible answer to the challenges of a modern and complex civilization. His argument is not that socialism cannot be implemented, but that when it is implemented, the results are different from the intentions. Only in the sense of results and expectations falling apart does Mises speak of impracticability. The interpretations that focus on the aspect of “feasibility” overlook (a) the fundamental difference between the equilibrium theories of the Lausanne School in the tradition of Walras and Pareto on the one hand and the Austrian approach on the other; and (b) the contradictions within 34

Socialist calculation debate and problem of modern civilization

the Austrian School. While Friedrich Wieser, as Hayek characterizes his teacher, leans toward Fabian socialism (Hayek 1978, 1), Mises regards himself in the 1920s as a staunch opponent of all forms of socialism.2 The fact that many of the later contributions to the socialist calculation debate are framed within the Lausanne rather than the Austrian School approach, has further complicated the understanding of the core of the dispute between Polanyi and Mises.3 In fact, neither Mises nor Polanyi is concerned with economic questions in the strict sense. They consider themselves, as Erwin Dekker characterizes them, “students of civilization.” (­Dekker 2016) Both are aware of the fact that World War I had ushered in a turning point. Mises and his neoliberal fellows see the question quite similarly to Polanyi. “But they differ from Polanyi in their response,” as Dekker remarks; They seek to resist this revolt; they argue that the market is a fundamental cultural institution of our modern society, an institution that is indispensable for informed decision making and indispensable because of the moral and cultural effects it has. (Dekker 2016, 68) At issue is the possibility of rational organization of the economy, a characteristic that both socialists and liberals regard as an indispensable feature of modern civilization. “Accounting” and “calculation” stand as abbreviations for rational economic management. Marx had criticized the capitalist mode of production for producing “by its anarchical system of competition, the most outrageous squandering of labour power and of the social means of production” (Marx 1996, 35, 530). Engels had announced that with the transition to a socialist economy “the social anarchy of production gives place to a social regulation of production upon a definite plan, according to the needs of the community and of each individual” (Frederick Engels 1996, 25, 267). And Polanyi, too, in an essay written in 1920, criticizes “the anarchic market of the capitalist profit economy” (Polanyi 2014, 170) that would be overcome by the transition to cooperative socialism. Mises takes up this criticism to turn the tables: Not capitalism, but a socialist economy is necessarily irrational and incapable of organizing production in an efficient way, he counters: “Without economic calculation there can be no economy. Hence, in a socialist state … it would be impossible to speak of rational production any more” (Mises 1935, 105). Polanyi, on the other hand, sketches the model of functional socialism in order to prove that civilizational progress is indeed possible under socialist conditions. In the second half of the 1920s the political and social climate will change – and so the character of the debate. Polanyi’s last contribution is the 1924-article. And Mises ends his participation in the debate in 1928 (Mises 2002b). Hayek is undoubtedly correct in pointing out that the later contributions of Taylor, Roper, Dickinson, and other Anglo-Saxon authors can hardly be said to have “really met any of the main points” (Hayek 1935, 207). Therefore, the following considerations will concentrate on the core in the debate between Mises and Polanyi.

Private ownership of the means of production as the key issue If the birthplace of neoliberalism was, as Slobodian (2018, 30) put it, Ludwig Mises’ office in the Vienna Chamber of Commerce, the publication of Mises’ 1920 essay was its moment of birth. Mises is one of the first to recognize that economic liberalism would have to fundamentally renew some of its principles to respond to changing conditions after the war. His critique of Mises’ essay makes Polanyi, on the other hand, one of the first critics of neoliberalism. This explains why the “neoliberal counterrevolution” at the end of the 20th century marked a renewed interest in 35

Claus Thomasberger

his work and why already before the financial crisis Polanyi was quoted by leading intellectuals around the world as one of the most influential thinkers and as one of the most important sources to oppose neoliberal reasoning. For the scientific development of both, the debate marked a milestone. Was Mises in his youth still “etatist, through and through” (Mises 2009, 11) who recognized in liberalism “the vestiges of a worldview that merited spirited opposition” (Mises 2009, 16), through the debate on socialist accounting, he finally becomes a persuaded neoliberal. With Polanyi, we can observe the opposite development. While in 1919 he still regarded himself as a “liberal socialist,” a supporter of a basically “physiocratic doctrine (Turgot, Carey, Oppenheimer, A. Dániel),” in which “the dependence of production as a whole on agricultural yields is a fundamental principle (and) the forms of organization of industry must always remain a secondary matter” (Polanyi 2014, 171), in the early 1920s he develops into a convinced adherent of the ideas of a functional organization of society and guild socialism (Polanyi 2016b; 2016a; Cole 1980). On the following pages, I will demonstrate that it is this debate where both develop the basic ideas for which they are famous today: criticism of economic planning, self-regulating market system, economic and human rationality on the one hand and critique of the institutional separation of the economy from society, fictitious commodities and liberal utopia on the other. The debate between Mises and Polanyi is crucial till today because it concentrates on the core questions. Neither does Mises’ later critique of interventionism (Mises 2012, 2011) yet play a role, nor does Polanyi address the protective counter-movement within capitalist society. Both refuse to equate the antagonism of capitalism versus socialism with the opposition of market versus marketless economy. For both, “planning in kind” of the Neurathian type is only one organizational proposal of a socialist economy among several (even if Mises thinks that it expresses its essence best). Mises explicitly emphasizes that “the principle of exchange can … operate freely in a socialist state” (Mises 1935, 91–92). Also Polanyi’s idea of functional socialism is far from the concept of a marketless economy but includes all types of price formation – agreed prices (legally or officially regulated), fixed prices as well as market prices. In the guild socialist economy, he underlines, “in a certain sense buying and selling at negotiated prices, and therefore if you will a ‘market,’ also exist” (Polanyi 2016c, 398). Polanyi’s argument is not directed against markets, prices and money, but against the idea of a market society based on self-regulating capitalist market system including market prices for labor, nature (land) and money. Polanyi knows that markets have existed for millennia, and that the existence of markets says little about the character of society. Market exchange is not a specific characteristic of capitalism, nor are markets inconsistent with a socialist economy. What matters to Mises and Polanyi is a different question: the characteristics of the capitalist market system, which is formed only, when markets for the factors of production have been established. Mises and Polanyi differ not in their description, but in their interpretation of the capitalist market system. What Mises presents as a self-regulating system, in Polanyi’s interpretation is an anarchic system threatening to destroy society as well as the natural foundation of human existence. For Mises, the dividing line between the capitalist system on the one hand and the socialist system on the other is based on only one criterion: “Not distribution … is the slogan of Socialism. To abolish private property in the means of production, to make the means of production the property of the community, that is the whole aim of Socialism” (Mises 1951, 51). If the means of production, which comprise labor, nature and money can be bought on markets, the decisive condition of a capitalist order is fulfilled. On the other hand, if the “producers’ goods will be res extra commercium” (Mises 1951, 158), we are dealing with a socialist economy.

36

Socialist calculation debate and problem of modern civilization

The “imputation problem” The emphasis on the means of production is essential for Mises’s line of reasoning. In a socialist state, Mises argues, The administration may know exactly what goods are most urgently needed. But in so doing, it has only found what is, in fact, but one of the two necessary prerequisites for economic calculation. In the nature of the case it must, however, dispense with the other – the valuation of the means of production. (Mises 1935, 107) And it is on this second point alone that Mises’ argumentation is aimed. He thus establishes a bridge to an issue that in the context of the Austrian School has been called the “imputation problem” (Zurechnungsproblem): the impossibility of valuing the contribution of the individual means of production. Sure, it is no problem to determine the value of the means of production in their totality. This follows directly from their contribution to the value of consumer goods that can be produced through their use. But the means of production are complementary goods; they are productive only through their interaction. Any attempt to theoretically isolate the value of a single factor proves impossible. Consequently, the subjective theory of value has a particular problem in evaluating the contribution of the single factors. The imputation problem concerns, in principle, all means of production. However, the pivot on which the whole discussion turns are labor, land and money. As Mises (1951, 338) notes: “In deducing the laws of the theory of imputation we are justified in speaking simply of ‘land’ and ‘labour’. For from this point all goods of the higher order are significant only as economic objects.” Indeed, there are good reasons for sharpening the debate on labor, land and money (capital): (1) The factors of production are the final elements in the chain of the production process, the basis of all economic activities. That is to say they are not produced and therefore do not have a supply schedule comparable to ordinary commodities. (2) They cannot be supplied by private enterprises, but only society can provide them by turning labor, land and money into alienable private property through appropriate legislation. (3) Treating the factors of production as private property to be bought and sold in markets is absolutely indispensable to the establishment of a market system. Only if labor, land and money are commodified, the economic circle is closed. Only then consumer spending ensures that the money, earned by labor, land and money flows back to the producers. The motives of monetary gain and hunger drive the economy. The uniqueness of what Mises interprets as the self-regulating capitalist market system lies in the fact that, once it is established, it forces workers, landowners, and even capitalists to follow its rules. Already in 1871, Carl Menger had raised the imputation problem in his Principles and proposed a solution whose inadequacies had been pointed out in the 1880s by Friedrich Wieser. But Wieser’s own proposal also remained controversial. In the following decades, almost all Austrians, Eugen Böhm-Bawerk, Josef Schumpeter, Ludwig Mises, Hans Mayer, etc., participated in this discussion. Friedrich Hayek made the imputation problem the subject of his 1923 doctoral dissertation.4 At least for half a century, the discussion of the imputation problem played a key role in the Austrian debates.5 Recognizing that the imputation problem “has not yet found a universally accepted solution,” Polanyi together with his friend Schafer (1930, 1; transl. by the author) join the debate at the beginning of the 1930s.

37

Claus Thomasberger

Mises’ conclusion from the theoretical failures is simple but striking: If the problem of valuing the means of production is theoretically impossible, a government must fail a fortiori if it cannot orient itself to market prices. “In a socialist state,” Mises concludes, “production could never be directed by economic considerations” (Mises 1935, 105). The impossibility of determining rationally the contribution of the single factors of production under socialist conditions has some far-reaching consequences that would undermine the foundation of modern civilization, Mises maintains. 1 Since the value of the factors of production is only another name for the incomes of workers, landowners and capitalists, in a socialist economy there are no rational criteria to guide the distribution of incomes. The only response left to the administrative authority would be to introduce a convenient but arbitrary rule. 2 A second, more important consequence is that it becomes impossible for the government to decide in a rational way what the factors of production should be used for. Any rational decision as to whether – indeed, which – investment projects should be undertaken and which should not, becomes impossible. Mises gives the example of a railroad. Without factor prices, there are no criteria for deciding whether the line should be routed on this or that side of the mountain, or whether it should be built at all. Decisions about which direction the economic and technological development of society should take, whether heavy industries should be expanded, capital goods or consumer goods production should be promoted, remain arbitrary. 3 The most serious consequence for the character of civilization is: Even if it lacks any rational basis, the government (or an authority appointed by it) must make choices. Not to decide is not an option, i.e. “the socialist society … would issue an edict” (Mises 1935, 109). In other words, the government must decide arbitrarily. It must choose which industries to expand and which to cut back. To ensure the coherence of its plan, it must enforce its decisions, whatever the actual wishes and desires of the people are. Therefore, Mises maintains, the rule of the planning administration necessarily takes on an authoritarian character. People must obey. Enterprises and individuals must submit to the plan. Authoritarian forms of rule become inevitable to enforce the plan. As a result, the best intentions are replaced by dictatorship over needs. Arbitrariness and coercion go hand in hand. The problem is not so much the inefficiencies of a socialist economy as the fact that freedom is lost. Modern civilization can be preserved, Mises argues, only if the self-regulating market system is allowed to achieve in practice what the human mind is incapable of accomplishing.6 Milton Friedman and his wife will call this “the miracle of a free market” (Friedman and Friedman 1990, e71). Only the existence of market prices for the means of production enables producers to calculate costs and profits in a rational manner. Polanyi, on the other hand, analyzes economic activity from a perspective of society. In his model of functional socialism, it is society that values the factors of production, not economic calculus.7 Against Mises’ assertion that the prices, formed by competition for monetary surpluses, would automatically result in a rational organization of production, he puts forward three arguments. First, the multitude of small and individual enterprises (especially in industry), on the one hand, and “cartels, trusts, syndicates, and other private monopolistic organizations” (Polanyi 2016c, 404), on the other, prevent the technical possibilities of increasing productivity from being exploited. Second, more important to him seem the impairments of “social productivity,” i.e. the neglect of the public utility of production, which the capitalist mode of production implies: “There is no means by which the social valuation of goods in any particular situation can be enforced over 38

Socialist calculation debate and problem of modern civilization

their individual valuation” (Polanyi 2016c, 405). Demand is misguided, pseudo-needs are created and, in contrast, public goods, social infrastructures, spiritual and cultural goals are ignored. No better, according to his third objection, is the case with “social justice.” If incomes are nothing more than the flip side of the prices of the factors of production, distribution is determined not according to criteria of social justice but solely by competition for monetary gain. “The distribution of goods organized through these incomes is therefore unjust and irrational” (Polanyi 2016c, 407). All these deficits, he argues, would be overcome by a functional-socialist organization of the economy.

Functional socialism, Polanyi’s search for a “positive economic theory” and the birth of the notion “fictitious commodities” The main part of Polanyi’s critique of Mises’ line of reasoning in the debate consists in sketching a hypothetical type of functionally organized socialist transition economy. Polanyi was never a supporter of central planning. And he makes no attempt to defend administrative-economy models against Mises’s criticisms. To the contrary, in his own socialist perspective, socialization has to be grounded in associations of collective interests at the local, regional and national levels. The cornerstones are the “production associations” (Produktionsverband) representing producers and cooperatives on the one hand and the “commune” (Kommune) understood not only as a political organ, but also as the real representative of the higher goals of the community. Already in the first essay he explicitly emphasizes that “we offer here to the dogmatists of the economy without markets, such as those of the Kautsky-Neurath-Trotsky tendency, just as little that is fundamentally new as we offer to the dogmatists of the pure exchange economy” (Polanyi 2016c, 398). And in the second essay, he explicitly identifies the form of socialism he advocates as a third model, fundamentally distinct from the capitalist market system and administration. “Our own essay originated in pronounced opposition to the two conventional positions” (Polanyi 2018d, 52). He is not concerned with a compromise, but with an independent path to a socialist economy beyond capitalist market system and administration. The decisions about the valuation of labor, nature and money are not in the hands of private owners, but of society as a whole, represented by the “production associations” and the “commune,” whose task is to agree upon them. He concludes that the requirement for maximal technical productivity as well as for social productivity, “culminates in the program of socializing the means of production, not to produce goods at a higher level of technical productivity but rather to produce goods with higher social utility” (Polanyi 2016c, 406). The accounting scheme that Polanyi proposes for a functionally organized socialist economy is not more than a rough sketch. Many details are only touched upon with the consequence that the presentation sometimes remains ambiguous. But the important point is another one. His contribution to the debate is an attempt to demonstrate that from the perspective of the theory of a socialist economic organization, the supposed antagonism of “collectivism versus syndicalism” is misleading. There may be a variety of socialist answers – all modern, all democratic and all defending personal freedom. Guild socialism is just one proposal within a larger family of functional-socialist approaches. However, Polanyi is aware of the limits of his response. A more complete answer would have to build on what he calls a “positive theory of socialist economics” (sozialistische Wirtschaftslehre). His own approach, he admits, “does not even have a rudimentary economic theory” (Polanyi 2016c, 399). Indeed, much of the introductory remarks to his essay deal with the question of how he can criticize Mises’ approach as long as there exists no socialist economic theory to draw upon. 39

Claus Thomasberger

The elaboration of such a theory he considers a key task in the following decades. As we know from Felix Schafer’s memoirs (Schafer 1963–1965), starting in 1923 Polanyi organizes a seminar in his home in the Vorgartenstrasse with a group of students on the topic of “socialist economics,” which allows some participants – including Schafer himself – to write their doctoral dissertations.8 The critical examination of the works of the representatives of the Austrian School, esp. Menger, Mises, Böhm-Bawerk and Wieser, forms a main focus of the seminar. In addition, social science issues such as the question of the origin of social institutions and the overview problem are on the agenda. As the seminar draws to a close, Polanyi and Schafer continue to address the “imputation problem,” “the problem of the two stocks,” and the relationship between the “exchange economy” and the “purchasing power economy.”9 And finally, he organizes between 1930 and 1933, in the apartment of Walter Schiff, again a Saturday seminar. However, as Felix Schafer (1963–1965, 58–64) also reveals, in Vienna the efforts to elaborate an economic theory remain without satisfactory result. Polanyi cannot persuade himself to complete and publish the papers that have been written in this context.10 Polanyi’s years-long striving for developing a new economic theory demonstrates that the interpretation that he would have supported the marginal utility theory of value (cf. Bockman 2016, 389; Gemici 2015; Dale 2010, 12–14) is misleading. First, the fact that he rejects Ricardo’s labor theory of value does not automatically mean that he accepts the theory of marginal utility. Second, if he had truly adhered to the marginal approach, his efforts to develop a new theory would have been futile. Third, his rejection of utilitarianism and the importance he attaches to fixed prices and negotiated prices that take into account not only economic but also social aspects contradict such a classification. Fourth, as we will see below, the idea of fictitious commodities is quite incompatible with neoclassical economics. Last but not least, his critique of liberal economics as a utopian creed shows that he did not even consider marginal utility theory an adequate description of the 19th-century economy. For Polanyi, the engagement with the economic-theoretical questions did not end in Vienna. After his emigration to England, he continues to work on the problem of the valuation of the factors of production and the significance of the market solution. However, he now approaches them from a different, more historical perspective: Why is the valuation of the factors of production impossible? What does it mean when the market system produces prices for labor, nature and money? What is the meaning of these prices? Given the fact that most of Polanyi’s records and notes from the 1930s on this subject have not survived,11 we cannot describe with certainty the exact path from Polanyi’s critique of Mises’ claim that modern civilization is based on markets for the means of production to his critique of commodity fiction in The Great Transformation. Other influences may also have played a role.12 However, (a) there is no doubt that the central arguments on which Polanyi relies can already be found in the Vienna discussion of the 1920s; and (b) we can trace at least the rough stages on the basis of archival material. Let us start with the latter. In the hand-written “Notes,” (Polanyi 1934) which Polanyi takes in England after 1934 for what would become The Great Transformation, we do not only find the entries “labor,” “land,” “money,” and “factors of production,” but also “commodity fiction” with references to authors such as Edwin Cannan, Roy Harrod, August Lösch, Carl Menger, and Joseph Schumpeter, focusing on the question of how they distinguish the factors of production from regular commodities. At the end of the 1930s, in the manuscript “The Fascist Virus,” he describes labor as a “fictitious commodity” (Polanyi 2018c, 117). When he gives in summer 1940 his lectures series The Present Age of Transformation at Bennington College, he adds land to the

40

Socialist calculation debate and problem of modern civilization

list. “Land and labour,” he explains, “can be treated as commodities only on a more or less fictitious basis.” In this occasion he also introduces the term “market utopia” (Polanyi 2017, 19–20). In The Great Transformation, finally, he conceptualizes all the factors of production as fictitious commodities. Now, the decisive arguments concerning the fictitious commodities already played a central role in the debate in Vienna. Important contributions came not only from Mises’s friend Max Weber,13 but also from his intimate enemy within the Austrian School, Friedrich Wieser. What “can be doubted,” Wieser (1893, 81) remarked already in the 1890s, “is whether it be just and advantageous for society to permit the existence of private and individual property in land and capital, whereby the return from land and capital is transferred exclusively to single individuals” (Wieser 1893, 81). Later, in his 1914 book Theory of the Social Economy, Wieser goes one step further arguing that labor, land and money are not products14 and should not be called commodities (translated as “wares”): “We shall only speak of wares in connection with commodity-products,” Wieser (1927, 176) declares. Wieser had left it with these remarks. He did not ask about the significance that these findings would have for economic theorizing. This is where Polanyi takes up. As Wieser had made clear, factors of production are fundamentally different from regular commodities for the very reason that they are not produced and do not have a supply function comparable to regular commodities.15 Nevertheless, if they are transformed into private property, markets can be simulated. Labor, land and money are, as Polanyi defines them, “fictitious commodities.” In other words, neither the “ontological” nor the “structural” interpretations do justice to Polanyi’s category “fictitious commodities” (Fraser 2014), nor does it primarily express a moral judgment.16 No doubt, if labor, land and money are traded on a market, competition will establish a price. But while in the case of genuine commodities the cost of production and human needs mark out the field on which competition plays, in the case of factors of production no such field exists. The price of labor is not regulated by any economic “law,” but simply by supply and demand, i.e. by “the cunning right of the stronger,” as Frederick Engels (2010, 431) put it. The prices of land and other products of nature cannot be traced back to production costs or utility, they depend exclusively on the power to monopolize the market. And money supply, created by competition between profitseeking banks threatens to increase without limits, if it is not checked by central banks. If Polanyi’s considerations are correct, the assumption that the capitalist market economy functions as a self-regulating system, is utopian. Marx got closer to the heart of the matter than the neoliberals when he described the capitalist market system as “social anarchy which turns every economic progress into a social calamity” (Marx 1996, 35, 490). Unsustainable price fluctuations that threaten to destroy man, nature, and, ultimately, capitalism itself shatter the neat picture of social progress and economic welfare. Breakdowns, cyclical crises, concentration and centralization, hunger and social rebellion constantly bring the order to the brink of collapse. However, this means no less than to understand that the market society is built on a fiction – a fiction that has become reality. Mises accuses socialism of being a utopian scheme in the sense that, if realized, it will produce results that diverge from the intentions of its protagonists. Polanyi uses the term “utopia” in the same sense as Mises, but he turns it against economic (neo)liberalism. This is what Polanyi will elaborate in The Great Transformation. In his masterpiece he analyzes the outcome of the European civilization of the 19th century, i.e. the advancement, the transformation as well as the social catastrophes that it produced and, finally, the collapse of this civilization that Mises in the 1920s describes as the highway to personal freedom.

41

Claus Thomasberger

Capitalism, democracy, and the future of Western civilization Today, Western liberal civilization is once again in the midst of a profound crisis. The fresh blood that the United States injected after World War II helped to stabilize the Western world only for a rather short period of time. In the last decades, the anarchic characteristics of the capitalist market system are once again gaining the upper hand. Today, the markets for the factors of production labor, nature, and money are playing a key role in disorganizing the global economy. The simulation of markets for land and raw materials threatens the natural basis of human existence on earth. Unsustainable emissions of greenhouse gases, increasing global temperatures, ocean pollution and species extinction are only some of the threats that result from the dominance of economic calculus over social wellbeing. In the same time, prices for land and housing, raw materials, gas and petrol are out of control. Arbitrary price changes undermine the already precarious living conditions of billions of people all over the globe. Capitalist companies are unwilling (and unable) to reorganize their investments in a way that respects planetary boundaries. Neoliberal policy, adhering on market solutions, is incapable to assume responsibility and enforce the required decisions. At the same time, the hands of monetary policy are tied by a market-based financial system that governs through panic. In the global context, the neoliberal West is losing status and self-confidence. Economically, in the 20th century the center of the world has shifted from Europe to North America and finally to Asia. The United States is trying to salvage the fading dominance of neoliberal principles by increasing political and military tensions between regional powers up to the point that the specter of a nuclear war emerges as a real possibility. At the same time, with export-restrictions, economic sanctions, and the freezing of currency reserves Western policy is undermining its own project of market globalization. To discourage opposition and close ranks Mises’s image of a bipolar world is invoked again, in which capitalism, democracy, and freedom struggle against the allegedly evil forces of socialism, authoritarianism and unfreedom. When capitalist market society can no longer be defended on the basis of its merits, neoliberalism once more conjures up the specter of an authoritarian, unfree civilization to make its own failures seem the lesser evil. As Polanyi noted a century ago, the alternative is not, as Mises would have us believe, between capitalist market system and authoritarian planning. Nor does the former guarantee freedom and democracy. On the contrary, the more the socially devastating consequences of the market society manifest themselves, the more neoliberal forces aim at isolating the capitalist market system from democratic influences – with devastating consequences for personal freedom and democracy. The true problem which is essential for the survival of those achievements of modern civilization that we prize highly is social. There is no reason to believe that the freedoms that we cherish for their own sake – popular democracy, freedom of speech, of association, of conscience, etc. – are the outcome of any technological triumph or any particular mode of economic organization. Western civilization today has reached a point where it is vital to free itself from the domination of the capitalist market system over society. In his debate with Mises, Polanyi raises the crucial questions already in the 1920s and indicates the direction in which, according to his convictions, answers might be found.

Notes 1 In this chapter, the terms ‘liberal’ and ‘liberalism’ are used in the original meaning which until today prevails in the European discussions. We are well aware of the fact that in the United States the notions have come to have a rather different meaning. 2 The most severe accusation Mises could level at Wieser was that the latter’s theoretical ideas belong not to the Austrian School at all: “Wieser … never really grasped the core of subjectivism …. His imputation

42

Socialist calculation debate and problem of modern civilization theory is untenable. His ideas on value calculation support the claim that he cannot be called a member of the Austrian School. He had more in common with those of the Lausanne School” (Mises 2009, 27–28). 3 The economic theories of the 20th century to which Polanyi refers critically are – and remain throughout his life – those of the Austrian School. In Vienna, he intensively studies the writings of Carl Menger, ­Eugen Böhm-Bawerk, Friedrich Wieser and, of course, Ludwig Mises. He would return to these again and again in his later works. The Lausanne School never aroused his interest. He was familiar with Keynes’ work, but was more interested in his writings on economic and social policy than in the theoretical ones. 4 Here a short list of some of most important contribution to the debate on “imputation”: Menger, C. 1871: Principles of Economics, Auburn 2019, pp. 149–174. Wieser, F. 1889: Natural Value, London 1893, pp. 69– 214. Böhm-Bawerk, E. 1889: Capital and Interest, Positive Theory of Capital, New York 1930, pp. 170– 189. Schumpeter, J. 1909: Bemerkungen über das Zurechnungsproblem, in: Z. für Volksw. Soz. Verwalt. 18), pp. 79–132. Hayek, F.A. 1926: Some Remarks on the Problem of Imputation, in: Capital and Interest, Chicago 2011, pp. 1–19. Mayer, H. 1928: Zurechnung, in: Elster, L./Conrad, J. (eds.) Handwörterbuch der Staatsw, Jena, pp. 1206–1228. Polanyi, K. /Schafer, F. 1929–1932: Hans Mayer’s Lösung des Zurechnungsproblems, Con 02 Fol 10, KPIPE Montreal. Mises, L. 1949: Human Action, Auburn 2010, pp. 330–336. 5 The fact that this issue is almost completely ignored in the Anglo-Saxon world seems to be due to the theory of general equilibrium prevailing there, which excludes production from the agenda and is, therefore, blind to the subject. 6 It was Schumpeter who argued already in 1909 with regard to the problem of imputation: “Practice therefore certainly solves the problem and thus proves its solvability by action” (Schumpeter 1909, 84; transl. by CT). 7 It is this perspective that will later lead him to remark that under the rule of the capitalist market system, “instead of the economic system being embedded in social relationships, these relationships were now embedded in the economic system (Polanyi 2018b, 206). 8 Mises, privatdozent but not professor at the University of Vienna, during this period also conducted his later famous ‘private seminar’, attended by Friedrich Hayek, Gottfried Haberler, Fritz Machlup and Oskar Morgenstern, among others. 9 Cf. Polanyi’s reference to the idea of a “a purchasing-power economy” and Felix Schafer in “The Great Transformation” (Polanyi 2001, 206). 10 In the second half of the 1930s, Felix Schafer will publish extracts of these papers (Schafer 1937, 1939). 11 Only a few of these papers – and these only incompletely – have survived. Cf. “Tauschwirtschaft und Kaufkraftwirtschaft” (Exchange Economy and Purchasing Power Economy) (Polanyi 1925) sowie “Hans Mayers Lösung des Zurechnungsproblems” (Hans Mayer’s Solution of the Imputation Problem) (Polanyi and Schafer 1930). 12 A text Polanyi was most likely aware of is Ferdinand Tönnies’ “Community and Society,” which states: “Labour and services are offered and sold as commodities. We expect them to have a price, just like a loaf of bread or a sewing needle. But they are different from these commodities” (Tönnies 2001, 81). 13 In the preface to his “Sociology of Religion,” published the same year as Mises’s opening essay, Weber emphasized that the “rational-capitalist organization of (formally) free labor,” i.e., its commodification, is a feature specific to the Occident and was found “nowhere else on earth” (Weber 1920, 7). Mises had established a friendship with Max Weber in 1919 when the latter was teaching in Vienna. 14 “Labor is not a product; it is not the result of a process comparable in any way to that of producing merchandise.” (Wieser 1927, 176) Regarding financial markets: “Bonds are not products; more especially they have not the supply-index of the costs of production.” (Wieser 1927, 176) Concerning land: “In the realty-market, it is not customary to speak of wares or merchandise. The indices of supply and demand are here too conspicuously different from those of commodity-products.” (Wieser 1927, 176) 15 During the 1920s, Polanyi draws on these ideas in his contributions to the debate on the fringes of Austromarxism about the question of socialization, the overview problem and other aspects of a socialist transformation of society. From a socialist perspective, he states in a speech given at the beginning of the second half of the 1920s, it is obvious that, “labor power is by its nature not a commodity. ... Labor power is not produced by anyone ... Man ... stands as the creator of the natural production process and therefore outside the economy. The same is true for certain raw materials. ... They stand at the beginning of the natural economic process and outside of the economy.” (Polanyi 1926, 18) Later he applies this insight not only to socialist societies but also to capitalist market society itself. 16 The category “fictitious commodities” should not be confused, Polanyi underlines, with “Marx’s assertion of the fetish character of the value of commodities” that “refers to the exchange value of genuine commodities” (Polanyi 2001, 76 (note)).

43

Claus Thomasberger

Literature Barone, Enrico. 1935. “The Ministry of Production in the Collectivist State (1908).” In Collectivist Economic Planning, edited by Friedrich A. Hayek, 245–290. London: Routledge & Kegan Paul Ltd. Bauer, Otto. 1976. “Der Weg Zum Sozialismus (1919).” In Werke, Bd. 2, edited by Otto Bauer, 89–131. Wien: Europaverlag. Becchio, Giandomenica. 2007. “The Early Debate on Economic Calculation in Vienna (1919–1925). The Heterodox Point of View: Neurath, Mises and Polanyi.” Storia Del Pensiero Economico 2: 133–144. Bockman, Johanna. 2016. “Socialism and the Embedded Economy.” Theory and Society 45 (5): 385–397. https://doi.org/10.1007/s11186-016-9276-9. Cole, G. D. H. 1980. Guild Socialism Restated. New Brunswick, NJ: Transaction Publishers. Dale, Gareth. 2010. Karl Polanyi: The Limits of the Market. Cambridge; Malden, MA: Polity. ———. 2016. Karl Polanyi: A Life on the Left. New York: Columbia University Press. Dekker, Erwin. 2016. The Viennese Students of Civilization: The Meaning and Context of Austrian Economics Reconsidered. Cambridge: Cambridge University Press. Engels, Friedrick. 1996. Herr Eugen Dühring’s Revolution in Science (1878). In Collected Works, edited by Karl Marx and Frederick Engels, MECW, Vol. 25: 5–309. New York: International Publishers. Engels, Frederick. 2010. “Outlines of a Critique of Political Economy (1843–44).” In Karl Marx and Frederick Engels, Collected Works, MECW, Vol. 3: 418–443. New York: International Publishers. Fraser, Nancy. 2014. “Can Society Be Commodities All the Way Down? Post-Polanyian Reflections on Capitalist Crisis.” Economy and Society 43 (4): 541–558. https://doi.org/10.1080/03085147.2014.898822. Friedman, Milton, and Rose Friedman. 1990. Free to Choose: A Personal Statement. San Diego: Mariner Books. Gemici, Kurtuluş. 2015. “The Neoclassical Origins of Polanyi’s Self-Regulating Market.” Sociological ­Theory 33 (2): 125–147. https://doi.org/10.1177/0735275115587389. Hayek, Friedrich A. 1935. “The Present State of the Debate (1935).” In Collectivist Economic Planning, edited by Friedrich A. Hayek: 201–244. London: Routledge & Kegan Paul Ltd. ———. 1978. “Coping With Ignorance.” Imprimis 7 (7): 1. Hülsmann, Jörg Guido. 2007. Mises: The Last Knight of Liberalism. 1st ed. Auburn, Ala: Ludwig von Mises Institute. Marx, Karl. 1996. “Capital Vol. I (1867).” In Collected Works, edited by Karl Marx and Frederick Engels MECW, Vol. 35. New York: International Publishers. Mendell, Marguerite. 1990. “Karl Polanyi and Feasible Socialism.” In The Life and Work of Karl Polanyi. A Celebration, edited by Kari Polanyi-Levitt: 66–77. Montréal; New York: Black Rose Books. Mises, Ludwig. 1935. “Economic Calculation in the Socialist Commonwealth (1920).” In Collectivist Economic Planning, edited by Friedrich A. Hayek: 87–120. London: Routledge & Kegan Paul Ltd. ———. 1951. Socialism: An Economic and Sociological Analysis (1922). New Haven, CT: Yale University Press. ———. 2002a. “New Contributions to the Problem of Socialist Economic Calculation (1923).” In Selected Writings of Ludwig von Mises. Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, edited by Richard M. Ebeling, 2: 351–366. Indianapolis: Liberty Fund Inc. ———. 2002b. “Recent Writings Concerning the Problem of Economic Calculation under Socialism (1928).” In Selected Writings of Ludwig von Mises. Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, edited by Richard M. Ebeling, 2: 367–371. Indianapolis: Liberty Fund Inc. ———. 2009. Memoirs (1978). Auburn: Ludwig von Mises Institute. ———. 2011. Mises, L: Interventionism: An Economic Analysis (1940). Indianapolis: Liberty Fund Inc. ———. 2012. A Critique of Interventionism (1929). Auburn: Ludwig von Mises Institute. Neurath, Otto. 1919. Durch Die Kriegswirtschaft Zur Naturalwirtschaft. München: G.D.W. Callwey. Polanyi, Karl. 1925. “Tauschwirtschaft Und Kaufkraftwirtschaft.” Wien. Con 03 Fol 09. Karl Polanyi Digital Archive (KPIPE) Montreal. ———. 1926. “Das Übersichtsproblem.” Wien. Con 03 Fol 01. Karl Polanyi Digital Archive (KPIPE) Montreal. ———. 1934. “Notes.” Con 06 Fol 05 and Con 06 Fol 06. Karl Polanyi Digital Archive (KPIPE) Montreal. ———. 2001. The Great Transformation: The Political and Economic Origins of Our Time. Boston, MA: Beacon Press.

44

Socialist calculation debate and problem of modern civilization ———. 2014. “The Crucial Issue Today (1920).” In For a New West: Essays, 1919–1958, edited by Giorgio Resta and Mariavittoria Catanzariti: 165–76. Cambridge, MA: Polity. ———. 2016a. “Guild and State.” In Karl Polanyi: The Hungarian Writings, edited by Gareth Dale, 121–122. Manchester: Manchester University Press. ———. 2016b. “Guild Socialism.” In Karl Polanyi: The Hungarian Writings, edited by Gareth Dale, 118–120. Manchester: Manchester University Press. ———. 2016c. “Socialist Accounting (1922).” Theory and Society 45 (5): 398–427. https://doi.org/10.1007/ s11186-016-9276-9. ———. 2017. The Present Age of Transformation Five Lectures by Karl Polanyi Bennington College,1940. London: Prime. http://www.primeeconomics.org/e-publications/. ———. 2018a. “Ideologies in Crisis (1919).” In Karl Polanyi’s Vision of a Socialist Transformation, edited by Michael Brie and Claus Thomasberger: 264–267. Montreal: Black Rose Books. ———. 2018b. “Our Obsolete Market Mentality.” In Economy and Society: Selected Writings, edited by Michele Cangiani and Claus Thomasberger: 197–212. Cambridge: Polity Press. ———. 2018c. “The Fascist Virus (ca. 1938–1940).” In Economy and Society: Selected Writings, edited by Michele Cangiani and Claus Thomasberger: 108–129. Cambridge: Polity Press. ———. 2018d. “The Functionalist Theory of Society and the Problem of Socialist Economic Accounting (1924).” In Economy and Society: Selected Writings, edited by Michele Cangiani and Claus Thomasberger: 51–58. Cambridge: Polity Press. Polanyi, Karl, and Felix Schafer. 1930. “Hans Mayers Lösung des Zurechnungsproblems.” Con 29 Fol 09. Karl Polanyi Digital Archive (KPIPE) Montreal. Rief, Silvia. 2022. “Karl Polanyi’s ‘Socialist Accounting’ and ‘Overview’ in the Age of Data Analytics.” New Political Economy 28 (2) July: 1–15. https://doi.org/10.1080/13563467.2022.2095995. Schafer, Felix. 1937. “Reine Rechtslehre Und Reine Wirtschaftstheorie.” Internationale Zeitschrift für Theorie des Rechts 11: 203–214. ———. 1939. “Rechtliche Und Wirtschaftliche Zurechnung.” Internationale Zeitschrift für Theorie des ­Rechts 13: 162–176. ———. 1963–1965. “Memoirs.” Con 29 Fol 09. Karl Polanyi Digital Archive (KPIPE) Montreal. Schumpeter, Joseph A. 1909. “Bemerkungen Über Das Zurechnungsproblem.” Zeitschrift Für Volkswirtschaft, Sozialpolitik und Verwaltung 18: 79–132. Slobodian, Quinn. 2018. Globalists: The End of Empire and the Birth of Neoliberalism. Cambridge, MA: Harvard University Press. Tönnies, Ferdinand. 2001. Community and Society (1887). Cambridge; New York: Cambridge University Press. Weber, Max. 1920. Gesammelte Aufsätze zur Religionssoziologie, Bd. I. Tübingen: J. C. B. Mohr. Wieser, Friedrich. 1893. Natural Value (1889). London: Macmillan. ———. 1927. Social Economics (1914). New York: Adelphi.

45

PART 2

The ‘Great Transformation’

I

In theory

4 POLANYI AND NEOLIBERALISM Bob Jessop

Introduction Two of Polanyi’s most important contributions to critical social science were his insistence that land, labour, and money were fictitious commodities and that the liberal propensity to treat them as if they were real commodities was a major source of contradictions and crisis-tendencies in capitalist development – so great that society would eventually fight back against the environmentally and socially destructive effects of such treatment. He accepted Marx’s analysis of commodity fetishism and reification in the capitalist mode of production but criticized its neglect of the economistic fallacy shaping economic determinism in the capitalist market economy. This, in turn, meant, for Polanyi, that Marx could not explain the character of the double movement as one that rolled out a utopian liberal credo and provoked a realist resistance. He applied these arguments to the fightback against liberalism in the late 19th century and also noted their relevance to the economic crises of the 1930s. They have been further developed by Polanyian scholars to analyse society’s fightback against neoliberalism. I consider their implications in this chapter.1

On commodities and fictitious commodities This section elaborates some crucial distinctions based partly on Polanyi’s analysis and partly on a more general critique of capitalism inspired by Marx. First, a commodity is a good or service that is actively produced for sale in a labour process. If this were not so, Polanyi could not have sensibly distinguished commodities and fictitious commodities. A commodity can result from peasant, petty commodity, state production, cooperative production, or social enterprise as well as from capitalist production – what matters is that it is production for sale. Second, a capitalist commodity is one produced in a labour process subject to capitalist competition that creates pressures to reduce both the socially necessary labour time involved in its production and the socially necessary turnover time involved in realizing the surplus value that it embodies (Marx 1996: 46–48, 114–140). This generates a dynamic relation between the organization of production and the commodity character of the products being produced. Exchange value refers to a commodity’s market-mediated monetary value for the seller; use value to its material or symbolic usefulness to the purchaser. Without exchange value, commodities would not be



51

DOI: 10.4324/9781003336747-7

Bob Jessop

produced for sale; without use value, they would not be purchased. This was the basis on which Marx dialectically unfolded the complex dynamic of the capitalist mode of production. Third, a fictitious commodity has the form of a commodity (can be bought and sold) but is not actually produced in order to be sold. It already exists before it acquires the form of an exchange value (e.g., raw nature) or it is produced as a use value before being appropriated and offered for sale (e.g., human artefacts originating in a socially embedded economy). Above all, in contrast to a capitalist commodity, a fictitious commodity is not created in a profit-oriented labour process subject to the competitive pressures of market forces to rationalize its production and reduce the turnover time of invested capital. This concept is important because analysing land, money, and labour power as simple and/or capitalist commodities would obscure the conditions under which they enter the market economy, get transformed therein, and so contribute to producing goods and services for sale. This explains why, although land, labour, and money are “absolutely vital parts” of the market economy, Polanyi regards them as fictitious commodities. For, as he notes, what we call labour is simply human activity, whereas land is the natural environment of human beings, and money is just an account of value. This view was also shared by Marx, who also contrasted their role in pre-­capitalist societies with their fictitious commodification in the capitalist mode of production (Burkett 1999; Foster 2000; Saito 2017). Indeed, Polanyi emphasizes several times both that “[t]he postulate that they are produced for sale is emphatically untrue” and that “it is with the help of this fiction that the actual markets for labor, land and money are organized” (2001: 75). This also entails the organization of the wider society as a market society to sustain the organization of the economy in separate, market-based, and market-oriented institutions disembedded from nonmarket relations. For, as he argues, “a market economy can function only in a market society” (2001: 60). This legitimates, in turn, the idea that each factor of production is entitled to its own share in the distribution of the total income and/or wealth of society. This theme is elaborated by Polanyi (1957a: 69) in the following terms: Self-regulation implies that all production is for sale on the market and that all incomes derive from such sales. Accordingly, markets exist for all elements of industry, not only for goods (always including services) but also for labor, land, and money, their prices being called respectively commodity prices, wages, rent and interest. The very terms indicate that prices form incomes: interest is the price for the use of money and forms the income of those who are in the position to provide it; rent is the price for the use of land and forms the income of whose who supply it; wages are the price for the use of labor power, and form the income of those who sell it; commodity prices, finally contribute to the incomes of those who sell their entrepreneurial services, the income called profit being actually the difference between two sets of prices, the price of the goods produced and their costs, i.e., the price of the goods necessary to produce them. If these conditions are fulfilled, all incomes will derive from sales on the market, and incomes will be just sufficient to buy all the goods produced. Yet if this threefold [fictitious] commodification goes too far, it undermines the market economy by provoking a wide range of social forces adversely affected thereby. Thus “the extension of the market organization in relation to genuine commodities was accompanied by its restriction in relation to fictitious ones” (Polanyi 2001: 79). The self-regulating market of economic liberalism is opposed by social protection intended to preserve man and nature. This is Polanyi’s famous “double movement”.

52

Polanyi and neoliberalism

Polanyi argued that: “[t]he true criticism of market society is not that it was based on economics – in a sense, every and any society must be based on it – but that its economy was based on selfinterest” (ibid.: 257). But pursuit of self-interest can occur at the expense of shared interests and produce negative externalities that ravage society when linked to the “utterly materialistic” creed that “all human problems could be resolved given an unlimited number of material commodities” (ibid.: 42). Polanyi counterposes this amoral economy to the pre-industrial epoch, when economic activities were embedded in familial, age-group, totemic, political, or religious relations and when commitments to reciprocity and redistribution ensured individual, household, and societal subsistence, short of disasters that overwhelmed the whole community (Polanyi 1957a: 68–71, 81, 90, 2001: 48–51). In contrast to the 19th-century “marketing view of society” that assumes the omnipresence of separate economic institutions, the characteristic of human societies is precisely the absence of such separate and distinct economic institutions. That the economic system is “embedded” in the social relations means precisely this. (Polanyi 2001: 101)

Polanyi as a moral economist In general, moral economy explores the genesis, variation, selection, and consolidation of specific economic imaginaries and their ethical and moral underpinnings. Moral imaginaries may give more weight to deontological (value-rational) principles or else to consequentialist principles that relate various means and end in a more pluralistic manner (Polanyi 1957b: 239–240, 245–247). Polanyi (1947: 97, 101) also distinguished ideal from material interests, their differential articulation, and condemned the materialism of market economies. The crucial theoretical underpinning of Polanyi’s moral economy is an analytical distinction between substantive and formal economics. This is linked to his historical distinction between non-market and market economies and to his suggestion that, while it is anachronistic to talk of “economic motives” in non-market economies, they emerge and become dominant in market economies at the expense of wider “social motives”, such as honour, pride, solidarity, civil obligation, moral duty, or simply a sense of common decency (1947: 98, 101, 2001: 31). In non-market societies, because there is no price-making mechanism, the distribution of want-satisfying material resources of varied provenance is governed by non-market moral codes and organizational principles. However, in market economies, everything eventually acquires a market price and enters exchange relations. Exchange is the dominant mechanism of distribution and the self-regulating interaction of supply and demand distributes goods and services as commodities. In short, market forces define what will count as exchange-values, mediate their exchange, and reproduce market relations as commodities are exchanged for money. In a market economy, exchange becomes the dominant mode of social integration. On this basis, Polanyi distinguished a substantive, transhistorical definition of economics as want-satisfying behaviour and a formal, historically specific definition of economics as rational, economizing behaviour. The economy, in its substantive sense, is “an instituted process of interaction between man and his environment, which results in a continuous supply of want-satisfying material means” (1957b: 248). This covers non-market and market economies. Formal economics, however, does not recognize the distinction. It thereby commits the “economistic fallacy” in seeing all economic conduct as formally rational and economizing and assimilates the properties of

53

Bob Jessop

other non-capitalist economies to those of market economies (1977). The economistic fallacy is a key feature of the capital relation and takes different forms in different varieties of capitalism. The study of how economies are instituted should start, Polanyi suggests, from how the economy acquires unity and stability. Thus, in his history of trade and markets as well as his economic anthropology, he argues that societal (institutional) conditions sustain the (circular) interdependence of economic movements and ensure the “recurrence” of its parts (that is, their continued reproduction). This alone secures the unity and stability of the (instituted) economic process. He focused here on basic structural principles – householding, reciprocity, redistribution, or exchange – that vest the economic process with institutional unity and stability (1957b: 249–250). A well-developed example is Polanyi’s account of haute finance in the golden age of laissezfaire as a crucial mode of what nowadays would be called metagovernance. Haute finance was The main link between the political and the economic organization of the world in this period … a permanent agency of the most elastic kind […] the nucleus of one of the most complex institutions the history of man has produced. (2001: 10, 11) It rested not only on an interpersonal network with diasporic as well as national dimensions but also depended on a complex web of interorganizational relations that reconciled the rival logics of the economic, political, and military systems on both national and international levels (2001: 210–217). This statement is a major corrective to one-sided readings of Polanyi that focus only on the disembedding of the capitalist economy from pre-capitalist social arrangements and institutions. He also studies how a newly differentiated market economy becomes integrated into an emerging market society. It is unclear whether the emergence of the market society refers to the apogee of self-regulating markets in the 19th century as they were disembedded from their earlier institutional frameworks and new laissez-faire principles were instituted on a society-wide basis with the result that “the running of society is an adjunct to the market” (2001: 60); or it refers to the process whereby the society, being forced to adapt and reorganize in this way, starts to “fight back” by demanding new social institutions that can constrain market forces and compensate for market failures.

The “double movement” of capitalist development This ambiguity is captured in Polanyi’s “double movement”. He suggested that this can be personified as the action of two organizing principles in society, each of them setting itself specific institutional aims, having the support of definite social forces and using its own distinctive methods. The one was the principle of economic liberalism, aiming at the establishment of a self-regulating market, relying on the support of the trading classes, and using largely laissez-faire and free trade as its methods; the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization, relying on the varying support of those most immediately affected by the deleterious action of the market – primarily, but not exclusively, the working and the landed classes – and using protective legislation, restrictive associations, and other instruments of intervention as its methods (2001: 138–139). These two principles are not purely economic but embody specific normative principles and values. First, the liberal principle is premised on hunger and fear of hunger for those who possess only labour power and on the unbridled pursuit of gain, or the prospect of it, on the part of those who own 54

Polanyi and neoliberalism

or control land and money (Polanyi 1947: 98). However, ideologically, as Marx noted, in the labour market and in commercial exchange, this creates the appearance of a “very Eden of the innate rights of man [w]here alone rule Freedom, Equality, Property” (Marx 1996: 186). Polanyi seems to interpret this indirectly in terms of a belief in the economic determinist creed of liberalism (Thomasberger 2012–2013: 17). In contrast, the principle of social protection addresses actual asymmetries in the labour process, the negative externalities of unregulated markets, other forms of market failure, and the need to secure daily, lifetime, and intergenerational social reproduction that cannot be fully delivered, let alone guaranteed, by self-regulating markets in labour and land. Indeed, Polanyi argues: Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. (2001: 76) Second, although the countermovement was essential to protect society from the annihilating effects of the commodification of land and labour, “in the last analysis it was incompatible with the self-regulation of the market, and thus with the market system itself” (2001: 136). Pushed too far, it would undermine the market economy, which, as a self-regulating system, reacts unpredictably to outside intervention. In addition, market winners also resist such intervention. It is illustrated in Polanyi’s comment on The mutual incompatibility of institutions like the wage system and the “right to live”, or, in other words, […] the impossibility of a functioning capitalistic order as long as wages were from public funds (2001: 86). [And, likewise, that] the self-protection of society for which he [Owen] was calling would prove incompatible with the functioning of the economic system itself. (2001: 135) The latter claim reflects the role of guild socialism as an alternative to the market and planning. Hence, third, the diverse interventions of “society” (notably, but not only, made by the state in response to demands coming from political and civil society) were limited to “checking the action of the market in respect to the factors of production, labor, and land” (2001: 136). Polanyi also explores the performative effects of the liberal economic imaginary on policies, politics, polities, economic development, and social antagonisms, both before and after its collapse (2001: 21–30). This imaginary had crucial ideational bases in the wider system of political economy that sought to fit the “amazing regularities and stunning contradictions [of self-regulating markets] […] into the scheme of philosophy and theology” and reconcile their self-evident constraints and destructive implications with the moral principles of harmony and pursuit of freedom (2001: 31, 88–89). In addition, laissez-faire was associated with “social instrumentalities” (2001: 8) such as the other three institutional pillars of the self-regulating market economy [the liberal state, the balance of power in international relations, and the gold standard] and the role of haute finance in governing the relations among all four pillars in its capacity as a decentred coordinating network of banks that also worked with governments to maintain peace (2001: 10–11). And the 55

Bob Jessop

ideological blinkers of the advocates of laissez-faire from the 1820s onwards led to neglect of accumulating tensions and crisis-tendencies from self-regulating labour markets, the gold standard, and free trade (2001: 21, 141). Polanyi unpacks resistance in the double movement in three ways. First, he recognized the role of rival class interests, insisting that these are not just economic but extend into other social fields, and arguing that the reaction of classes to unregulated market forces is one way in which “society” resists its destruction by the market (2001: 132). This included the efforts of capitalist interests to defend and even produce profits and extra-profits in defiance of market competition.2 Second, he highlighted non-class bases of spontaneous resistance to the logic of the market (2001: 159–161). In this regard, cross-class social alliances drawing on quite diverse logics of justification also played their role. Indeed, third, Polanyi also records the heterogeneity of the social categories who resist the wider effects of commodification and marketization: While monetary interests are necessarily voiced solely by the persons to whom they pertain, other interests have a wider constituency. They affect individuals in innumerable ways as neighbors, professional persons, consumers, pedestrians, commuters, sportsmen, hikers, gardeners, patients, mothers, or lovers – and are accordingly capable of representation by almost any type of territorial or functional association such as churches, townships, fraternal lodges, clubs, trade unions, or, most commonly, political parties based on broad principles of adherence. (2001: 162) It is unsurprising, then, that Polanyi also recognizes forms of resistance to the eventual consolidation of self-regulating markets in a fully consolidated market society. For him, this is expressed in the polar principles of liberalism and social protection, around which different hegemonic, sub-hegemonic, and counter-hegemonic struggles occur over such issues as: the entrenchment or rolling back of marketization and seeking to shape and mobilize “common sense” for or against extending the logic of capital accumulation as the desirable and/or necessary condition for accomplishing other social goals. This is reflected in the competing economic and political programmes and ethico-political visions into which economic liberalism is articulated and the range of counterhegemonic projects developed to resist the onward march of liberalism. For, if society’s fightback is to move beyond dispersed, disorganized, and mutually contradictory struggles, attention must be paid to how “society” acquires a relative unity and cohesion in resisting capital’s unhampered logic, which is not reducible to market liberalism. As Polanyi argues, the reaction of society to the destructive impact of liberal market forces is not conducted merely in terms of sectional interests but in the name of the general interest of society as a whole. This is where the role of specific economic, political, and social projects, of hegemonic visions, and of associated strategic capacities becomes crucial. Indeed, as Polanyi well knew, it makes a world of difference whether this resistance is conducted in the interwar period under the dominance of fascism,3 social democracy, corporate liberalism à la New Deal, or a communist regime. And he also saw a maximally decentralized socialism (his preferred alternative, which would overcome the institutional separation of the economic and the political) as “essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society” (2001: 242). This would be how society overcame the problems of living in the complexity of a technological society which could not be reduced to the separation of economy, politics, and civil society.

56

Polanyi and neoliberalism

Polanyi and neoliberalism Polanyi’s comparative, substantive, historical focus on substantive economies is innovative in three ways. First, analysing them through the lens of distribution and corresponding modes of social integration produces important new insights into earlier periods without losing sight of the historical specificity of the capitalist mode of production. For, in Polanyian terms, it is the dominance of the exchange principle tied to the generalization of the commodity form to all the inputs into production that separates capitalism from pre- or non-capitalist social formations. Second, by highlighting the fictitious character of land, labour, and money as commodities, that is, their treatment as if they were commodities when they are not produced for sale but do have a price, he can ground both a normative moral economy and a critical scientific analysis of capitalism. This approach can also be generalized to knowledge as a fourth fictitious commodity (cf. Jessop 2007). Third, his enquiry into the bases of the unity and stability of specific substantive economic arrangements has parallels with Gramsci’s analysis of the “historical bloc” in capitalism as a reflection of “the necessary reciprocity between structure and superstructure” (1971: 366; cf. 377). But his analysis of the economy has a much broader historical sweep than Gramsci’s does and, importantly, includes an adequate conceptual schema to deal with pre-capitalist societies. This chapter is concerned, however, with the relevance of Polanyi’s analysis to neoliberalism. In this regard, he had an undertheorized4 notion of embeddedness, dis-embedding and what one might (but Polanyi did not) call re-embedding, especially in The Great Transformation, but clarity on these processes is critical to fully understanding the potential of his work for the study of neoliberalism. The sequence of embedding, disembedding, and re-embedding provides a powerful heuristic that could be enhanced through more detailed analysis of the institutional arrangements to which they relate and by asking whether this is a “fractal” process, that is, one that occurs in similar ways at different scales and over different time horizons. There are strong hints of this in The Great Transformation and The Livelihood of Man. Developing these hints would help disinterested researchers and concerned citizens to judge whether neoliberalization can recuperate from shocks through its capacities hitherto for reinvention across different spatio-temporal scales and horizons of action – although it may finally be running out of road for this as the new double movement takes populist right-wing forms. Polanyi’s analysis of the crisis of liberalism and the double movement applied to the effects of economic determinism in the late 19th century. Although he showed the limits of self-regulating markets in coordinating economics, politics, and civil society in liberal bourgeois civilization, he presents these insights in an eclectic manner. Liberal capitalism ended with the death of the international Gold Standard. He did not apply these insights to the interwar period because, as Claus Thomasberger has argued, [T]he Great Depression was not primarily an economic crisis, it was the end of the liberal credo and of the countermovement it had triggered. And it laid the groundwork for completely new alternatives. (Thomasberger 2012–2013: 25; cf. idem 2020: 154) Indeed, none of the four institutions which Polanyi considers the defining institutions of the civilization of the 19th century – the balance-of-power system, the international gold standard, the self-regulating market system and the liberal state – had survived the great transformation (Thomasberger 2020: 136). In this regard, Polanyi recognized that society’s fightback against

57

Bob Jessop

self-regulating markets is neither directed against market forces (or capitalism) as such nor is it a reaction of the wider “society” as such. In addition, he was unaware of the extent to which Marx had already anticipated his analysis of the three fictitious commodities of labour-power, money (including credit and money as capital), and land (see Jessop 2019). And he did not build on Marx’s incisive analyses of the contradictions and crisis-tendencies in the capital relation, inclining on many occasions to be dismissive of its underlying theoretical assumptions. The “double movement” involved a complex series of reactions at many different points in social space to specific conflicts, crisis-tendencies, and contradictions associated with the unregulated extension of market forces. As Polanyi emphasized, there is nothing natural about the market economy. In the period of the liberal credo, it was assumed that economic laws were laws of nature, and that laissez-faire was an appropriate form of regulation. The belief in naturalism disappeared with the Great Transformation and the neoliberal credo will later argue that economic laws depend on contingent human decisions and practices. Indeed, for neoliberal protagonists, “the creation and the extension of the [self-regulating] market system are considered as a goal to be achieved, as their mission” (Thomasberger 2012–2013: 28). In this regard, a useful baseline definition is that neoliberalism is a political project that is justified on philosophical grounds and seeks to extend competitive market forces, consolidate a market-friendly constitution, and promote individual freedom (Jessop 2012). This is reflected in the promotion of a one-sided reading of the commodity relation in all its forms – affecting capitalist commodities and fictitious commodities alike. Neoliberalism revives the economistic fallacy and applies it to everyday life, not just to economic relations. Referring to Marx, we can see that neoliberal policies emphasize that the commodity form is an exchange value rather than substantive use-value, money is a tradeable international currency rather than national store of value, capital is a sum of money that can be freely exported to be valorized anywhere in time and space rather than a specific set of resources that need to be deployed in a specific time-space context, labour-power is an abstract capacity to add value rather than a specific set of skills, the state is an ideal collective capitalist rather than an institutional order charged with securing the relative cohesion of a divided society, nature is a set of commodifiable resources rather than free gift of spaceship earth, knowledge is an intellectual property entitled to rents rather than substantive collective wisdom,5 and so forth. In this sense, neoliberalism could emerge when the first stage of industrial civilization, with its dominance of the machine, ended (Polanyi 2018: 197–198, 210–211, 243–250). Yet so incisive was the experience of the market economy, that our current notions are almost entirely derived from this short period (Polanyi 2018: 244). Although Polanyi sought to adapt industrial civilization to new societal challenges and to overcome the economistic fallacy, neoliberalism was possible because liberal capitalism survived in the USA (Polanyi 2018: 197, 231–232). In this sense we can refer, instead, to financial civilization replacing the machine age. This leads to The commodification of everyday life, the ideological naturalization of commodity relations, and the subordination of society to the casino rhythms of finance in particular and of the world market in general. (Dale 2010: 215) The role of the state, broadly understood in the Gramscian sense of “political society + civil society” (Gramsci 1971: 261–263), in promoting finance-dominated accumulation indicates that, far from being the product of spontaneous market forces and signifying the primacy of the economy, a neoliberal regime is the product of political mobilization by interest-bearing capital and depends 58

Polanyi and neoliberalism

on a primacy of the political. Its rise, consolidation, and crisis-management are linked to “unusual deals” with political authority (such as the exchange of financial contributions for administrative, judicial, fisco-financial or commercial decisions that privilege particular capitals and fall well outside the normal working of the rule of law), profit on the market from force and domination (including the use of state power to impose neo-liberal rules, institutions and practices on other accumulation regimes and open up new fields of accumulation), and predatory political profits (including kleptocracy, accumulation based on dispossession, and so on). In short, finance-dominated accumulation extends and deepens earlier forms of political capitalism in advanced post-war societies and leads to major changes in the circuits of capital as interest-bearing capital forms closer ties to the state apparatus. Neoliberalization contributes to the completion of the world market by facilitating the deepening of the spatial and scalar divisions of labour, by creating more opportunities for moving up, down, and across scales, by commodifying and securitizing the future, and by re-articulating time horizons through space-time compression and time-space distantiation. It also enhances capital’s opportunities to displace and/or defer its contradictions and negative externalities onto other economic actors and interests, other systems, and the natural environment. In this context, interest-bearing capital gains strongly from world market integration because it controls the most liquid, abstract, and generalized resource and because it has become the most integrated fraction of capital. As finance-dominated accumulation expands and penetrates deeper into the social and natural world, it transforms the micro-, meso- and macro-dynamics of capitalist economies. First, it alters the calculations and behaviour of non-financial firms through the rise of shareholder value as a coercive discourse, technology of governance, and vector of competition. One aspect is the growing importance for non-financial firms of financial activities (e.g., treasury functions, financial intermediation, using retained profits for share buybacks and/or acquisition or expansion of financial subsidiaries) that are not directly tied to their main profit-producing pursuits (Krippner 2005; Lapavitsas 2013). Second, it boosts the size and influence of the financial sector. Fee-producing and risk-taking activities increase relative to banking capital’s more traditional roles in intermediation and risk management; securitization, leverage and shadow banking with corresponding liquidity risks and weak prudential controls also expand; and so does the significance of new forms of financial capital (e.g., hedge funds, private equity, vulture capital, sovereign wealth funds). Third, as successive crises from the mid-1970s show, financialization makes the economy more prone to recession and, in severe cases, more liable to the downward spiral of debtdeflation-default dynamics (Lapavitsas 2013; Rasmus 2010). Indeed, as more scandals emerge in the financial sector, it is becoming clear that these superprofits derive in part from predatory and, indeed, criminal activities that were facilitated by successive measures of deregulation enacted thanks to the financing of political parties and unusual deals with political bodies (Black 2014). The resistance to neoliberalism can take different forms, depending on the use-value aspects of the commodity relation that are neglected. If we can talk of a double movement in the neoliberal era, resistance would arise on different grounds. The economization of social relations is not opposed in terms of such policies being impracticable because resistance contradicts natural economic laws (Thomasberger 2020: 141). Instead, resistance emerges because it rejects the utopian ideal of the self-maximizing principle of market forces seeking the highest return to one or another of its commodified forms. Polanyi’s analysis remains topical because in our days a utopian belief, masked as a realist insight, has again become the main driving force of social change. Again, this fiction is used to favour market solutions and reject (as far as possible) the claims of social protection. Indeed, neoliberalism regards protection as infringing the laws of the market. This protection alone “offers an answer to the problem of a technological society without destroying personal freedom and falling back on dictatorship over needs” (Thomasberger 2020: 159–160). 59

Bob Jessop

Conclusions I have argued that Polanyi’s analysis of the Great Transformation has only indirect implications for neoliberalism because it focused on the heyday of market economy and market society. His work concerned the utopian liberal credo that interpreted economic laws as natural laws of economic motion against which those affected by laissez-faire approaches to the self-regulation of fictitious commodities mobilized to defend their real interests. The era of liberal utopia was ended during the interwar period and has no exact parallel in the rise of neoliberalism. Nonetheless there are important similarities in the revival of a form of economic liberalism in contemporary capitalism. These can be seen in the revival of the market utopia and the treatment of land, labour, and money as fictitious commodities and the destructive effects of market system on human life, nature, and the productive apparatus. The nature of contemporary capitalism reflects the end of the dominance of industrial capitalism and the rise of post-industrial capitalism, the rise of financialization and digitalization, the increasing integration of the world economic order, and the importance of the principle of seeking maximum profit from the different forms of the commodity relation. This leads to the increasing economization of everyday life and culture. This, in turn, alters the nature of the double movement. It is no longer concerned to defend real life against the naturalist liberal credo but to protect society against the economizing tendencies of neoliberal beliefs. Marx’s views on commodity fetishism and belief in reification have become more relevant to neoliberalism and his insights into the contradictions and crisis-tendencies of the capital relation merit integration with a Polanyian perspective. I have shown how this can be attempted and drawn some policy recommendations. A key in the argument was to consider the political framework (political society + civil society) within which neoliberal regime shifts have been pursued and the effects of this pursuit on the nature and crisis-tendencies of the state. This involves, in turn, the consolidation of authoritarian neoliberalism as the “best possible political shell” for a still evolving, and inevitably crisis-prone, predatory, finance-dominated accumulation regime. It remains to see whether the many fragmented forms of resistance can be linked up horizontally, vertically, and transversally to provide an effective challenge to this new bloc, its finance-dominated accumulation regime and its “new normal” state form by exploiting their fragilities. This will require connecting economic and political power in ways that are “proscribed” by the democratic rules of the game but are realized continually in non-democratic ways by the new transnational financial bloc.

Notes 1 The final draft of this chapter was greatly improved by the comments of the editors, who are experts on the whole work of Polanyi. Any errors of interpretation remain mine. 2 I am grateful to Michele Cangiani for this observation. 3 Polanyi interpreted fascism as a totalitarian attempt to subordinate an entire society to the logic of the market in the interests of the proprietors; he analysed its anti-universalist ideology of “blood and race”, neofeudal economic structures, and the political matrix within which it emerged occurred (see Maucourant 2000). 4 Olofsson shows that Polanyi used various words for embeddedness in his magnum opus that are “either linguistic varieties of the same concept (i.e., embeddedness) or that take up partly different specialized meanings of the general concept” (1995: 86). 5 Historically, the production of knowledge occurred outside the market, in institutions such as guilds, universities, religious bodies, or state institutions; and it was rewarded through patronage, prestige, prizes, or income tied to rank or status rather than to economic performance. Or, as Polanyi concluded, “[s]cience and the arts should always be under the guardianship of the republic of letters” (2001: 263–264).

60

Polanyi and neoliberalism

References Black, William K. 2014. Posing as hyper-rationality: OMB’s assault on effective regulation. New Economic Perspectives 27 May. Burkett, Paul. 1999. Marx and Nature: A Red and Green Perspective. New York: St Martin’s Press. Dale, Gareth. 2010. Karl Polanyi. The Limits of the Market. Cambridge: Polity. Foster, John Bellamy. 2000. Marx’s Ecology Materialism and Nature. New York: Monthly Review Press. Gramsci, Antonio. 1971. Selections from the Prison Notebooks. London: Lawrence & Wishart. Jessop, Bob. 2007. Knowledge as a fictitious commodity: Insights and limits of a Polanyian analysis. In Reading Karl Polanyi for the 21st Century, eds, Ayse Buğra and Kaan Ağartan, 115–134. Basingstoke: Palgrave. ——— 2012. Neoliberalism. In The Wiley-Blackwell Encyclopedia of Globalization, vol. 3, ed, George Ritzer, 1513–1521. Chichester: Wiley-Blackwell. ——— 2019. Money and credit as fictitious commodities, financialisation, and contemporary financial crises. In: Great Transformations? In Capitalism after Polanyi, eds, Roland Atzmüller, Brigitte Aulenbacher, Ulrich Brand, Fabienne Décieux, Karen Fischer and Birgit Sauer, 75–90. Cheltenham: Edward Elgar. Krippner, Greta R. 2005. The financialization of the American economy. Socio-Economic Review 3: 173–208. Lapavitsas, Costas. 2013. Financialization in Crisis. Chicago: Haymarket Books. Marx, Karl. 1996. Capital: A Critique of Political Economy. Volume I: The Process of Production of Capital. London: Lawrence & Wishart. Maucourant, Jérôme. 2000. Polanyi, lecteur du Marx. Actuel Marx 27: 133–151. Olofsson, Gunnar. 1995. Embeddedness and integration: An essay on Karl Polanyi’s ‘The Great Transformation’. In Social Integration and Marginalization, ed, Niels Mortensen, 72–113. Frederiksberg: Samfundslitteratur. Polanyi, Karl. 1947. On belief in economic determinism. Sociological Review 37(1): 96–102. ——— 1957a. Aristotle discovers the economy. In Trade and Market in the Early Empires, eds, Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson, 64–94. Glencoe: Free Press. ——— 1957b. The economy as instituted process. In Trade and Market in the Early Empires, eds, Karl ­Polanyi, Conrad M. Arensberg and Harry W. Pearson, 243–269. Glencoe: Free Press. ——— 1977. The Livelihood of Man. New York: Academic Press. ——— 2001. The Great Transformation: The Political and Economic Origins of our Time. 2nd paperback edition. Boston: Beacon Press. ——— 2018. Economy and Society: Selected Writings. Edited by Michele Cangiani and Claus Thomasberger. Cambridge: Polity. Rasmus, Jack. 2010. Epic Recession: Prelude to Global Depression. London: Pluto. Saito, Keiho. 2017. Karl Marx’s Ecosocialism: Capital, Nature, and the Unfinished Critique of Political Economy. New York: Monthly Review Press. Thomasberger, Claus. 2012–2013. The belief in economic determinism, neoliberalism, and the significance of Polanyi’s contribution in the twenty-first Century, International Journal of Political Economy 41(4): 16–33. ——— 2020. Fictitious ideas, social facts and the double movement: Polanyi’s framework in the age of neoliberalism. In Karl Polanyi and Twenty First Century Capitalism, eds, Radhika Desai and Kari PolanyiLevitt, 135–163. Manchester: Manchester University Press.

61

5 TWENTY-FIRST-CENTURY CAPITALISM BETWEEN EMBEDDEDNESS AND DISEMBEDDEDNESS Karl Polanyi and beyond1 Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima Introduction For nearly three decades now, economic sociology has been exploring the implications of Polanyi’s account of the “problem of embeddedness”, as Mark Granovetter (1985) has settled it in his seminal article. For Granovetter, embeddedness was supposed to be the core concept of economic sociology, encapsulating the very idea of a sociological view of the economy. Following through on his conception, a number of authors who participated in the intellectual enterprise of a then “new economic sociology” associated it with the more general notion of “social construction of the economy” (Swedberg & Granovetter 1992; Steiner 1999: 44–73; Swedberg 2003: 34). Granovetter’s interpretation was eventually challenged, and first strand of criticism came from Krippner (2001), Krippner and Alvarez (2007), and Gemici (2008), who pointed to the persistent separation between the economic and social spheres which belies Granovetter’s use of the concept. For them, embeddedness was useful in providing the grounds for a critique of neoclassical economics and its atomized representation of social agents, but it failed to provide a sociological theory of the market per se, so that economic sociology should look elsewhere for a more adequate theoretical reference.2 As a matter of fact, embeddedness is probably the most cited and disputed concept in Karl P ­ olanyi’s oeuvre, where it appears mostly in its adjective form embedded (e.g. Polanyi 1944: 60, 1977: Chapter 4, 1974: 114). Polanyi does not provide a more precise definition to it, which is captured along the reading of his work. The word appears a few times in his masterpiece, The great transformation. First, in the much quoted lines where he describes the evolution of the market pattern: “Instead of economy being embedded in social relations, social relations are embedded in the economic system” (Polanyi 1944: 60). But it is in the following excerpt that one can get closer to a definition: In the vast ancient systems of redistribution, acts of barter as well as local markets were a usual, but no more than a subordinate trait. The same is true where reciprocity rules; acts of barter are here usually embedded in long-range relations implying trust and confidence, a situation which tends to obliterate the bilateral character of the transaction. (Polanyi 1944: 64)3 DOI: 10.4324/9781003336747-8 62

Twenty-first-century capitalism: embeddedness and disembeddedness

The frequent use of contrasting references such as “separate”, “isolated”, and “distinct” to describe the way the economy relates to society under capitalism or, as he also refers, “market society”, helps clarify the meaning of pre-capitalist economic forms, so that embeddedness as a concept makes its full sense in Polanyi’s work in connection with its opposite form, disembeddedness. The opposition between embeddedness and disembeddedness lies at the center of Karl ­Polanyi’s analysis of capitalism. In The Great Transformation, he portrays the dislocations produced by the introduction of the market system, in which an economy previously embedded in broader social relations underwent a political process of change whose main trait was its disembedding from society. Several forces contributed to this change: technological advances, the interests of the bourgeoisie (and its translation into political power at the parliament), the rise of liberal ideas, and the integration of nations into the world market, all favored the emergence of a novel way of producing and exchanging. Instead of kinship, community or status, the motive of gain became the leading force in the economic reproduction of life. The political creation of a disembedded economy involved introducing a self-regulated market system that lied outside the control of society. Such change was achieved through the creation of the three “fictitious commodities”: labor, land, and money (Polanyi 1944: 68–76). According to Polanyi: Production is interaction of man and nature; if this process is to be organized through a selfregulating mechanism of barter and exchange, then man and nature must be brought into its orbit; they must be subject to supply and demand, that is, be dealt with as commodities, as goods produced for sale. (Polanyi 1944: 136) Turning labor, land, and money into commodities comprised subjecting these otherwise embedded elements of previous forms of economic activities to the forces of the “market system”, a form of symbolic and material violence that impinged first on British peasants, then spread through Europe and North America. The concept of countermovement complements Polanyi’s interpretation of capitalism, having to do with the artificiality of the “fictitious commodities” and the risks they represent to the “fabric of society”, as Polanyi depicts the reproduction of everyday life. Countermovements touch upon the “self-protection of society” and they are the loci where the politics of “the great transformation” takes place. Such politics comprises the state and social classes, which respond to the spread of the market system by checking on its expansion, defending their own interests, their livelihood, and eventually the very existence of society.4 Polanyi states in the first paragraphs of his book: “Our thesis is that the idea of a self-adjusting market implied a stark Utopia” (Polanyi 1944: 3). His metaphor of the “satanic mill” is straightforward in identifying the enactment of this utopian project as a threat to society, while his interpretation of the “great transformation” taking place in the first half of the 20th century has to do with virtually the end of the self-regulating market, as The conflict between the market and the elementary requirements of social life provided the century with its dynamics and produced the typical strains and stresses which ultimately destroyed that society. (Polanyi 1944: 257, italics ours) It is noteworthy that for Polanyi, such “strains and stresses” were less a matter of material exploration, as in the typical Marxian perspective, and more a matter of cultural violence.5 Treating the market logic as universal was, in fact, the most prominent aspect of such violence. In this 63

Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima

sense, his later work has put strong emphasis on the distinction between the formal and the substantive meanings of “economic”. The first meaning, the formal, springs from the logical character of the means-ends relationship, as in economizing or economical; from this meaning springs the scarcity definition of economic. The second, the substantive meaning, points to the elemental fact that human beings, like all other living things, cannot exist for any length of time without a physical environment that sustains them; this is the origin of the substantive definition of economic. (Polanyi 1977: 19) Polanyi denounces as an “economistic fallacy” the tendency of economic theory to attribute the logic of scarcity and calculation to all human history (Polanyi 1977: Chapter 1). This is the reason why he draws extensively on economic history and anthropology to demonstrate the embedded character of economic activities in pre-capitalist societies. However, he also acknowledges that under capitalism the formal and the substantive meanings coincide.6 Polanyi was deeply engaged in finding alternatives to that society, and he wrote the manifesto-like article “Our obsolete market mentality” (1947), where he summarizes the arguments from The Great Transformation and contends for a “new thought pattern” away from the liberal creed. In this paper, Polanyi recasts his interpretation on the commodification of labor, land, and money, and discusses the separation between “material” (economic, e.g. hunger and gain) and “ideal” (political, moral, and other non-economic social dimensions, e.g. pride, honor, civil obligation) motives that characterize the ideology of market society. Then, he pleads for the reunification of such motives, “which should inform man in his everyday activity as a producer, for the reabsorption of the economic system in society” (Polanyi 1974: 115–116). This brings us back to the problem of ‘embeddedness/disembeddedness’ as a central issue in the analysis of contemporary capitalism, and the way economic sociology has tackled it. The debate that started with Granovetter and his critics has gone further and this chapter aims to discuss its development. In doing so, the chapter will contend that the ‘problem of embeddedness’ continues to be a relevant one in economic sociology, not in itself, but in connection with the correlate concept of disembeddedness. Instead of a stark process of change, as portrayed in part of the literature that will be reviewed below, the relevance of the concept relies on a more nuanced, ambiguous, and contradictory view of the relationship between market and society. Thus, the chapter discusses three waves of interpretation of the issue, beginning with the “always embeddeded” approach inspired by Granovetter; moving to the expectation of a re-embedding of the economy after the disembedding movement represented by neoliberalism in the 1980s and 1990s; and then coming to more recent characterization of the capitalist economy as “always disembedded”. In doing so, the chapter addresses relevant theoretical questions, but its contribution is not limited to theory. The debate on the tensions between embeddedness and disembeddedness is definitively a public issue, being relevant for public policy, social movements, and the livelihood of people in general. The chapter obviously does not aim to provide answers or guidelines, but it does aim to extend the possible contributions of the Polanyian debate on the expansion of market logic into the social fabric in contemporary capitalism.

Always embedded: embeddedness as “the social construction of the economy” Contemporary economic sociology, during the time when it was recognized as the “new economic sociology” (Swedberg 1997), stood out for a very particular use of the concept of embeddedness, by claiming for a balanced view of embeddedness between pre-market and market societies.7 In 64

Twenty-first-century capitalism: embeddedness and disembeddedness

this vein, Granovetter proposes a research agenda aimed to demonstrate the role of networks in facilitating (or eventually hindering) economic outcomes, drawing from his previous work on social ties (Granovetter 1983, 1974). The volume by Zukin and DiMaggio (1990) expanded the Granovetterian approach by mapping four types of embeddedness: structural, political, cognitive, and cultural.8 This expansion of the concept resulted in the incorporation of authors who until then had not taken part in the debate with Granovetter or even with Polanyi, but that explored these different forms of embeddedness in a variety of empirical settings, such as Viviana Zelizer (1985, 1994, 2005), Neil Fligstein (1990), Frank Dobbin (1994), and Pierre Bourdieu (2005). In parallel, the “comparative capitalisms” approach (Campbell, Hollingsworth & Lindberg, 1991; Hollingsworth, Schmitter & Streeck 1994; Hollingsworth & Boyer 1997; Hall & Soskice 2001; Deeg & Jackson 2007) demonstrated both the vitality and the persistence of diversified types of market economy, all of them embedded in more or less robust institutional arrangements that provided resilience to the pressures generated by globalization, thus allowing them to follow along development trajectories distinct from those advocated by the so-called Washington Consensus. As previously noted, the Granovetterian approach was the object of strong criticism within economic sociology scholarship. In his in-depth examination of Polanyi’s arguments on embeddedness, Gemici (2008) explores the acknowledged ambiguity of the concept in the author’s work and stresses the double role played in it: “an analytical construct that discerns the changing place of economy in human history” (Gemici 2008: 6); and a Methodological principle positing that economy and society can only be analyzed through a holistic approach; economic life can be analyzed only through the examination of how it forms a part of social relations and institutions. (Gemici 2008: 7) respectively a gradational versus a methodological approach. For him, the analytical construct is untenable as it presupposes that economy and society are seen as “separate spheres”, which is misleading as they are not “physical entities with a definite shape and boundary” (Gemici 2008: 26).9 Krippner (2001), on her turn, argues that the “intuition” that markets are socially embedded has beguiled economic sociologists into neglecting a more robust theorization of the market itself, which continues to be taken for granted. For Gemici and Krippner, the methodological use of embeddedness is the only one that should persist, but it cannot serve as a theoretical reference, much less a causal force, that would explain the way economy is socially constructed. However, in spite of the thoroughness of their analysis into the work of Polanyi, it turns out that Gemici and Krippner tend to interweave Polanyi’s and Granovetter’s “always embedded” approaches.10 The alternative interpretation, the “gradational view” that Gemici explicitly dismisses (and Krippner does so in a more subtle way) was not left by economic sociology. The next two sections are dedicated to the way the “gradational” approach to embeddedness, as defined in the opposition between embeddedness and disembeddedness, has endured in economic sociology.

Embedded, disembedded, re-embedded The next wave of the use of embeddedness in economic sociology is more directed at the changes in the relationship between state and market engendered by globalization, with a special interest in neoliberalism and its impact on economic development and social solidarity. A seminal work in this tradition is Mark Blyth’s Great transformations (Blyth 2002), where he proposes that in opposition to the great transformation of the early 20th century, when the economy was re-embedded 65

Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima

in society through what he calls “embedded liberalism”, a second great transformation took place toward the end of the century, this time a “counter double movement” away from such embedded liberalism. His work puts strong emphasis on the state as the key actor of embeddedness, while advancing a theoretical approach where ideas are the central causal mechanism of institutional change. Therefore, his analysis of two exemplary cases of this back-and-forth movement – the United States and Sweden between the post-war years and the 1970s and 1980s – narrates the way ideas about Keynesianism and neoliberalism gained traction in the public debate and took the lead in government action thereafter. At the same time, other authors were also discussing an expected third great transformation, if we follow Blyth’s counting. It was in 2001 that a new edition of The Great Transformation appeared, bearing a new introduction by economic sociologist Fred Block, a specialist in the debate on development and the state’s role in the economy (Block 1994; Block & Evans 2005), as well as a preface by Joseph Stiglitz, former chief-economist of the World Bank, Nobel laureate in economics in the same year of 2001, and a critic of the approaches that had underpinned the market reforms of the previous years (Chang 2001; Stiglitz 2002). In both the Preface (Stiglitz 2001) and the Introduction (Block 2001), the authors highlight the ideological character of the economic prescriptions in favor of the “retreat of the state”, calling attention to their negative impacts on those societies where they had been implemented, and confronting such prescriptions with historical evidence of the persistent involvement of the state with the economy in both developed and developing countries, in both the past and the present. This version of the “gradational approach” to embeddedness, according to which capitalism would be characterized by a pendular movement where the advancement of the market logic implicates the retreat of the state and vice-versa, a process dubbed “the great oscillation” by Gareth Dale (2010: 226–230), was compared with stretching a “giant elastic band” by Block, as follows: Efforts to bring about greater autonomy of the market increase the tension level. With further stretching, either the band will snap – representing social disintegration – or the economy will revert to a more embedded position. (Block 2001: xxv) The “always embedded” approach underlies such interpretation, with frequent references to the Polanyian passages where he states the utopian character of the market logic, and, more importantly, his accentuation of the threatening character of such logic to the social fabric.11 Along these lines, Block and Somers argue that embeddedness is a substitute for politics, social relations, and institutions. According to the authors: “For Polanyi, an always-embedded market economy means that markets are always organized through politics and social practices” (Block & Somers 2014: 10, original italics). Among the relevant works of this second wave are the studies by Fred Block himself, focused on criticizing “market fundamentalism” and appealing for a greater engagement of economic sociology in the public scene (Block 2007), as well as analyzing the public sector’s capacity to promote and financially support the private sector in the formation of a national innovation system in the United States. This runs counter to “market fundamentalism” that envisages the US economy as an exemplary case of a (state-)“free market”, so that he speaks of a “hidden developmental state” in the country (Block 2008). In a theoretical vein, Evans (2010) engages in the debate on development in the 21st century by arguing for an expanded understanding of embeddedness elaborated in his previous work (Evans 1995): instead of an autonomous bureaucracy of a Weberian type, with formal and informal links to business imprinted in the “embedded 66

Twenty-first-century capitalism: embeddedness and disembeddedness

autonomy” model, the author proposes a state qualified to increase citizen capacity, entailing more connections with civil society, as well as greater investment in deliberative institutions (Evans 2003, 2008). Going back to Gemici’s antinomical definitions, this second wave combined both the methodological and gradational approaches to embeddedness, as the return of the “elastic band”, as in Block’s metaphor, is a necessary consequence of the “always embedded” condition of the economy in relation to society. This was seen as a promising assessment for the world economy, especially after the financial crisis of the late 2000s.12 The state was a common denominator along the authors, and its return to centerstage was seen as an evidence of re-embeddedness in motion. However, in the aftermath of the financial crisis, neoliberalism not only persisted but its several policy prescriptions enticed even more political support.13 The next section discusses the third wave of interpretations on the use of embeddedness in economic sociology, in which the interplay between political economy and cultural/normative approaches is explored as a possible mechanism for the resilience of neoliberalism in the capitalism of the 21st century.

Always disembedded (under capitalism) The third wave of the debate on embeddedness brings disembeddedness to the fore, highlighting it as a distinctive trait of capitalism and fully dismissing the “always embedded” approach. In this sense, Dale (2010) contends that what defines Polanyi’s work is his capacity to demonstrate that, in addition to the fact that the economy is embedded in society in a wider sense, in market society, it is the economy’s isolation from non-economic institutions that matters. Cangiani (2011) points to the need to distinguish “disembeddedness as instituted process” from the pure theory of abstract neoclassical models – it is the latter that possesses a utopian character and, therefore, cannot exist. It is precisely because disembeddedness is instituted – i.e. because it becomes a reality – that society produces the counter-movements that “give the social system its typical dynamics and complexity” (Cangiani 2011: 191).14 Machado (2011), in turn, stresses the contrast in Polanyi’s work between market society and previous communities, as society is left “at the mercy of a blind mechanism – the self-regulating market – that controls and overpowers it” (Machado 2011: 122). He also reminds that state intervention cannot be confused with embeddedness, as it is responsible for enacting both disembedding and protective measures vis-à-vis the market logic.15 By following an alternative path, authors interested in the moral and normative dimensions of the economic order highlight the extent to which the market logic has spread through society, especially after the triumph of neoliberalism. In fact, for this literature, the strength of neoliberalism lies in its moral and normative character, and relevant references include the performativist approach of Michel Callon (1998, 2007), when he talks about the “embeddedness of economic markets in economics”; the works of Marion Fourcade and Kieran Healey concerning the forms of classification, valuation and status attribution engendered by the techniques and devices that organize markets in the contemporary world (Fourcade & Healey 2007, 2013, 2017; Fourcade 2011); and, from a broader perspective, the work of Dardot and Laval (2010) on neoliberalism as a “new way of the world”.16 These authors place special focus on the role of economic knowledge in the organization of social life under capitalism, as well as the role of technological and scientific devices that render market logic – and by extension, neoliberalism – popular. In this sense, neoliberalism assumes the condition of a moral-normative frame that generalizes the market economy logic throughout society, spreading economizing and calculative forms of action to all social spheres. As a moral-normative system, neoliberalism acts upon governments, firms, and above all individuals by imposing efficiency and competitive practices. 67

Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima

The expectation that some authors place on civil society and social movements as a way out of neoliberalism deserves a final discussion against the backdrop of this moral-normative approach. Dale, for example, acknowledges the strength of the financial and business interests driving the neoliberal project, but stresses that such interests do not assure its perpetuation, and concludes: “in order for neoliberalism to come to an end, powerful social movements would be necessary” (Dale 2010: 234). Colin Crouch, in his discussion about the “strange non-death of neoliberalism”, refers to the re-invigoration of civil society and its institutions as the best way to recover forms of sociability that provide alternatives to neoliberalism (Crouch 2011: 152–161). Block and ­Somers (2014), in turn, advocate for the radicalization of democracy against neoliberalism based on participative institutions through which “citizens would directly influence the allocations made by local governments […] participation of employees in the governance of the workplace”, and giving citizens “direct voice in the patterns of economic development” (Block & Somers 2014: 238). The problem with this expectation is that, as delineated by the moral-normative approach, civil society and popular classes are socialized in the market logic to such an extent that their livelihood today probably makes much more sense in market (disembedded) terms then in non-market (embedded) ones. Therefore, social analysists and reformers should take into account this very distinctive trait of contemporary capitalism: the extent to which it is embedded in the disembeddedness represented by market logic. It does not mean that we should naturalize neoliberalism and all its political implications, especially greater and greater inequality, but it does mean that one of the political implications of the discussion is that whatever way out of neoliberalism under capitalism will have to incorporate some considerable level of market logic in it.

Concluding remarks For decades now, economic sociology has explored the “the problem of embeddedness” (­Granovetter 1985) in order to make sense of a world where the market logic has occupied an ever greater space in the everyday life of people and institutions. A first wave of analyses put emphasis on what Gemici (2008) called the “methodological” dimension of embeddedness, adhering to the interpretation that whatever form of economic action or arrangement will be embedded in some kind of structural, political, cultural, or cognitive dimension of modern society. Such view was successful in criticizing the atomized representation of markets and economic life by neoclassical economics, but less so in offering an alternative theory of the market. A second wave of analyses gave prominence to a more historical and institutional perspective, combining Gemici’s definition of the “methodological” and “gradational” approaches so that the economy could actually be disembedded from society, but since it was supposed to be embedded “in a broader sense”, eventually all disembedding processes would be succeeded by re-embedding, as in the period between the late 19th-early 20th century. Finally, a third and more recent wave has been emphasizing the disembedded character of the capitalist economy, in which the market logic fully disseminates into more and more spheres of social life and influences, or at least constrains, the dynamics of society as a whole. Along these lines, neoliberalism has represented a major challenge to economic sociology. Indeed, the first wave of analyses confronted neoliberalism in two ways: by questioning the atomized agent brought up by economic models that underpin neoliberal prescriptions; and by rejecting the arguments in favor of a convergence of national political economies to a single liberal model of capitalism. The second wave of analyses interpreted neoliberalism as a “great transformation” away from the embedded liberalism that emerged with the previous great transformation, the one analyzed by Polanyi. Based on an “always embedded” approach, these analyses attach to the 68

Twenty-first-century capitalism: embeddedness and disembeddedness

expectation that “society” would eventually react to the threats of the market and, mostly by means of state action, would bring the economy back to its control. Finally, the third wave addresses neoliberalism from the perspective of a moral-normative phenomenon as a unifying trend of contemporary capitalism. As a final observation, we advance the proposition that the resilience of neoliberalism has to do with a combination of forces at the level of the political economy (Cangiani 2011; Machado 2011; Dale 2010) and moral-normativity (Callon 1998, 2007; Dardot e Laval 2010; Fourcade 2011): it is an institutional arrangement supported both by material aspects of the organization of the economy, and by symbolic elements that give sense to it. Important events such as the 2008 financial crisis and the recent COVID pandemics have not substantially changed this combination. As the 21st century moves on, economic sociology should continue keeping track of the interplay between the advancement in the market logic and the countermovements by nations, communities, social movements, individuals and, why not, business. If 21st century capitalism is to be less destructive to the fabric of society, i.e. less neoliberal, this will depend on how countermovements will be able to check on the expansion of the market logic. This political dynamics tends to be the main concern of a Polanyi-inspired economic sociology in the coming years.

Notes 1 The authors acknowledge financial support from the National Council for Scientific and Technological Development (CNPq) and the State of Rio de Janeiro Research Foundation (FAPERJ) and the editors of the volume for their insightful comments to a previous version of the chapter. 2 To be sure, Gemici (2007) aims primarily on the work of Polanyi, and the Granovetterian approach is discussed along the paper, while Krippner (2001) and Krippner and Alvarez (2007) directly address Granovetter’s approach in comparison with the Polanyian one. However, none of the authors elaborate a theoretical substitute for the concept. Such task is attempted by Jens Beckert (1996, 2007) who also departs from a critique of Granovetter’s interpretation and proposes an alternative economic sociology of the market following an action model based on sociological assumptions about the way actors overcome uncertainty by means of social devices and coordination problems (Beckert 1996, 2007). 3 In his introduction to the 2001 edition of The great transformation, Fred Block suggests that the concept is a metaphor drawn from coal mining, based on Polanyi’s extensive reading “on the history and technology of the English mining industry that faced the task of extracting coal that was embedded in the rock walls of the mine” (Block 2001: xxiv). 4 It is worthwhile mentioning Polanyi’s reference to a “collectivist conspiracy theory” that imputed the countermovement some sort of coordinated action among relevant social agents (e.g. labor) to countervail the market logic. He demonstrates that in many cases the common interests between labor and capital (e.g. in specific economic activities) adjust their otherwise conflicting interests in order to preserve common values – sometimes cultural, sometimes monetary ones, often a combination of both. See Polanyi (1944: 158–170). 5 See, for instance, Polanyi’s “Notes on sources” to Chapter 13 of The great transformation (“Disraeli’s ‘two nations’ and the problem of colored races”), where he compares the impact of the market system upon the pauperized population of England between the late 18th and early 19th centuries with that of colonialism on Indian and African populations. For him, in both cases it was not economic exploration that stood out, but the cultural violence of destroying a population’s livelihood (Polanyi 1944: 290–294). 6 In The great transformation, he refers to Adam Smith’s version of the economistic fallacy, his passage about the natural propensity to truck, barter, and exchange, as follows: “This phrase was later to yield the concept of the Economic Man. In retrospect it can be said that no misreading of the past ever proved more prophetic of the future. For while up to Adam Smith’s time that propensity had hardly shown up on a considerable scale in the life of any observed community, and had remained, at best, a subordinate feature of economic life, a hundred years later an industrial system was in full swing over the major part of the planet which, practically and theoretically, implied that the human race was swayed in all its economic activities, if not also in its political, intellectual, and spiritual pursuits, by that one particular propensity” (Polanyi 1944: 45–46, italics ours).

69

Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima 7 In Granovetter’s words: “I assert that the level of embeddedness of economic behavior is lower in nonmarket societies than is claimed by substantivists and development theorists, and it has changed less with ‘modernization’ than they believe; but I argue also that this level has always been and continues to be more substantial than is allowed for by economists and formalists” (Granovetter 1985: 482–483). 8 Swedberg (1997) and Steiner (1999) also stick to this typology in their introductory texts to the field. 9 He adds: “Strictly speaking, economy and society as bounded ontic entities do not exist. As a result, one cannot be embedded in the other, nor can the embeddedness level change over time” (Gemici 2008: 26). 10 As previously noted, Krippner (2001) compares the Granovetterian and Polanyian approaches but she directly addresses mostly the Granovetterian one in her discussion and conclusion on the limitations of the concept of embeddedness, while Gemici strongly relies on Krippner’s criticism to support his own (Gemici 2008: 26–27). It is worth noting that eventually Granovetter himself acknowledged that his 1985 article did not directly engage in Polanyi’s debate on embeddedness. He argues that his aim was to show the impact of social networks on social relations in which economic life is “embedded”, contributing to the understanding of the links between micro- and macro-level theories (see Krippner et al. 2004: 113–114). 11 According to Block: “In his view the theorists of selfregulating markets and their allies are constantly pushing human societies to the edge of a precipice. But as the consequences of unrestrained markets become apparent, people resist; they refuse to act like lemmings marching over a cliff to their own destruction. Instead, they retreat from the tenets of market self-regulation to save society and nature from destruction” (Block 2001: xxv). He then introduces the elastic band metaphor. 12 In Latin America prospects were even more optimistic regarding the presumed defeat of neoliberalism with the “pink tide” that took over the continent along the decade. See, for example, Diniz (2007). 13 Again, in Latin America the defeat of the “pink tide” and the return of right-wing governments with strong popular support was a relevant drawback to the defenders of a “great transformation” toward ­re-embedding the economy. On that, see Plewe and Fischer (2019). 14 He adds: “The history of our society is to be considered as an irreversible process of institutional change, which is complex and indeterminate, but constrained by the need to reproduce the most general institutional features, that is, market- and capitalist relations, and therefore a disembedded economy” (Cangiani 2011: 192). 15 It is worth mentioning that Machado also reviews the “new economic sociology” debate starting with Granovetter, passing through Swedberg, Beckert, Krippner and Block, but his main contention narrows down to the fact that capitalist economies are disembedded. In his words: “The disembeddedness of the economy – i.e., its detachment from society – marked the historical rise of an automatic system of pricemaking markets. In every society before that, the economy had always been embedded or immersed in the social system (…). Within capitalist society the economy takes on a life of its own, heedless of human will and I believe this to be the very essence of ‘disembeddedness’” (Machado 2011: 137). 16 Dardot and Laval are strongly inspired by the Foucauldian notion of governmentality (Foucault 2004), pointing to the incorporation of the market logic as a form of self-government, orienting the conduct of agents in a diffuse manner, thus challenging the perception that the neoliberal logic is “imposed” on agents by external political injunctions such as economic policy, free trade, or, more generically, globalization.

Bibliography Beckert, Jens. 1996. “What is sociological about economic sociology? Uncertainty and the embeddedness of economic action.” Theory and Society 25: 803–840. ——— 2007. “The social order of markets.” MPIfG Discussion Paper, 07/15. Block, Fred. 1994. “The roles of the state in the economy.” In: N. Smelser and R. Swedberg (eds.). The handbook of economic sociology. Princeton, NJ/New York: Princeton University Press/Russell Sage. ——— 2001. “Introduction.” In: Karl Polanyi (eds.). The great transformation. Boston, MA: Beacon Press. ——— 2007. “Confronting market fundamentalism: Doing ‘public economic sociology’”. Socio-Economic Review 5/2: 326–334. ——— 2008. “Swimming against the current: The rise of a hidden developmental state in the United States.” Politics & Society 36/2: 169–206. Block, Fred, and Peter Evans. 2005. “The state and the economy.” In: Neil Smelser and Richard Swedberg (eds.). The handbook of economic sociology. 2nd ed. Princeton, NJ/New York: Princeton University Press/ Russell Sage.

70

Twenty-first-century capitalism: embeddedness and disembeddedness Block, Fred, and M. Margaret Somers. 2014. The power of market fundamentalism: Karl Polanyi’s critique. Cambridge, MA: Harvard University Press. Blyth, Mark. 2002. Great Transformations: Economic Ideas and institutional change in the 21st century. Cambridge: Cambridge University Press. Bourdieu, Pierre. 2005. The social structures of the economy. Cambridge, UK: Polity Press. Callon, Michel. 2007. “What does it mean to say that economics is performative?” In: D. Mackenzie, F. Muniesa and L. Siu (eds.). Do economists make markets? On the performativity of economics. Princeton, NJ: Princeton University Press. ——— 1998. “Introduction: The embeddedness of economic markets in economics.” In: Michel Callon (ed.). The laws of the market. Oxford, UK: Blackwell/The Sociological Review. Campbell, John L., J. Rogers Hollingsworth, and Leon Lindberg (eds). 1991. Governing the American economy. Cambridge: Cambridge University Press. Cangiani, Michele. 2011. “Karl Polanyi’s institutional theory: Market society and its ‘disembedded’ economy.” Journal of Economic Issues 45/1: 177–197. Chang, Ha-Joon (ed.). 2001. Joseph Stiglitz and the World Bank: The rebel within. London: Anthem Press. Crouch, Colin. 2011. The strange non-death of neoliberalism. Cambridge: Polity Press. Dale, Gareth. 2010. Karl Polanyi: The limits of the market. Cambridge: Polity. Dardot, Pierre, and Christian Laval. 2010. La nouvelle raison du monde: Essai sur la société néoliberale. Paris: La Découverte. Deeg, Richard and Gregory Jackson. 2007. “Towards a more dynamic theory of capitalist variety.” SocioEconomic Review 5/1: 149–179. Diniz, Eli. 2007. “El post-consenso de Washington: Globalización, Estado y desarollo reexaminados.” Boletín Brasil 4/1. Dobbin, Frank. 1994. Forging industrial policy: The United States, Britain, and France in the railway age. Cambridge: Cambridge University Press. Evans, Peter. 1995. Embedded autonomy: States and industrial transformation. Princeton, NJ: Princeton University Press. ——— 2003. “Além da monocultura institucional: Instituições, capacidades e o desenvolvimento deliberativo.” Sociologias 9: 20–63. ——— 2008. “Is an alternative globalization possible?” Politics and Society 36/2: 271–305. ——— 2010. The challenge of the 21st century development: Building capability-enhancing states. New York: Global Event Working Paper. Ferrer, Aldo. 1997. “Development and underdevelopment in a globalized world: Latin American dilemmas.” In: Louis Emmerij (ed.). Economic and social development into the XXI Century. Washington, DC: InterAmerican Development Bank. Fligstein, Neil. 1990. The transformation of corporate control. Cambridge, MA: Harvard University Press. ——— 2001. The architecture of markets: An economic sociology of twenty-first century capitalist societies. Princeton, NJ: Princeton University Press. Foucault, Michel. 2004. Naissance de la biopolitique: cours au Collège de France (1978–1979). Paris: Seuil. Fourcade, Marion. 2011. “Cents and sensibility: Economic valuation and the nature of ‘nature’”. American Journal of Sociology 116/6: 1721–1777. Fourcade, Marion, and Kieran Healey. 2007. “Moral views of market society.” Annual Review of Sociology 33: 285–311. ——— 2013. “Classification situations: Life-chances in the neoliberal era.” Accounting, Organizations and Society 38: 559–572. ———. 2017. “Seeing like a market.” Socio-Economic Review 15/1: 9–29. Fridman, Daniel. 2016. Freedom from work: Embracing financial self-help in the United States and Argentina. Stanford, CA: Stanford University Press. Gago, Verónica. 2018. A razão neoliberal: Economias barrocas e pragmática popular. São Paulo: Elefante. Gemici, Kurtulus. 2008. “Karl Polanyi and the antinomies of embeddedness.” Socio-Economic Review 6/1: 5–33. Granovetter, Mark. 1985. “Economic action and social structure: The problem of embeddedness.” American Journal of Sociology 91/3: 481–510. ——— 1983. “The strength of weak ties: a network theory revisited.” Sociological Theory 1: 201–2033. ——— 1974. Getting a job: A study on contacts and careers. Cambridge, MA: Harvard University Press.

71

Cristiano Fonseca Monteiro and Raphael Jonathas da Costa Lima Hall, Peter A., and David Soskice (eds.). 2001. Varieties of capitalism: The institutional foundations of comparative advantage. Oxford: Oxford University Press. Hollingsworth, J. Rogers, and Robert Boyer (eds.). 1997. Contemporary capitalism: the embeddedness of institutions. Cambridge: Cambridge University Press. Hollingsworth, J. Rogers, Philippe Schmitter, and Wolfgang Streeck (eds.). 1994. Governing capitalist economies: Performance and control of economic sectors. Oxford: Oxford University Press. Krippner, Greta. 2001. “The elusive market: Embeddedness and the paradigm of economic sociology.” ­Theory and Society 30/6: 775–810. Krippner, G., and Anthony S. Alvarez. 2007. “Embeddedness and the intellectual projects of economic sociology.” Annual Review of Sociology 33: 219–240. Krippner, Greta et al. 2004. “Polanyi Symposium: A conversation on embeddedness.” Socio-Economic Review 2/1: 109–135. Machado, Nuno Miguel. 2011. “Karl Polanyi and the new economic sociology: Notes on the concept of (dis) embeddedness.” RCCS Annual Review 3: 119–140. Mackenzie, Donald, Fabian Muniesa, and Lucia Siu. 2007. “Introduction.” In: Do economists make markets? On the performativity of economics. Princeton, NJ: Princeton University Press. Plewe, Dieter and Fischer, Karin. 2019. “Continuity and variety of neoliberalism: reconsidering Latin America’s pink tide.” Revista de Estudos e Pesquisas sobre as Américas 13/2: 166–202. Polanyi, Karl. 2001 [1944]. The great transformation. Boston, MA: Beacon Press. ——— 1977. The livelihood of man. New York: Academic Press. ——— 1974. “Our obsolete market mentality: civilization must find a new thought pattern.” Commentary 3: 109–117. Polanyi, Karl, Conrad Arensberg, and Harry Pearson (eds.). 1957. Trade and market in the early empires. Economies in history and theory. New York/London: The Free Press/Collier-Macmillan. Steiner, Philippe. 1999. La sociologie économique. Paris: La Découverte. Stiglitz, Joseph. 2002. Globalization and its discontents. New York: Norton & Company. ——— 2001. “Foreword.” In: Karl Polanyi (eds.). The great transformation. Boston, MA: Beacon Press. Streeck, Wolfgang. 2014. Buying time: The delayed crisis of democratic capitalism. New York: Verso. ——— 2010. “E pluribus unum? Varieties and commonalities of capitalism.” MPIfG Discussion Paper 10/12. Swedberg, Richard. 1997. “Vers une nouvelle sociologie économique: Bilan et perspectives.” Cahiers Internationaux de Sociologie CIII: 237–263. ——— 2003. Principles of economic sociology. Princeton, NJ: Princeton University Press. Swedberg, Richard, and Mark Granovetter. 1992. “Introduction.” In: M. Granovetter and R. Swedberg (eds.). The sociology of economic life. Boulder, CO: Westview Press. Zelizer, Viviana. 1985. Pricing the priceless child: The changing social value of children. New York: Basic Books. ——— 1994. The social meaning of money. New York: Basic Books. ——— 2005. The purchase of intimacy. Princeton, NJ: Princeton University Press. Zukin, Sharon, and Paul DiMaggio. 1990. “Introduction.” In: S. Zukin and P. DiMaggio (eds.). Structures of capital: the social structures of the economy. Cambridge, MA: Cambridge University Press.

72

6 ANTINOMIES OF THE ‘DOUBLE MOVEMENT’ From Polanyi to the Polanyi debate Eren Duzgun

Introduction Of Karl Polanyi’s several conceptual innovations, the ‘double movement’ constitutes the analytical backbone of his grand narrative of ‘great transformation’. Witnessing the rise and crisis of market society, Polanyi used double movement to capture the historically accumulating tensions between capitalism and democracy; between the promotion of (seemingly) self-regulating markets and concerns for political stability; between the relentless push for marketization and the counterpush for societal protection; between the persistent drive toward ‘disembedding’ the markets from society and the counter movement toward controlling them. In short, the double movement serves as a heuristic to conceptualize the contradictory principles that governed modern societies in the West within a historically specific time period, a particular historical sequence beginning with the rise of market civilization, the crisis and collapse of its liberal 19th-century phase and competing efforts to reorganize or transcend it in the first half of the 20th century – efforts that varied from socialism to fascism and to the New Deal. This chapter begins by discussing the concept of double movement in Polanyi’s oeuvre, alongside other concepts such as ‘fictitious commodities’, ‘economistic fallacy’, ‘embeddedness’, and ‘disembeddedness’. The second section intends to show that, despite its centrality, the concept of double movement has proved to be a major bone of contention among Polanyian scholars. In particular, the question as to what ‘disembeddedness’ is, how the markets can be ‘tamed’ and what the processes of taming really entail has led to widely differing interpretations of what is meant by ‘double movement’. The third section provides a summary as well as a brief discussion on the broader implications of the Polanyi debate.

Double movement: an overview In his magnum opus, The Great Transformation (1944), Karl Polanyi writes that “for a century the dynamics of modern society was governed by a double movement” (2001: 136). On the one hand, self-regulating market, i.e. the idea of a market functioning according to its own laws, became the organizing principle of the world economy. This was a radical idea, because self-regulating markets could arise only when hitherto never systematically commodified aspects of human life, most



73

DOI: 10.4324/9781003336747-9

Eren Duzgun

notably land and labor, were systematically turned into commodities. Without the commodification of land and labor, it is impossible to assume the existence of a self-regulatory mechanism of demand and supply. Yet, the paradox is that Land and labor are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists. Therefore – Polanyi continues – To include them in the market mechanism means to subordinate the substance of society itself to the laws of the market. (Ibid.: 75) In the 19th century this effort was systematically pursued. Self-regulating market “developed in leaps and bounds; it engulfed space and time […] a new way of life spread over the planet with a claim to universality” (ibid.: 136). Self-regulating market signaled an attempt to make the “market mechanism the sole director of the fate of human beings and their natural environment” (ibid.: 76). Yet, meanwhile, people did not simply sit and wait for the birth of this new mode of life. The rise of trade unions, factory laws, central banks, customs tariffs and working-class movements entering parliaments built a protective buffer against the vicissitudes of the self-regulating market. In other words, “the movement [towards self-regulating markets] was met by a countermovement checking the expansion in definite directions” (ibid.: 136). In particular, “a network of measures and policies was integrated into powerful institutions designed to check the action of the market relative to labor, land, and money” (ibid.: 79). However, ultimately, “the clash of the organizing principles of economic liberalism and social protection […] led to deep-seated institutional strain” (ibid.: 140). Society took measures to protect itself, but whatever measures it took impaired the selfregulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it. (Ibid.: 3–4) Phrased differently, a process, which might be considered economically beneficial in the long run, could not be born in the present without threatening the destruction of the social and cultural fabric. No wonder society resisted its reduction into a mere appendage of the market. Different classes supported this “utopian experiment” at different times and places; yet, when the social destruction brought about by the rise of market society could not be compensated by monetary benefits, protective measures kicked in. The reactions of the working class and the peasantry led to factory laws and agrarian tariffs, whereas capitalists tried to protect themselves through customs tariffs and monetary policy. Therefore, “the spread of the market was […] both advanced and obstructed by the action of class forces” (ibid.: 162). Yet, Polanyi adds that regardless of the agents and the necessity of the counter movement, it was very hard, if not impossible, in the long run to sustain the co-existence of protective measures and the imperatives of the marketplace. Crisis eventually turned into a series of disasters, leading to World War I, the Great Depression, the rise of fascism, and ultimately another World War. Though the new protective institutions, such as trade unions and factory laws, were adapted, as far as possible, to the requirements of the economic mechanism, they nevertheless interfered with its self-regulation and, ultimately, destroyed the system. (Ibid.: 81) 74

Antinomies of the ‘double movement’

The double movement overturns the logic of the conventional liberal narratives of this period in two main ways. First, Polanyi contends that there was nothing ‘natural’ about the self-regulating market. The gradual development of an “entrepreneurial spirit” is not enough to explain the establishment of the market society. Nor could it be understood simply as letting people do whatever they wanted. Instead, the alleged “self-regulation” was the “product of deliberate state action”. Free markets and competition – Polanyi continues – “could never have come into being merely by allowing things to take their course”; they “required intervention to be workable” (ibid.: 145). Second, Polanyi argues that while the self-regulating market was the product of deliberate political intervention, “subsequent restrictions on laissez-faire started in a spontaneous way”: in other words, “laissez-faire was planned; planning was not” (ibid.: 147). For, Polanyi asks (ibid.: 156), If market economy was a threat to the human and natural components of the social fabric […] what else would one expect than an urge on the part of a great variety of people to press for some sort of protection? After all, To expect that a community would remain indifferent to the scourge of unemployment, the shifting of industries and occupations and to the moral and psychological torture accompanying them, merely because economic effects, in the long run, might be negligible, was to assume an absurdity. (Ibid.: 224) Therefore, non-functioning markets led to political intervention or even revolution (instead of vice versa). To exemplify, fascism and socialism, albeit generating completely different outcomes for human freedom, were both “rooted in a market society that refused to function” (ibid.: 248). Overall, then, the root cause of the cataclysms of the 19th and 20th centuries “lay in the utopian endeavor of economic liberalism to set up a self-regulating market system” (ibid.: 31). Human beings ended up losing control of an “economic” system of their own making, and every attempt they made to control it only deteriorated the situation, causing further crisis. But how did we get to this point of civilizational collapse? How did we end up losing control of an economic system of our own making? Polanyi argues that this is indeed an anomaly in human history. The conception of the ‘economy’ as an autonomous sphere dictating its own rules over society did not exist in non-capitalist societies. “Neither under tribal, nor feudal, nor mercantile conditions was there […] a separate economic system in society” (Polanyi 1957b: 74). The economy either “remained nameless” or had “no obvious meaning”, for the economic process and prices were instituted through nonmarket means, such as kinship, marriage, age groups, status, political patronage, etc. (Polanyi 1957a: 68–71). Even “where markets were most highly developed, as under the mercantile system”, the economic system, as a rule, “was absorbed in the social system” and showed “no tendency to expand at the expense of the rest” (Polanyi 2001: 71). In this sense, the market system with a distinctive logic, autonomy, and dynamic of its own was completely unknown to our ancestors. “[N]ever before our time were markets more than mere accessories of economic life” and, indeed, the emergence of the idea of “self-regulating” markets represented a complete reversal of the way in which past economies functioned (Polanyi 2001: 71). In order for “self-regulating” markets to self-regulate, a variety of political and institutional arrangements had to be initiated to progressively eliminate the non-market survival strategies that 75

Eren Duzgun

humans previously relied upon (ibid.: 92). Most notably, the age-old communal systems of ­social and moral regulation needed to be eradicated, a process that systematically subordinated the “natural and human substance of society”, i.e. land and labor, to market relations for the first time in history (ibid.: 44). In this regard, the transition to market society “resembles more the metamorphosis of the caterpillar than any alteration that can be expressed in terms of continuous growth and development” (ibid.). Phrased differently, “predominance of markets emerged not as a matter of degree, but of kind” (Polanyi 2018 [1947]: 203) and the rise of market society represented “a violent break with the conditions that preceded it” (Polanyi 2018 [1977]: 268). At the heart of the rise of market society, therefore, rested a political, legal, and violent process that led to the historically unprecedented characterization of land and labor as commodities. Obviously, land and labor are no other than human beings and the socio-natural order in which humans exist; therefore, they can, at best, be “fictitious commodities” (Polanyi 2001: Chapter 6). Yet, market society’s very existence hinges on its political ability to continuously reproduce this fiction. Without treating and thinking of human beings and nature as ‘factors of production’, i.e. without treating the planet’s living substance as commodities, it would have been impossible to view the ‘economy’ as an institutionally and motivationally self-regulating sphere of life. Polanyi’s concepts of ‘embeddedness’ and ‘disembeddedness’ provide further insights into the possibility and limits of self-regulating markets, hence at the center of his notion of double movement. Disembedding refers to a process during which the markets are stripped of their former social and moral institutions; a process, which ultimately institutionalizes society and nature (however fictitiously) as an adjunct to the market. The birth of market society thus involves a shift from embeddedness to disembeddedness as a socio-ecological condition. That said, to Polanyi, fully self-regulated markets are impossible. For, Polanyi points out (ibid.: 76), every attempt at pushing “the market mechanism to be sole director of the fate of human beings and their natural environment […] would result in the demolition of society”. Not only does this entail the destruction of the physical and mental fabric of human beings, but equally important, as society’s protective shell is disturbed, “nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, […] the power to produce food and raw materials destroyed” (ibid.). In short, “the idea of a self-adjusting market implied a stark utopia” (ibid.: 3). For all its centrality, however, the concept of double movement has also proved contentious, leading to a variety of interpretations regarding the meaning of ‘disembeddedness’ and ‘embeddedness’, and exactly what Polanyi proposes to subordinate market societies to the requirements of societal welfare and democracy. Next section presents a brief synopsis of these debates.

Double movement reconsidered: anatomy of the Polanyi debate The idea that self-adjusting markets are a utopia suggests that every form of society would try to safeguard itself (in one form or another) from the detrimental effects of the market system. Indeed, based on this insight, the dominant reading of embeddedness claims Polanyi for a social democratic vision of the world. On this reading, Polanyi’s vision of society rested on the reconcilability of the double movement dialectic; i.e. capitalism, if regulated properly, can be reconciled with the requirements of social welfare and democracy. According to Fred Block and Margaret Somers (2014: 221), for example, Polanyi’s vision of double movement depends on the possibility of a political-economic compromise by which businesses would continue to earn profits, but they would accept regulatory restraints, taxation, and the steady expansion of social welfare institutions. Therefore, although “Polanyi’s writings defy easy classification”, so runs the argument, “[he] was an expansive social theorist and social democratic thinker who still believed in 76

Antinomies of the ‘double movement’

the indispensable role of markets” (ibid.: 7) and whose vision of redistributive capitalism has been epitomized most notably by the Scandinavian experiments with the welfare state (ibid.: 221). Yet, plausible as it may be, the social-democratic reading is susceptible to a major ambiguity. That is, although Polanyi recognized the need of taming the markets, he also pointed to the impossibility of really re-integrating the economy in society by merely regulating market society. As discussed above, Polanyi believed that the attempts at regulating markets, albeit a necessary response to laissezfaire, backfired catastrophically during the interwar period in Europe, becoming the source of future dislocations and crises. In short, from Polanyi’s perspective, protective action “merely increased the strain on the social system”, i.e. it “conflicted fatally with the self-regulation of the system”, hence not a sustainable cure for the chronic ills of market society (Polanyi 2014: 218, 2001: 87). Block and Somers, the most influential proponents of the social-democratic interpretation of Polanyi, are indeed aware of these arguments in Polanyi’s work. Yet, they interpret Polanyi’s central insight as an interpretive ‘tension’ and political ‘inconsistency’. They maintain that “[i]t is not logical for Polanyi to claim both that a system of self-regulating markets was impossible and that any effort to constrain or limit market self-regulation was doomed to produce a systemic crisis” (Block and Somers 2014: 85). Block and Somers attribute this presumed interpretative contradiction to a number of theoretical, logistical and conjunctural issues which they think Polanyi experienced midway through the writing of TGT. Most importantly, they argue that in the early 1940s Polanyi’s thought went through an epistemological shift. Polanyi was a socialist until the end of the 1930s, yet during his time in the US, Polanyi witnessed the “real political and social achievements” of the New Deal policies, which forced an alteration in his vision of the double movement from revolutionary socialism to regulated welfare capitalism. In contrast to his earlier position on the irreconcilability of capitalism and democracy, to Polanyi “it appeared [even if briefly] that market societies could be fundamentally reshaped by deeply democratic reforms” (ibid.: 95). Yet, the problem was that Polanyi did not have the time for a major revision of the book. He wanted TGT to be out as soon as possible to weigh in the debates on the postwar order, therefore he completed the book rather hastily, without correcting its internal contradictions (ibid.: 73). Block and Somers’ interpretation postulates that the social democratic eureka moment came rather late in Polanyi’s life, and that under time pressures he did not have the opportunity to write a more coherent text. Block and Somers further elaborate Polanyi’s social democratic turn through what they call “always-embedded markets”. Their argument is that Polanyi’s arrival at social democracy was a logical consequence of his realization that markets are always embedded. Block and Somers contend that Polanyi is often mistakenly understood to be saying that with the rise of capitalism in the 19th century, the economy was disembedded from society. Yet, such a view, according to them, contradicts Polanyi’s own argument that market society is a utopia and that land, labor and money are not real but only fictitious commodities. This implies that Throughout the whole history of market society, the strength of protection effectively embeds the economy. He suggests that functioning market societies must maintain some threshold level of embeddedness or else risk social and economic disaster. (Ibid: 93) In short, no market society can afford to be disembedded. Disembedded markets are an impossibility, hence the “always-embedded” nature of the markets. Correlatively, this also suggests that if “there can never be a self-regulating market system, [Polanyi’s] idea of impairing its functioning is illogical” (ibid.: 94). In Block and Somers’ thought, the impossibility of disembedded markets 77

Eren Duzgun

generates the assumption of “always-embedded” markets, which, in turn, is used to weaken the logical basis of Polanyi’s argument that self-regulating markets and social protection are irreconcilable. It is precisely this theoretical foundation on which Block and Somers (ibid.: 96) argue that in Polanyi’s thought “there are no inherent obstacles to restructuring market societies along more democratic and egalitarian lines”. This is another way of saying that, as Block argues elsewhere, we don’t have to choose between capitalism and socialism, because Markets can be embedded in many different ways. To be sure, some of these forms will be more efficient in their ability to expand output and foster innovation, and some will be more “socialist” in subordinating the market to democratic direction, but Polanyi implies that alternatives that are both efficient and democratic were available both in the nineteenth and twentieth centuries. (my emphasis, Block 2001: xxix) All that said, however, when one dissects Block and Somers’ critique and reconstruction of Polanyi, several ambivalent aspects arise, which makes their argument hard to sustain. To start with, the argument that market societies are always embedded because disembeddedness is impossible suggests that embeddedness is equally applicable to capitalist as well as non-capitalist societies, and therefore there is no qualitative difference between them. Such an assumption does considerable damage to Polanyi’s original argument both methodologically and analytically (cf. Polanyi-Levitt 2013: 102; Cangiani 2017: 926). Methodologically, blurring the distinction between non-capitalist and capitalist societies runs the risk of falling into what Polanyi calls “economistic fallacy”, which is the tendency to read back into history the dynamics of market society. Economistic fallacy naturalizes and universalizes capitalist economic action, thereby turning capitalism into a selfreferential and self-birthing phenomenon. It narrates a world history in which past economies appear to be mere “miniatures or early specimens of our own” and markets seem to have “come into being unless something was to prevent it” [Polanyi 1957: xviii, 1977: 14]. Therefore, the suggestion that embeddedness is a transhistorical concept contradicts Polanyi’s emphasis on the unprecedentedness of market society, i.e. a break in human history, which, as I have shown above, cannot be understood with “any alteration that can be expressed in terms of continuous growth and development”. Furthermore, we need to keep in mind that Polanyi was not less but even more adamant on this point after the publication of TGT, as most of his writings after TGT were dedicated to the comparative study of pre-capitalist economic systems, with the purpose of demonstrating the specificity of the disembeddedness of market society. Putting embeddedness in a transhistorical straitjacket, therefore, removes one of the most important pillars of Karl Polanyi’s theoretical framework, rendering Polanyi’s analysis and critique of market society almost unrecognizable. In other words, neither disembeddedness can be reduced to a mere fiction nor can embeddedness be transhistoricized without jettisoning the central tenets of Polanyi’s argument. In this sense, it makes much more sense to conceptualize disembeddedness as an ‘organizing principle’ that turns, however imperfectly, the fiction of market society into reality. The commodity description of labor, land, and money is entirely fictitious. Nevertheless, it is with the help of this fiction that the actual markets for labor, land, and money are organized; these are being actually bought and sold on the market; their demand and supply are real magnitudes; and any measures or policies that would inhibit the formation of such markets would ipso facto endanger the self-regulation of the system. The commodity fiction, therefore, supplies a vital organizing principle in regard to the whole of society affecting 78

Antinomies of the ‘double movement’

almost all its institutions in the most varied way, namely, the principle according to which no arrangement or behavior should be allowed to exist that might prevent the actual functioning of the market. (Polanyi 2001: 76) In the contemporary global political economy, can we deny that labor, land, and money, however fictitious their origins might be, are “bought and sold on the market [and] their demand and supply are real magnitudes”? No. Can we refuse that the ‘economy’ developed, however fictitiously, an existence of its own, dictating its own economic laws across the globe? Hardly. Do the remaining pockets of social protection and democracy, e.g. welfare state, minimum wage regulations, parliaments, and state involvement in the economy, necessarily mean moments of ‘re-embedding’, hence implying the impossibility of disembeddedness? Depends. If we could show social protection amounts to decommodification of fictitious commodities, we could claim that disembeddedness was impossible. Yet, the historical experience of the last 70 years shows that no market correcting measures can afford (at least not in the long run) to put the means of production and subsistence out of the marketplace. Even the most generous welfare systems that provide extensive market-correcting policies are unable to offer recipients with a genuine “alternative to market dependence” (Esping-Andersen 1990: 22–23). To the contrary, turning labor and land into commodities on a systematic basis is a prerequisite to providing (limited and temporary) protection to the least fortunate members of society. Disembeddedness is much more a reality than a fiction in today’s world. Our societies are characterized by a historically specific political economy, which, despite the continuity of use of political power for social protection, is ultimately premised on the ability of public and private powers to achieve material reproduction through the world market and on the capacity to reproduce the fiction of self-regulating markets. In this sense, disembeddedness does not imply at all the existence of a ‘state-free’ market economy driven by perfect competition (Cangiani 2017: 926–927). To be sure, the state is sine qua non for all market economies given its marketcorrecting, market-enabling and market-saving ‘interventions’ into the economic sphere. And this is precisely why Polanyi writes that market society is a utopia, it is “always more of an ideology than of an actual fact”. Given the constant state intervention into the market, “the separation of economics and politics [is] never carried completely into effect” (Polanyi 2014: 218). Yet, even the language of ‘intervention’ is suggestive of the existence of disembedded markets: only through the processes of disembedding do these spheres gain a self-referential character and the analytical division between the political and the economic parallels their institutional differentiation. Therefore, Institutional separation of society into an economic and a political sphere […] is, in effect, merely the restatement, from the point of view of society as a whole, of the existence of a self-regulating market. (Polanyi 2001: 74) Whatever the market in question — labor, land, or money — the strain would transcend the economic zone and the balance would have to be restored by political means. Nevertheless, the institutional separation of the political from the economic sphere was constitutive to market society and had to be maintained whatever the tension involved. And this was the other source of disruptive strain. (Ibid.: 227) 79

Eren Duzgun

In short, market society is disembedded by default. Put differently, “market society is instituted as disembedded” (Cangiani 2011: 193). Therefore, the assumption of “always-embedded markets” seems analytically untenable. Equally important, the expression ‘always-embedded markets’ does not exist anywhere in Polanyi’s oeuvre. Block and Somers admit this, arguing that they coined the term ‘always-embedded markets’ as another moniker for what Polanyi called ‘always-instituted economy’ (Somers and Block 2021: 424). Yet, institutionalization does not necessarily mean embeddedness. The historical specificity of Polanyi’s market society lies precisely in its embeddedness within disembeddedness. Moreover, even when one accepts that Polanyi might toy with the idea of “always-embedded markets”, Block and Somers (2014: 95) concede that this argument remains “subordinated to the idea that the protective countermovement impairs the functioning of market self-regulation”. Therefore, that ‘always-embedded markets’ was just a fleeting idea which Polanyi only implied already signals that Block and Somers’ reinterpretation stood on thin ice. Yet, it was Hannes Lacher’s recent intervention that laid bare the weaknesses of idea of ‘always-embedded markets’. Based on extensive archival research, Lacher (2019) scrutinizes all the key assumptions underlying Block and Somers’ re-interpretation of Polanyi. He argues that there is no archival evidence to support the alleged social-democratic eureka moment in Polanyi’s thought. According to Lacher, Block and Somers “severely overemphasize”, among other things, the alleged discontinuity between Polanyi’s earlier work and TGT and the alleged time pressures under which Polanyi presumably worked. There seems to be only very little, if any, textual basis to suggest a theoretical shift or a temporary embrace of the so-called ‘always-embedded markets’ in Polanyi’s writings, notes and letters. If there is no slippage toward ‘always-embedded market’ in Polanyi’s thought, Lacher concludes, we should just admit that Polanyi Was entirely serious in showing that social protectionism, necessary as it was, ultimately exacerbated the economic and social crises of capitalist society to the point of its cataclysmic unravelling. […] [Therefore,] any reading of TGT as an argument for social democracy or a ‘capitalism with a human face’ is unsustainable. (Lacher 2019: 703) This position is to some extent shared by another and undoubtedly one of the most prolific Polanyian scholars, Gareth Dale. Dale (2010: 373–374) argues that Polanyi could be read as a socialist as well as a social democrat. “One can see, in Polanyi’s writings, the grounds for both interpretative strategies”; his concepts are “open to interpretation”, and “there were periods in his life in which he inclined towards more or less radical positions”. Dale goes on to give two direct textual evidence, which he thinks support the social democratic interpretation of Polanyi. The first one is a letter dated to 1941, in which Polanyi writes that “the urgent thing today is to produce a simple and clear i.e. rational picture of a regulated market-system in a plastic society i.e. in a society which can attain its self-organisation by political means”.1 Dale (2010: 374) quotes this sentence to show from where the social democratic interpretation of Polanyi may take its cue. Yet, does what Polanyi calls regulated ‘market-system’ necessarily imply a regulated ‘market society’? For, Polanyi appears to use the term ‘market-system’ as a general concept applicable to both capitalist and non-capitalist societies. On the one hand, Polanyi’s historical and anthropological studies are directed to an understanding of the rise of market society; therefore, it is understandable that when Polanyi uses the term ‘market system’, he usually means ‘market society’. Yet, in TGT he also uses

80

Antinomies of the ‘double movement’

the term ‘market system’ in a future context in which, Polanyi hopes, “the market system will no longer be self-regulating, even in principle, since it will not comprise labor, land, and money” (Polanyi 2001: 259). The point is that given that he uses the term ‘market system’ to refer to a future non-capitalist context, the ‘market-system’, which Polanyi invokes in his letter, may not indicate his endorsement of ‘market society’ in a regulated form. The second is a 1943 letter, in which, according to Dale (2010: 374), Polanyi, “in a subtle but far-reaching modification of earlier statements”, leans toward social democracy. In this letter, ­Polanyi discusses his own vision of the New Deal, which he believes should rely “on a clear conception instead of opportunistic, unresolved, confused and unprincipled intervention in everything”. The formula he has in mind is like the following: ‘since today neither money, not land, nor labour are under the laws of the market any more, the best thing would be openly to take the three out of the market’. In other words, In reality today we can see nothing but a middle course. The real alternative is between a laissez-faire and a regulated economy. The first believes in automatic market organization, the second doesn’t believe in it, and accordingly it undertakes the task of regulating the market […] Land, money and labour should not be left to the market. Apart from this the free operation of the market should be left intact. (Polanyi 1943 quoted in Litvan 1991: 259–260) It is not clear why these statements should be considered supportive of the social democratic interpretation of Polanyi. On the one hand, several commentators have already noted that Polanyi, at least initially, had too high expectations from the New Deal and the emerging post-war international economic order (cf. Lacher 2020). Yet, on the other, what Polanyi expected or hoped for was not that the New Deal would pursue a third way-ist political economy between free markets and social regulation, but that regulations would lead to the elimination of market society. For, if land, money and labor are taken out of the marketplace, as Polanyi says they should, fictitious commodities disappear, and the ‘market society’ is no more. Furthermore, in the same letter Polanyi notes that “[Ludwig von] Mises attacked me saying that I cherished illusions if I thought that there existed a middle course between a laissez-faire and a totally planned economy” (Polanyi 1943 quoted in Litvan 1990: 259, my emphasis), which implies that Polanyi did not believe in the virtues of a regulated market economy. In short, what transpires from this brief exposition is that there may not be enough textual or logical ground to claim Polanyi for a third way-ist position. That said, in his later works, Dale has slightly modified his position, increasingly (but not completely) withdrawing the interpretative licence he initially provided to the social democratic interpretation. In 2016, he writes that the social democratic interpretation of Polanyi “enjoys a greater following but less textual support. Much evidence casts doubt on the supposition that Polanyi believed the market should prevail as the dominant mechanism of economic integration”. Besides, according to Dale, there emphatically is no “pendular swing” at the heart of Polanyi’s Great Transformation. Contrary to the conventional social democratic interpretation, therefore, Polanyi “was not a champion of ‘embedded liberalism’ or […] of Keynesian economics, but was committed to the replacement of capitalism by a socialist order” (Dale 2016a: 6–7). That said, however, Dale continues to register his dissatisfaction with the more radical Polanyian interpretation on the grounds

81

Eren Duzgun

that Polanyi still believed that social democracy could provide the means to carry out a “socialist transformation”. That is, “actually existing democracy in the political sphere provided the platform on which a socialist democracy could be constructed” (Ibid.: 7). As contradictory it may sound, Dale thinks that Polanyi’s oscillation between social democracy and socialism is perfectly in line with the logical tensions within Polanyi’s ‘reform socialism’. Polanyi, according to this interpretation, was a reform-socialist who believed that a socialist society could be created by reforming, instead of revolutionizing, the existing social relations and institutions. Given his gradualist stance on socialist transformation, Polanyi’s view of double movement inevitably involved elements of regulated welfare capitalism and parliamentary reformism, as well as virtues of a socialist mixed economy subordinated to the dictates of democracy and redistribution. At times [Polanyi’s] emphasis was passionately upon the radical expansion of human freedoms, understood to necessitate a bursting of the shackles imposed by a society that is structured on the commodification of land and labor; at other times his horizon appeared limited to providing the market economy with a warmer and more cohesive social integument. (Dale 2016b: 283) Therefore, it is only natural that TGT Can legitimately be read either as an anti-capitalist manifesto or as a social democratic bedtime story: a provider of sweet dreams that help chastened idealists to rise in the morning, to get to work on the countermovement, more or less ruefully reinterpreted as a mission to improve, upholster, and repair the cogs of the market machine. (Ibid.: 286) As such, Dale attempts to ‘break from the confines’ of the bipolar Polanyi debate, explaining the logic of Polanyi’s work by analyzing the contradictions and (false) expectations of the reform-­ socialist project itself. Yet, if Dale had been correct about Polanyi’s socialist reformism, one wonders what to make of Polanyi’s insistence on the “impaired market economy”, i.e. his insistence on the self-defeating nature of the efforts to reform capitalism from inside, his repudiation of the attempts to moderate the excesses of market society and his remarks on the contradictions of political democracy that does not attempt to extend democracy to the economic sphere. For instance, against market apologists who argue that markets could have made everybody better-off in the long run if no selfish interests had obstructed their functioning, Polanyi does not try to defend protective measures per se. He rhetorically asks: Who could deny that government intervention in business may undermine confidence? Who could deny that unemployment would sometimes be less if it were not for out-ofwork benefit provided by law? That private business is injured by the competition of public works? That deficit finance may endanger private investments? That paternalism tends to damp business initiative? This being so in the present, surely it was no different in the past […] Who can doubt that factory laws, social insurance, municipal trading, health services,

82

Antinomies of the ‘double movement’

public utilities, tariffs, bounties and subsidies, cartels and trusts, embargoes on immigration, on capital movements, on imports […] must have acted as so many hindrances to the functioning of the competitive system, protracting business depressions, aggravating unemployment, deepening financial slumps, diminishing trade, and damaging severely the self-regulating mechanism of the market? (Polanyi 2001: 150) Instead of defending protective interventions per se, Polanyi contends that it is indeed true that these measures impaired the market economy. Yet, he quickly adds that people had no choice but to protect themselves against the perils inherent in a self-regulating market system. People’s reactions were only natural and spontaneous. The root cause of the present and future crisis, therefore, was not selfish and short-sighted societal demands for self-defence, but the inherent incompatibility between the market economy and human beings. Likewise, Polanyi argues that in Europe radicalizing democracy without seeking to overthrow the market society in toto led to nothing but a perilous social and institutional deadlock, ultimately giving birth to fascism (Polanyi 2001: 139–140). By the turn of the nineteenth century—universal suffrage was now fairly general—the working class was an influential factor in the state; the trading classes, on the other hand, whose sway over the legislature went no longer unchallenged, became conscious of the political power involved in their leadership in industry. This peculiar localization of influence and power caused no trouble as long as the market system continued to function without great stress and strain; but when, for inherent reasons, this was no longer the case, and tensions between the social classes developed, society itself was endangered by the fact that the contending parties were making government and business, state and industry, respectively, their strongholds. Two vital functions of society—the political and the economic—were being used and abused as weapons in a struggle for sectional interests. It was out of such a perilous deadlock that in the twentieth century the fascist crisis sprang. (Polanyi 2001: 140) In short, Polanyi warns that working classes unable or unwilling to extend their influence from parliaments to factories, from politics to economics, were ultimately bound to surrender to the dictates of the marketplace imposed by the fascist state. Therefore, while showing “the perverse consequences of the efforts to reform and humanize capitalism”, Polanyi draws lessons in TGT for the post-war period, warning the working classes that they Must not fall for the illusions that capitalism could be tamed and overcome from within [and that] they would have to break fundamentally with capitalism, and abolish private property. (Lacher 2019: 704) From this angle, there appears to be not much room in Polanyi’s thought for a reformist strategy of socialist transformation. Indeed, if anything, it seems much more plausible that Polanyi’s work, and especially TGT, is read “not as an idiosyncratic expression of reform-socialism, but as its ­cogent original and decisive refutation” (ibid).

83

Eren Duzgun

Conclusion Double movement constitutes the conceptual heart of Karl Polanyi’s history of market society. While helping to conceptualize the historical dialectic between ‘disembeddedness’ and ‘embeddedness’, double movement also points to the constant source of instability built into the very structure of market society. The question if or what extent this perpetual tension could be ameliorated is the crux of the Polanyi debate. Does Polanyi’s double movement, as Block and Somers argue, refer to a reconcilable dialectic; i.e. the processes of commodification, if regulated properly, can be reconciled with the requirements of social welfare and social democracy? Or, does the double movement, as Dale suggests, refer to a gradualist strategy of socialist transformation, which inevitably involved elements of regulated welfare capitalism, as well as the virtues of a socialist mixed economy subordinated to the dictates of radical democracy and redistribution? Or, as Lacher contends, it may as well be the case that Polanyi’s vision of double movement and reembedding systematically counters both welfare capitalism and reform-socialism, i.e. the double movement does not end with ‘reform’ of any sort, but is a systematic inquiry into how to bring a radical end to the tyranny of the market over human beings and nature. Of course, this debate is continuing, and the jury is out. However, in this chapter I have tried to show that Polanyi’s vision of double movement is not well-suited to accommodate reformist or gradualist strategies of social transformation. Given his insistence on the necessary yet contradictory nature of protective measures, Polanyi can hardly be read as espousing social measures designed to moderate the excesses of market society. Given his belief in the unreformability of market society, Polanyi’s vision of double movement could not afford a strategy of reform-­ socialism, nor did it allow a choice between capitalism and ‘capitalism with a human face’. Instead, the logic of his argument pointed to a much more radical choice that human beings would eventually have to make. Any meaningful attempt at overcoming double movement needs to take the bull by the horn. As long as the underlying dynamics of our lives remain the same, as long as we keep treating nature and human beings as commodities, no cosmetic surgery will do. To the contrary, historical experience suggests that such minimal interventions will sooner or later backfire, re-legitimizing capitalism pure and simple. The only way to re-embed our economies and save our lives from ecological and social collapse is by intervening in the very heart of the beast: land and human beings need to be taken out of the market. The beast is not tameable; it needs to be killed (Duzgun 2020).

Note 1 47–11, Letter Karl Polanyi to Marschak, 29 January 1941, my emphasis.

References Block, Fred. 2001. “Introduction” in Karl Polanyi’s The Great Transformation. Boston: Beacon Press: xviii–xxxviii. Block, Fred and Margaret Somers. 2014. The Power of Market Fundamentalism: Karl Polanyi’s Critique. Cambridge: Harvard University Press. Cangiani, Michele. 2011. “Karl Polanyi’s Institutional Theory: Market Society and its ‘Disembedded’ Economy”. Journal of Economic Issues 45/1: 177–197. ——— 2017. “‘Social Freedom’ in the Twenty-First Century: Rereading Polanyi”. Journal of Economic ­Issues 51/4: 915–938. Dale, Gareth. 2010. “Social Democracy, Embeddedness and Decommodification: On the Conceptual Innovations and Intellectual Affiliations of Karl Polanyi”. New Political Economy 15/3: 369–393.

84

Antinomies of the ‘double movement’ ——— 2016a. Reconstructing Karl Polanyi. London: Pluto Press. ——— 2016b. Karl Polanyi: A Life on the Left. New York: Columbia University Press. Duzgun, Eren. 2020. “Ecology, Democracy, and COVID-19: Rereading and Radicalizing Karl Polanyi”. In Ryan, J. Michael (ed.), COVID-19: Volume I: Global Pandemic, Societal Responses, Ideological Solutions. London: Routledge, 85–97. Esping-Andersen, Gosta. 1990. The Three Worlds of Welfare Capitalism. London: Polity. Lacher, Hannes. 2019. “Karl Polanyi, the ‘Always-Embedded Market Economy,’ and the Re-Writing of The Great Transformation.” Theory and Society 48: 671–707. ——— 2020. “Multilinear Trajectories: Polanyi, the Great Transformation and the American Exception”. In Radhika Desai and Kari Polanyi Levitt (eds.), Karl Polanyi and Twenty-First-Century Capitalism. Manchester: Manchaster University Press, 164–188. Litvan, György. 1991. “Democratic and Socialist Values in Karl Polanyi’s Thought”. In Marguerite Mendell and Daniel Salée (eds.), The Legacy of Karl Polanyi: Market, State and Society at the End of the Twentieth Century. New York: St. Martin’s Press, 251–271. Polanyi, Karl. 1957a. “Aristotle Discovers the Economy”. In Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson (eds.), Trade and Market in the Early Empires: Economies in History and Theory. New York: The Free Press, 64–94. ——— 1957b. “The Economy as Instituted Process”. In Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson (eds.), Trade and Market in the Early Empires: Economies in History and Theory. New York: The Free Press, 243–270. ——— 1977. The Livelihood of Man. Edited by Harry Pearson. New York: Academic Press. ——— 2001. The Great Transformation. Boston: Beacon Press. ——— 2014. For a New West: Essays, 1919–1958. Edited by Giorgio Resta and Mariavittoria Catanzariti, Cambridge: Polity. ——— 2018. Economy and Society: Selected Writings. Edited by Michele Cangiani and Claus Thomasberger. Cambridge: Polity. Polanyi-Levitt, Kari. 2013. From the Great Transformation to the Great Financialization: On Karl Polanyi and Other Essays. London: Zed Books. Somers, Margaret and Fred Block. 2021. “Against Polanyian orthodoxy: a reply to Hannes Lacher”. Theory and Society 50: 417–441.

85

7 MARKETS, PROTECTIONISM AND SELF-REGULATION A key to the ‘Great Transformation’ Hannes Lacher

Introduction For a book meant by its author to tell a “very straightforward, simple story”,1 Karl Polanyi’s The Great Transformation continues to stimulate a surprising amount of debate over its basic meaning and purposes. Mostly read as a foundational text for the social-democratic make-over of Western societies after World War (WW) II, it has also been interpreted as a clarion call for a much more fundamental – and ultimately abortive – socialist transformation. In this chapter, I will make a case for the latter reading. I will argue that TGT is best understood if we take seriously the integral ­elements of the thesis statement on its opening page: Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institutions could not exist for any length of time without annihilating the human and natural substance of society […] Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it. (Polanyi 1957: 3–4) Far from championing regulated capitalism and welfare states, Polanyi set out to show how the efforts to democratize and humanize capitalism, embodied in the protectionist countermovement since the 1870, themselves contributed to the catastrophic crisis of the 1930s and 1940s. To be sure, the root cause was the liberal utopia that had sought to reduce human work – und ultimately human life – to something that could be bought and sold in the pursuit of profit. But protectionism and interventionism had not undone the foundations of the “market system”; indeed, they had contributed to a disarticulation that ultimately threatened the very foundations of social life. This necessitated a radical transcendence of the “double movement”. In the end, TGT did not ask for more or more systematic protection, but for a comprehensive, indeed revolutionary, reorganization of social life. The radicalism of Polanyi is easy to miss because TGT broke from the Leninist mold both in terms of its analysis of the contradictions of modern society, and from its prescriptions for DOI: 10.4324/9781003336747-10 86

Markets, protectionism and self-regulation

revolutionary agency. Of the latter, there is none in TGT; in 1943, Polanyi seems to have been convinced that revolution could, at that historical conjuncture, be achieved without revolutionaries. Capitalism – not just the liberal capitalism of the mid-19th century, but the organized and interventionist capitalism elaborated after 1870 – had comprehensively failed, and the fascist rescue operation was on the verge of military defeat. Socialism, Polanyi was convinced, was the only remaining alternative, at least in Europe.2 The purpose of TGT was precisely to drive home these lessons from history, to inoculate the working classes against any temptations to resort back to the failed efforts of the interwar period. But that required a compelling narrative of exactly how things had gone wrong, and in this regard Polanyi found little of help in Marxist accounts of the global crisis. Instead, he developed an innovative mode of analysis that centered, not on the contradictions within the capitalist economy, but rather on the tensions between the conflicting demands of market-economy and social life respectively. In this regard, Polanyi built on what would later be called the ‘neoliberal’ argument, developed from the 1920s onwards in Vienna by thinkers like Hayek and Mises, that the crisis was owed to too much intervention and too little market; to the argument, in short, that capitalism “had never really been tried” because it had been constricted, almost from birth, by all sorts of interferences and incumbrances. The key to TGT, I suggest, lies in recognizing that Polanyi’s argument, and the very structure of that book, owes itself to a considerable extent to his efforts to appropriate the neoliberal narrative of the “perverse effects” of interventionism for an argument that ultimately subverts neoliberalism’s political implications and opens the door for a future beyond laissez-faire and protectionism.

The neoliberal origins of the double movement Polanyi’s encounter with neoliberalism went back to the socialist calculation debate of the early 1920s. Against Mises’ efforts to refute the possibility of cost calculation in centrally planned economies, and thus the viability of any form of socialism, Polanyi argued that a “functionally organized socialist society” could, through democratic decision-making processes, account for both the technical costs of production and the social costs of just wages, prices, etc. Such a socialism would eschew central planning and even entail a certain subordinate role for markets in signaling product shortages; but neither capitalist competition, nor profit-driven investment would persist. These ideas remained central to the vision and the political project of TGT,3 conjoined with another critical insight from the 1920s: “To the socialist, this seems self-evident: labor power is not, in its essence, a commodity. That it appears as such in capitalism is the inhumane trait in its economic ideology”.4 This embryonic introduction of the notion of fictitious commodities initially provided ­Polanyi with a basis for an ethical critique of capitalism and the elaboration of an “idealist socialism”, which sought to modify, but not challenge the prevalent reform-socialist expectation of a gradual democratization and socialization of an increasingly “organized” capitalism. Rather than advocating revolution, Polanyi “envisioned workers transforming Viennese municipal socialism, in an evolutionary fashion, into functional socialism” (Bockman 2016: 393). But with the fascist revolutions in Austria and Germany, and the violent defeat of ‘Red Vienna’, Polanyi’s politics changed, too. Over the next decade, he would persistently and explicitly call for socialist revolution.5 Moreover, he now extended his critique of the commodification of human labor and made this notion of fictitious commodities central to the historical-sociological analysis of capitalism and the elucidation of the present crisis. This move furnished Polanyi with the fundamental idea at the heart of TGT, of a contradiction between the requisites of 87

Hannes Lacher

market economy and the necessities of social existence, an argument he developed in his mid1930s manuscript on ‘The Fascist Transformation’: But the absorption of society, by liberal capitalism would amount to no less than the complete destruction of society by Capitalism. Society reacts to this peril through various measures of self-protection. The State starts out to regulate, limit and control the economic sphere. […] State and Industry interpenetrate. It is this partial and incidental integration of society that has been often described as the transition from liberal to regulated capitalism.6 As Polanyi noted in 1939, the “present difficulties [were], essentially, the outcome of this makeshift”.7 While “regulated” or “organized” capitalism thereby lessened “some of the dangers threatening society from the blind forces of an economic”,8 this came at a cost: Beneath the superficial incomplete reintegration the basic incompatibility of capitalism and political democracy continued, the unity of society was not restored. Rigid, inelastic economic systems are the outcome. A diminishing capacity for adjustment is the price of the increased security, stability, sanity, and safety in society.9 These arguments, which TGT would condense in the theorem of “impaired” market self-­regulation, emerged from Polanyi’s engagement with a second strand of the neo- (and ordo-)liberal literature: its critique, not of socialism, but of what they saw as “degenerated” markets, or a “subsidizedmonopolized-protectionist-capitalist” economy.10 In his 1932 essay on “The Myth of the Failure of Capitalism”, Ludwig von Mises similarly argued against the then prevailing common sense that the Great Depression had laid bare the bankruptcy of capitalism and liberalism. Liberalism cannot be deemed responsible for any of the institutions which give today’s economic policies their character. It was against the nationalization and the bringing under municipal control of projects which now show themselves to be catastrophes for the public sector and a source of filthy corruption; it was against the denial of protection for those willing to work and against placing state power at the disposal of the trade unions, against unemployment compensation, which has made unemployment a permanent and universal phenomenon, against social insurance, […] against tariffs (and thereby implicitly against cartels), […] against excessive taxation and against inflation, against armaments, against colonial acquisitions, against the oppression of minorities, against imperialism and against war. (Mises 1932) To Mises, while socialism had not fully displaced capitalism, what existed in the run-up to the Great Depression was a “capitalism […] harassed by the intervention of the government”, and it was that interventionism, not capitalism itself, that bore responsibility for the crisis (ibid.) The origins of fascism, moreover, could be traced back directly to the economically and social destructive consequences of interventionism, which it sought to rectify by an ever more systematic direction of the economy. These arguments would be elaborated enthusiastically by other neoliberals. Indeed, it is in their writings that the idea of the “double movement” originates.11 In The Road to Serfdom (1944), Hayek argues that Bismarckian Germany enabled “collectivism” and “socialism” to increasingly infringe upon the market system that had previously emerged “spontaneously”.12 In the American context, Lippmann’s Good Society (1937) similarly pointed to a “collectivist counter-revolution” in the late 19th century that partially reversed the capitalist “market revolution” of the preceding 88

Markets, protectionism and self-regulation

century. Unlike Hayek, he saw this as more than a left-wing attack on capitalism. And he went further than Mises, who had conceded that it was not just unionized workers, but the greed of industrial and agrarian elites, too, that sought to bend markets to their respective benefits (with protective tariffs, for instance). For Lippmann (1937: 171), the problem was more fundamental, namely that a market economy required a new mentality that could only emerge at a lag, for “[m]en are not as adaptable as a fluctuating market demands. They are not abstract economic units but creatures of habit with deep attachments to their own ways of life”. Therefore, As the revolutionary transformation proceeds, it must evoke resistance and rebellion at every stage. It evokes resistance and rebellion on the right and on the left – that is to say, among those who possess power and wealth, and among those who do not. The movement of the left is socialistic and tends logically toward communism. The movement of the right, composed of men of property in alliance with statesmen and soldiers, operates through economic nationalism, pre-emptive imperialism, corporate monopoly, and becomes in its extreme and desperate form what is now called fascism. (Ibid.: 168) Like other neoliberals, Lippmann considered it imperative to habituate people to the demands of the market, so they would eventually respond individually to its signals rather than collectively to subvert them. If he was more willing than Mises to make limited concessions along the way, he nevertheless shared Mises’ diagnosis of the sources of the Great Depression: “The crisis under which the world is presently suffering is the crisis of interventionism and of state and municipal socialism, in short the crisis of anticapitalist policies” (ibid.). Interventionism, Lippman, Hayek and Mises argued, disarticulated the prices on which calculations of profit and investment decisions depended; to rectify such problems, further interventions would be required, with their own attendant negative consequences. Ultimately, investment would cease (or be relocated abroad), mass unemployment follow. Tariff protection meanwhile might provide temporary relief, but inevitably “reduce the productivity of human labor and thus the social dividend” (Mises 1996 [1929]: 7–9) The critical problem, neoliberals argued, was that interventionism left the market economy – defined by Mises (1949) as “the social system of the division of labor under private ownership of the means of production” – in place to regulate investment decisions, while interfering with the mechanisms through which entrepreneurs sought to calculate costs and expected profits. Capitalist society is guided by the play of the market mechanism. […] If the function of the market as regulator of production is always thwarted by economic policies in so far as the latter try to determine prices, wages, and interest rates instead of letting the market determine them, then a crisis will surely develop. (Ibid.)

Jujitsu with Mises In important ways, Polanyi agreed with the neoliberals’ notion that the protectionist counter-­ movement had generated a profound institutional dysfunction. When around the 1870s a general protectionist movement – social and national – started in Europe, who can doubt that it hampered and restricted trade? Who can doubt that factory laws, social insurance, municipal trading, health services, public utilities, tariffs, bounties and 89

Hannes Lacher

subsidies, cartels and trusts, embargoes on immigration, on capital movements, on imports […] must have acted as so many hindrances to the functioning of the competitive system, protracting business depressions, aggravating unemployment, deepening financial slumps, diminishing trade, and damaging severely the self-regulating mechanism of the market? (Polanyi 1957: 150) The consequence of protectionism and interventionism, TGT demonstrated in great detail, was not a viable amalgamation of regulation by the market and regulation of the market. What had emerged instead was an incoherent and dysfunctional blend with an “impaired” market at its center. The contradictions of protectionism had increasingly made themselves felt as the countermovement gained sway; increasingly, [E]conomic adjustment became slow and difficult. The self-regulation of markets was gravely hampered. Eventually, unadjusted price and cost structures prolonged depressions, unadjusted equipment retarded the liquidation of unprofitable investments, unadjusted price and income levels caused social tensions. (Ibid.: 218) Worse, as European societies democratized after WWI, the result was not economic and social stabilization through some form of “organized capitalism”, but societal “deadlock” and paralysis which eventually gave rise to the existential crisis of (Western) society after 1929. The appropriation of neoliberalism’s doctrine of the “perverse consequences” (cf. Dale 2008) of protectionism and interventionism had furnished Polanyi with the ability to explain the radically dysfunctional character of “organized capitalism”. Social-democratic and reform-socialist hopes and expectations of a taming or evolutionary transcendence of capitalism, TGT demonstrated, were thus equally built on quicksand. And yet, Polanyi vehemently rejected both neoliberalism’s conclusion that fascism was the necessary consequence (and indeed the highest form) of interventionism, and its prescriptions, i.e. the need to unhamper market competition and prices and to limit democracy’s reign over the economy. It is here that Polanyi sets up the jiujitsu move that would enable him to turn the force of the neoliberal argument against itself: Liberal writers like Spencer and Sumner, Mises and Lippmann offer an account of the double movement substantially similar to our own, but they put an entirely different interpretation on it. While in our view the concept of a self-regulating market was utopian, and its progress was stopped by the realistic self-protection of society, in their view all protectionism was a mistake due to impatience, greed and short-sightedness, but for which the market would have resolved its difficulties. (Polanyi 1957: 142–143) Neoliberals, Polanyi charged, found the “root of all evils” in the “forces of selfishness” that since the 1870s increasingly interfered with the “freedom of employment, trade and currencies” (ibid.: 150–151). Salvation, consequently, required the restoration of the status quo ante. For Polanyi, however, a very different solution was required because the actual roots of the crisis went even deeper: It is agreed that the liberal movement, intent on the spreading of the market system, was met by a protective countermovement tending toward its restriction; such an assumption, indeed,

90

Markets, protectionism and self-regulation

underlies our own thesis of the double movement. But while we assert that the application of the absurd notion of a self-regulating market system would have inevitably destroyed society, the liberal accuses the most various elements of having wrecked a great initiative. (Ibid.) Challenging this narrative of a supposed fall from grace was one of TGT’s central purposes: “In a nutshell this is the economic liberal’s defense. Unless it is refuted, he will continue to hold the floor in the contest of arguments” (ibid.). What TGT sought to show was that the crisis of the 1930s, more than a simple consequence of post-1870 “corruptions” of capitalism, was ultimately rooted in the 1830s, with the utopian (and perverse) endeavors of governments to subject humans and nature to the market, to turn labor and land into commodities, and to make societies conform to the demands of the market mechanism and the commodity fiction. Yet it is crucial to note that Polanyi does not turn his critique of neoliberalism into a defense of protectionism. To be sure, for Polanyi, the spontaneous protective responses to the dislocations wrought by the market, from across the political spectrum and sectors of society, were necessary for the persistence of human community and society, to Allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed […] would result in the demolition of society. […] Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure. (Ibid.: 76) Instead of a “collectivist conspiracy” (ibid.: 213) advanced by an “unholy alliance of trade unions and labor parties with monopolistic manufacturers and agrarian interests, which in their shortsighted greed joined forces to frustrate economic liberty” (ibid.: 150), Polanyi insists that these groups in fact acted in the defense of the integrity of society itself. Had the protectionist countermovement been stopped in its tracks in the 19th century, the course of the disease would have been different – and perhaps even more destructive.13 The implication of Polanyi’s argument is thus clearly not that it would have been better for children to die in the factory chimney’s they were forced to clean; it is not that nothing should have been allowed to soil the purity of the self-regulating market (cf. Block and Somers 2021; Lacher 2019). And yet, instead of righting the ship of capitalism by stabilizing it with protectionist and regulatory mechanisms, Polanyi argues that those very mechanisms finally caused it to capsize. Restating TGT’s fundamental thesis (“Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way”), Polanyi concludes his book thus: Nineteenth-century civilization was not destroyed by the external or internal attack of barbarians; its vitality was not sapped by the devastations of World War I nor by the revolt of a socialist proletariat or a fascist lower middle class. Its failure was not the outcome of some alleged laws of economics such as that of the falling rate of profit or of underconsumption or overproduction. It disintegrated as the result of an entirely different set of causes: the measures which society adopted in order not to be, in its turn, annihilated by the action of the self-regulating market. (Ibid.: 257)

91

Hannes Lacher

If not the defense of protectionism and interventionism, nor the championing of the restoration of market self-regulation – what, then, follows from Polanyi’s narrative? What path out of the cataclysmic crisis of humanity did he seek to chart? Polanyi, we can now see, used the force of neoliberalism’s critique of interventionism against neoliberal conclusions. In a nutshell, TGT argued that precisely because – as Mises had demonstrated – the market system tolerated no interference without generating deleterious consequences such as mass-unemployment, poverty or hyper-inflation, it patently could not provide a viable foundation for any society. If market economy responded to measures whereby certain social actors sought to protect themselves and their environment from the often-inhumane consequences of market outcomes with consequences that endangered production, employment and social reproduction – then the necessary conclusion was not that markets should be allowed to self-regulate, but that a fundamental dismantling of the market foundations of European economies was existentially necessary. A far more fundamental transformation was therefore required than the protectionist counter-movement’s ill-fated efforts to tame markets and make them compatible with societal life.

Institutedness, protectionism and re-embedding: the inner coherence of TGT The widespread misreading of the Polanyi’s text as a historical justification of protectionism (and as a program for its extension and deepening in the form of capitalist welfare states) has given rise to an increasing puzzlement among neo-Polanyians regarding TGT’s inner logic and coherence (Cahill 2018; Block and Somers 2014; Cahill 2018). On this view, Polanyi’s repeated insistence that the critical problem of the inter-war period was the “impaired self-regulation” of the market seems to suggest that Polanyi perhaps failed fully follow through on his own argument. For, given that TGT documented in detail all the ways in which markets were not only politically constituted, but almost from the beginning accompanied by protectionist measures – shouldn’t that have led Polanyi to conclude that markets were in fact politically regulated from the beginning? And when Polanyi argued that “[v]ital though such a countermovement was for the protection of society, in the last analysis it was incompatible with the self-regulation of the market, and thus with the market system itself” (1957: 130) – why posit an “impaired selfregulation” of markets as a result of that incompatibility, instead of a simple canceling out of the “self” in that regulation? If so, finally, then Polanyi’s warnings that the “protective action conflicted fatally with the self-regulation of the system” could only be considered further evidence for incoherent thinking. There certainly was no shortage of books in the interwar period that documented and celebrated the long rise and rise of interventionism, and made a case for its extension and deepening. The defense of laissez-faire by neoliberals like Mises was notable not because it described the existing status quo, but because it sought to mount an intellectual onslaught on this historically grown interventionist capitalism, widely acknowledged to have come into existence over the previous half-century, and its many intellectual champions. Those, in turn, gave no quarter. Evan Durbin’s The Politics of Democratic Socialism: An Essay on Social Policy (1940) argued in this vein: [T]he reactions of public opinion to the insecurity, inequality and wide fluctuations of prosperity springing from the institutions of free enterprise and property have imposed upon those institutions, at least in political democracies, such a comprehensive system of regulations and burdens that the economic order can no longer be described as a laisser-faire system […] It is an organized economy; and it is a monopolistic and restrictive economy. […] [T]he historical evidence clearly demonstrates that this economy is not in a state of collapse, 92

Markets, protectionism and self-regulation

or even of decay. On the contrary it is still an expanding economy with a rising standard of living, a broadening ownership of property and an important set of regulations – the social services and factory legislation – that are protective in their origin and consequences. (Durbin 1940: 325) This new capitalism, Durbin conceded, was still “profoundly unsatisfactory” (inequalities abounded, monopolies limited growth) – but more reform and intervention would ultimately resolve those shortcomings. Durbin’s book, in other words, made the case that neo-Polanyians attribute to TGT. But Polanyi’s book sought to show the fatal contradictions of protectionism in a capitalist society – not its shortcomings. Even while stabilizing some aspects of social life threatened by the market, it contributed to new disturbances. Polanyi thus highlights the inner relationship between the social and national protectionism of the 1870s, on the one hand, and the emergence of militarist and imperialist “crustacean” states, preparing the conditions for great power conflict and world war, on the other (1957: 211, 222–227). And he goes to great length in TGT’s critical Chapters 17–20, in which Polanyi seeks to elucidate the crisis mechanisms of his own period (and which are rarely given much attention by Polanyians), to show how market impairment feeds into economic and societal paralysis. For Polanyi, ultimately, the theorem of impaired market self-regulation was not a logical impossibility, but the very key to what TGT sought to explain: the lethal dynamics that had led the world toward a cataclysmic precipice. The source of that historical contradiction was, for him, that protectionism and interventionism did not fully cancel out market self-regulation. Consider labor: The critical stage was reached with the establishment of a labor market in England, in which workers were put under the threat of starvation if they failed to comply with the rules of wage labor. As soon as this drastic step was taken, the mechanism of the self-regulating market sprang into gear. (Ibid.: 225) To be sure, almost simultaneously, too, protectionist responses set in. But, incomplete as its imposition was, this commodification nevertheless radically transformed societies. Men and women did find themselves, as never before, compelled to make a living from wages, and in competition for employment, and over wage levels, with other in similar situations. Land, too, did, over the course of the 19th century, become subject to market transfers in ways that it had never been before. This, for Polanyi, was critical: humanity’s mode of organizing its reproductive relationship with nature had been put on a new foundation; it was now organized through the institutional pattern of exchange. With it, a critical function of any society, the production of the goods on which everyone in society, and society’s social hierarchies and relations, depended, were handed over, to a significant extent, to the market mechanism. Indeed: “[t]he extreme artificiality of market economy is rooted in the fact that the process of production itself is here organized in the form of buying and selling” (ibid.: 77). What made this system “self-regulating”, though? Not merely that prices for labor, land, money and goods were subject to the balance of supply and demand. What really set this economy apart from all others was that it allowed decisions about what would be produced and how to be guided by the pursuit of profit. This mechanism was the dynamic motor of market self-regulation: whether society’s material needs would be secured and whether all those dependent on the market could actually secure employment and incomes, depended on willingness of others to invest and hire because they expected their costs to be lower than the returns on their investment. And, as liberal 93

Hannes Lacher

economists had long insisted, that, in turn, required that prices reflected supply and demand, rather than political influences. Polanyi agreed, as we have seen, that this was indeed the system-­ immanent requirement of a market-economy – but rejected vehemently the notion that workers could or should have allowed themselves to be reduced to adjuncts of the market (ibid.: 185). Indeed, as workers found their social status “degraded” and increasingly subject to the Threat of mass unemployment, […] the function of trade unions becomes morally and culturally vital to the maintenance of minimum standards for the majority of the people. Yet clearly any method of intervention offers protection to the workers must obstruct the mechanism of the self-regulating market, and eventually diminish the very fund of consumers’ goods that provides them with wages. (Ibid.: 239) The contradictory relationship between self-regulation and protectionism prevailed because people, however much they used their collective capacity to influence the conditions and prices of labor, remained subject to the profit-driven calculations of private entrepreneurs whether or not to hire and produce. Protectionism, in Polanyi’s view, disarticulated the price signals on which those decisions depended (leading first to inefficient investments and then, during the 1920s, to investors refusing to invest) – but it did not displace the mechanism that decided over the production and reproduction of society. Impaired market self-regulation ensued, and ultimately threatened society in new ways, rather than reconstituting the economy on more just, humane, and economically viable foundations. Two opposed modes of regulation thus came into a fundamental conflict: on the one hand, the market-immanent mechanism, that was constituted and maintained by marketmaking and sustaining state interventions, such as anti-union or anti-trust legislation. And, on the other hand, a society-sustaining mode of regulation, with its own, competing forms of protectionist intervention, that insisted that the value and use of land, labor and money must not be left to the market to determine. What, then, was required to overcome this institutional contradiction? Polanyi argued that humanity’s determination, to the chagrin of neoliberals everywhere, to preserve its social and communal life required that not just prices and wages, but the decision-making over investments and production itself, needed to be determined politically. This, he argued, had been the case in many pre-capitalist societies, but Polanyi did not seek to restore despotic mechanisms. Instead, he argued that the resolution of the crisis of humanity required democratic forms of economic planning. It would require displacing the market from the organization of production by allocating and valuing land, labor and money on non-market foundations, leaving only incidental product markets. Most importantly, however, mankind’s and society’s production and reproduction must no longer be dependent on the profit calculation of individual entrepreneurs, but by democratic institutions based on social – and societal – need.

Conclusions Following his reductio ad absurdum of neoliberalism’s demands for the restoration of market self-regulation, Polanyi ultimately derived from its partial appropriation a new justification for the transition to socialism. This, he hoped, would not only provide the working class with a better understanding than Marxist accounts of why and how capitalism had failed; it might also provide a stronger impetus for efforts to overcome capitalism. This hope, of course, came to naught. After

94

Markets, protectionism and self-regulation

the war, new forms of market market-making interventions were combined with protectionist elements that successfully stabilized capitalism. When Polanyi was rediscovered as a social theorist, it was at the beginning of the neoliberal shift. As the Left turned to defend what gains it had made, Polanyi’s critique of neoliberalism seemingly filled a theoretical and political gap. But it was a radically simplified reading that now prevailed, one that almost completely disregarded TGT’s critique of the limits and pitfalls of protectionism. This was perhaps inevitable, as the experience of the now passing ‘golden age’ of capitalism was widely – and probably rightly – attributed to its regulated post-war form. In the process, Polanyi emerged as the supposed visionary who had foretold that capitalism, once humanized, would also become economically more successful. That interpretation, I have argued in this chapter, is fundamentally misleading. TGT sought to show the opposite: that market economy could not be tamed, humanized and stabilized. He may well have been wrong in this regard, but I think it remains useful to try to understand the inner logic of his argumentation – and we probably can learn more from fallible social theorists than from thinkers held up us prophets. That requires us to understand Polanyi’s most germane and innovative contribution to modern social theory: the theorem of impaired market self-regulation. I have argued that we can understand this theorem if we examine it in the context of Polanyi’s engagement with the neoliberal thinkers he first encountered in the 1920s. Indeed, Polanyi repeatedly indicates his appropriation of their notion of an anti-liberal countermovement. He does so, however, to show that the neoliberals’ argument that markets needed to be restored to self-­regulation would require intolerable sacrifices that European societies refused, and increasingly from the 1870s, and that in the present would require extreme form of violence, and the destruction of democracy, to succeed. I have sought to show, finally, that we can grasp the historical problem that Polanyi grappled with through the notion of impaired market self-regulation if we follow his efforts to show, in TGT, how the protectionist countermovement did not usher in a new and coherent form of economic regulation, but how it generated an institutional conflict between two competing and ultimately contradictory regulatory principles. Much has been made in recent years of the idea that Polanyi’s central claim, namely that protectionism ultimately contributed destructively to the pathologies of capitalist society, was logically incoherent. Polanyi’s undeniable efforts to show that the constitution and maintenance of market economy required continuous intervention have been widely understood to imply that Polanyi wanted to (or should have wanted to) argue that such interventions cancelled out market self-regulation – and thus left little plausible room for the idea that the two should conflict “fatefully”. Yet I have argued that the logic of Polanyi’s argument is internally consistent and coherent (if not ipso facto historically accurate or useful). What Polanyi sought to show was that the societal processes whereby market self-regulation was institutionalized (or “instituted” as he subsequently came to term it; cf. Lacher 1999; Clark 2014; Mosar 2021), required massive forms of market-making and sustaining intervention. What changed after the 1870s was not that states intervened (nor even the extent of those interventions), but that now increasingly market-limiting interventions, through which societies sought to protect diverse groups of social actors from the ravages of the market, came to dominate. But ultimately, those protectionist interventions did not “re-embed” the market, nor did the cancel out market “self”-regulation. Instead, the two contradictory modes of regulation, one seeking to make the market supreme, the other insisting on the supremacy of society and human community, entered into an ultimately destructive dialectic. It is with this notion of “impaired market selfregulation” that TGT stands or falls – and very few Polanyians have ever seriously sought to test the strength of Polanyi’s actual argument.

95

Hannes Lacher

Notes 1 59–02, Letter to Kari dated February 23, 1941. 2 For a detailed analysis of Polanyi’s understanding of the European trajectory, and the critical disjuncture of the American path, see Lacher 2020. 3 In a socialist society, Polanyi suggested in TGT (1957: 252), far more limited product markets would serve “to ensure the freedom of the consumer, to indicate the shifting of demand, to influence producers’ income, and to serve as an instrument of accountancy”. 4 3–1 Das Übersichtsproblem, p. 18 (my translation) 5 This position contrasts with Dale’s (2016) interpretation of Polanyi’s thought during the 1930s and in TGT as a direct outgrowth of his reform-socialist commitments of his Vienna years. In my view, while there are numerous continuities that reach back to the early 1920s, Polanyi’s social thought and politics underwent a radicalization in response to the patent failures of reform-socialism. TGT sought to show why they failed. 6 20–08, The Fascist Transformation, ~1935. 7 17–03 Oxford Course on Social and Political Theory, 1939, 8 Ibid. 9 08-07, The Christian and the World Economic Crisis, mid-1930s, emphasis in the original. 10 Alexander Rüstow, cited in Geyer 2022: 74. Wilhelm Röpke (1948: 27) went a step farther when he suggested in 1944 that the term ‘capitalism’ should be reserved for the “distorted and soiled form which market economy assumed in the economic history of the last hundred years”. 11 For a systematic (but somewhat different) consideration of the relationship between Hayek and Polanyi, including the notion of the double-movement, see Thomasberger 2009. 12 More so than Mises, von Hayek emphasized that this market system required political and legal safeguards and mechanisms to entrench and deepen competition. While von Mises comes close to reasserting a laissez-faire position as a solution to the global crisis, Hayek and Lippmann are willing to jettison laissez-faire in favor of a more activist role for the state. This has led some recent observers to suggest that Hayek, and even more so the Ordoliberals, were not far removed from Polanyi’s assertion that the market order was constituted not by a withdrawal of the state but through its active role in re-regulating the economy – and that their prescriptions of post-war capitalism and social democracy should be considered less than antagonistic. Cf. Dekker 2022; Woodruff 2017. 13 Preventing them, moreover, would have required the suppression of societal mechanisms for collective protective action by considerable force, as it did in the 1930s: for which reason Polanyi considered Mises’ approach a ‘liberal’ variant – rather than an implacable foe – of fascism.

Bibliography Block, Fred, & Margaret Somers. 2014. The Power of Market Fundamentalism: Karl Polanyi’s Critique. Harvard University Press. Bockman, Johanna. 2016. “Socialism and the embedded economy”. Theory and Society 45/5: 385–397. Cahill, Daniel. 2018. “Polanyi, Hayek and embedded neoliberalism”. Globalizations 15/7: 977–994. Clark, Timothy D. 2014. “Reclaiming Karl Polanyi, Socialist Intellectual”. Studies in Political Economy 94/1: 61–84. Dale, Gareth. 2008. “Karl Polanyi’s the great transformation: Perverse effects, protectionism and Gemeinschaft”. Economy and Society 37/4: 495–524. ——— (2016). Reconstructing Karl Polanyi: Excavation and Critique. Pluto Press. Dekker, Erwin. (2022). “Framing the market: The unexpected commonalities between Karl Polanyi and the ordoliberals”. https://www.researchgate.net/publication/366092183 Durbin, Evan. 1940. The Politics of Democratic Socialism: An Essay on Social Policy. Routledge. Geyer, Martin. 2022. “Aporias of ‘political capitalism’ between World War I and the depression”. In M. Föllmer and P. Swett (eds.), Reshaping Capitalism in Weimar and Nazi Germany. Cambridge University Press, 58–84. Hayek, Friedrich A. 1944. The Road to Serfdom. University of Chicago Press. Lacher, Hannes. 1999. “The politics of the market: Re‐reading Karl Polanyi”. Global Society 13/3: 313–326. Lacher, H. 2019. “Karl Polanyi, the “always-embedded market economy,” and the re-writing of the great transformation”. Theory and Society 48/5: 671–707.

96

Markets, protectionism and self-regulation Lacher, H. 2020. “Multilinear trajectories: Polanyi, the great transformation and the American exception”. In R. Desai and K. Polanyi Levitt (eds.), Karl Polanyi and Twenty-First-Century Capitalism. Manchester University Press, 164–188. Lippmann, Walter. 1937. An Inquiry into the Principles of the Good Society. Little, Brown and Company. Mises, L. von. 1932. “The Myth of the Failure of Capitalism”. https://mises.org/print/5955 Mises, L. von 1949. Human Action: A Treatise on Economics. Yale University Press. Mises, L. von 1996[1929]. A Critique of Interventionism. Foundation for Economic Education. Mosar, Louis 2021. “The always instituted economy and the disembedded market: Polanyi’s Dual critique of market capitalism,” Journal of Economic Issues 55/3, July: 615–636. Polanyi, K. 1957. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press. Röpke, W. (1948). Civitas Humana. William Hodge and Co. Somers, M., & Block, F. (2021). “Against Polanyian orthodoxy: A reply to Hannes Lacher”. Theory and Society 50/3: 417–441. Thomasberger, C.  (2009). ‘Gesellschaftliche Freiheit und Marktordnung. Karl Polanyi versus Friedrich v. Hayek‘. In H. Hieke (ed.), Kapitalismus. Kritische Betrachtungen und Reformansätze. Metropolis, 13–38. Woodruff, D. (2017). ‘Ordoliberalism, Polanyi, and the theodicy of markets’. In J. Hien and C. Joerges (ed.), Ordoliberalism, Law and the Rule of Economics. Hart Publishing, 215–227.

97

II

Its history

8 THE LEAGUE OF NATIONS’ PROGRAMME ‘FINANCIAL RECONSTRUCTION OF AUSTRIA’ AND POLANYI’S ECONOMIC AND POLITICAL THEORY Maria Markantonatou The Austrian crisis While Polanyi was living in Vienna, where he had migrated from Budapest in 1919, a programme of structural adjustment (“Financial Reconstruction of Austria” 1922) was implemented under the auspice of the League of Nations (hereafter LoN). The programme consisted of policies of austerity and liberalization, leading to unemployment, the weakening of social services, and severe ­political tensions. Polanyi, who from 1924 was a member of the editorial team of the most important economic and financial weekly in Central Europe Der Österreichische Volkswirt (The Austrian Economist) and author of a series of articles οn issues of national and international economy, experienced, and observed the events from close up. Before we examine his views on the programme in the next subchapter, we briefly look at the LoN’s programme, starting with the request of the Austrian Christian-social Chancellor Ignaz Seipel1 in September 1922. Seipel turned to the LoN for financial assistance to cope with hyperinflation, fiscal crisis and insolvent banks, and used the following words: It is with profound emotion that I come today before the Council of the LoN to plead my country’s cause. (…) I appear therefore before you today to beg you to help my country (…). Austria can no longer check the depreciation of her currency, which becomes more disquieting every day, and our people, who have endured such terrible suffering and who are perhaps even more crushed by fear for the uncertainty of their future than by the physical misfortunes of the present time, are menaced by actual decimation through hunger and cold. These disasters would not only endanger the maintenance of order within the heart of ­Europe; they would involve the ruin of a territory which, although comparatively small, plays an important part in the commerce and productivity of the world. (Seipel in LοΝ 1922: 19–20) Seipel was invited together with Alfred Grünberger, the Austrian Foreign Minister, to take part in the deliberations of the LoN’s Council and present the country’s situation. Seipel (in LοΝ 1922:

101

DOI: 10.4324/9781003336747-12

Maria Markantonatou

20) characterized the crisis as “unique in the financial history of the world”, as high exchange rates prevented the import of essential goods such as corn, sugar, and coal, leading to food shortages. A year earlier, in 1921, the LoN had decided to suspend liens on Austrian resources, provided that the government would undertake fiscal reforms. The government had quickly increased taxation, abolished the subsidies on foodstuffs and, amidst financial troubles, had to cope with delays in funding (ibid.). From 1919 to 1921, such solutions were offered as food deliveries on credit after the Armistice of 1918, emergency credits from France, Great Britain, Italy, and the US, and various foreign charitable distributions, which, however, did not halt inflation (LοΝ 1945: 37).2 Thus, the LoN offered a broader scheme of economic assistance and demanded that a Commission of experts controlled the use of credits. Seipel (in LοΝ 1922: 22) stated that his government would “admit that such a control is inevitable and natural” and that it would be “unreasonable to refuse, simply for reasons of prestige”. As he put it, his government could not “accept this control unless sufficient credits were granted at the same time. For nothing could justify the control of an independent State except the real help accorded to her” (ibid.). As a result, it was decided that the LoN’s Financial Committee3 supervised the Austrian state budget. Austria, which after the war barely comprised of 7 million inhabitants, had emerged after the disintegration of the Habsburg Empire, a market of 50 million multinational consumers with a common currency and banking system (Gross/Gummer 2014: 253). The successor states stamped the old Habsburg krone notes to separate their currencies from the Empire’s krone, but such temporary measures soon created monetary chaos (ibid.: 255). Thus, it was considered urgent by the defenders of economic liberalism to stabilize the currency, reduce capital flight, manage the deficits caused by war, and stimulate economic growth. The Austrian Schilling was introduced, and an independent central bank, the Austrian National Bank was established (Macher 2017: 24). A “Commissioner-General”, Alfred Zimmerman from the Netherlands, was appointed in Vienna (Ginneken 2006: 137) to supervise the programme that became known as the Genfer Sanierung, since the LoN was based in Geneva. The tasks of Zimmerman’s team were the control and evaluation of the annual budget, the approval of loan tranches, the supervision of banking and public administration reforms, and the reintroduction of the gold standard. Austria was the first country to receive loans by the LoN in the interwar period. Hungary, Bulgaria, Greece, and Estonia followed (Polanyi 1933[a]: 72). To disburse loan tranches, the LoN requested austerity policies, such as cuts in social services and the public sector’s personnel and infrastructure. For the LoN (1922: 48), the programme’s duration depended “upon the resolution and the authority of the Austrian Government in carrying out the drastic reforms recommended” and if this “vital condition” was realized, a “budget equilibrium in two years” would be achievable. The “excessive number of employees” was considered as the crisis’ main cause and, thus, the reduction of the number of Federal Ministries and the dismissal of 100.000 officials in two years were required (LoN 1923: 5). The argumentation was the same for the – highly unionized – railways sector’s deficit, and the City of Vienna too was blamed for having “more State employees than when she was the capital of an empire of over 50 millions. The Committee considers that an effective reduction of gold expenses by at least one-third should be effected” (LoN 1922: 84). Dismissals initially led to an increase instead of a decrease in public expenditure, due to new payments that became necessary (gratuities and pensions) and thus, a new loan injection was required, which, in turn, necessitated new austerity measures. With the loan funds, access to foreign capital markets re-opened, and net foreign capital inflow between 1925 and 1930 increased, but the economic performance deteriorated again in 1929– 1930, with the global crisis (Macher 2017: 15–16). The collapse of the Creditanstalt bank in 1931 led to rapid capital flight, speculation on the currency and market panic, which necessitated a 102

League of Nations’ programme and Polanyi’s theory

new LoN’s loan. Once again, it put pressure on the public budget, in a period, in which, although the cost of living had remained stable, incomes were in free fall (Senft 2003: 41). For instance, a skilled worker in the metal industry saw his hourly wages being cut from 1.39 ATS in 1929 to 1.33 in 1933, and to 1.28 in 1937 (ibid.: 44). Moreover, unemployment had skyrocketed from 9.1% in 1923 to 26% in 1933 (Tálos/Fink 2008: 2) and homelessness trebled in Vienna from 1924 to 1934 (Dale 2008: 508). Finally, two dimensions are important regarding the LoN and the Austrian government. First, the restriction of sovereignty of the Austrian state in economic policy did not mean a weakening of the state imposing law-and-order. On the contrary, a strong state became necessary to break social resistance and prevent social movements from delaying or obstructing the austerity measures. The LoN (1923: 10) demanded the suppression of resisting social groups, trade unions, and political opponents, as well as the imposition of emergency procedures and legislation: The reforms demanded in the Geneva Protocols are so stringent that they can only be carried out by a strong and fearless Government. (…) The Government must not only be furnished with extraordinary powers, but must also have the will, the courage and the strength to use them (…). In short, it is the Government’s duty not to hesitate to go forward with the necessary measures, taking no account of any political considerations, even should it be obliged (…) to run counter to the interests and to thwart the desires of more or less important sections of the population. Second, for the Entente powers (the UK, Italy, France, Japan, and the US), financial diplomacy in Austria had an urgent geopolitical expediency, namely, to prevent Germany’s annexation of Austria (Anschluss), although it was ultimately not avoided. The prohibition of the annexation (Anschlussverbot) was a strict term dictated in the Geneva Protocol in 1922 (Berger 2003: 78). After the collapse of the Creditanstalt, an ultimatum and various forms of pressure were exercised by France to make the government abandon the German-Austrian customs union project (Aguado 2001: 214). Furthermore, there was the LoN’s requirement for an extension of this prohibition in the framework of the loan agreement in 1932.4 As Polanyi (1933[b]: 577) described, the loan required the “prolongation of the prohibition of a union with Germany” but also “the curtailing of social services, the cutting down of pensions of the railway employees, etc.”. Polanyi was aware and particularly concerned of the crisis in Austria, and the events, policies and relevant debates had an important impact on his work, which we overview in the following sections.

Polanyi’s analysis Speenhamland and red Vienna A – usually unnoticed – connection of the LoN’s programme with Polanyi’s analysis involves his examination of the rise and fall of the Speenhamland system, which occupies a great space in The Great Transformation. At the book’s “Notes on Sources”, in the text entitled “Speenhamland and Vienna”, Polanyi (2001: 298) acknowledges the inspiration he drew from interwar Austria and stirred his interest in Speenhamland: “The author was first drawn to the study of Speenhamland and its effects on the classical economists by the highly suggestive social and economic situation in Austria as it developed after the Great War”. He referred to “Red Vienna” that flourished at the beginning of the 1920s, when the city council constructed a remarkable local welfare state (Novy 103

Maria Markantonatou

et al. 2001: 135). According to Polanyi-Levitt (2017), in a time where no country had a socialist economy, in Red Vienna “workers were privileged socially – in terms of the services, in terms of the wonderful collective tenements that were built […]; the atmosphere and the cultural level were very unusual”. Red Vienna – Polanyi-Levitt notes – constituted “an amazing episode in history”; Polanyi, “who had no status and was not employed by any university”, had the opportunity to give public lectures on socialism and challenge the market-oriented thinking of Mises. To understand the importance of the housing policies implemented after the Social Democratic Workers’ Party won the absolute majority in the 1919 local elections, we need to look at the working-­class housing conditions. Dwellings in poor areas consisted of a kitchen and a sleeping room, with no gas, electricity and running water, while toilets and washing facilities were communal, resulting in tuberculosis, child mortality, and poverty (Lewis 1983: 336). The city council funded a project and built more than 25.000 – small but very modern – units from 1923 to 1927, which rose the living standards of working-class families but met the resistance of landlords, who blamed the socialists for Steuersadismus (tax sadism with regard to luxury and rent taxes) and destroying the private housing market (ibid.). As Lewis (1983: 342–343) notes, the city council followed “orthodox and stringent economic tactics” only in the first year of office: At the very time […] Seipel was negotiating substantial loans from the LoN in order to restabilize the currency, the Viennese authorities were developing a system of progressive taxation, which effectively shifted the bulk of the fiscal burden from the working classes […] to the bourgeoisie itself. Taxation and the housing project evoked severe struggles between class groups and between the national and local government. It was financed, as Lewis (ibid.: 337) describes, In the face of severe opposition from the national government and the LoN […]. One consequence of this was that whilst alleviating a social evil which affected large numbers of Viennese, the housing programme also played its part in fuelling class conflict which in turn led to the civil war. This is the background in which Polanyi (2001: 298) refers to Red Vienna as a “socialist municipality”, which “was bitterly attacked by economic liberals”. He argues that these policies “were incompatible with the mechanism of a market economy”, but stresses that “purely economic arguments did not exhaust an issue which was primarily social, not economic”. After the First World War unemployment insurance in Austria was based mainly on public funds; rents remained stable at the pre-war level, and the city council was able to raise capital through special taxation to fund large tenement houses (ibid.). Social housing and low rents were incompatible with liberal principles, and the entire system was, according to Polanyi (2001: 298), “anomalous”, as “social protection in the impoverished country interfered with the stability of the currency”. The Viennese project “became a burning political issue in every national and local election”, as the economic policy conflicted “with that of the national government and the interests of the peasantry which supported it” (Lewis 1983: 341). Gradually, Polanyi (2001: 298) writes, “Vienna, like Speenhamland, succumbed under the attack of political forces powerfully sustained by the purely economic argument”. He criticizes liberal economists who claimed that “the Vienna regime” was another “maladministration of the Poor Law”, and another “allowance system which needed the iron broom of the classical economists” (ibid.). He further criticizes Malthus for his views on overpopulation, and Ricardo for his views on the Bank of England’s role to currency policy. “Thus”, 104

League of Nations’ programme and Polanyi’s theory

Polanyi (ibid.) notes, “the Vienna experience and its similarities to Speenhamland, which sent some back to the classical economists, turned others doubtful of them”. He was doubtful both of his times’ liberals and the English political economy, and he drew arguments from the development of Speenhamland and Vienna. Comparing the two cases, he found similarities and differences. The most important similarity he stressed was the urgent need for social protection in both cases. Lower classes in both countries were threatened and had to be protected – in the English case from an emerging market economy; in the Austrian case from the effects of economic retrogression caused by the war, defeat, and industrial chaos. Second, the protectionist systems of Speenhamland and Red Vienna led not only to a conflict between the working class and the capital owners, but also within the ruling class to a struggle between profit seekers and rentiers. Both systems were heavily attacked because they clashed with capitalists’ interest. There were, however, some crucial differences. First, England was marked by the effort to adjust society to the market economy by overcoming previous societal arrangements. In post-war Austria, the restoration of the market system itself was in question and required the defeat of the socialist Red Vienna endeavour. Second, Speenhamland was destructive to society, while Red Vienna “achieved one of the most spectacular cultural triumphs of Western history” (ibid.: 299). According to Polanyi (ibid.), 1918 led to “a highly developed industrial working class which, protected by the Vienna system, withstood the degrading effects of grave economic dislocation” and achieved unique living standards actually “never reached before by the masses of the people in any industrial society”. Given the different historical contexts (the rise of the European market society in the mid-19th century and its decline in the interwar period), Speenhamland led to a reorganization of work, which opened the way in direction of an era of liberal capitalist development. Red Vienna attempted to safeguard society in a period of crisis and implement policies, which not only offered economic relief to workers through social housing, but also elevated them morally and intellectually, for instance through providing an adult education which fostered social solidarity and democratic action (Yazdanpanah 2019). When it was defeated, “the Heimwehr victory in Austria formed part of a total catastrophe”, Polanyi (ibid.) notes, referring to the Austrian Civil War in 1934 and the world economic and political crisis.

Austrofascism In the 1920s, polarization escalated between the Social Democrats, the Christian-Social party which was based on political Catholicism, and the German-national camp which aspired an annexation to Germany. These camps acted as “subsocieties, which organized the lives of members loyally bound to their respect” (Pelinka 1988: 71) and were armed with weapons from the former imperial army (Jedlicka 1966: 128). The dictatorship imposed by Chancellor Dollfuss, who shut down the Parliament in 1933, was followed in February 1934 by a brief but devastating civil war in various cities (Vienna, Linz, Graz and elsewhere) between the state forces assisted by the paramilitary, rural-fascist group Heimwehr and the army of the Social Democratic Party (Schutzbund).5 The civil war and the dictatorship were related to the efforts by both domestic elites and the LoN to eliminate the influence of the political Left and the social-democratic endeavours in ­Vienna. As the British New York Times correspondent in interwar Vienna, Gedye (2009 [1939]: 12) put it, The first thing was to get foreign money into the country, the second to persuade international finance […] that its money would never be really safe until the power of the Left had been broken down. 105

Maria Markantonatou

Similarly, Polanyi (1933[b]) stressed the continuum of austerity going hand in hand with antisocialist politics: The Government in Austria had never relaxed its pressure against the Left. The attack upon the position of the Left was carried several stages further. The Socialist press, the SocialDemocratic Party, social services, rights of collective bargaining, the legal standing of public servants and of employees of public utility enterprises, the finance of the Municipality of Vienna, all had to suffer. The crisis did not bring about Austrosocialism but Austrofascism and the “corporative state” (Ständestaat), which Polanyi (1934: 743) criticized as “the embodiment of religious and racial fundamentalism”. The Ständestaat has been identified as a form of “clericofascism” and “native fascism” or, in the words of Mussolini, a “buffer fascism” that would simultaneously stave off Nazi Germany and restrict the Socialist Party (Klemperer 1979: 89). Polanyi refers to the “corporative state” in numerous texts, especially on fascism and on Othmar Spann and his view of Spann is similar to that of Mises. For Mises (2009: 78), Spann “did not teach economics”, but he “preached universalism, that is National Socialism”. For Polanyi (2018 [1935]: 83) “the common complaint that fascism has not produced a comprehensive philosophic system of its own is not altogether fair to Spann”. A great part of the essay The essence of fascism is devoted to Spann’s views on anti-individualism and corporatism, and Spann’s attacks on democracy as the institutional link between socialism and individualism (ibid.: 88–91). Spann inspired the Heimwehr, which found in the “corporative state” an ideology to push the government to change the constitution. In his text Austria and Germany, Polanyi (1933b) follows closely the role of Heimwehr and other far-right groups, but also the events after the ­German elections in March 1933 which paved the way to Anschluss: Germany’s and Italy’s pressures on ­Austria, the Austrian government’s Pronunciamento (a government proclamation banning public gatherings, and imposing censorship to the press), and the political polarization and instability. These events constitute the historical background of Polanyi’s analyses. It is therefore important to associate the LoN-programme with both Polanyi’s theses on fascism and the separation of economy from society, or at least acknowledge the role of the Austrian programme to the elaboration of these theses. Throughout his work, Polanyi (2018: 114) stressed the “antagonism” or “incompatibility of democracy and capitalism”, which was inherent in the capitalist market society but peaked in the case of fascism. This antagonism emanated from the liberal idea that the economic and political “spheres” had to be kept apart and that the self-regulating economy had to be insulated from political intervention and social demands. However, even if it is only in capitalism compared to previous systems that the economy has such a dominant role, this separation was never fully realized. In theory, the liberal state was “separated from and independent of economics: liberalism, in its essence, rejected the unity of society”, but in actual fact, Polanyi (1939) stressed, “this condition of affairs never existed”. Contrary to understandings of the market as a natural or spontaneous process, it was (national and international) politics, which, for Polanyi, had a crucial role in its construction. This is clear in the LoN’s case, which constitutes the background of his notion of “authoritarian interventionism”, mentioned in his discussion of a Report of the Gold Delegation of the LoN in 1932: Though opposed in theory to interventionism and inflation alike, economic liberals had chosen between the two and set the sound-currency ideal above that of nonintervention. […] Yet such a course of action […] heaped up the deficits of the various national economies to the point where a disruption of the remnants of international division of labor became inevitable. The stubbornness with which economic liberals, for a critical decade, had, in the 106

League of Nations’ programme and Polanyi’s theory

service of deflationary policies, supported authoritarian interventionism, merely resulted in a decisive weakening of the democratic forces which might otherwise have averted the fascist catastrophe. (Polanyi 2001: 242) The LoN’s interventions contributed to polarization, the empowerment of liberal economics, and the repression of the labour movement and of socialist methods to resolve the crisis such as economic planning. While Mises ([1920] 2012) argued that only market prices provided the necessary information for rational decisions, and that socialism was utopian, Polanyi rejected these ideas (in his texts in the journal Archiv für Sozialwissenschaften about the “socialist accounting”, Polanyi [2016]). He advocated the socialist “overview” (Übersicht) of production by the “commune”, the unions and workers’ councils, and argued that their suppression by liberals led to capitalist restoration and fascism. With “liberals” he was very likely referring to the LoN’s liberals, and their domestic supporters: It was as a result of [the liberals’] efforts that big business was installed in several European countries and, incidentally, also various brands of fascism, as in Austria. Planning, regulation, and control, which they wanted to see banned as dangers to freedom, were then employed by the confessed enemies of freedom to abolish it altogether. Yet the victory of fascism was made practically unavoidable by the liberals’ obstruction of any reform involving planning, regulation, or control. (Polanyi 2001: 265)

Restoring economic liberalism The men who addressed themselves to the task of reconstruction naturally had in their mind’s eye, as the aim to be achieved, the automatism that had prevailed for generations down to the First World War […]. Prosperity, it was believed, could be attained by no other means than a return to the freedom of movement across frontiers of persons, goods, and capital. […] Post-war efforts were aimed at the re-establishment of these three fundamental freedoms. (LoN 1945: 16–17) Polanyi agreed with the LoN’s description of the LoN policies in the above quote that the reconstruction policies aimed at re-establishing the pre-war market “automatism”. But, for Polanyi (2001: 23), the failure to achieve prosperity and secure peace lied precisely in this idea. In the chapter “Conservative 1920s, revolutionary 1930s” of The Great Transformation, he describes the idea that prevailed among elites: peace could be established only through the reconstruction of the pre-war international currency and credit system, at any cost. The 1920s were “deeply conservative and expressed the almost universal conviction that only the reestablishment of the pre1914 system […] could restore peace” (ibid.: 22). His thesis (ibid.) was that the 1930s crisis was borne out of the 1920s’ efforts to resolve the problem of global economy by resorting to the same practices which had put it to a course of collapse already since 1900. The LoN’s intervention prompted Polanyi’s critique to the gold standard, which is fundamental to his general analysis. Policies of “sound currency” usually caused new economic turbulences, which, in the German case “laid the foundation for the Nazi revolution” (ibid.: 25). In the reconstruction project, currency stabilization of 107

Maria Markantonatou

Austria, Hungary, Bulgaria, Finland, Romania, or Greece was not only an act of faith on the part of these small and weak countries, which literally starved themselves to reach the golden shores, but it also put their powerful and wealthy sponsors – the Western European victors – a severe test. (ibid.: 27) The latter’s status relied heavily on the Austrian programme’s success. As Beyersdorf (2011: 149– 150) observes, “neither the League nor the Anglo-American banking community could allow the state to fail […]. For the League, success in Austria provided the first evidence of its usefulness”. In the same spirit, Polanyi (2001: 25) refers explicitly to the Austrian programme and Geneva’s liberalism: “The prestige of Geneva rested on its success in helping Austria and Hungary to restore their currencies, and Vienna became the Mecca of liberal economists”. Polanyi further notes that In Austria in 1923, in Belgium and France in 1926, in Germany in 1931, Labour Parties were made to quit office ‘to save the currency’: Statesmen like Seipel […] eliminated Labour from government, reduced social services, and tried to break the resistance of the unions. (Ibid.: 237) Whether due to external pressures or internal contradictions or both, the fact is that the Social Democratic Party (major opposition) backed the LoN’s programme, despite its various objections and the severe parliamentary tensions. It did not vote for the programme initially, but it stepped back from the option to prevent in the parliamentary process the exceptional reconstruction law (Wiederaufbaugesetz) from passing, thus facilitating the agreement with LoN (Berger 2000: 51). Trade unions went on strikes at the gas and electricity sectors, fire service, public transport, and city administration, but the social democratic leadership held that workers had to accept short-term pain for a long-term economic gain (Dale 2016: 87). For Polanyi (2001: 26), this support was due to party leader’s faith to the gold standard: “Otto Bauer supported the monetary principles underlying the restoration of the krone attempted by his bitter opponent, Seipel”. “Belief in the gold standard was the faith of the age”, Polanyi (2001: 27) writes. Believers included very different persons, the British politician of the Labour Party Snowden, the opponent of the regulatory state, US President Coolidge, the Socialist Trotsky, or the anti-Marxist Mises. Austroliberals made state policy responsible for the crisis, consisting of excessive taxes, social burdens, rigid wages, and, in sum, to the violation of the entire liberal regime symbolized by the gold standard (Klausinger 2006: 27). The avoidance of inflation and budget deficits was required, and – at least in theory – only a minimum of government intervention into industry. This was the LoN’s spirit, which saw gold standard and free trade as the two pillars of international peace and functional market economies. The LoN, according to Polanyi (2001: 28), Acted as the sponsor of a process of rehabilitation in which the combined pressure of the City of London and of the neoclassical monetary purists of Vienna was put into the service of the gold standard. The LoN insisted on the effectiveness of the gold standard, which tied together the monetary systems of the countries that had re-adopted it, a decision that contributed substantially to the Great

108

League of Nations’ programme and Polanyi’s theory

Depression (Macher 2017: 145). Although it recognized deflation could be disastrous for society, the LoN insisted on the re-introduction of the gold standard. At the LoN’s (1945: 20) Brussels Conference, it was stated that Countries which had departed from the effective gold standard should return to it. Needless to say, all the States that obtained the League’s help in financial affairs had long since been forced off gold. The Brussels Conference had recognised that in many cases it would be impossible to return to gold without radical deflation, and that deflation might have disastrous consequences. Polanyi criticized the gold standard, as a system that served international liberalism but produced deflation and unemployment, especially in times of crisis. Its reintroduction was the reason why he suggested that the 1930s “lived to see the absolutes of the 1920s called in question” (Polanyi 2001: 148). Assuming that the social crisis of the 1930s was merely due to the attempt to restore the economic system of the 19th century is too vague, but examining the specific LoN’s interventions offers a more concrete understanding, especially if we take into consideration Polanyi’s (2001: 140) illustration of these policies’ social effects: The repayment of foreign loans and the return to stable currencies were recognized as the touchstone of rationality in politics; and no private suffering, no restriction of sovereignty, was deemed too great a sacrifice for the recovery of monetary integrity. The privations of the unemployed made jobless by deflation; the destitution of public servants dismissed without a pittance; even the relinquishment of national rights and the loss of constitutional liberties were judged a fair price to pay for the fulfillment of the requirement of sound budgets and sound currencies, these a priori of economic liberalism.

Final remarks: from the LoN to current structural adjustment programmes The Austrian programme is the first case of technocratic international economic governance designed and undertaken by a supranational actor as the LoN. As noted by Kindleberger (2006: 321), “the LoN staff in Austria can be thought of as a forerunner of IMF stabilization advice to countries with balance-of-payments and stabilization problems after the World War II”. Following Slobodian (2018: 266), the LoN’s intervention can be understood as part of Geneva neoliberalism or “ordoglobalism”, a project to adapt ordoliberal principles to the global level and institutionalize “juridical power to encase markets beyond democratic accountability”. Slobodian’s (ibid.: 12) account of this economic governance as “insulated from democratic decision making” is in line with Polanyi’s analysis of the economy-democracy separation in capitalism. Polanyi’s proposal was, on the contrary, that of subordinating the economy to the democratic expression of the social will. “Re-­embedding the market” for Polanyi “was to restore a measure of humanity and social justice”. By contrast, the aim of neoliberal control was “to prevent state projects of egalitarian redistribution” (ibid.: 19). The economic global governance after the Second World War and the ‘bailouts’ in the Third World followed the pattern of conditionality in loans’ provision to countries in need, with the poor having to pay the price of fiscal adjustment. Examples include IMF’s interventions in Latin America (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Honduras, Peru, Uruguay) (for the period 1954–1984 and 114 IMF arrangements in Latin America, see Remmer 1986), in Africa

109

Maria Markantonatou

(Gabon, Ghana, Kenya, Malawi, Mauritius, Morocco, Nigeria, South Africa, Tanzania), in Asia (Bangladesh, India, Indonesia, South Korea, Malaysia, Pakistan, Philippines, Singapore, Sri Lanka, Thailand), and elsewhere (e.g. Jamaica, Jordan, and Turkey) (for the period 1975–1991 and 58 IMF programmes see Garuda 2000). After 2010, in the framework of the Eurozone crisis, a series of loans were provided by the “Troika” (European Commission, European Central Bank, International Monetary Fund), and harsh austerity measures were imposed on Greece (Markantonatou 2022), Portugal (Estanque 2020), Cyprus (Ioannou 2020), and Ireland (Barretta et al. 2019). The Troika-loans were alarmingly reminiscent of the interwar LoN’s policies (Markantonatou 2019). If the gold standard was “a key element… in the collapse of the world economy” (Eichengreen/Temin 1997: 184) and the “gold standard mentality” of economic officials was what intensified interwar economic slump (Polanyi’s thesis), a “euro mentality” produced similar effects. During the Eurozone crisis, democracy was put under severe test, far-right forces and parties increased their influence, and social resistance from the Left had to be fought off. With austerity, working classes and the public sector were severely hit, and the welfare state, which had shrunk after decades of neoliberalization and privatization, was further weakened. Despite these outcomes, the social stances and views on the Eurozone’s fiscal adjustment programmes varied between different countries, and class, interest and national groups. The LoN’s programme was heterogeneously evaluated too.6 Polanyi (2001: 25) describes the LoN programme ironically as “a brilliantly successful operation on Austria’s krone which the patient, unfortunately, did not survive”. He shows how the stabilization programme contributed to social crisis and dictatorship, and how national democratic forces, parties and countermovements ended up unable to provide a way out of the crisis as a result of the LoN’s anti-democratic and ideological persistence on restructuring the international economy with 19th-century principles. His perspective on the LoN’s programme serves as a useful starting point for the understanding and critique of the various fiscal adjustment programmes today, their ideological pattern, their historical and institutional background, and the devastating outcomes they can produce for democracy and society.

Notes 1 Seipel was a former priest of the Roman Catholic Church and university professor described by Mises (2009: 65) as a “noteworthy personality”, and “not a demagogue”, who, although “stranger to economics” who lacked “wordliness”, at least saw “inflation as an evil”. 2 Mises (2009: 14) noted that food supplies from abroad often did not last more than eight or ten days. Lloyd George (in LoN 1922: 16) remarked that foreign loans produced “no permanent improvement of the Austrian financial situation, which [had] gone from bad to worse”. According to Royall Tyler, representative of the Trustees for the LoN, “The rapid deterioration of the social structure in Austria was regarded with concern by the Western Powers, which realized that a collapse there might imperil the whole settlement in Central and South-Eastern Europe” (LoN 1945: 37). 3 The Financial Committee and the Economic Committee were created by the LoN’s International Financial Conference (Brussels 1920), and the Fiscal Committee and the Committee of Statistical Experts were subcommittees. The Financial Committee consisted of 12 experts of national services and directors of private and national banks (Ginneken 2006: 84). 4 LoN’s interventions continued after the assassination of Chancellor Dollfuss in 1934 and his replacement by Kurt Schuschnigg who tried to stay faithful to the LoN, despite the support to Mussolini of fascist ­actors as Prince Starhemberg and the Heimwehr (Jedlicka 1966: 144). 5 The book The Austrian Schutzbund and the Civil War of 1934 by Ilona Duczvnska (1978), Polanyi’s wife, member of the Communist parties of Hungary and Austria and participant at the activities of Schutzbund, contains her testimony and views of the situation. 6 For these different evaluations see Berger (2003: 76), Flores and Decorzant (2012), Warnock (2015).

110

League of Nations’ programme and Polanyi’s theory

References Aguado, Iago Gil. 2001. The Creditanstalt Crisis of 1931 and the Failue of the Austro-German Customs ­Union Project. Historical Journal 44/1: 199–221. Barretta, Sean, Shaen Corbet and Charles Larkin. 2019. Sustainability, Accountability, and Democracy: ­Ireland’s Troika Experience. Finance Research Letters 28/March: 53–60. Berger, Peter. 2000. Im Schatten der Diktatur. Die Finanzdiplomatie des Vertreters des Völkerbundes in ­Österreich. Meinoud Marinus Rost van Tonningen, 1931–1936. Vienna: Böhlau Verlag. ——— 2003. The League of Nations and Interwar Austria: Critical Assessment of a Partnership in Economic Reconstruction. In: The Dollfuss/Schuschnigg Era in Austria: A Reassessment. Günter Bischof, Anton Pelinka, Alexander Lassner (eds.), New Jersey: Transaction Publishers, 73–93. Beyersdorf, Frank. 2011. ‘Credit or Chaos’? The Austrian Stabilisation Programme of 1923 and the League of Nations. In: Internationalism Reconfigured: Transnational Ideas and Movements Between the World Wars. Daniel Laqua (ed.), London: I. B. Tauris, 135–157. Dale, Gareth. 2016. Karl Polanyi: A Life on the Left. New York: Columbia University Press. ——— 2008. Karl Polanyi’s the Great Transformation: Perverse Effects, Protectionism and Gemeinschaft. Economy and Society 37/4: 495–524. Duczvnska, Ilona. 1978. Workers in Arms: The Austrian Schutzbund and the Civil War of 1934. New York: Monthly Review Press. Eichengreen, Barry and Peter Temin. 1997. The Gold Standard and the Great Depression. National Bureau of Economic Research (NBER). Working Paper 6060. June. Estanque, Elisio. 2020. Commodification and Countermovements: Portugal Against the Trend. International Karl Polanyi Society. Available at: https://www.karlpolanyisociety.com/2020/06/21/ commodification-and-countermovements-portugal-against-the-trend/ Decorzant, Yann and Juan-Huitzi Flores. 2012. Public Borrowing in Harsh Times: The League of Nations Loans Revisited. IFCS. Working Papers in Economic History 12–07. Universidad Carlos III de Madrid. Instituto Figuerola. Garuda, Gopal. 2000. The Distributional Effects of IMF Programs: A Cross-Country Analysis. World Development 28/6: 1031–1051. Gedye, G.E.R. 2009 [1939]. Fallen Bastions: The Central European Tragedy. London: Faber and Faber. Ginneken, Anique H.M. van. 2006. Historical Dictionary of the League of Nations. Lanham: Scarecrow Press. Gross, Stephen and Chase S. Gummer. 2014. Ghosts of the Habsburg Empire: Collapsing Currency Unions and Lessons for the Eurozone. East European Politics and Societies and Cultures 28/1: 252–265. Ioannou, Grigoris. 2020. Cyprus: Small, Quiet and Easy to Handle? International Karl Polanyi Society. Available at: https://www.karlpolanyisociety.com/2020/06/21/cyprus-small-quiet-and-easy-to-handle/ Jedlicka, Ludwig. 1966. The Austrian Heimwehr. Journal of Contemporary History 1/1: 127–144. Kindleberger, Charles P. 2006. A Financial History of Western Europe. London: Routledge. Klausinger, Hansjörg. 2006. From Mises to Morgenstern: Austrian Economics during the Ständestaat. The Quarterly Journal of Austrian Economics 9/3: 25–43. Klemperer, Klemens von. 1979. Review of Die Österreichische Wochenschrift “Der Christliche Ständestaat”. The Catholic Historical Review 65/1: 88–90. League of Nations. 1922. The Restoration of Austria. Agreements. Geneva. ——— 1923. Financial Reconstruction of Austria. First Report by the Commissioner-General of the League of Nations at Vienna. Extract no 11 from the Official Journal. March, C. 41: 1–31 ——— 1945. The League of Nations Reconstruction Schemes in the Inter-War Period. Economic, Financial and Transit Department. Geneva: Official: C. 59. M. 59., F. 1696/1. Lewis, Jill. 1983. Red Vienna: Socialism in One City, 1918–27. European History Quarterly 13: 335–355. Macher, Flóra. 2017. The 1931 Financial Crisis in Austria and Hungary: A Critical Reassessment, Ph.D., Department of Economic History. London School of Economics. Markantonatou, Maria. 2019. “Conservative 1920s” and Conservative 2010s? Austerity Politics in Interwar Austria and Present-day Greece. Austrian Journal of Sociology 44: 183–195 ——— 2022. A Decade of Austerity Politics and Neoliberal Reform: Overview of the Greek Financial Crisis (2010–2020). In: Neoliberalism and Unequal Development: Alternatives and Transitions in Europe, Latin America and Sub-Saharan Africa. Fernando Lopez Castellano, Carmen Lizarraga and Roser ManzaneraRuiz (eds.), London: Routledge, 157–173

111

Maria Markantonatou Mises, Ludwig von. 2009. Memoirs. Alabama: Ludwig von Mises Institute. Available at: https://cdn.mises. org/Memoirs_2.pdf ——— 2012 [1920]. Economic Calculation in the Socialist Commonwealth. Ludwig von Mises Institute. Available at: https://cdn.mises.org/economic_calculation_in_the_socialist_commonwealth.pdf Novy, Andreas, Vanessa Redak, Johannes Jäger and Alexander Hamedinger. 2001. The End of Red Vienna: Recent Ruptures and Continuities in Urban Governance. European Urban and Regional Studies 8/2: 131–144. Pelinka, Anton. 1988. The Great Austrian Taboo: The Repression of the Civil War. New German Critique 43/ Winter: 69–82. Polanyi, Karl. 2016 [1922]. Socialist Accounting. Translation and Preface “Socialism and the Embedded economy” by Johanna Bockman, Ann Fischer & David Woodruff. Theory and Society 45: 385–427. ——— 1933a. Der Mechanismus der Weltwirtschaftskrise. Wien: Sonderbeilage des Österreichischen Volkswirt, Karl Polanyi Archive 3–11. ——— 1933b. Austria and Germany. International Affairs 12/5. Karl Polanyi Archive 18–2. ——— 1934. Corporative Austria: A Functional Society? New Britain 2/51. Karl Polanyi Archive 18–3. ——— 1939. Coercion and defence. Bulletins for Socialists. Karl Polanyi Archive 20–16. ——— 2001. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press. ——— 2018 [1935]. The Essence of Fascism. In Karl Polanyi, Economy and Society: Selected Writings. Michele Cangiani and Claus Thomasberger (eds.), Cambridge: Polity Press, 81–108. ——— 2018. The Fascist Virus. In Karl Polanyi, Economy and Society: Selected Writings. Michele Cangiani, Claus Thomasberger (eds.), Cambridge: Polity Press, 108–123. Polanyi-Levitt, Kari. 2017. Shaping ‘the Great Transformation’: A Conversation with Kari Polanyi Levitt. Interview to Michael Burawoy. Global Dialogue: Magazine of the International Sociological Association 7/4: 5–11. Remmer, Karen L. 1986. The Politics of Economic Stabilization: IMF Standby Programs in Latin America, 1954–1984. Comparative Politics 19/1: 1–24. Senft, Gerhard. 2003. Economic Development and Economic Policies in the Ständestaat Era. In: The Dollfuss/Schuschnigg Era in Austria: A reassessment. Günter Bischof, Anton Pelinka, Alexander Lassner (eds.), New Jersey: Transaction Publishers, 32–56. Slobodian, Quinn. 2018. Globalists: The End of Empire and the Birth of Neoliberalism. Cambridge: Harvard University Press. Tálos, Emmerich and Marchel Fink. 2008. Arbeitslosigkeit: eine Geißel, die nicht verschwindet, Alterssicherungsreform in Österreich. In Österreich: 90 Jahre Republik. Stefan Karner and Lorenz Mikoletzky (eds.), Innsbruck: Demokratiezentrum, 1–10. Warnock, Barbara. 2015. The First Bailout – The Financial Reconstruction of Austria 1922–1926. London: Birkbeck College, University of London. Yazdanpanah, Marie-Noëlle. 2019. Education for Everyone. In: The Red Vienna Sourcebook. Rob McFarland, Georg Spitaler and Ingo Zechner (eds.), Martlesham: Boydell & Brewer, 313–330.

112

9 THE WORLD ECONOMIC CRISIS OF THE 1930S. POLANYI’S ANALYSIS OF THE GREAT DEPRESSION, AND THE CURRENT GLOBAL CRISIS1 Kari Polanyi Levitt Introduction The literature on the World Economic Crisis, the collapse of the International Gold Standard and the economic, social, and political consequences fills entire libraries and includes contributions by the most important economists of the past century, such as John Maynard Keynes, John Kenneth Galbraith, Charles Kindleberger, Ludwig Mises, Friedrich Hayek, and Lionel Robbins. Polanyi’s article here commented is outstanding, however, not only because it was written in 1933, i.e. while the crisis was still ongoing, but also because it reflects the particular experience of a Central and Eastern European observer. His location in Vienna as a journalist and political analyst of a leading financial and economic weekly placed him at the centre of the political and economic upheavals of post-First World War Continental Europe culminating in the fateful collapse of the Kreditanstalt – a major bank in Vienna founded by the Rothschilds – with consequences spreading westward to England and the United States. According to Polanyi’s Central European perspective, the long 19th century did not end in 1914 but crashed in the World Economic Crisis of 1929–1933. After the war, the victorious Western European imperial powers, although impoverished, experienced no substantial transformative change. They were determined to restore the pre-1914 economic order, giving priority to re-floating the International Gold Standard. The pound sterling was restored to its pre-war gold value, favouring overseas investors of the leisure classes. By contrast, the defeated central powers of Germany and the fragile succession states of the former Habsburg Empire lacked the resources to meet the conflicting demands of workers for living wages, farmers for remunerative prices and middle-class rentiers for security for their savings from inflation. These troubles were only exacerbated as the League of Nations, acting on behalf of Western creditors, imposed on these countries austerity measures akin to the IMF’s Structural Adjustment Programs of the 1980s and 1990s. In 1932 Germany, with 8 million unemployed, Chancellor Brüning proudly announced that the government had balanced the budget, precipitating the political crisis that brought Hitler to office in March 1933.



113

DOI: 10.4324/9781003336747-13

Kari Polanyi Levitt

The word economic crisis marked the dividing line between the Conservative Twenties and the Revolutionary Thirties when “change set in with abruptness” (Polanyi 2001 [1944]: 24). Its landmarks were the abandonment of the Gold Standard by Great Britain and the United States; the Five-Year Plans, especially the collectivization of the farms in Russia; the launching of the New Deal; the National Socialist Revolution in Germany; and the collapse of the balance of power in favour of autarchic empires. By 1940, “every vestige of the international system had disappeared” (ibid.). The general rejection of laissez-faire capitalism in the 1930s is what Polanyi calls the “great transformation” in his homonymous work. In this chapter, we review Polanyi’s commentaries on the world economic crisis as it unfolded and attempt to draw some insights about the current conditions in the world.

Lessons of the world economic crisis of 1931–1933 Central and Eastern Europe were far more profoundly affected by the First World War than the victorious Western powers of England and France, where the gloss faded from the pre-1914 Belle Époque, when, according to John M. Keynes (1971: 129) in England “internationalization was nearly complete in practice”. After the war, however, bourgeois life continued much as before. The coupon-clipping rentiers of the English leisure classes continued to invest abroad, as if not very much had changed. City interests returned the pound to its golden pedestal at pre-war valuation, in defiance of Britain’s slippage as the premier exporting country of the world and the unsustainable burden of reparations imposed on the defeated central powers. In a remarkable study written in 1933, “The Mechanisms of the World Economic Crisis”, ­Polanyi traced the origins of the 1931–1933 crisis back to the social and economic costs of the Great War. Production in Central and Eastern Europe as well as Russia did not recover to 1913 levels until late 1928. The scale of human and societal destruction was of such magnitude that the social fabric could not sustain the forces of adjustment to a post-war equilibrium. In his view it was “one single economic crisis” (Polanyi 2018 [1933]: 66) that had only been postponed as the burden of adjustment shifted from one region to another. In this essay Polanyi provided an exemplary political economy analysis of conflicting class interests in the post-war adjustment to diminished levels of real resources. There were three major social claimants: the bondholders (rentiers), who had financed the war and without whose confidence in currencies and credit capitalist economies could not be reconstructed; the workers, who had carried the moral and political burden of the war and were promised a reward of more rights and more bread; and the peasantry, who appeared to be the only bulwark against the threat of Bolshevism on the continent. In the victorious countries, strong currencies favoured the interests of rentiers. The democratization of public life in England increased the number of eligible voters from 8 million pre-war to 28 million. When the war finished, there were no excuses for failure to deliver on the promises of ‘homes worthy of heroes’. Nobody in Britain believed in the necessity to restrict living standards after the war. When the realities of the diminished economic capacity of England began to dawn, the entire burden of adjustment to defend – and increase – the value of rentier incomes was placed on the working classes. In the defeated countries, the rentier classes were devastated by inflation. The workers likewise were not protected from the fallout of the crisis, but they had priority. Installed in the seat of political power, the worker (and ex-soldier), who had borne the greatest burden of the war, demanded the promised rights and the promised bread. The third party to the trilogy was the peasantry, whose general Weltanschauung (worldview) allied it with the forces of conservatism. A viable social 114

The World Economic Crisis of the 1930s

framework demanded the protection of rentier interests by the defence of currencies, protection of worker incomes by the stabilization of real wages and protection of farm incomes by the stabilization of commodity prices. In the war-impoverished, capital-depleted economies of Continental Europe, the satisfaction of all these demands was impossible. But when the viability of society comes into conflict with what is economically impossible, economic possibilities are stretched one way or another. The way they were stretched was by interventions, including politically negotiated foreign credits. Although the eventual collapse was inevitable, it could be – and was – delayed by sacrificial interventions. Interventions – sometimes misconceived and short-sighted in implementation – ­significantly postponed the solution of the crisis. But postponement was certainly not without rationale: The mother of all interventions was the war itself. All the interventions of the post-war era were no more than costly measures taken to protect society against the lethal consequences of this most brutal of all disruptions to equilibrium. But at the same time they created unnecessary new disruptions which exacerbated the consequences of the original major intervention of the war. It is impossible to comprehend the function of the interventions of the post-war era without understanding how the destruction caused by the war made them inevitable. (Polanyi 2018 [1933]: 71) While noting that reparations and war debts contributed to economic pressures, Polanyi was explicit in placing primary emphasis on policies that sought to stabilize the domestic incomes of rentiers, workers and peasants. Excess demand of the three major categories of income earners could be met from only three sources: • Firstly, redistribution of domestic income in favour of privileged classes. Where workers and peasants were favoured, the distributional burden fell on the assets of the middle classes and on working capital in industry by means of property taxes, and above all by the most unrelenting and unfair of all taxes – currency depreciation. Agricultural overconsumption was sustained by external tariffs and other protectionist expropriation methods, at the expense of the urban population. • Secondly, consumption of capital. Domestic capital was eaten away by inflation and by the sale of assets to foreigners. • Thirdly, the remaining deficit had to be made up through new foreign borrowing (ibid.: 71–72). Countries financed their deficits by perpetual external borrowing. Weaker national economies sought assistance from stronger ones. Years of apparent stability, a run of strong growth and a deceptive appearance of equilibrium were punctuated by new economic and financial difficulties, until suddenly, at the height of the American boom, the elastic band snapped. The interdependent deficit economies went into an irreversible slide, and the whole stabilization structure collapsed. The geographic displacement and consequent postponement of the crisis was facilitated by credit mechanisms of unique capacity and flexibility. While the world economy was destroyed by the war, then gradually resurrected after the war, only to slide into uninterrupted decline at the end of 1928, the system of credits had already reached new heights during the war. This paradoxical phenomenon has continued almost throughout the entire post-war period. The amazing mobility and magnitude of international 115

Kari Polanyi Levitt

credit was accompanied by an often alarming constriction and paralysis of international economic integration. (Ibid.: 72) The source of this system of credits was the cooperation of the victorious powers in mobilizing credit to finance the war: “Never in the history of modern capitalism has credit been so politicized” (ibid.). A close relationship developed between the commercial banks and note-issuing authorities (central banks) in London, New York, and Paris. The new and seemingly inexhaustible source feeding this ultra-modern pipeline for the distribution of credit to the whole of Europe, which brought gold to irrigate the parched plains of Central Europe’s economy, was the unfathomable wealth of America. The unimaginably enormous profits which America made in the war were searching for investment. The reconstruction of Europe appeared as an excellent business which could not only rescue American claims on Europe but would also show a far-sighted love of humanity. Unequalled in wealth – and inexperienced – the investors who now appeared on the scene asked only that this credit mechanism should be fuelled by their resources. If we now find it incredible that the world could have been so mistaken as to the true state of the financial balance sheet of the war, we merely need to recall for a moment the financial claims which were considered ‘good’. The sum total of war debts between the allies was estimated at 25,000 million dollars. (Ibid.: 73) It was believed that claims on Russian War and pre-war debtors estimated at 35 billion gold francs were good. In 1925, after Britain and Germany had returned to the Gold Standard, there was talk of a 16 billion gold mark reparations issue as if it were a normal business deal. Little wonder that the creditors owed these sums thought they were rich – until they were all written off […] This credit mechanism, which contemporaries endowed with virtually mythical powers, was the principal actor in the ten-year postponement of the crisis. (Ibid.)

The course of the crisis Polanyi traces the geographical course of the crisis – from East to West. The actors were, on the one side, the defeated states: Russia, Austria, Hungary, Bulgaria, and the succession states carved from the eastern war regions like Rumania, Yugoslavia, Czechoslovakia, Poland, and Greece. Last but not least, there was Germany. On the other side, the victorious states – England, France, Belgium and Italy – and, in a class by itself, there was the super-victor: America.

The period 1918–1924 The process starts in the East with the reconstruction of the defeated states – with assistance from the victors and America. The Austrian (1923) and Hungarian (1924) currencies were stabilized with help from the League of Nations; at the same time, Greece, Bulgaria, Finland, and Estonia were structurally adjusted (saniert). Rumania, Poland, Czechoslovakia, and Yugoslavia received French credits; even Russia was a candidate for economic assistance. The high point was the restoration of the Gold Standard in Germany, financed by Dawes Plan loans, almost half of American 116

The World Economic Crisis of the 1930s

provenance. The reinstatement of the Gold Standard stripped the defeated states of the secret reserves of inflationary finance. Their structural deficits were increasingly covered by foreign loans; the burden of these debts was thus transferred to the victorious states, whose currencies were at that time far from secure.

The period 1925–1928 In addition to the deficits of the defeated states, the victorious states had their own problems. From the time of the re-establishment of the Gold Standard, the defence of the currency assumed top priority. By central bank cooperation, England shifted the burden of maintaining the external value of the pound to the United States (by US short-term credits). “From this time on, the secret purpose of American credit policy was not so much assistance to Europe, as assistance to England” (ibid.: 74). The high point was the negotiations between the Bank of England governor, Montague Norman, and the Federal Reserve governor, Benjamin Strong Jr., in May 1927. In August of that year, the United States adopted a ‘cheap credit policy’, which lasted till February 1928, and prepared the way for the Wall Street crash of October 1929. The American crypto-inflation signified effective support for the European currencies that had returned to the Gold Standard – by the availability of cheap credit.

The period 1929–1933 The deficits of the European defeated and victorious states were effectively shifted to America and covered by the steady growth of US credits over the previous ten years. America financed the Dawes Plan and re-negotiated British and French War debts and the servicing of its own loans – in addition to putting wasted efforts into supporting English stabilization, bad German investments and the accumulation of East European private-sector deficits in financial institutions in Vienna. Vienna’s Kreditanstalt crashed on May 12, 1931, the Reichsmark declined, the English pound devalued. On April 19, 1933, the dollar was floated. “The constriction of the world economy and the chaotic instability of currencies are comparable only to conditions prevailing in the immediate aftermath of the war” (ibid.: 75). Critics who ascribed the economic crisis to policy errors such as the textbook example of the return of the pound at pre-war parity, or the Central European belief that the English bank rate was too low to sustain the value of the pound, were taken to task. Alternative policies, Polanyi maintains, were “merely alternative paths to the same undesirable outcome” (ibid). English exports became uncompetitive when France and Belgium devalued their currencies by 80%. England chose to privilege its rentier class, whereas France and Belgium devalued the (foreign) assets of their rentiers. Had England gone that route, there would have been a reduction in the export of capital considered essential to the maintenance of British exports. Had England raised the bank rate, which in any event never fell below 4.5% – far above historically prevailing rates – this would have aggravated the acute economic crisis in England. The fact that English rentier incomes were protected (by overvalued exchange rates) assured the continued flow of British long-term investments to Continental Europe – assisted by the flow of cheap money from New York to London. Flotation of foreign bonds in London amounted to $651 million in 1927; reduced to $525 million in 1928 and a mere $228 million in 1929. From the start, the elastic band which bound the ever more fragile equilibria of the deficit economies were the American credits. “But the transmission belt which carried the deficits of even the strongest European economies into America’s credit ledgers [of financial institutions] was 117

Kari Polanyi Levitt

the re-established gold standard” (ibid.: 76). European national economies were forced to adjust their weakened economic capacities by adherence to the rigid rules of the Gold Standard. Their increased indebtedness to American creditors occurred silently, but no less effectively than negotiated loans. Whereas the stabilizations in Central Europe were sustained by cheap credit available on London money markets, the restoration of the pound sterling at pre-war parity was sustained by nothing less than the American silent inflation of 1926–1929. From August 1927 to February 1928 the discount rate of the New York Federal Reserve Bank was a mere 3.5%. The result was an enhanced economic boom in the United States and Europe as a flow of American credits supported European currencies. Foreign investments to Germany in 1927/28 topped $2 billion. In July 1928 the New York rate was raised to 5% to check a speculative bubble on the stock market. The supply of long-term capital to Europe dried up. In the first half of 1929 the value of European bonds floated in New York was a mere $101 million, compared with $449 million in the first half of 1928. Up until 1925, American protectionist and credit policies sustained living standards in the United States and Europe by accepting gold for payment of imports and by the extension of credits. After the restoration of the Gold Standard in Europe, the debtor states could withstand the pressure on their currencies only because inflationary cheap money policies in the United States were instrumental in an enormous increase in foreign lending to Europe. When American inflationist policies were reversed, financial pressure on debtor states triggered the world crisis. Neither gold nor new money was available to finance payments deficits. In the mid-1929, the United States and France accounted for 59% of the world’s monetary gold. Debtor states now had no alternative to the increase in the export of goods. Europe and overseas raw material exporting countries since 1928/1929 have flooded markets with exports at virtually any price. The trend of universally falling world prices manifested in 1929 was the prelude to the world crisis. Then came the credit crisis of 1931, the decline in world trade in 1932 and the collapse of currencies in 1933. The geographic displacement and postponement of the economic deficits had run their course. If inflation succeeded in saving the social fabric, it could not save humanity from a prolonged and painful process of adjustment. Polanyi cites Professor J.B. Condliffe (1933: 277), principal author of the Economic Yearbook of the League of Nations for 1932/1933, in support of his analysis: The real difficulties did not manifest themselves as long as the currencies of most of the debtor states were independent of each other, exchange rates were flexible, and inter-­ governmental debts unregulated. But as currencies returned to the gold standard, exchange rates were fixed, and debt payments were officially negotiated, tensions in the newly reconstructed international financial mechanism increased. For a few years, from 1925 to 1929 debt service was effected without radical adjustment of national economies by means of large flows of capital to the debtor states, principally from the United States. From 1928 and continuing in 1929, capital flows diminished. As pressures on debtor states increased, prices declined and credits dried up, the difficulties of international adjustment precipitated the collapse of the whole structure of international payments.

The significance and relevance of Polanyi’s interpretation of the crisis In many ways, Polanyi’s summary of the world economic crisis of the 1930s accords with received conventional wisdom. What then is interesting about this article – aside from the fact that it was written in 1933, without benefit of hindsight? How does it differ from the second chapter

118

The World Economic Crisis of the 1930s

of The Great Transformation? What can we learn about our present – and our future – from Polanyi’s account of the past? The first thing to note is the role played by the First World War in Polanyi’s account of the economic crisis of 1929–1933: “the conjunctural crisis of 1929–33 is only the most dramatic phase in a general crisis which had its origins in the world war” (Polanyi 2018 [1933]: 67). Conventionally, the war of 1914–1918 marks the close of the ‘long nineteenth century’. For Polanyi the historical break – the great transformation – set in with abruptness, in the early thirties. The world economic crisis of 1929–1933 was the last and final chapter of the 19th century. Next we note the role of the United States as the “super victor” of the First World War and the close relationship between central bankers and commercial bankers in New York, London and Paris. Although the source of the American funds that underpinned the complex structure of credit extended to European states was private, these credits were politically negotiated transfers of resources. Polanyi argues that “It is the curse of politically shaped economic facts: the terrible consequences of the original intervention often can only be warded off by costly new interventions” (ibid.: 77). On the domestic front, we note the emphasis on the political priority of assuring “the viability of society” (ibid.: 70) – what now is called the preservation of social capital or concern for the social fabric in stressful transformations of the economic order or severe insufficiency of economic resources to meet expectations of improvement in living conditions. This raised issues of domestic income and asset distribution. Here we note Polanyi’s attention to the political impact of economic mechanisms. For example, the rentier classes in England were privileged by an overvalued exchange rate, whereas the Russian, German, Austrian, and Hungarian middle classes were pauperized by hyperinflation. In this context, he observed that it is mistaken to consider only those policies that are intended to benefit the workers or the peasants as ‘interventionist’. The convenient assumption here is that economic measures designed to restore the pre-war order require no further justification. Restoration of currency values, no matter how artificial and draconian the means used, is not considered interventionist; no one asks whether the new equilibrium state in a given country permits the restoration of rentier income that is a side effect of such a currency policy. A theory of equilibrium which consists exclusively in the purely formal assertion of the sanctity of contract is of no value as a practical tool of economic and financial policy. (Ibid.: 71) Polanyi’s approach to the analysis of the world crisis of the 1930s invites the following considerations concerning the unfolding global crisis of today.

Financialization The dominant force shaping the trajectory of the global economy since the 1990s has been neither trade nor technology but finance (cf. UNCTAD 2017). Large complex financial institutions – ­ranging from banks, bond investors and pension funds to big insurers and speculative hedge funds – together with the insurance and real estate industries now account for some 20% of GDP in the advanced countries. World Bank economists lend their support to extending financialization to the poorest 40% of households in the belief that “financial inclusion allows people to make many everyday financial transactions more efficiently” (Storm 2018: 308).

119

Kari Polanyi Levitt

The iconic American corporation of the early post-war era was known for the products it produced. It sought to increase long-term profits by expanding sales, retaining earnings and reinvesting in real capital formation. The difference in remuneration between management and common labour was in the order of 40 to 1, and there was low turnover of staff (Lazonick 2014). The profitability problems of the 1970s resulted in the progressive financialization of the corporation. Maximizing shareholder value replaced long-term profitability as the metric for successful management, and this was achieved by the downsizing of labour, the buyback of stock and the acquisition of companies with liquid assets. Instead of ‘retain and reinvest’, companies distribute earnings to shareholders who are increasingly not individuals but complex financial institutions. Real investment has diminished and the difference in remuneration between management and labour is now in the order of 400 to 1 (ibid.). Banks, too, have become financialized. Whereas they once acted as intermediaries in channelling household savings to finance investment in the real economy, today they lend to households to sustain effective demand. As borrowing supplements incomes, financialization is transforming household budgets. Family incomes are more dependent on financial transactions. Pensions, traditionally designated in terms of previous income, have become ever more dependent on stock market earnings. Personal savings take the form of contributions to pension, investment, or mutual funds. Additionally, there is a massive growth in credit card and student debt. Financial capital is directly exploiting the population in the sphere of circulation. Financialization “has allowed the ethics, morality and mindset of finance to penetrate into the deepest recesses of social and individual life”, reflected in the pervasiveness of short-term and consumerist thinking (Lapavitsas 2009: 116). While the 2008 financial crisis was not unexpected by some observers, the mainstream economics profession erroneously believed in the ability of financial markets to accurately judge the risks associated with financial interests, as admitted by Alan Greenspan (Financial Crisis Inquiry Commission 2010). It was seen as the most serious crisis since the Great Depression of the 1930s, and the meltdown of the world financial system was averted by massive government support. Unlike the 1930s, most governments and central banks responded to the 2008 financial crisis with fiscal expansion, near-zero interest rate cuts, and quantitative easing. However, in reality very little has changed. The liberalization of capital flows has continued. Debts and inflation rates have increased. Moreover, unregulated markets have aggravated ecological damage resulting in a deteriorating environment and runaway climate change while restricting public revenues required to fulfil climate commitments. Financialization has corrupted the political process of representative government resulting in a loss of legitimacy of the democratic system. Polanyi reminds us that the credit mechanism in the 1920s did not lead to a solution, but to a spatial shift and a temporal postponement of the crisis. Some scholars argue that economic change is a pendulum which swings between surges of expansion and counter-movements of resistance to market forces. This implies the capacity of effective political intervention by the state. However, we remind the reader that the three postwar decades of the Keynesian consensus were a response to the Great Depression and a war that consumed an estimated 30 million lives. A more likely outcome of neoliberal globalization is an ecological and financial crash on a scale exceeding the crisis of 2007–2008.

Globalization and the nation state In 1994, there appeared a word we had never heard before: ‘globalization’. The word could not be found in the shorter Oxford dictionary, nor in computer spell-checks of that time. The World Development Report of 1995, Workers in an Integrating World, greeted globalization as inevitable 120

The World Economic Crisis of the 1930s

and beneficial to workers in advanced and developing countries alike, provided they conform to the neoliberal Washington Consensus. Language matters. When the word ‘global’ is used to replace ‘international’, what disappears from view is the nation. When globalization replaces international interdependence what disappears is internationalism, or cooperation between nations. This is not accidental. As noted by James Galbraith (2019: 30), the term “globalization” “emerged from nowhere at that time and for a reason: to cast a light of benign inevitability over the project of Western hegemony offered up as the future following the collapse of the USSR”. Economic globalization is best understood in terms of the ability of large transnational corporations to construct international supply chains and other economic linkages within corporate structure. Through globalization, these international structures of private economic power have escaped national regulation by circumventing what Wolfgang Streeck has called the “national cage” (Streeck 2017: 5). Globalization has delivered on its promise of creating winners and losers. The biggest winner has been China, which has achieved a revolutionary economic transformation, drawing millions into industrial employment for export markets, resulting in massive poverty reduction. As described by Dani Rodrik, China and other East Asian countries Played the globalization game by different rules. They opened their markets only partially, governing the pace and impact of economic integration with interventions ranging from subsidies for favoured industries to controls over cross-border capital flows. (Rodrik 2017: 1) Polanyi drew attention to the increasing importance of the nation state in the 19th-century capitalist order. He explained that there is no such thing as a world market distinct and separate from the national economies which together constitute an international market. In reflections on the Asian crisis of 1997, Dani Rodrik recalled Karl Polanyi’s important insight that “we have never had a global capitalist system […] Capitalism is, and will remain, a national phenomenon” (Rodrik 1998: 17). Rodrik insists that nation states are essential to globalization because they provide public goods, ranging from law enforcement to macroeconomic stabilization, needed for open markets to thrive, and for the construction of international supply chains (Rodrik 2017: 1). In 1860, historical rivals France and Britain concluded a free trade agreement. The following decade saw the consolidation and unification of the nation state in Germany, Italy, Russia, the United States and Canada. These late industrializers emerged to challenge British free trade hegemony and created the 19th-century world market. In the closing decades of the 19th century, protectionism became the common way to expand national industries, and world growth exceeded that of the earlier free trade era dominated by Britain (Bairoch 1995). If the Roosevelt administration was able to pass the comprehensive New Deal legislation in the 1930s despite Republican opposition and without straining the democratic process, this was, Polanyi pointed out in one of his most acute insights, due to “the absence of the control of the financial market over the credit of the state itself” (Polanyi 2017 [1940]: 29). The conflict of White House and Wall Street in the first years of the New Deal, in conjunction with the dropping of the Gold Standard, may have had greater importance than it is usually credited with. This comment is indeed prophetic of the control of finance to which the American political system would later succumb. In reality, the political process operates exclusively at the national level. People can influence the outcome of national elections; they have no say or control over corporate or financial global giants, nor over supranational organizations. There cannot be meaningful democracy, liberal, or illiberal, in the absence of sufficient policy space to determine and achieve national objectives. 121

Kari Polanyi Levitt

Keynes insisted on capital controls over all external payments to protect national sovereignty. Neoliberal policy favours freedom of international capital flows at the expense of national sovereignty and meaningful democracy. As globalization intensifies, the nation state behaves as a ‘shock absorber’ protecting society from the disruptive impact of trade and capital flows. Polanyi observed that “modern nationalism is a protective reaction against the dangers inherent in an interdependent world” (Polanyi 2017 [1940]: 24).

The trend towards economic multi-polarity According to Giovanni Arrighi (2010), successive great hegemons in decline – from Genoa and the Dutch Republic to Britain and the United States – consolidated territorial gains by financialization. This made Amsterdam the financial capital of Europe, the city of London the financial capital of the world and Wall Street the financial centre of American empire. The Great Financialization and the proliferation of financial centres may therefore be symbolic in indicating the decline of American political hegemony and its rise to a global financial empire. We are now living in a dangerously disordered world. The West continues to act with imperial arrogance in its military and other international interventions. In this new age, no single state has a political hegemony, and the world is dominated by multiple actors exercising economic and political power. The emergence of the United States as leader of the Western world was due more to circumstance than to a predestined role. While other major powers suffered devastating losses of material and human resources, the United States gained significantly in economic strength from the Second World War. As victory in Europe was celebrated in 1945, the United States identified the Soviet Union as the dominant military and ideological threat to the West. In this contest, America was at an advantage as the primary source of economic resources to assist reconstruction and revive international trade. The defeated countries were folded into the US security system in Europe and Asia. The contest between a multiplicity of powers that characterizes today’s world is eerily reminiscent of the atmosphere that preceded the First World War (Escobar 2018). There is a proliferation of weapons of mass destruction and former hegemonic powers are exhibiting symptoms of failed states. In our disordered world, the stakes are much higher than those before 1914. Today, the vast nuclear arsenals of the former Cold War adversaries, the United States, and Russia constitute the gravest danger to peace and the future of humanity. Even before the war in Ukraine, the Bulletin of Atomic Scientists moved the Doomsday Clock closer to midnight than at any time since the Cuban Missile Crisis of the 1960s. Some people have interpreted the war in Ukraine as the start of a new cold war, but it is not. It is a hot war and a very destructive war, a serious danger that could lead to a war between the United States and Russia in alliance with China, and that must be avoided at all costs. We would be wise to remember that in 1913 nobody believed that an incident in Sarajevo could result in a major European war. The trend towards economic multi-polarity is reminiscent of Polanyi’s 1945 vision of regional blocs corresponding to historic and cultural commonalities. In his day, his vision for the post-war world was the coexistence of the United States, the Soviet Union, the British Commonwealth, China and India in arrangements of negotiated and managed international trade (Polanyi 2018 [1945]: 231–240). Late in life, in a letter addressed to an old friend of his youth, Karl Polanyi (1958) wrote that his work was for the “New Nations of Asia and Africa”. He hoped that these countries would not follow Rostow’s stages of capitalist development which rested on the assumption of the ‘economizing’ behaviour of homo economicus and would instead take a “substantivist” approach to economic institutions with reciprocity and redistribution as well as exchange as patterns of economic integration. In the new millennium, but especially since the 2008 financial crisis, world growth is shifting from West to East. China’s historic industrial revolution of the past 122

The World Economic Crisis of the 1930s

decades was accompanied by a major and ongoing transformation in international economic and financial governance with new institutions emerging. They include the Belt and Road Initiative, the Asian Infrastructure Investment Bank, the BRICS Development Bank and other examples of South–South cooperation that reflect the growing importance of the developing world. China’s development has both benefited from and contributed to the economic development of other developing countries. The financial crisis expanded the policy space for innovative development, including “a growing diversity of financial architectures across the global South” (Chang and Grabel 2014: XXX). In this shifting landscape, we share the hopes of Samir Amin (2017) for a renewal of the Bandung spirit, whereby the states of Latin America and the Caribbean can join Africa and Asia in a united front to resist neo-colonialism and neoliberal globalization.

Note 1 This chapter is based on ideas developed in several earlier papers, among them: “Back to the Future: Insights from Karl Polanyi’s analysis of the world economic crisis of the 1930s”, presented at the XIV Congress of the International Sociological Association, Montreal, 1998; “Back to the Future. The World Economic Crisis of the 1930s” (Chapter 4 of my book From the Great Transformation to the Great ­Financialization, Zed Books 2013); and “The return of Karl Polanyi”, published in the co-edited book Karl Polanyi and Twenty-First-Century Capitalism” (Manchester University Press 2020).

Literature Amin, Samir. 2017. “From Bandung (1955) to 2015: Old and new challenges for the states, the nations and the peoples of Asia, Africa and Latin America.” Interventions 19/5: 609–619. Arrighi, Giovanni. 2010. The Long Twentieth Century: Money, Power and the Origins of our Times. Miamisburg, OH: Verso. Bairoch, Paul. 1995. Economics and World History: Myths and Paradoxes. Chicago, IL: University of Chicago Press. Chang, Ha-Joon and Ilene Grabel. 2014. Reclaiming Development: An Alternative Economic Policy Manual. London: Zed Books. Condliffe, John B. 1933. Economic Yearbook of the League of Nations 1932–33. Geneva: League of Nations Publication. Escobar, Pepe. 2018. “Back in the (great) game: The revenge of Eurasian land powers.” Consortium News, 29 August. Financial Crisis Inquiry Commission (Angelides Commission). 2010. Official Transcript of Commission Hearing, Wednesday, April 7. 2010. Washington, DC, p. 93, lines 21–24, http://fcic-static.law.stanford. edu/cdn_media/fcic-testimony/2010-0407-Transcript.pdf. Accessed 14 December 2019. Galbraith, James. K. 2019. “Inevitable war?” In The Crisis of Globalisation (SE Dossier): 30–33. London: Social Europe, https://www.socialeurope.eu/wp-content/uploads/2019/03/The-Crisis-of-Globalisationfinal.pdf. Accessed 14 February 2020. Keynes, John M. 1971. Economic Consequences of the Peace. The Collected Works of JMK, Vol. II. London: Macmillan. Lapavitsas, Costas. 2009. “Financialised capitalism: Crisis and financial expropriation.” Historical Materialism 17: 114–148. Lazonick, William. 2014. “Taking stock: Why executive pay results in an unstable and inequitable economy.” Roosevelt Institute White Paper, June. Polanyi, Karl. 1958. Letter to Bé de Waard. Karl Polanyi Archive (KPIPE): Montreal, Con 30 Fol 02. ———. 2017 [1940]. The Present Age of Transformation: Five Lectures by Karl Polanyi, Bennington College. London: Prime Economics. ———. 2018 [1933]. “The mechanism of the world economic crisis.” In Id. Economy and Society: Selected Writings, edited by Michele Cangiani and Claus Thomasberger, 66–80. Cambridge: Polity Press. ———. 2018 [1945]. “Universal capitalism or regional planning?” In Id. Economy and Society: Selected Writings, edited by Michele Cangiani and Claus Thomasberger, 131–140. Cambridge: Polity Press.

123

Kari Polanyi Levitt Rodrik, Dani. 1998. “The global fix.” New Republic, 2 November. ———. 2017. “The trouble with globalization.” The Milken Institute Review, 20 October. www.­milkenreview. org/articles/the-trouble-with-globalization. Accessed 14 December. Storm, Servaas. 2018. “Financialization and economic development: A debate on the social efficiency of modern finance.” Development and Change 49/2 (January): 302–329. Streeck, Wolfgang. 2017. “The return of the repressed.” New Left Review 104: 5–18. UNCTAD. 2017. Trade and Development Report. Beyond Austerity: Towards a Global New Deal. United Nations, New York and Geneva

124

10 OBSERVING THE TRANSFORMATION. POLANYI’S WRITINGS IN THE INTERWAR PERIOD Michele Cangiani Introduction The main motives of Karl Polanyi’s writings in the 1920s and 1930s are his activity as a journalist, his teaching to adults, and his political commitment. It is no wonder, therefore, that analyses of current events, historical investigation, political concern, and theoretical insight complement and reinforce each other. Only a portion of those writings can be considered here, mostly chosen from the Viennese political-financial weekly Der Österreichische Volkswirt. Among the various themes Polanyi deals with, the transformation is privileged, that is the passage from the liberal (19th-century, Victorian) institutional structure of the capitalist society to “Capitalism in its non-Liberal, i.e. corporative, forms” (Polanyi 2018 [1935]: 87). Besides, the analysis of the transformation is more specifically addressed to two cases. First Great Britain, where the market society took full form earlier than elsewhere, giving this country a hegemonic position. Then, the United States, whose “exceptionality”, and hegemonic future, Polanyi investigates.

Polanyi’s contribution to Der Österreichische Volkswirt Between 1924 and 1938, Polanyi wrote over 250 articles, short correspondences and reviews for Der Österreichische Volkswirt (hereafter Ö.V.). He was a member of the editorial team (Bermann 2006 [1928]) and “foreign editor”1 from 1933, when he moved from Vienna to England. About 10% of the articles concern the economic, social, and constitutional innovations of the American New Deal. 5% talk about Germany, the Union of Soviet Socialist Republics, Austria, and other countries. All the remaining articles, about 85%, deal with world politics and economy, and Great Britain: two themes sometimes overlapping, when international issues are considered from the point of view of Britain’s overseas interests and diplomatic activity. From 1924 to 1932, most of the articles are about Great Britain. Polanyi’s attention is initially focussed on the labour movement, the question of the coal mines, the struggles culminating in the general strike of 1926. Later, the crisis and the first manifestations of institutional reforms enter the scene. Also international affairs are constantly followed, often through the activity of the League of Nations. The main problem is peace in Europe. The powers continue to negotiate about

125

DOI: 10.4324/9781003336747-14

Michele Cangiani

security, war reparations and debts, border disputes, disarmament, the rights of defeated countries, especially Germany. But it seems to Polanyi that basic conditions are lacking for a true and lasting peace: that is, the development of democracy in the direction of socialism within states, and a supranational organization endowed with effective power. In 1933 there are fourteen articles, in addition to the essay “Der Mechanismus der Weltwirtschaftskrise”2 published in a special supplement of the Viennese weekly. In this crucial year, Polanyi deals with Hitler’s seizure of power, planning in the Soviet Union, the turning point in the United States with Roosevelt’s presidency. In the background there is the difficulty of coping with the economic crisis: its extent is exceptional, proposed remedies are obsolete or doubtful, nations fail to agree on a policy (as demonstrated by the flop of the World Economic Conference in London). At the end of the year, after Germany withdrew from the Conference on Disarmament and the League of Nations,3 the world appears more precarious, in danger, than ever (“Ein Welt im Wanken”, Dec. 23, 1933). It was then evident that the tendencies towards democracy and socialism had been defeated, and the drift towards war prevailed over the attempt to secure peace. The “great transformation” was emerging in various forms from the definitive crisis of the liberal capitalist system: a crisis of its economic and political institutions, as well as of international equilibrium. Polanyi considers 1935 as another “milestone” in this sense (“Markstein 1935”, Dec. 21, 1935). The war brought by fascist Italy in East Africa shatters hopes for peace. Furthermore, the relevance is now evident of the conflictual alternative between different methods and outcomes of the transformation in determining opposing international alignments.4 Most of Polanyi’s numerous articles of 1934 concern the corporative transformation in Great Britain; in 1935, he began his reports on the New Deal. About fascism, he published his analyses elsewhere than in the Ö.V., after the censorship imposed in Austria by the Dollfuss government in 1933.5 The need for self-censorship may also explain the general change in Polanyi’s contribution to the Viennese weekly from 1936 to 1938, when it ceased publication following the Anschluss. Polanyi’s correspondences became brief and dry: almost always mere diplomatic news and accounts of international events. A more in-depth analysis is dedicated only to the “démocratie en Amérique”. The articles for the Ö.V., being the fruit of Polanyi’s daily work of informing and commenting on the evolution of the world situation, constitute a precious source for understanding what problems interested him most, what ideas of his were then born – all in all, what his attitude was in the face of the changing historical situation.

A socialist transformation: hopes and delusions Still in Vienna, Polanyi appreciates English socialism, especially guild socialism “restated” by George D. H. Cole (1920), for its democratic spirit, the will and ability to assume governmental responsibilities, the effective diplomatic peace initiatives (“England und die Wahlen”, Nov. 9, 1924). According to Cole (1935: 36), socialism became “a formidable force” in England thanks to the struggles of the years 1910–1914; around the end of the First World War it strengthened further. In January 1924 the Labour Party formed a minority government, which fell prematurely the following November. Commenting on these events, Polanyi reveals his trust (or hope) that this government experience, though short and contrasted, could contribute to transforming the Labour Party into “a great popular socialist party”, oriented towards “political”, not merely “tradeunionist” goals. The socialist left, hegemonized by the Independent Labour Party, presses in this direction; however, as Polanyi doesn’t fail to note, it is a minority, indeed a disunited one. Moreover, opposite 126

Observing the transformation

tendencies prevail, both at the top of the Labour Party and in the Trade Unions, which form the basis and strength of the Party (“Zur Krise der englischen Arbeiterbewegung”, Apr. 25, 1925). The ‘possibilist’ attitude, the governmental spirit, risk ending up in the search for social peace at all costs and therefore in the weakening of both the political project and the claims addressed to the social counterpart and the government. Differently from “trade-unionism”, understood as the mere defence of group interests, the pursuit of the general interest through an overall political project – Polanyi argues – should be the purpose of a true democracy. In this regard, he also dwells on proposals for electoral reforms aimed at promoting the political awareness of voters and their control over the choice of candidates and their activity (“Von Parteienwahl zu reinen Vertreterwhal”, June 6, 1925). The feared risk was the closure of voters and elected officials in their respective vested interests, and, at the same time, their complicity.6 In the following years Polanyi carefully records the facts destined to gradually destroy illusions regarding English democracy and the socialist movement. Commenting on the failure of the general strike of 1926, he tries to clarify the responsibilities of Labour leaders and Trade ­Unions – without forgetting the adverse strategies of entrepreneurs and government. The failure of the strike, in his opinion, gives the ruling class the opportunity to put the Labour Party in trouble and, more generally, to carry out the counter-revolution, that is, to definitively end a period of class struggles around the very organization of society. A historical cycle has come to an end, one in which the political weight gained by the workers’ movement within democratic institutions seemed to lead to the gradual creation of a true democracy, also extended to the economic sphere, capable of adequately solving the problem of organizing human life in industrial society (“Probleme des englischen Generalstreiks”, May 29, 1926). It is significant that at this point Polanyi’s reports on the English labour movement ceased. He will resume them in 1934 with shorter articles, that, as we shall see, intend to show just how much the political situation changed. Obviously, Polanyi’s approach was influenced by the Austrian events. 1926 is also the year in which Otto Bauer, at the Linz Congress of the Austrian Social Democratic Party, admits the difficulty, in fact and in principle, of a gradual and peaceful development of democracy towards socialism (see, e.g. Loew 1979). This is true, however, regarding political strategy, while both Bauer (1936) and Polanyi remain convinced of the continuity between the bourgeois and the socialist revolution, between the affirmation of freedom and democratic principles, which characterizes the genesis of modern society, and their implementation, which the overcoming of capitalism would, at least, make possible.7 For both Bauer and Polanyi, the overcoming of illusory freedom, that is, of the institutions of liberal capitalism, would safeguard, indeed affirm more strongly, individual liberty and civil rights against any arbitrary form of authority. For both, the break with the democratic acquisitions of modern society characterizes fascism, which is “the outcome of the mutual incompatibility of Democracy and Capitalism in our times” (Polanyi 2018 [1935]: 100). As a rule, when, thanks to democracy, the working class acquires power and the capitalist system feels threatened, its survival is imposed at the expense of democracy, and thus of freedom, either partially or “under a dictatorship”. Based on this analysis, Polanyi denounces the “prejudice” that “the free enterprise system” is the necessary condition for individual liberty (Polanyi 2014 [1949]: 42, 43), while criticizing those Marxists who reduce democracy to a superstructure of the capitalist mode of production. Harold Laski too questions democracy, in connection with the contradictions of the liberal system. According to him, the attempt to make the economic and social structure coherent with political democracy collides, even in democratic United Kingdom, with the reaction by “the aristocratic and plutocratic power”, and political institutions such as the electoral system and the House 127

Michele Cangiani

of Lords (Laski 1933, 1934). In short, where democracy is not swept away completely, it must be harmless for the ruling class. In The Great Transformation (TGT), Polanyi says that the foreign policy of Nazi Germany benefited from its ostentatious opposition to the Union of Soviet Socialist Republics, that is, to a type of transformation which the capitalist classes deemed more dangerous than the fascist type. Polanyi does not fail to record, in the Ö.V., the attraction fascism exerted in Great Britain on eminent Conservatives, such as William Joynson-Hicks and Winston Churchill (“Der englische Generalstreik”, May 8, 1926; “England und der abessinische Krieg”, Oct. 26, 1935). The conviction that fascist dictators took advantage of Conservatives’ sympathies and fears was traceable in those years in the circles of the “Christian Left”, which Polanyi frequented in England. We find it, for example, in Richard Tawney (1938). According to Polanyi, the parallel crisis of economy and democracy, fuelled by class antagonism, brought society into an impasse. As it is made clear in the articles of the interwar period, and recalled in TGT, the prospect of a socialist revolution soon ceased to be real, and perhaps never was. However, the political institutions of liberal democracy continued to admit the possibility of a “popular government” and thereby of reforms in the interest of the subaltern class; this was the feared and condemned “interference” of politics in the functioning of the market system. The opposition of classes took the form of the opposition between politics and economy; the economy was harmed, democracy discredited. Especially and increasingly after the end of the First World War – Polanyi maintains (“Wirtschaft und Demokratie”, Dec. 24, 1932) – the opposition between economy and democracy damages both. In this article, and more emphatically in TGT, he explains this opposition principally in terms of class conflict between “labor entrenched in parliament” and capitalists who “built industry into a fortress from which to lord the country” (Polanyi 2001 [1944]: 244). In “Wirtschaft und Demokratie” (cit.) Polanyi also mentions more specifically causes and modalities of the growing economic and political crisis. Instead, he hopes for an authentic democracy, in which the diffusion of knowledge, of economics in the first place, allows individuals to decide freely and responsibly regarding the organization of their society. The impasse was to be overcome. Hopes of a socialist transformation having vanished, the political-democratic “interference” with the economy was to be transformed into corporative intermediation and beneficial state intervention for dominant economic interests. Polanyi, as it is apparent from his writings examined here, early interpreted in this way the neoliberal institutional transformation, in the different shapes it took in different countries. Moreover, this is consistent with his idea that, if the definitive crisis of liberal capitalism could not be overcome through the socialist realization of modern freedom, the conflict between “economy and democracy” would have been resolved at the expense of the latter: even where fascism, which was the solution in most of Europe, did not take root.

From the crisis to neoliberal-corporatist transformation The relationship between economy and democracy is an important theme of Polanyi’s analysis of British politics. In the article “Demokratie und Währung in England” (Sept. 19, 1931) he mentions theories on the economic crisis and possible remedies, in particular the position of the Committee on Finance and Industry, which was chaired by Harold Macmillan and counted John M. Keynes among its members. The new ideas, Polanyi points out, are hampered by the difficulty of departing from classical economic theory, in a country where the gold standard is “a part of the constitution”. Besides, he does not fail to notice that behind the concern for “the 128

Observing the transformation

salvation of the pound” there was pressure from the City to reduce the unemployment benefit and, subsequently, wages. Nor was enough, to reassure capital, the Labour Government’s willingness in this sense: it had to resign.8 What Polanyi stresses, what matters most to him, is that, by forming the National Government – which included members of Labour, Conservative and Liberal parties – the Labour leader Ramsay MacDonald himself “interrupted the tradition of democracy to the detriment of the masses” (“Demokratie und Währung in England”, cit.). (A noble tradition that merely allowed two Labour governments, in 1924 and 1929, both forced to resign prematurely, also through pressures and propaganda methods in principle foreign to democratic procedures.) In both Labour governments, MacDonald was Prime Minister, and Philip Snowden, member of the Independent Labour Party, “a gold standard addict” according to Polanyi (2001 [1944]: 236), was Chancellor of the Exchequer. The tone of Polanyi’s comment, however, changes from one government to the other. Regarding the second, he seems not as confident about the future of democracy and the socialist movement as he was regarding the first. Besides, he realizes how much the historical situation has changed in just a few years. In the United Kingdom too, he argues (“Demokratie und Währung in England”, cit.), the great crisis makes the attempt to move to a new institutional set-up inevitable, traumatic – and strictly controlled by the ruling (economic) class. Immediately after the publication of this article, on September 21, 1931, one of the first provisions of the National Government was the abandonment of the gold standard: an ironic result, as the safety of the pound had been the pretext for the attack on the Labour Government. The crises of the two Labour governments in 1925 and 1931 had, in fact, a fundamental trait in common: although in the first case it was a matter of returning to the gold standard rather than exiting it, in both cases the political choice was to favour financial against labour interests. The special attention with which Polanyi followed and commented on British events was undoubtedly influential in the genesis of the theory of the “great transformation”. Think, for instance, about the great significance – real, and symbolic – the collapse of the gold standard has in the book of 1944; or about the idea that a new economic policy became possible only after having weakened the resistance of the working class and brought down any socialist or simply “popular” government, leveraging for this purpose also on the constraints imposed by the old economic policy (such as budget balance and convertibility of currency into gold). Finally, England being the home of the “market system”, British hegemony itself was linked to the world dominance of this system in its ‘Victorian’ shape. A new order was needed in the international setting too. Let us now dwell on a topic that, practically absent in TGT, has instead a prominent place in Polanyi’s previous articles, where the British restructuring of the mining, textile, and iron and steel industries is examined, as well as the new “dirigiste and autarkic” agricultural policy. Both industrialists and Walter Elliot, Minister of Agriculture, relied, among other things, on the customs barrier established in 1932. The United Kingdom, after the free-market era it promoted (and exploited), adapted to what Polanyi indicates as “the new protectionist wave” (“Neue Schutzzollwelle”, Nov. 28, 1931). Polanyi never limits himself to the technical and economic aspects, but considers the organizational and political ones, always placing industrial problems in the overall context of society and the historical situation. Examining the issue of the coal mines, in 1925–1926, he deals with the social struggles, in which the miners were in the front row. It is a question not only of wage agreements and government interventions, but also of the socialization hypothesis, which in the post-war period benefited from the experience of the war economy and was socialist oriented. Later – as above recalled – Polanyi acknowledges the changed situation. After the period in which the strength of the workers’ movement and its ability to propose solutions to the problems of 129

Michele Cangiani

industrial society was growing, the initiative passed to the other side. The restructuring of B ­ ritish industry and more generally the overcoming of the 19th-century liberal system, which could not be achieved in the perspective of socialism, were implemented in the interest and under the hegemony of capital. In 1928 Polanyi (“Liberale Wirtschaftsreformen in England”, Feb. 11, 1928; “Liberale Sozialreformer in England”, Feb. 25, 1928) analyses the reforms proposed in Britain’s Industrial Future by the Liberal Industrial Inquiry (1928). The Inquiry was sponsored by David Lloyd George and involved Keynes, whose essay “The end of laissez-faire” (1926) had a considerable influence. The liberalism of “liberal reformers”, Polanyi observes, leaves behind classical utilitarianism, individualism, and the magic of price mechanism; it even envisages a “social policy” imbued with “psychological pragmatism”, that is, attentive to the workers’ views on their own situation, and based on the assumption that collaboration is convenient for everybody. First, the Inquiry raises the problem of a reorganization of production involving entire industrial sectors, which should equip themselves with self-governing bodies. The state, in turn, should give directions to private investments, control capital movements and trusts acting in conditions of oligopoly, create “public concerns” capable of replacing private initiative for major works of national importance or in case of monopoly. Britain’s Industrial Future shows an innovative interest in integrating the working class in exchange for concessions and guarantees. More importance is given to the question of power and control than to wages – Polanyi notes. The watchword is “industrial cooperation”, to be pursued through more effective and extensive joint bodies than existing ones, a prudent profit-sharing, an “unconditional recognition of the task of the Trade Unions as interpreters of interests”, and the involvement of the Government in the settlement of conflicts. Are these, Polanyi asks (“Liberale Sozialreformer in England”, cit.), signs in the direction of overcoming the “society whose substance is the cash-nexus, that is, the exchange of wages for labour power”? There is, he replies, the intention to “raise wage labour from a mere contractual relationship to a legally guaranteed status, substantiated by social values”: but certainly not that of abolishing the private ownership of means of production, not even of undermining financial and managerial power. In this comment too we note the coexistence, characteristic of Polanyi, of an ideal tension and a realistic historical and political awareness. On the one hand, he is unwilling to completely give up the hope of overcoming liberal capitalism in a democratic and socialist sense. On the other hand, he acknowledges the historical distance from the revolutionary years around the end of the war and recognizes the ability of the ruling class to arrange the institutional transformation of the market society to its own advantage. The Works Councils now outlined by the Liberals, he observes (ibid.), have little in common with those born in 1915 from the Clyde workers’ revolt against the Ministry of Munitions. Apparently, Britain’s Industrial Future takes up the path indicated in 1917–1918 by the reports of the Whitley Committee: but, contrary to the latter, the reforms now proposed presuppose the pre-eminence of communion instead of conflict of interests between capital and labour. This reversal is evident, according to Polanyi, in the ideas of Alfred Mond, president of the Imperial Chemical Industries, author of the book significantly entitled Industry and Politics (1927), and promoter of an innovative dialogue between industrialists’ organizations and the General Council of the TUC (Trades Union Congress). A series of talks was held in the years 1929–1933 (cf. Ditenfass 1984). In this initiative – Polanyi comments – the trend emerges towards a new corporative form of industrial organization, in which the objective of rationalizing British industry should be combined with that of social peace (“Liberale Sozialreformer in England”, cit.).

130

Observing the transformation

The times, however, were not yet ripe to move from projects to actual implementation. A key topic of TGT is that the Great Depression is the needed catalyst. Then the liberal system, the “market system” in the strict sense, appears to be definitively overcome, while capitalism and the market system in their most general meaning are preserved. The corporative transformation is taking place. Despite the abandonment of the gold standard and free trade, the British government in the 1930s remained faithful to the balance-of-budget orthodoxy. A Keynesian fiscal policy aimed at full employment was undertaken, if at all, only after the Second World War. In general, economic and financial policies were more innovative in Sweden and the United States, not to mention fascist countries. Polanyi emphasizes Britain’s conservatism in this respect. However, he considers the 1930s to be “revolutionary” in this country too: even there the liberal period in the history of capitalist society seems closed to him, because he turns his attention to the new forms of organization of the economy, to the vicissitudes of democracy, and to the reciprocal relationship of economic and political dynamics.

Premises and features of a new institutional set-up A prerequisite for the transformation – either socialist or neoliberal or fascist – was earlier acknowledged by Polanyi (2018 [1925]: 41): “technical and economic concentration and centralization within capitalism”. As we have seen, he comments correlative practices of conscious organization involving British industrialists, trade unions and government, supported by economic and political research. Obviously, also elsewhere – we read in another article (“Schmalenbach und Liberalismus”, June 30, 1928) – attempts were made to arrange forms of coordination and control, without, however, eliminating “the principles of freedom of the economy”, that is, its capitalist character. “That free competition leads to monopoly” – Polanyi continues – is an old truth and is a “structural phenomenon that characterizes an era”. Already in the 1920s, the self-regulation of the market was little more than an ideology, that, while justifying capitalist market freedom and deflationary policies at the expense of the working classes, hindered the understanding of the selfreinforcing crisis that economy and politics had entered. In Polanyi’s view, the essential principle of liberal capitalism was the “institutional separation” between economy and politics as a condition for both the functioning of the economic system and the existence of representative democracy – both, anyhow, controlled by the ruling class. The need to save the economic system from undesirable political interferences acquired a new meaning and urgency since universal (or expanded) suffrage had given political weight to the representatives of the working class. The crash of 1929, the depression and the abandonment of the gold standard forced to acknowledge, not only in fact but also in theory, that it was no longer a question of relying on the mere price mechanism. Both the economic process and social-political dynamics should be purposefully organized – as well as their relationship with each other. The erosion of the margins of economic compromise due to the crisis – and the strategic need of the ruling class to control the process of change – put into question the very permanence of democratic institutions. No matter if the defeat of the workers’ movement, Polanyi notes, was already accomplished. Even where authoritarian regimes were not the final achievement, democracy must transform itself: while the ruling class had to stay firmly in power, the organizations of the subordinate class had to be involved in new forms of economic and political regulation. Several Polanyi’s 1934 articles in the Ö.V. continue the analysis, started in the late 1920s, of the transformation in Great Britain. The concentration of capital is accompanied by an attempt to rationalize production also through agreements and cartels for entire industrial sectors. In the 1930s,

131

Michele Cangiani

the state’s policy of guidance and assistance for industrial reorganization intensified. Three articles of Polanyi’s deal with the new agricultural policy. Regarding industry, in addition to the interventions in the coal sector, the reorganization of the cotton industry was the subject of laws in 1936 and 1939. Already in 1925–1926, Polanyi’s articles on the question of the coal mines evidence that the game was for three: entrepreneurs, workers and the government. In 19349 he examines the attempts to rationalize the Lancashire cotton industry, the crisis of which appears to be the poignant symbol of the decline of liberal capitalism, of British hegemony, and of ‘Manchesterism’ as a practical and theoretical attitude. Japanese competition, Polanyi points out, relies not only on concentration and technical and marketing innovation, but also on cultural tradition making corporative industrial relations natural. What success, he asks, will technical, financial and organizational rationalization have in England? What will be the new role of workers’ unions, employers’ associations and the state? To another important sector of English industry in crisis, the iron and steel sector, the government grants special customs protection, conditional however on the approval by industrial associations of a plan envisaging the rationalization of production and exports, price fixing, and the allocation of production quotas to eliminate excess capacity (“Englisches Stahlstatut”, Apr. 28, 1934). Further Polanyi’s articles on this industry concern the plans proposed, in turn, by the Trade Unions, the Labour Party, and the Conservatives. Among the latter, a leading figure is Harold Macmillan (1933), who suggests a moderate planning policy and a moderate corporativism, understood as a pluralistic representation of interests and as a systematic organization of relations between industry and state. To this end, representative bodies should be set up at various levels, culminating in a Central Economic Council. Thus, the recommendation of a National Industrial Council issued a few years earlier, with the approval of the TUC, from the “Mond-Turner talks” (mentioned above) was taken up again. Both Mond (Lord ­Melchett) and Lloyd George (another forerunner, as we have seen) support now Macmillan, who however, Polanyi notes, finds it difficult to convince the Conservative Party and industrialists that the modest planning he proposes is aimed not at weakening but at “consciously strengthening the bourgeois foundations of the economy”, by adopting “self-administration, voluntary self-defence of industry” as an alternative to “socialization” of the socialist type (“Tory Planwirtschafter”, Oct. 20, 1934). Historians have confirmed Polanyi’s judgement: Macmillan’s attempt at a pluralistic corporatism, albeit with the guarantee of the dominance of industrialists and a limited central leadership, was defeated by the tendency – supported by the Federation of British Industry – towards a reorganization implemented voluntarily and independently by individual industrial sectors. For the industrialists, the attitude of the working class organizations was not indifferent. ­According to Polanyi (“Labour und Eisenindustrie”, Aug. 25, 1934), an essential factor of the British transformation is the collaboration of the trade unions, involving that of the majority of the Labour Party. Especially after the 1931 crisis of Labour Government, he points out, few traces of social struggles and “socialist tendencies” remained: what, then, is the meaning of the Plan for the socialization of the iron and steel industry now drawn up by the TUC? This is – Polanyi argues – “a sign of the growing planning tendencies”, in the name of which the trade unions look for an understanding with business organizations, and attention from the government. In short, the unions’ identification in “the responsibility for the production process is presented as an inevitable evolution” (ibid.). The Plan is such that, even if there really was an intention to implement the socialization it outlines, it would still be a question of managing an economy in which “not so much the political state as trade unions would impersonate the community” (ibid.). In other words, in organizing production, it would be difficult to address the general interest of society, 132

Observing the transformation

expressed politically. Rather, corporative interests of various categories of workers would be ­defended – always, of course, within the limits set by the need to make a profit and by managerial and ‘technical’ choices, even if the unions would intervene in the choice of managers and in the resolution of conflicts. The socialization Plan was approved by the Labour Party, despite the opposition of the left headed by the Socialist League. Polanyi (“Labour in Southport”, 10–13–1934) reports that the League, and Laski on behalf of it, considered the plan “a corporative solution to the problem of socialization”, and even feared, behind a harsh verbal condemnation of fascism, “a yielding mental attitude toward it”. Polanyi, in turn, defines trade unions’ attitude as “democratic-corporative” and as a good meeting ground with bourgeois theorists and politicians (“Gewerkschaftstagung in Weymouth”, 22–9–1934). Neither capitalist power nor the autonomy of the economy was in question.

The American exception Polanyi devotes a special interest to the New Deal, which he deems an institutional transformation starting from different conditions and taking a different direction from that prevailing in ­Europe: an attempt to counter the crisis through “a public administration of well-being” (“T.V.A. Ein amerikanisches Wirtschaftsexperiment”, Feb. 22, 1936), supported by the improvement, not the decline of democracy. He appreciates the lively debate that accompanies the new plans and institutions put in place by the Government, especially through the ‘codes’ of the National Recovery Administration (NRA). Reference is made to reforms regarding industrial relations, social policies, the banking system, as well as to the development from craft to industrial unionism and the conquest of the collective labour agreement. Polanyi lingers on the constitutional difficulties raised by such an innovative government interventionism. The core of the problem was that the competence of the Federal Government in economic matters was seen as detrimental to both the competence of individual states and free entrepreneurial initiative. The object of “Roosevelt’s constitutional battle” – Polanyi comments – is ultimately who should govern: the Government, or “industrial and financial capital as has happened up to now” (“Roosevelt im Verfassungskampf”, June 22, 1935). A general and basic trait of Polanyi’s vision is that the autonomy and self-referentiality of the economic system, in addition to being a source of inequity, compromise the very existence of human beings, impoverish their subjectivity and their political initiative, and damage the natural environment: dynamics which unfortunately reinforce each other. In 1936 Polanyi sees in the Tennessee Valley Authority plan an “experiment” in reversing that destructive trend (“T.V.A. Ein amerikanisches Wirtschaftsexperiment”, I–II–III, Feb. 22 and 29, March 7, 1936). The construction of dams on the Tennessee River was one aspect of the overall hydrogeological settlement of the territory and its agricultural, industrial, and housing redevelopment; in addition, the river was made navigable, and energy was produced. The importance of the TVA, in Polanyi’s view, is that it makes evident the connection between the “authentically collective” use of energy sources, the ability to have an overall vision of productive activities in view of well-being and “the concern to safeguard the human-natural environment”. Polanyi argues that, if the exploitation of the territory and natural resources is instead an instrument of short-term private profit and of the anarchic action of individuals within the market system, the consequences can be disastrous and irreversible. An example of this, he notes, is the destruction of forests and prairies for the purpose of cultivating and exploiting timber in vast territories of the United States. This made the soil sterile and changed the climate, favouring extreme phenomena such as drought, frost, cyclones. Besides, the decay of the geophysical environment corresponds to 133

Michele Cangiani

the misery of the farmers, forced into migrations and stunted survival, for instance in the mountainous region of the Appalachians or as sharecroppers in the territories cultivated with cotton. So, the TVA seems to Polanyi a promising cultural acquisition, albeit partial and precarious: the optimal or at least not maladaptive use of natural resources, through political decision in view of the general interest. A social-political control over the economy is necessary, in contrast with the rhetoric of the free market. Paradoxically, Polanyi observes, it is the oligopolies of electricity generation that are invoking antitrust legislation against the TVA. The achievements of the New Deal are all the more remarkable, Polanyi suggests, in that it had to start from afar: from the very need to build “a state in the modern sense” (“Amerika in Schmelztiegel”, June 29, 1935). Hence the constitutional disputes between Roosevelt and the Supreme Court: as we read in TGT (2001 [1944]: 234), an American peculiarity is that the Constitution “isolated the economic sphere from [its own] jurisdiction”, thereby creating “the only legally grounded market society in the world. In spite of universal suffrage, American voters were powerless against owners”. In England, Polanyi recalls, where “the Chartist leaders were jailed”, the “better paid stratum” of workers acquired the right to vote only after decades of struggles and only when they “acquiesced in the system” of the labour market. Anyhow, “from Macaulay to Mises”, “there was not a militant liberal who did not express his conviction that popular democracy was a danger to capitalism” (ibid.). Facts like these suggest and support Polanyi’s conceptual abstractions – such as “liberal state” or “institutional separation” of the economy and politics or the tendency of capitalism and democracy to be “mutually incompatible” (Polanyi 2018 [1935]: 105). Historical facts are made meaningful by him both in their specificity and within the wider reality of a given form of society, the market and capitalist one. A fundamental and permanent feature of this society, its class division, is constantly present in Polanyi’s narrative. Among the disparate interpretations of the New Deal, Polanyi’s is as balanced as it is i­ nsightful – and authentic, we could say, since he reports a statement by Secretary of State for Agriculture Henry Wallace. According to the latter, a policy based on the principle that “economic activity is a public matter” and on the central role of the federal State must guarantee the rights and wellbeing of workers. This, however, does not imply the end of capitalism: on the contrary, it rescues it (“Arbeitsrecht in U.S.A.”, Feb. 13, 1937). Polanyi is aware, on the other hand, of the persistent reactionary opposition to the New Deal. In general, indeed, capitalism tends to counter reforms of this kind, even if it would benefit from them. In a 1940 lecture – “Is America an Exception?” (Polanyi 2017 [1940]) – he notes that it is “too early to say” if reforms, unlike in Europe, will be able to continue “without danger of a fatal stoppage”. Soon after, he senses in advance, before Roosevelt’s death, a change of course, both in domestic and foreign policy. In the final chapter of TGT he pleads for civil rights and the “right to nonconformity” (2001 [1944]: 263), as if he foresaw the attack of McCarthyism on them. At the same time, he realizes that the United States is going to consciously assume a world leadership, also counting on the role it has assumed as “universalistic” coryphaeus of the “obsolete” principles of liberal capitalism.10 In short, the American transformation will be ‘normalised’ with respect to the neoliberal-corporative trend. Indeed, that trend was later directed and fuelled by the United States. Polanyi’s attitude towards the New Deal radically diverges from that prevailing among “militant liberal” economists. Joseph Schumpeter, for example, not only didn’t share Roosevelt’s policy. Even after the war, he fears for the fate of “the private enterprise system”: he perceives unfoundedly as a “march into socialism” such political interventions as: stabilization policies; income redistribution; public control over the financial, money and labour markets; the creation of public bodies to cater for social needs; welfare legislation (Schumpeter 1950: 448–450). 134

Observing the transformation

A final note In 1934, Polanyi analyses various hypotheses of ‘functional’ reorganization of society in a series of articles in New Britain,11 the magazine of a movement of the same name, that supported the institution of a “three-fold state” – that is, organized through three autonomous representations: economic, political, and cultural. He highlights the contrast between various proposals, including the New Britain one, of a corporative and ‘functional’ (i.e. based on individuals’ function/place in society) constitutional set-up. This kind of reform can support the improvement of democracy or, conversely, its demise – he explains, outlining the criteria to distinguish in this regard. Who owns and controls the means of production? Is politics dominating over the economy, or do economic corporations, obviously hegemonized by capitalists, condition political institutions – or even supplant them, as in fascism? How is representation established: as an expression of widespread democratic participation, or through top-down appointments? Concerning, for example, the Austrian corporative constitution of 1934, its tendency is evident: it should be implemented “without doing away with capitalism”, and people in decision-making positions would be nominated by higher or parallel authorities (Polanyi, “Corporative Austria – A Functional Society?”, cit.). Here too Polanyi sets the problem of institutional transformation by defining the two poles between which to place it in its different occurrences. On the one hand, a radically democratic socialism, of the guild type, in which the ‘positive’ freedom of individuals is achieved; on the other, fascism. On the one hand, the integration of the economy into politics, on the other the decline of politics in the proper – democratic – sense, and therefore the dominance of capital in the economy and of the economy in society. How the institutional separation of economy and politics, which originally characterized liberal capitalism, is inevitably overcome remains a constant criterion of Polanyi’s political concern and theoretical approach. After the war he again proposes the alternative: either “a truly democratic society”, where the economy would be organized “through the planned intervention of the producers and consumers themselves”, or a society “more intimately adjusted to the economic system”, which would be maintained “unchanged” in its fundamental features (Polanyi 2018 [1947]: 210–211). Both in theory and in practice, Polanyi’s alternative is still relevant in the face of a neoliberal transformation that has continued in the direction he outlined – hoping to avert it.

Notes 1 He is thus mentioned in a Ö.V. advertisement in The Economist, May 26, 1934: ii. 2 See Chapter 9 in this volume. 3 “Der 14 Oktober”, Der Österreichische Volkswirt, Oct. 21, 1933; hereafter Polanyi’s articles in this journal will be cited in the text with their title and date. Some were translated into Italian (Polanyi 1993); a larger selection was republished in German (Polanyi 2002; 2003). 4 See Chapter 12 in this volume. 5 On Polanyi’s publications and manuscripts on fascism, see Chapter 11 in this volume. 6 Referring to the subsequent developments of neoliberalism, Zygmunt Bauman (1982) speaks of the ­“simulated politics” inherent in corporatism. 7 On the working class becoming the standard-bearer of the ideals of the French Revolution cf. Hobsbawm 1990. On Polanyi’s relationship with Austro-Marxism, see Chapter 2 in this volume. 8 This issue revives in TGT, Chapter Nineteen. The mechanism of the gold standard, Polanyi observes (2001 [1944]: 237), similarly worked throughout Europe: “In Austria in 1923, in Belgium and France in 1926, in Germany in 1931, Labour Parties were made to quit office ‘to save the currency’”. 9 “Lancashire im Fegefeuer”, June 2; “Lancashire als Menschheitsfrage”, June 23; “Lancashire als ­Menschheitsproblem”, June 30.

135

Michele Cangiani 1 0 Polanyi 2018 [1945]. Cf. Chapter 14 in this volume. 11 “What Three-Fold State?”, March 14: 503–504; “Corporative Austria – A Functional Society?”, May 9: 743–744; “Othmar Spann, the Philosopher of Fascism”, May 23: 6–7; “Spann’s Fascist Utopia”, June 6: 74–75; “Fascism and Marxian Terminology”, June 20: 128–129; “Marxism Re-Stated”, June 27: 159, and July 4: 187–188; “Rudolf Steiner’s Economics”, August 1: 25–26.

References Bauer, Otto. 1936. Zwischen zwei Weltkriegen? Die Krise der Weltwirtschaft, der Demokratie und des Sozialismus. Bratislava: Eugen Prager Verlag. Bauman, Zygmunt. 1982. Memories of Class. The Pre-History and After-Life of Class. London: Routledge & Kegan Paul. Bermann, Richard A. 2006 [1928]. “Editorial Meetings of the Österreichische Volkswirt”. In Karl Polanyi in Vienna, Kenneth McRobbie and Kari Polanyi Levitt, eds. Montréal: Black Rose Books, 325–327. Cole, George D. H. 1920. Guild Socialism Restated. London: Parsons. ——— 1935. The Simple Case for Socialism. London: Gollancz. Ditenfass, Michael. 1984. “The Politics of Producers’ Co-operation: The FBI-TUC-NCEO Talks”. In Businessmen and Politics, John Turner, ed. London: Heinemann, 76–92. Hobsbawm, Eric. 1990. Echoes of the Marseillaise: Two Centuries Look Back on the French Revolution. New Brunswick, NJ: Rutgers University Press. Keynes, John M. 2010 [1926]. “The End of Laissez-Faire”. In Id. Essays in Persuasion. London: Palgrave Macmillan, 272–294. Laski, Harold. 1933. Democracy in Crisis. London: George Allen & Unwin. ——— 1934. “Le Tournant de la Démocratie.” Archives de Philosophie du Droit et de Sociologie Juridique IV/3–4: 156–168. Liberal Industrial Inquiry. 1928. Britain’s Industrial Future. London: E. Benn. Loew, Raimund. 1979. “The Politics of Austro-Marxism”. New Left Review I/118, 15–52. Macmillan, Harold. 1933. Reconstruction: A Plea for National Policy. London: Macmillan. Mond, Alfred. 1927. Industry and Politics. London: Macmillan. Polanyi, Karl. 1993. Cronache Della Grande Trasformazione. Michele Cangiani ed. Torino: Einaudi. ——— 2001 [1944]. The Great Transformation. Boston: Beacon Press. ——— 2002. Chronik der Großen Transformation, Band 1. Michele Cangiani and Claus Thomasberger eds. Marburg: Metropolis-Verlag. ——— 2003. Chronik der Großen Transformation, Band 2. Michele Cangiani and Claus Thomasberger eds. Marburg: Metropolis-Verlag. ——— 2014. For a New West. Essays, 1919–1958. Giorgio Resta and Mariavittoria Catanzariti eds. Cambridge: Polity Press. ——— 2014 [1949]. “Economic History and the Problem of Freedom”. In Polanyi 2014, 39–46. ——— 2017 [1940]. The Present Age of Transformation. Five Lectures. Introductions by Kari Polanyi Levitt, and Jeremy Smith & Ann Pettifor. Prime (primeeconomics.org). ——— 2018. Economy and Society. Selected Writings. Michele Cangiani and Claus Thomasberger eds. Cambridge: Polity Press. ——— 2018 [1925]. “New Reflections Concerning our Theory and Practice”. In Polanyi 2018, 41–50. ——— 2018 [1935]. “The Essence of Fascism”. In Polanyi 2018: 81–107. ——— 2018 [1945]. “Universal Capitalism or Regional Planning?”. Polanyi 2018: 231–240. ——— 2018 [1947]. “Our Obsolete Market Mentality”. Polanyi 2018: 197–211. Schumpeter, Joseph A. 1950. “The March into Socialism”. American Economic Review 40/2: 446–456. Tawney, Richard H. 1938. Equality. London: George Allen & Unwin. (First edition 1931).

136

11 POLANYI’S UNORTHODOX CONTRIBUTION TO THE STUDY OF FASCISM Kris Millett and Sang Hun Lim

Introduction Karl Polanyi’s work remains largely unrecognized within the field of fascism studies. This is remarkable since the problem of fascism serves as the backdrop for Polanyi’s most recognized achievement, 1944’s The Great Transformation. Polanyi was also personally connected to the phenomenon, having relocated to escape persecution from fascist regimes, while publishing a series of articles in the 1930s chronicling fascism’s rise. In this chapter, we attempt an exegesis of Polanyi’s theory of fascism, finding it to operate on two primary levels: (1) fascism as a philosophy rooted in a radical form of anti-individualism, and (2) fascism as a political force that responded to the institutional deadlock caused by the breakdown of the market-based economic system in the 1930s. Polanyi’s theory makes a novel contribution to the understanding of fascism, intervening in several vexing debates over the nature of fascism past and present. In considering both its philosophical propositions and political function, Polanyi transcends both Marxist and liberal definitions in explaining how fascism is a socially revolutionary force which paradoxically worked to preserve the economic status quo via a corporatist reform of capitalism. In Polanyi’s view, fascism is an “ever given possibility” under market capitalism, whose success relies on decisions made by capitalist elites rather than its degree of mass support. Our chapter is structured as follows: we begin by providing a brief overview of Polanyi’s writings on fascism and their biographical context. The next section outlines the first main theme of Polanyi’s thesis: that fascism is an anti-individualist philosophy that blends forms of vitalist and totalitarian thought in the blueprint of the corporatist state. We then cover Polanyi’s second main theme on how fascism functioned to preserve capitalism through radically transforming the political and economic system during the market economy’s collapse. Fascism’s success signified to Polanyi a broader antagonism between a capitalist economy and democratic government. In our Summary and Discussion section we examine how Polanyi’s two-part thesis fits together, the numerous challenges Polanyi makes to conventional understandings of fascism, while considering how Polanyi’s theory might apply to present developments including the global rise of authoritarian and radical right-wing political activity.



137

DOI: 10.4324/9781003336747-15

Kris Millett and Sang Hun Lim

Timeline and context Polanyi’s first thoughts on fascism appear in a 1932 essay in German, “Wirtschaft und Demokratie”. This kicked off a period of extensive writing on fascist phenomena (e.g., Polanyi 1933/2004, 1934b, 1934/2018) including publications in the English journal New Britain that chart developments in Austria and Germany and articulate the differences between fascist and socialist guild systems. The Karl Polanyi archive also contains notes from public lectures given during this period (e.g., Polanyi 1934c) along with sets of unpublished writings. Of this latter material, two items that stand out are a synopsis for a planned book entitled The Fascist Transformation (Polanyi 1934d) and another unfinished piece The Fascist Virus attributed to 1940 that has recently been published in a new collection of Polanyi’s work (Polanyi 2018). Polanyi’s personal connection to the issue is exemplified in some of these pieces. His writings on fascism began at a point in which Polanyi relocated from Vienna to London to avoid the creeping fascism of Austria’s Dollfuss regime, while also assisting family members from escaping fascist persecution across Central and Southern Europe (Dale 2016). The influence of Polanyi’s setting in, and escape from, Vienna is part of what makes his contribution to fascism studies unique. Polanyi centres a theorist like Othmar Spann, a leading intellectual in the Austrian scene but virtually unmentioned in the fascism studies canon, while drawing insights from the Federal State of Austria, an often-overlooked case study of European fascism. It was during Polanyi’s 1930s exile in Britain that he produced his (only) great synthesis of the subject, the 1935 essay entitled “The Essence of Fascism”. This appeared in the volume Christianity and the Social Revolution, a project Polanyi served on as an editor with collaborators among the ‘Christian Left’ in England. Christianity and the Social Revolution has been out of print for several decades, rendering “The Essence of Fascism” relatively obscure prior to its 2018 re-printing (Polanyi 2018). We will draw heavily from this text, particularly in the next section on fascist philosophy. It might be said that following “The Essence of Fascism”, the subject of fascism began to retreat from the centre of Polanyi’s analysis and towards the mould it takes in The Great Transformation – where it serves as a backdrop for Polanyi to pursue more fundamental concerns, i.e., the origins of the principle of the self-regulating market and on the meaning of freedom in modern industrial society. After 1944’s The Great Transformation, Polanyi’s work would again shift fields, and he did not write on fascism again. One hypothesis for Polanyi’s lack of recognition in fascism studies is that, unlike some of his peers (e.g., Drucker 1939; Adorno et al. 1950), Polanyi did not produce a text or volume systematically outlining his positions on the subject (the 31 pages of “The Essence of Fascism” notwithstanding). When Polanyi’s views on fascism are raised, they have typically been drawn from The Great Transformation, which, despite detailing the political and economic conditions of fascism’s rise, does not contain many thoughts on its contents. With the digitization of the Karl Polanyi archive and recent re-publication of his early essays (e.g., Polanyi 2014, 2018) scholars are beginning to survey his examination of fascism across a wider range of his works. This chapter aims to contribute to this growing body of scholarship (e.g., Reynolds 2015; Atzmüller and Décieux 2019; Dale and Desan 2019; Lim 2021; Millett 2021; England 2022) that assesses the dimensions and import of a Polanyian theory of fascism through his lesser known and unpublished archival works.

Polanyi’s theory of fascism: loose ends We have centred our analysis around two primary themes – fascism as an anti-individualistic philosophy and fascist politics as a response to the crisis of market society. As early as 1932, Polanyi

138

Polanyi’s unorthodox contribution to the study of fascism

can be seen to be developing both themes. In “Wirtschaft und Demokratie” he speaks of the systemic dysfunction between economic and political spheres, a problem which he later posits fascist politics “solves”, as well as the “lost” position of the individual in industrial society which he locates in fascist philosophy. We find these themes to recur (albeit inconsistently) across Polanyi’s 1930s work leading up to The Great Transformation. Within this broader thematic, there are a couple of ‘loose ends’. One is Polanyi’s initial interest in fascism as a mass phenomenon. In “Wirtschaft und Demokratie”, he notes how fascism is nourished by working class disappointment over the failure of left governments to stem the effects of the economic depression, causing their support to move to the political right. This leads Polanyi to view public education (on the realities of the economic crisis) as an antidote to fascism. This is a train of thought that Polanyi abandoned by 1935’s “The Essence of Fascism” and outright counters in The Great Transformation. While Polanyi continued to associate fascism with a decline in working class strength, he rejected bottom-up explanations of fascism, going as far in The Great Transformation as to argue that mass support was largely immaterial to its success: To imagine that it was the strength of the movement which created situations such as these, and not to see that it was the situation that gave birth in this case to the movement, is to miss the outstanding lesson of the past decades. (2001: 247) Here Polanyi is asking readers to shift focus away from the rightward march of the immiserated working masses during the interwar economic crisis in favour of a more systemic understanding of fascism’s success. This understanding highlights the failed attempts to continue running the world’s economy based on the principle of the self-regulating market and on the role of capitalist elites, protective of their ownership of the means of production, who side with fascists as a way out of the crisis that protects property title and civilizational order (Polanyi n.d./2018.). This reading of Polanyi leads to a second potential ‘loose end’, that being Polanyi’s conception of fascism as a type of pathology endemic to industrial capitalism. This comes from an unfinished manuscript circa 1940 entitled “The Fascist Virus” (Polanyi n.d./2018). Polanyi’s metaphor of fascism as an “anti-democratic virus” within capitalism has grown in popularity (e.g., Sandbrook 2017, 2018; Markantonatou 2019; Novy 2022) in relation to the recent successes of right-wing populist movements and neo-authoritarian movements worldwide. However, there are reasons to approach Polanyi’s “virus” metaphor with caution. Polanyi did not complete the “Fascist Virus” manuscript and moreover did not use the “virus” metaphor in The Great Transformation, despite covering entirely similar subject matter. In fact, in the “Fascist Virus” manuscript, Polanyi does not develop the “virus” metaphor beyond its opening 3 pages. It thus remains open on the degree to which Polanyi subscribed to his own analogy. If we assume that Polanyi did endorse the “virus” analogy, its contemporary application tends to truncate his understanding of fascism by conflating it with forms of right-wing and authoritarian politics on a “spectrum of disorders”, and by producing lean definitions such as by Lacher (2019) of Polanyi viewing fascism as “[r]egulated capitalism without democratic institutions” (689). This can be excused by Polanyi’s statement at the beginning of “The Fascist Virus” on fascism being “no more than the most recent form of the recurrent attack of capitalism to modern forms of government” (Polanyi n.d./2018: 108). The veracity of this notwithstanding, our enquiry into Polanyi’s thoughts on fascism reveals a far more complex phenomenon, which we outline in the following two sections.

139

Kris Millett and Sang Hun Lim

Fascism as a philosophy of anti-individualism One of Polanyi’s unique contributions is to challenge the commonly held view of fascism being a doctrineless ideology (e.g., Paxton 2004). His position on this matter is first revealed in notes from his October 1934 lecture entitled “The State and the Individual in Fascism”. Here, Polanyi writes: For a long time [fascism] was regarded as a political fact only, or, as a political movement with political aims, at the best. We must realize that it is more than that; it is a philosophy. (Polanyi 1934c: 1)1 For Polanyi, fascist philosophy is rooted in a radical form of anti-individualism that denies both the integrity and value of the individual and the equality of individuals in society. Polanyi finds the individualism fascism opposes to differ from “atomistic” conceptions, instead tracing it back to religious scripture and the Christian doctrine of the ‘brotherhood of man’. In “The Essence of Fascism” Polanyi presents the reasoning of this doctrine, based on the principle that because every individual has a soul, they are equals with intrinsic value as individuals, which is realized in human community as a “relationship of persons” (Polanyi 1934c: 11, 1935/2018: 89). According to Polanyi, fascists draw a connecting line from this Christian idea of individualism to the modern phenomena of liberalism, democracy, and socialism, identifying this link in speeches by Mussolini and Hitler, passages from the Italian Labour Charter of 1927, and in writings by the fascist intelligentsia of Germany, Italy, and Austria, including Alfred Rosenberg, Giovanni Gentile, “Catholic fascist” Curzio Malaparte, and “reactionary aristocrat” Julius Evola (Polanyi 1934c: 13–14, 1935/2018). Remarkably, Polanyi agrees with the fascists’ reasoning, seeing socialism as individualism’s fullest embodiment,2 that extends the Christian principal of individual equality from the political sphere of liberalism into the economic sphere (Polanyi 1935/2018: 87–88). The difference is that Polanyi advocates this conception of socialism whereas fascist thinkers have based their philosophy against it. Polanyi explains how fascism strives to sever the link between liberalism, socialism, and the ‘brotherhood of man’ by abolishing the individual as the fundamental unit of society. As explained by Polanyi in “The Essence of Fascism”: Fascist philosophy is an effort to produce a vision of the world in which society is not a relationship of persons. A society, in fact, in which there are either no conscious human beings or their consciousness has no reference to the existence and functioning of society. (1935/2018: 89) Polanyi then explores two variations of anti-individualism in fascist philosophy. The first Polanyi describes as vitalism. Polanyi views vitalism as a philosophical tradition inspired by a selective interpretation of Friedrich Nietzsche “carried to an appalling extreme” by later German philosopher Ludwig Klages.3 Vitalism privileges non-conscious aspects of human life thought to be located in the body and expressed through natural forces. Vitalist fascism scrapes the psyche of any sense of ego, ethics, or volition – vitality sapping properties of the mind – in favour of a biocentric mode of existence that operates closer to the plane of “animal or vegetative life” (Polanyi 1935/2018: 91). Polanyi describes Klages’ vitalist subject as such: No movement towards self-realization emerges because there is no self. The tide of consciousness does not reach out towards the faculty of intelligence […] No vapour of the Mind

140

Polanyi’s unorthodox contribution to the study of fascism

hovers over the surface of the Soul and drives the wedge of the Will into the tissue of animal instinct. Neither power nor value have crystallised in the day-dream of tribal existence. Life is immediate, like touch. (1935/2018: 91) It is not difficult to draw from Polanyi’s analysis of vitalism how fascist anti-individualism was incorporating elements of a broader philosophical critique of scientific modernity in the tradition of Nietzsche, Rousseau, or in contemporaneous writing on “being/dasein” in Heidegger’s Being and Time. Polanyi then shifts to a competing strand of fascist thought that in many respects represents vitalism’s opposite. Polanyi calls this philosophy totalitarianism, marking one the first published uses of the word in the English language. Here, human individuality is negated via different means, becoming subsumed entirely within larger social entities such as a state or religion. These entities, not individuals, become the basic units of society and individuals only relate to one another through these larger entities. Polanyi attributes totalitarianism to Austrian philosopher Othmar Spann’s vulgarization of Hegel’s philosophy of Absolute Mind. Under totalitarianism, a sense of permanent self-estrangement ensues as all group action, economic and private life is mediated through outside social phenomena. It is an arrangement where, in Polanyi’s words, “[n]othing personal has here substance unless it be objectified, i.e. has become impersonal” and “everything seems to possess life except human beings” (1935/2018: 92). Polanyi notes the seed for this in capitalist production where human relationships are less immediate and direct and commodities begin to “possess a strange selfhood of their own” (Ibid: 93). Serving as ideological poles, both vitalist and totalitarian fascism unite in their de-centring of the individual. In vitalist thought, a mythological past is sought where “the person is not yet been born into society”, whereas in totalitarianism the ‘post-conscious’ individual “has already been absorbed” into society (Polanyi 1935/2018: 98). Polanyi considered fascist regimes to exhibit vitalist and totalitarian ideas in differing quantities. Taking the example of National Socialism, he observed the Nazis adopting a vitalist understanding of social order through Hans Prinzhorn’s principal of a “fixed sequence of devouring”, an order of “perfect harmony” where “every animal is certain to end in the belly of another animal” (Polanyi 1935/2018: 96–97). Polanyi also observed how the Nazis were employing totalitarian means of social organization, where subjects relate to each other purely though fictional representations of ‘blood’ and ‘race’. Polanyi’s mid-1930s writings also consider the political model that derives from these forms of fascist anti-individualism. Exploring this will help explain the second part of Polanyi’s theory on fascism regarding the function it played for the elites of interwar Europe as the marketbased economic model collapsed. In a 1934 article entitled “Spann’s Fascist Utopia”, Polanyi presents the newly ratified Austrian constitution as a blueprint for the fascist corporatist state. He explains how this “functionalist” political model abolishes democracy while preserving the capitalist system. Through the entity of the “Economic Estate”, major branches of industry are recognized as corporations and gain all “legislative, judicial, and executive functions” previously accorded to the “Political State” (Polanyi 1934b: 2). In the “Essence of Fascism”, Polanyi draws out the anti-individualist implications of fascist corporatism, a social order which is in no way dependent “on the conscious will and purpose of the individuals constituting it” (1935/2018: 106). Social life becomes organized on a vocational basis with citizens recognized “as producers, and as producers alone” (Ibid.: 106). In his lecture notes from 1934, Polanyi raises the example of the Italian fascist state, anti-individualist and totalitarian in character,

141

Kris Millett and Sang Hun Lim

whose official definition declares it to be “not the counterpart of the individual”, and of which Giovanni Gentile wrote “has an absolute moral value for us as being the person by whose functions all other persons derive value” (Polanyi 1934b: 12).4 From the vantagepoint of the mid-1930s, Polanyi concludes that the purpose of the fascist corporatist system is to eliminate “the possibility of its reversion to democracy” and thus any tendency to develop towards socialism (1935/2018: 105). This insight moves Polanyi’s analysis from fascism’s philosophic character towards its systemic function, anticipating Polanyi’s longer analysis in The Great Transformation on the “solution” the fascist political system presented to ruling elites of Europe faced with the dilemma of how to preserve capitalist relations at the point of social collapse. This other fascism in Polanyi, as the restructuring of politics and economy for capitalism, is what we explore in the proceeding section.

Fascism as the restructuring of society for capitalism The function that fascism played in the interwar period, and the conditions behind its rise, is the area of Polanyi’s theory that has received the most coverage. Outlined magisterially in the closing chapters of The Great Transformation as well as in secondary literature (e.g., Reynolds 2015; Dale and Desean 2019) we will provide a brief overview here and attempt to connect it to his insights on fascist philosophy. To put it succinctly, in The Great Transformation Polanyi explains how fascism served as a solution5 to the pitfalls of what he terms “market society”. To understand fascism from this perspective, in Polanyi’s words, “we must revert to Ricardian England” where the principle of the self-regulating market system first gained a foothold a century earlier. The ‘market society’ is a state of affairs, unprecedented in Polanyi’s view, where the economic system is setup on the selfregulating market principle and social relations become reoriented to be subservient to the market. It requires the commodification of land, labour, and money to be achieved. The raison d’être of Polanyi’s magnum opus – The Great Transformation – is to trace the origins of this peculiar and unnatural situation found in contemporary societies. Fascism enters the scene following the First World War at a point in which the core institutional supports of the market-based order – the Gold Standard monetary system, liberal state, and “balance of power” between major European nations – have become unstable. The fascist moment truly begins after the 1929 stock market crash and subsequent dissolution of the Gold Standard system. As Polanyi explains, the years of the 1930s Great Depression were marked by institutional paralysis. Economic interests, resting largely in private hands, became increasingly at odds with political systems based on representative democracy. A situation ensued where neither financiers, private industries, nor democratic governments had the strength to implement their own plan. Social collapse loomed on a large scale. In “The Fascist Virus”, Polanyi states: Mass unemployment, insecurity of tenure for the producers, and the irrational distribution of incomes had reached an unbearable pitch. The system had broken down and its radical reform could no longer be put off. (n.d./2018: 110) Capitalists and ruling elites in Europe turned to fascists, in Polanyi’s words, “as an easy way out at whatever ultimate price” (Polanyi 2001: 244). As a political formation, fascism ‘reunited’ society’s political and economic institutions under corporatist capitalism. Industrial production and private ownership would be safeguarded while institutions of popular representation were abolished. In 142

Polanyi’s unorthodox contribution to the study of fascism

the end, Polanyi remarks, capitalism was preserved, but at the expense of democracy and market liberalism itself (Polanyi 1933/2004: 219, 2001: 245). Polanyi’s reading of fascism’s political success and function in The Great Transformation speaks to what he sees as a broader incompatibility between capitalism and democracy, a view Polanyi expresses in different ways across his writings of the 1930s. In “The Fascist Virus”, he suggests that this incompatibility was well understood by political and economic elites a century earlier, that the prospect of universal suffrage would lead to the dismissal of private property titles, and with it, the capitalist system. The stark reality of this schism became graspable once again in the 20th century, most notably by fascist leaders, with Polanyi citing Hitler’s Dusseldorf speech of 1932 where he proclaimed that the cause of the economic crisis lied in “the utter incompatibility of the principle of democratic equality in politics and of the principle of the private property of the means of production in economic life” (Polanyi 1935/2018: 105). Fascism, in the anti-democratic corporatist form, presented itself as an alternative to liberal democracy. As explained by Polanyi in his University of London lectures from 1937, fascism becomes a viable competitor to democracy based on “the necessity of interfering with an economic system when democracy is proving unable to do so” (Polanyi 2014: 203). The “fascist solution”, in Polanyi’s words, eliminates the possibility for working people “of exerting an influence either in the political or in the industrial field” while maintaining private ownership of the means of production. However, fascism was more than simple capitalism without democracy. Fascism would save capitalism with the help of a revolutionary transformation of the entire state and social system (Polanyi 1933/2004: 219). Fascists would transform capitalism itself from laissez-faire liberal capitalism to corporate capitalism – a planned economy, where capitalists, instead of democratic government, would dominate the decision of production and even of labour supply and social protection (Polanyi 1934/2018: 128). This, indeed, would be a revolutionary break in the entire social system, as fascism would eliminate the political space itself, where other social forces than capitalists could have a room for policy advocacy. In this light, Polanyi held that the aim of fascism “transcends the political and economic framework: it is social” (Polanyi 2001: 249). As Polanyi concludes in a 1937 lecture, fascism promises a “reform of capitalism”, redressing its business cycle and employment-based insecurities by merging capitalist industry and the state, albeit “at the price of the permanent elimination of freedom, equality and peace” (Polanyi 2014: 203 author’s italics). Polanyi observed this ‘fascist solution’ taking place most thoroughly in the political systems of Germany, Austria, and Italy, but noted that the fascism blueprint had yet to be fully realized. Despite its apparent utility during market society’s 1930s institutional malaise, Polanyi did not believe that the fascist system, where a handful of self-interested ruling capitalists took hold of all social functions, could survive in the long run (Polanyi 1934/2018: 129), although Polanyi did not make clear how fascism would end. *** Polanyi is not explicit about the connection between the anti-individualist philosophy outlined in “The Essence of Fascism” and the fascist “solution” to market economy outlined here. One of the few indications he makes is an oblique reference to “The Essence of Fascism” in The Great Transformation’s penultimate chapter.6 However, the practical relevance of an anti-individualist philosophy to the crisis of market society is not hard to deduce if we accept Polanyi’s assertion of a connection between Christian individualism and socialism7 (via liberalism and democracy) and the fundamental tension this has with a capitalist property system (Polanyi 1933/2004: 218, 1935/2018: 89–90). In “The Fascist Virus”, Polanyi intimates the profound importance of fascism’s anti-individualist philosophy to the defence of capitalist property once free market economics have been replaced by a corporatist model. He states 143

Kris Millett and Sang Hun Lim

There is now nothing apart from brute force to prevent the abolishment of the privileges of the property-owning classes, if only a democratic movement is in being […] But in order to prevent the re-emergence of any democratic nucleus in society, the individual has to be made incapable of functioning spontaneously as a responsible unit and the unity of mankind must be negated. (Polanyi n.d./2018: 111) In other words, fascist anti-individualist philosophy possesses a practical function in that it serves the need that “every vestige of democracy must be eliminated under a fascist economy” (Ibid.: 111, authors’ emphasis). That fascism’s anti-individualism is not more pronounced in the fascist programme (and subsequently downplayed or missed entirely in studies of fascism from Ernst Nolte to Roger Griffin) is partially explained by Polanyi in referencing the obfuscation of fascist manoeuvres, in that it opposes socialism (the assumed vestige of ‘collectivism’) and preserves capitalism (albeit in a non-liberal form). This posture has led some Marxists to mistakenly view fascism as, in Polanyi’s words, merely “Capitalism without the smokescreen of Democracy” (Polanyi 1934/2018: 126). This misses the epochal implications of its anti-individualism, which mark “a fundamental break in the history of humanity” (Polanyi 1934/2018: 128, 1934c: 11). It is part of Polanyi’s unique contribution, in comprehending both its philosophical essence and political function, that he can penetrate some of these mysteries regarding fascism. As such, he intervenes in the Marxist-liberal debate, partially agreeing with Marxists on fascism’s reactionary raison being to “keep the present economic system going” (1934/2018: 128), but also incorporating liberal perspectives in seeing fascism as having a socially revolutionary aim “to change the nature of human consciousness itself”. Polanyi saw such a task as necessary in order to preserve capitalist relations as they stood.

Summary and discussion Taken as a whole, Karl Polanyi’s writings on fascism provide a unique and comprehensive theory of the phenomenon, providing inroads for understanding fascism’s ideological content and the transformative function it played in during the economic depression in interwar Europe. His insights into fascism’s philosophy suggest that its thinkers have (correctly, according to Polanyi) identified how liberalism, democracy, and socialism derive from a similar interpretation of the individual and society, rooted in the Christian affirmation of the ‘brotherhood of man’. Fascist philosophy sets forth to reconfigure society by negating the idea of the individual as its prime unit, incorporating vitalist and totalitarian ideas that either pre-empt or transcend the conscious individual to draw diverging visions of a society that is “not a relationship of persons”. Polanyi also provides an explanation of the function that the fascist system played in 1930s Europe, with its model of corporatist capitalism serving as an alternative to liberal capitalism and democracy when the latter was unable to pass reforms to amend the economic system and prevent social suffering. Due to Polanyi’s emphasis on importance of “circumstances” to fascism – i.e., the breakdown of the market economy internationally and its political and economic institutions – Polanyi considered fascism as not the sole province of Germany and Italy, having instead housed many complex variants across different national cultures including in Japan, Scandinavia, and Latin American countries (2001: 245–246). Fascists utilized nationalism in militarily defeated countries to appeal to the general public. However, in other countries like England, the United States, the Netherlands and Norway, fascism coupled itself with pacifists and even national traitors (Polanyi 2001: 249). Instead of seeing fascism as an incoherent or doctrineless ideology, Polanyi instead marvels at 144

Polanyi’s unorthodox contribution to the study of fascism

fascism’s comprehensiveness, suggesting that its assertions and propositions “are more startling than anything which Radicals of the Left have ever produced” (1935/2018: 90). Polanyi thus breaks with the lasting stalemate between Marxist and liberal interpretations of fascism, indicating the limitations of both perspectives. The uniqueness of Polanyi’s conception is perhaps most succinctly captured by a note he made in his unfinished Fascist Transformation book synopsis, on fascism being “‘Revolutionary’. Not conservative in the classic sense […] Not reactionary; yet able to satisfy both to an important degree”. Embedded in this note is Polanyi’s criticism against Marxists for failing to consider the vast societal consequences of fascism’s anti-individualist philosophy, juxtaposed with his alignment on fascism’s importance for the survival and transformation of capitalism and in maintaining ruling class privilege. For Polanyi, the fascist system does present a reactionary option for capitalists when market society craters, albeit with the revolutionary aim to create a new society that breaks with interpretations of the individual and humanity stretching back over centuries. The note also contains a warning against conflating fascism with conservative and radical right-wing movements, while subtly acknowledging such conflations occur since fascism is “able to satisfy both to an important degree”. Lastly, Polanyi places quotations around “revolutionary”, signifying a discrepancy between fascism’s revolutionary philosophy and the practical character of its assent to power – which relied not on the strength of the fascist movements but on the decisions by elites to turn to fascism “as a way out” of the interwar socioeconomic crisis “at whatever ultimate price” (Polanyi 2001: 244). There are additional ways that Polanyi breaks from established interpretations of fascism, often based on the characteristics he fails to emphasize. Principal among these is his displacement of the importance of nationalism to fascism, which among current interpreters is considered to be part of fascism’s “ineliminable core” (Griffin 2018). Polanyi rather sees nationalism as a posture that fascists employ to draw support away from working class internationalism, and notes specific cases in Holland, Norway, and the United States where fascism was non-nationalist (2001: 249). For this matter, Polanyi also views racism as a subordinate characteristic to fascist anti-­individualism, a position that has garnered criticism against Polanyi for downplaying the importance of antisemitism in fascism (e.g., Reynolds 2015; Dale 2016). To Polanyi, fascists employ the racial-national principle as a practical means to break up the individual-universal principles as conveyed by Christian individualism as manifested in liberalism and democracy. At its core, neither the vitalist nor totalitarian philosophies contain a racial or nationalist component (Polanyi 1935/2018: 98–99). At the very least, Polanyi invites a recontextualization on the relationship of racism and nationalism to classical fascism of the interwar period. In this chapter we have outlined what we see as two principal themes running across Polanyi’s writings on fascism – the anti-individualist philosophy and the systemic “solution” for market ­capitalism – and considered the manner in which they connect. Current scholarship has picked up on the part of its political economic function, and the idea of a “fascist virus” potentially lurking in the neo-liberal capitalism of today. As an extension of his examination of fascism, Polanyi posed serious questions regarding the compatibility of liberal democracy and capitalism, and the ensuing decades appear to have to put this to the test in new ways. The question thus remains open of whether fascism remains “an ever-given political possibility” under capitalism (Polanyi 2001: 247). We propose that Polanyi’s contribution to understanding fascism penetrates beyond its utility for addressing political and economic pressures at the systemic level. This is to suggest that fascism’s anti-individualist essence responds to a deeper, connected crisis at the level of the individual life. Polanyi provides hints towards this in an unfinished text from the 1930s entitled “Fascism and Socialism”, where he states: 145

Kris Millett and Sang Hun Lim

There is also a moral crisis which runs parallel to the political and economic. The meaning of individual life and the freedom of personality […] We cannot link up the effects of our life and actions. Fullness of individual life is impossible. (Polanyi n.d.) Further enquiries are necessary to fully draw out the meaning of Polanyi’s two-part theory of fascism that we have outlined here, which is to consider ways that the “fascist solution” responds to the compromised position of individual life in a technologically advanced capitalist society as much as it does to the instabilities of the self-regulating market system. This might re-route questions over fascism’s return towards the problem of how make our societies “a relationship of persons”, how to meet the needs of the individual (for moral autonomy and community), or whether the idea of the ‘individual’ is not in some senses inimical to capitalist relations.

Notes 1 The word “philosophy” is underlined by Polanyi in the original document. 2 Polanyi’s understanding of socialism breaks from the tradition of liberal thought, most notably Friedrich Hayek, which views socialism as the apotheosis of ‘collectivism’ that negates individualism. 3 Polanyi also saw vitalist ideas proliferating elsewhere, such as in the poetry of English writer D.H. Lawrence. 4 Underlined words are from Polanyi’s original notes. 5 Polanyi refers to the “fascist solution” in several texts (e.g., 2001: 195, 244–245, 252, 2014: 199, 1935/2018: 105–106) as a figure of expression. He did not view it as a legitimate answer to the contradictions in liberal capitalism, calling it in The Great Transformation “the remedy […] in which civilizations perish” (2001: 245). 6 Polanyi refers to the corporatist “fascist solution” to the impasse of liberal capitalism while adding that people “were subjected to a reeducation designed to denaturalize the individual and make him unable to function as the responsible unit of the body politic”. Here he cites “The Essence of Fascism” and also refers to the brotherhood of man (Polanyi 2001: 245). 7 Polanyi acknowledges “[t]hat neither Socialism, nor, for that matter, Christianity, seem to be much aware of this mutual relationship does not invalidate the objective truth of the argument” (1934c: 3).

Bibliography Adorno, Theodor. W., Else Frenkel-Brunswik, Daniel Levinson and Nevitt Stanford. 1950. The Authoritarian Personality. New York: Harper & Brothers. Atzmüller, Roland and Fabienne Décieux. 2019. “‘Freedom’s utter frustration…’: Neoliberal social-policy reforms and the shift to the far-right through Polanyi’s theory of fascism.” In Atzmüller, R., et al. (Eds.), Capitalism in Transformation: Movements and Countermovements in the 21st Century. Cheltenham: Edward Elgar Publishing, pp. 135–151. Dale, Gareth. 2016. Karl Polanyi: A Life on the Left. New York: Columbia University Press. Dale Gareth and Mathieu Desan. (2019). “Fascism”. In Dale et  al. (Eds.), Karl Polanyi’s Political and ­Economic Thought: A Critical Guide. Newcastle upon Tyne: Agenda publishing limited, pp. 151–170. Drucker, Peter. 1939. The End of Economic Man. New York: The John Day Company. England, Christopher M. 2022. “Karl Polanyi and the rise of fascism”. New Political Science 44/4: 628–649. https://doi.org/10.1080/07393148.2022.2129199 Griffin, Roger. 2018. Fascism. Cambridge: Polity Press. Lacher, Hannes. 2019. “Karl Polanyi, the ‘always-embedded market economy,’ and the re-writing of the great transformation.” Theory and Society 48/5: 671–707. Lim, Sang Hun. 2021. “Look up rather than down: Karl Polanyi’s fascism and radical right-wing ‘populism’”. Current Sociology. https://doi.org/10.1177/00113921211015715 Markantonatou, Maria. 2019. “Economy–society tensions in the Eurozone: The ‘anti-democratic virus’ ­revived”. Social and Political Science. https://doi.org/10.4337/9781788974240.00014

146

Polanyi’s unorthodox contribution to the study of fascism Millett, Kristopher. 2021. “On the meaning and contemporary significance of fascism in the writings of Karl Polanyi”. Theory and Society 50: 463–487. https://doi.org/10.1007/s11186-020-09428-8 Novy, Andreas. 2022. “The political trilemma of contemporary social-ecological transformation – lessons from Karl Polanyi’s the great transformation”. Globalizations 19/1: 59–80. Paxton, Robert. O. 2004. The Anatomy of Fascism. London: Allen Lane. Polanyi, K. n.d. “Fascism and socialism”. Karl Polanyi archive, container 18, file 07, 3p. ——— n.d./2018. “The fascist virus”. In Polanyi, K., Cangiani, M. and Thomasberger, C. (Eds.), Economy and Society: Selected Writings. Cambridge: Polity, pp. 108–122. (Original work unpublished, contained in Karl Polanyi Archive (KPA), container 18, file 07). ——— 1934a/2018. “Fascism and marxism”. In Polanyi, K., Cangiani, M. and Thomasberger, C. (Eds.), Economy and Society: Selected Writings. Cambridge: Polity, pp. 125–129. (Original work published in 1934) ——— 1934b. Spann’s Fascist Utopia. New Britain, 6 June. Karl Polanyi archive, container 18, file 05. ——— 1934c. “The state and the individual in fascism”, 15 October, Karl Polanyi archive, container 20, file 21. ——— 1934d. “The fascist transformation”. Karl Polanyi archive, container 20, file 8. ——— 1935/2018. “The essence of fascism”. In Polanyi, K., Cangiani, M. and Thomasberger, C. (Eds.), Economy and Society: Selected Writings. Cambridge: Polity, pp.  81–107. (Original work published in 1935. ——— 2001. The Great Transformation (2nd ed.). Boston: Beacon Press. ——— 2002. “Wirtschaft und demokratie”. In Polanyi. K., Cangiani, M. and Thomasberger, C. (Eds.), Chronik der Groβen Transformation: Artikel und Aufsätze (1920–1945), Band 1: Wirtschaftliche Transformation, Gegenbewegung und der Kampf um die Demokratie. Marburg: Metropolis-Verlag, pp. 149– 154. (Original work from 1932, Karl Polanyi archive, container 18, file 05). ——— 2004. “Die geistigen voraussetzungen des faschismus”. In Polanyi. K., Cangiani, M., Polanyi-Levitt, K. and Thomasberger, C. (Eds.), Chronik der Groβen Transformation: Artikel und Aufsätze (1920–1947), Band 3: Menschiliche Freiheit, Politische Demokratie und die Auseinandersetzung Zwischen Sozialismus und Faschismus. Marburg: Metropolis-Verlag, pp. 216–221. (Original work published in 1933). ——— 2014. For a New West: Essays, 1919–1958. Resta, G. and M. Catanzariti [Eds.], Cambridge: Polity Press. ——— 2018. Economy and Society: Selected Writings. Thomasberger, T. and M. Cangiani [Eds.], Cambridge: Polity Press. Reynolds, N. 2015. “The crisis of market society and the fascist solution in the writings of Karl Polanyi: A preliminary investigation”. Accessed November 2, 2020 at www.academia.edu/24907916/The_Crisis_of_Market_Society_and_the_Fascist_Solution_in_the_Writings_of_Karl_Polanyi_A_Preliminary_ Investigation Sandbrook, Richard. 2017. “The second time around? Polanyi and today’s fascist tendency”. Peace Magazine July/September. ——— 2018. “Karl Polanyi and the formation of this generation’s new left”. IPPR Progressive Review 25/1: 76–103.

147

12 KARL POLANYI AND THE ‘INTERNATIONAL CIVIL WAR’ The analysis of a lucid witness and interpreter of his time Francesco Soverina Introduction Attentive observer and original interpreter of the dramatic changes unfolding in the 1930s, Karl Polanyi focuses – first in the article “Milestone 1935” (Polanyi 2003 [1935]), then in Europe To-Day (1937) – what in his eyes appears as “the most striking feature of contemporary history” (Polanyi 1937: 14), capturing – in the heat of events – the unprecedented intertwining of “external wars and civil wars”, a distinctive trait of the international political landscape, especially after Adolf Hitler took office in government in Germany on 30 January 1933. Polanyi’s analysis sheds light on a historic decisive moment in which a planetary economic crisis, the subversion of the international order, as well as the propagation of authoritarian and fascist regimes overlap (see Hobsbawm 1994, First Part in particular, Di Nolfo 2015; Ian Kershaw 2015). Based on the idea of the interdependence between “internal” and “external”, his approach is methodologically fruitful for those who want to fathom that complex decade or – mutatis mutandis – who intend to venture into the reconstruction and decoding of the geopolitical turning point announced by the outbreak of war between Russia and Ukraine, on the night of 24 February 2022. In Polanyi’s conspicuous and varied production, which has its best known expression in The Great Transformation (2001 [1944]), a central place is occupied by the effort to understand the meaning and direction of the epochal transition triggered by the self-destructive mechanisms of the “market society” during an “age of iron and fire”, marked by endemic conflict, by the connection between counter-revolution and nationalist revisionism, by the remodelling of the capitalist system devastated by a major socio-economic crisis (Procacci 1999; Gualtieri 2001).

An “epochal change” in the name of the interpenetration between “internal” and “external” A singular intellectual of Central European training, who will combine the sensibilities of the jurist, the economist, the historian with that of the anthropologist in the course of his life, Polanyi is induced by the pressing succession of events to question himself on the debacle of democracy and on the winds of war, which blow impetuously outside and inside the Old Continent and within its

DOI: 10.4324/9781003336747-16

148

Karl Polanyi and the ‘international civil war’

many pieces.1 His participation in the extraordinary cultural and political laboratory of socialist ­Vienna, and the long experience gained in the periodical Der Österreichische Volkswirt inspired his reflection. In this weekly, dedicated to national and international economics and politics, ­Polanyi published 250 articles from 1924 to 1938. From 1934, he had to comply with the self-censorship adopted by the magazine, since fascist tendencies and influences were prevailing in Austria. His articles become short, numerous reports: about 80 in 1937, ranging from the Spanish Civil War to Japanese expansionism in China, from the struggles for independence in Ireland and India to British foreign policy and the question of disarmament.2 In “Markstein 1935”, Polanyi sets out what will be the central assumption of Europe To-day, later re-proposed in The Great Transformation, according to which the close connection between “internal” and “external” is the factor in the light of which the basic lines of an international framework must be understood. The 19th-century categories of the policy of equilibrium are now inadequate. Here Polanyi’s innovative contribution emerges: he demonstrates that it is no longer sufficient to be interested in the plot of relations between states and empires, in the game of alliances and conflicts on the political-diplomatic chessboard in order to focus on “epochal change”, which suddenly manifests itself as characterized by a “close tangle of internal and external political events” (Polanyi 1935: 265). The end of the years of the Paris Peace Treaties has come. The threshold of a new historical period has been crossed. The time of transition is behind us and the contours of a new era are already taking shape. (Ibid.: 261) With this significant premise, Polanyi enters the analysis of the novelties that emerged in the international situation in the first half of the Thirties. They became evident in 1935, when the massive rearmament of Nazi Germany and the Japanese cancellation of the Washington Naval Treaty of 1922 dissolved the foundations on which peace had stood for about 15 years: the military superiority of France and its allies, the neutralization of China and the containment of Japanese naval power. Polanyi points out that, with the pulverization of the post-war treaty system and the stirring of the waters both in Europe and in Asia, Britain’s function of arbiter disappears, since it was based on the “geopolitical isolation of the Far East from the area of the Rhine, the Danube and the Vistula”. At the same time, also the Soviet Union ceases to act as a “security insulator” between those two centres of high tension in world politics (ibid.). With the entry, in 1934, in the League of Nations (LoN) of the USSR – very worried by the double pressure from Germany and Japan – “a short circuit” is created, which causes the Russian role of “planetary insulator” to fail, making the planet smaller, while inducing international actors to carry out a long-range foreign policy (ibid.). Even the USA, due to the Japanese questioning of the balance in the Pacific and the sudden change of geopolitical horizons, must adjust their foreign policy, renouncing the freedom of the seas. We are therefore in the presence of changes and repositioning such as to authorize us to speak of “epochal change”. Not even the Great War and the revolutionary triennium (1917–1919) – ­according to Polanyi – stand comparison with the disruptive scope of these dynamics; on the contrary, the war and the post-war period appear rather as an extension of the age of “liberal nationalism”. Only after the effervescent post-war conjuncture, animated by unsatisfied national demands and the revolution/counter-revolution dialectic, had run out, did “a course of events of a different nature” emerge from the mid-1920s (ibid.: 263). This is especially true for fascist Italy

149

Francesco Soverina

from 1925 onwards, for the USSR grappling with the first five-year plan and later for Germany which will fall into the hands of Nazism. Deviating from a widespread type of interpretation, Polanyi considers Nazism – like Bolshevism and fascism – not a heavy legacy of war trauma and the season of peace treaties, but a “new creation”, which a direct historical condition in conflict with all the sociological prerequisites that emerged in the past epoch, a new creation breaking out of the depths of a time crisis, which, fighting the old type of events with an almost miraculous ease, bursts open the existing political framework and replaces it with a completely different one. (Ibid.: 264) “In the crisis at the end of the year – notes Polanyi, underlining the periodizing value of 1935 – the novelty of world events reaches its climax” (ibid.: 265). With the colonial expedition undertaken in Abyssinia on October 2, 1935, Fascist Italy ended up coming into conflict with England. Gaining a military foothold between the Sudan and the Red Sea, it threatens the vital communication hubs of the British Empire: “the land route to Southern Africa and the sea route to India”. Thus, it pushes the Baldwin government to put pressure on the LoN, to protect the entire Blue Nile basin. This British move is successfull, but at the price of sacrificing Ethiopia. In this way, Polanyi comments, “a clear betrayal of the principles of the League of Nations to the advantage of the particular interests of Great Britain” takes place (ibid.: 265–266). Finally, one cannot fail to recall Polanyi’s pertinent remarks on the “unheard-of development […] of large state-economic units”, on the different role assumed by the state – regardless of its institutional form and political colouring – following the disintegration of the international economic order, based on gold currency, free trade and the global capital market. As a consequence of the economic crisis, or rather in response to it, which lays bare the serious difficulties of liberal capitalism, the State leaps to the fore, but as a “function of the system”. It is no coincidence that foreign policy is entrusted with the crucial task of safeguarding its stability and cohesion. In this way, the system becomes at the same time an ideal norm and a practical task, the guiding star, and the daily modality of politics. Since the time of the great wars of religion, there had never been such an identity of conformation of the internal and external fate of the State. (Ibid.: 265)

From the “Versailles system” to the caesura of the 1930s For Polanyi, it was the 1930s that constituted a real caesura, the ridge between a before and an after, between processes that have their roots in the 19th century and processes that lead to a change of an epochal nature. The institutions of liberal capitalism collapsed, with the abrupt decline of representative democracy and the liberal economy and, at the same time, with the upheaval of the world balance and the dissolution of hopes for peace. At the beginning of that decade, in fact, a dramatic clash broke out, marked by the interpenetration between domestic politics and international politics, which undermined the geopolitical and social structures of the world outlined in the peace treaties of 1919–1920. Thanks to the experiences and elaborations accumulated in accordance with his intense political and intellectual commitment, Polanyi offers an illuminating reading of this watershed in

150

Karl Polanyi and the ‘international civil war’

Europe To-Day (1937), where he collects his lessons held on behalf of the British Trade Unions, as part of a programme aimed, as he himself asserts, at “education in politics” understood as “education in citizenship”. The book has the merit – as the great socialist scholar G. D. H. Cole maintains in the Preface – of explaining “to the common man” the “essential meaning” of a convulsive historical passage. The emergence of social alongside of national conflict – Polanyi writes (ibid.: 14) – in our time goes a long way to explain what is, perhaps, the most striking feature of contemporary history, namely the frequency with which foreign wars and civil wars intersect in the pattern of international events. Polanyi critically illustrates and reconstructs, in a clearly and effective way, the dynamics of the international situation starting from the Paris peace treaties, identifying in 1933 the crucial moment that marks, he notes (ibid.), the entry into “a new historical phase”, with the affirmation of Nazism in ­Germany and the disintegration of the “Versailles system”, undermined by serious structural cracks, by the intrinsic weakness of the LoN due to the foreclosure of participation, until 1934, by the USSR, and to the lack of contribution from the USA (the US Senate will not ratify membership of the new-born body strongly desired by the Democratic president Woodrow Wilson). In the first part of his dense and informed analysis, Polanyi deals with the attitude of the various players in the field, especially the great powers, towards the ‘Versailles system’, recognizing the deepest causes of its collapse in the crisis of liberal society, contrary to evolve in a democratic and socialist sense, and in the incapacity of the LoN to resolve the contradiction between ‘revisionist’ claims and the need for ‘collective security’. The vicious circle was fuelled by the request for ‘collective security’, advocated by the victorious powers of the First World War, especially France, and by the “counter-claim of revision, that is, mainly, territorial revision” (ibid.: 39). Such vicious circle was responsible for the sinking of all initiatives aimed at a peaceful and balanced international order. The lack of agreement on Europe’s political problems is, for Polanyi, at the root of all tensions and difficulties. Between 1919 and 1933, conflicts between states held the international scene, called to compete on three fundamental issues: war reparations, the fate of minorities in the new state entities that emerged from the Paris negotiations, and disarmament. There is no doubt that the international arena was poisoned, in that period, by the diatribe over reparations, the weight of which fell by far on Germany, the object of a “Carthaginian peace”,3 a punitive Diktat, as the Germans defined it. Other particularly thorny knots are constituted – as above noted – by the problems of ethnic minorities and disarmament. This last battleground pits the victors against the defeated countries, whose demands, Polanyi underlines, have also to be taken into consideration. In his opinion, without general disarmament the balance of power, which had been the cornerstone of the European peace system of the 19th century, was out of reach and the Versailles system could only implode. All the governments involved were aware of this since the mid-1920s. The LoN could have functioned effectively only if the equal status of all its members had been recognized, as well as the same position, on the international level, of both the victorious and defeated countries. The general disarmament – Polanyi points out – was not only a means of avoiding an armaments race which would lead to a war even more terrible than the last, but it was an immediate necessity if a crisis in the existence of the League was to be averted. (Polanyi 1937: 38)

151

Francesco Soverina

If for the defeated states ‘collective security’ must rest – and it cannot be otherwise – on the removal of the clearly unfair aspects of the Paris Treaties, for the great powers it is necessary to strengthen the executive powers of the LoN to protect the peace, i.e. the status quo. In truth, according to Polanyi, the maintenance of international stability is an objective inextricably linked to that of disarmament on a general level. Objective not grasped by the conferences on disarmament, doomed to failure due to the divergent positions of France and Great Britain on the subject of ‘collective security’, a failure proving – in his opinion – the socialist thesis according to which capitalist states were able to guarantee peace only under extraordinary favourable circumstances, as in the 19th century. “Of all forms of equality of status – Polanyi bitterly comments – the most nefarious was achieved in the equal right of all to follow the course of a suicidal armaments race” (ibid.: 39).

The ‘nationalist revisionism’ Incapable of fulfilling the task for which it was born (composing the disagreements and frictions aligning on the international scene), the LoN proves impotent in the face of the corrosive force of “nationalist revisionism”, understood as a policy aimed at modifying or retouching peace treaties, seen as an unjust imposition by the victors. This turns out to be one of the main factors causing disturbance in the European situation. Against its own interests as a victorious power and moved by the myth of the ‘mutilated victory’, by a never dormant spirit of revenge, Mussolini’s Italy takes the lead of the group of revisionist states, cracking the alignment that emerged victorious from the Great War and contributing to the destabilization of the international scene. Fascism has a strong ideological aversion towards the ‘corporate countries’, towards the Franco-British hegemony within the LoN and towards the members of the Little Entente (Yugoslavia, Czechoslovakia, Romania, all three staunch defenders of the LoN). Thanks to Italy’s military weight – Polanyi adds – the territorial requests of Hungary and Bulgaria could no longer be ignored by Yugoslavia, which borders both with these countries and with Italy, moreover its rival in the Adriatic. In turn, France could not dismiss Italy’s support for the revisionist cause since it was a permanent member of the Council of the LoN. For its part, Italy was confident of drawing considerable advantages from the heightened pressure on Yugoslavia and France, its adversaries in the Adriatic and in the Mediterranean. In general, by leveraging the revisionist front, Mussolini managed to carve out an important role for Italy, as “the index of the balance of power in Europe” (ibid.: 46). For this reason, the government in Rome has tended often to put the revisionist countries under its protective wings; this policy tended to prevent the application of article 16 of the Covenant on sanctions, to hinder ‘collective security’, and to weaken the authority of the LoN. During the 1920s, revisionism in international fora was also supported by Great Britain, but with the aim – Polanyi writes – of preserving peace, which constitutes “the main reason and the fundamental purpose” of his policy on the European arena. On this ground, however, London is not willing to “pander to the French mania for security and to the spirit of obstruction against the idea of a Treaty revision” (ibid.: 49). Therefore, France and its allies have never seen Great Britain eager to take their side, whatever proposals they have made to untie the intricate knot of “collective security”. Furthermore, the British “guardian of the peace” – Polanyi underlines with some disappointment – wasted the only opportunity to overcome “the Versailles system” in a peaceful manner, with the approval of both the defeated countries and the victors, given that the Chamber of the Commons rejected in March 1925 the Geneva Protocol, i.e. the security plan presented to the assembly of the LoN in 1924 by the then Labour prime minister, Ramsay MacDonald, together 152

Karl Polanyi and the ‘international civil war’

with his French colleague Herriot. A missed opportunity, since with its ratification the spiral of rearmament and the drift towards a new war could have been avoided (ibid.: 50–51). Instead, the recovery since 1926 of nationalist-inspired forces calls into question the amount of solidarity that Western politics had achieved with the Locarno Treaty (1925), with which France, Belgium, and Germany had reached an agreement on the untouchability of their common borders, also giving rise to a large ‘cartel’ agreement on coal and steel. Political reconstruction, like the apparent economic recovery of those years, appears very fragile and, therefore, quickly fades away (Thompson 1965 [1957]: 625).

An “international civil war” The international situation changes radically in the 1930s, with the eruption of three closely related phenomena: the failure of the LoN, the arms race, the aggressive expansionism of the militarist and fascist ‘leviathans’. Polanyi draws attention to them in the second part of Europe To-day, in which he thematizes the link between external wars and civil wars. With Germany’s withdrawal from the Conference on Disarmament and, at the same time, from the LoN in October 1933, international tensions and dangers increased dramatically. This is one of the most relevant consequences of the advent of Nazism in power. Against the backdrop of the Great Depression, which sowed misery and disorder everywhere, causing the radicalization of political and social conflict, an ‘international civil war’ flared up, based on the deadly friend-enemy dialectic, as theorized by Carl Schmitt, the jurist and political scientist who was the theoretical guide of the Nazi state for a certain period of time (see e.g. Kervégan 2011). Since then, social conflicts and political-ideological disputes tend to intersect more and more with national antagonisms, the contrasts between states with internal struggles. The unravelling of the precarious structure built with the Paris Peace Treaties goes hand in hand with the cruelty of the attack on democracy, whose purpose is to put an end to the possibility for the organized working class to influence the political situation and thus to broaden its power. Complementary to these two processes are ‘national imperialism’ and the propensity for war. Hence the thrust towards another general conflict, hence the suicidal arms race (‘the grand prize of death’), which resumes and intensifies precisely with the wreck of the Versailles system and the LoN. The fragility of the Genevan organism is evident on three occasions, when it appears impotent in the face of the manoeuvres and warmongering tricks of imperial Japan in Manchuria (1931), of Mussolini’s Italy in Ethiopia (1935) and of Nazi Germany, which on 7 March 1936 – using the ratification of the agreement between France and the USSR as a pretext – proceeds with the remilitarization of the Rhineland. This move, which frustrates France’s military guarantees towards its Eastern allies, is “the first major territorial aggression of Nazism, and [...] perhaps the most important” (Thompson: 1965 [1957]: 690). It is a clamorous challenge to the arrangement of Versailles, even more than the initial rearmament, it violates the Locarno agreements, not imposed on Germany, but freely accepted by its rulers. This strain, which is “perhaps the most risky move of […] Hitler’s career’, sanctions the failure of “collective security” (ibid.). With lucid concern, already a few months after the rise to power of the ‘brown shirt’ movement, led by the “Bohemian corporal”, Carlo Rosselli – the founder of Giustizia e Libertà, assassinated in June 1937 by fascists together with his brother Nello in France – prophetically writes that “war is back” in Europe (Rosselli 1988 [1933]a, 1988 [1933]b). Since then, peace will run very serious risks. Polanyi underlines the connection between the igniting of an “armaments race of unprecedented dimensions and intensity”, mainly by Nazi Germany, which triggers the deadly mechanism, and the collapse of the LoN (Polanyi 1937: 52), whose disintegration could have been averted by means of a 153

Francesco Soverina

compromise between the aspirations of the revisionist states and the needs of ‘collective security’ – if, however, only claims of a national nature would have been at issue. At that juncture, however, the traditional political-diplomatic dispute gives way to an ideological conflict, involving peoples and societies before and more than the states, which see the efforts to re-establish a stable order evaporate. International tensions are exacerbated by the clash between “differing social interests and ideas” (ibid.: 53). Then, in that historical phase we witness the superimposition of social struggles on national antagonisms, the interweaving of the social sphere and the international sphere. And where the reaction takes on the features of a fascist counter-revolution, expenditure on armaments is increased, openly or covertly, in view of a warlike and expansionist policy. By coupling the ancient rivalry with France with the inflexible aversion towards the USSR, Hitler’s Germany becomes the pivot of the European chessboard, the power most capable of influencing the evolvement of international relations in both spheres. The USSR too, whose Foreign Ministry was led by Maksim Litvinov between 1930 and 1939, lays the foundations for the emergence of a new scenario, by leaving the revisionist camp and entering that of ‘collective security’, for fear of the materialization of the ‘capitalist encirclement’. The fascist countries – in the name of the anti-Bolshevik crusade – weave more or less solid alliances, however not free from disagreements and frictions. These are evident in the case of the Italo-German dispute over Austria in 1934. For some time under the tutelage of Mussolini’s regime, the small republic arisen in the heart of what had been the Habsburg Empire, was in the sights of Nazi Germany, which since its inception is determined to realize the expansionist design for the establishment of a Great Reich. To overcome the resistance of Italy, Hitler supported its aggression against Ethiopia (1935–1936); then he intervened together with Rome in support of Franco’s sedition. Besides, he signed the Anti-Comintern Pact with Tokyo in November 1936, an agreement against the USSR in an anti-communist key, to which Italy and Spain will join. For Polanyi, the prevalence of the national-imperialist spirit and the adoption of the strategic option of war were the inevitable consequences of the fascist suppression of democratic institutions (see Polanyi 1928), which could be observed in Italy since 1922. Soon after the March on Rome, in various countries, movements advocating the repudiation of the Versailles principles, illiberalism and the unscrupulous use of violence make their voices heard. During the 1920s, in Central-Eastern Europe (except Czechoslovakia), in the Balkans and in the Iberian Peninsula, authoritarian regimes centred on the army and the dominance of agrarian oligarchies took hold. In the following decade, fascism, albeit in its various expressions, and the dictatorships that looked to Rome or Berlin became the dominant force in most of the continent. The proliferation of authoritarian regimes, the spread of “reactionary subversivism”, in the fascist version, constitute a central aspect of European political history in the period between the two world wars. With the progress of the “militant reaction” in the 1930s, the progressive fascistization of Europe unequivocally unfolded.4

A radical alternative: fascism/democracy Polanyi – it is worth highlighting – believes fascism essentially an anti-socialist counter-­ revolutionary movement, which aims above all to “fight working class influence by destroying democracy”, through the banning of universal suffrage and representative government, i.e. the levers allowing workers to assert themselves, up to the point of reaching power. This “was invariably the Fascist aim” (Polanyi 1937: 55). And it is the same goal pursued by the “capitalist reactionaries”, who cling to “the inevitable weakness of the Russian Socialist experiment in order to discredit Socialism itself” (ibid.: 56). They agitate “the Bolshevik bogey” to bring democracy to its knees, to

154

Karl Polanyi and the ‘international civil war’

block the main avenue through which the working class extends its influence. “Thus the great idea of Fascism was born: to fight democracy under the cover of an anti-Communist crusade” (ibid.). Supported by the lower strata of the middle class, “imbued with a spirit of extreme nationalism” (ibid.), fascism appeals to patriotism, denouncing socialism for its internationalist creed and as a promoter of “fulfilment of the idea of freedom in a modern industrial society”, and thereby of “self-realisation of the human personality” (ibid.: 57). Fascism praises the use of violence and therefore despises pacifism, branded as a “crime” because it is an unnatural obstacle to the “eternal warfare between nations and peoples” (ibid.: 56). Hinged on the repudiation of self-government, of representative institutions, of civil rights, of the “very idea of liberty and freedom of the individual”, fascism for Polanyi is configured as the “deification of slavery”, of the “political bondage of the masses”, like “a philosophy which wants to uproot the Socialist ideal of perfect freedom in the hearts of men” (ibid.: 57). For all these considerations Polanyi identifies in the antithesis fascism/democracy the radical, inescapable alternative facing society in the 20th century: A modern industrial society, in the long run, is either democratic or Fascist. It is either based on the idea of common human equality and responsibility or on their negation. But democracy cannot be maintained under the conditions of present-day life, unless the principles of democracy are extended to the whole of society, including the economic system itself. This is commonly called Socialism. (Ibid.: 56) “The rise of Fascism – Polanyi observes (ibid.: 54), grasping one of its most significant ­implications – is at the heart of the social wars and civil wars of our time”. An unprecedented form of counter-revolution, fascism is based – in addition to the exercise of violence – on mass mobilization and, for this very reason, “it differs from pure military dictatorship, from old-fashioned ‘reaction’ and also from an ‘authoritarian government’” (Polanyi 1933a: 216). In particular, the German one promotes – with its gigantic, choreographic demonstrations – the “apparent participation of the masses”, while pursuing “the disempowerment of the masses organizationally ensured through the masses themselves”. Thus, Hitler becomes the holder of the “reactionary monopoly of the masses” (Polanyi 1933b: 187). Combining counter-revolution with nationalist revisionism, anti-democracy with expansionism, reaction in domestic politics with aggressiveness in foreign policy, fascisms create a climate of permanent civil war in Europe. Already in the 1920s right-wing dictatorships – Polanyi refers specifically to the Italian and Hungarian ones – bet on the card of nationalism, which is the major ideological envelope of reactionary subversivism, the latter’s response to the revolutionary wave aroused by the Russian explosion of 1917 and reverberated throughout Europe, in the form of insurrectionary attacks or extensive social struggles. With the eruption of fascism on the geopolitical chessboard, the class struggle, zeroed internally, was transfigured into conflict between states externally. For Polanyi, “the raison d’être of fascism” is the preservation of capitalist production relations, their protection from the demands and pressures of the workers’ movement: the essence of fascism consists, then, in destroying the very “substance” of democracy (Cangiani 1990: 792). Inside as outside. “Fascism – Polanyi states in a sharp typescript (2018 [n.d.]: 108) – is merely the most recent and virulent outburst of the anti-democratic virus, which was inherent in industrial capitalism from the start” and aimed at preventing and nipping “all forms of popular government”. It is the anti-democratic reaction typical of the “market society”, both in general and in specific circumstances.

155

Francesco Soverina

In the context of a very serious systemic crisis, when in several countries we are witnessing the gap, in the most acute form, between democracy and capitalism, fascism is credited as “the alternative” which “wants to abolish politics, absolutize the economy, allow it to take over the state, ‘separating’ it from the economy” (Polanyi 1933a: 219). By means of this apparent contradiction, Polanyi intends to say that the democratic state, capable of intervening democratically on the economy, is being replaced with a corporate state directly occupied by big economic interests. As a political translation of the alliance between the ruling elites and the middle classes, fascism has, by virtue of its seductive force, a large mass following: it thus presents itself as an organic response to the crisis of the “liberal utopia”. With his multiple analytical tools, used to provide an effective interpretation of one of the most relevant phenomena of his present, Karl Polanyi undertakes the arduous task of understanding the characters, consequences, and directions of the diffusion in Europe of what he eloquently defines as “the fascist virus”. In doing so, he focuses on the connection between totalitarianism5 and total war. The ‘totalitarian state’ – Polanyi masterfully specifies (1937: 58) – is the whole people, organized for ‘total war,’ i.e., for a war in which every particle of the nation has ceased to have any other function or value apart from that of being sacrificed in a supreme effort to annihilate the enemy. Such a war cannot begin with the starting of hostilities nor cease when they end. In years and decades of apparently peaceful preparation the energies of man must be diverted into the channels which will increase his effectiveness as a unit in total war to a maximum. The biological material of human life itself must be subordinated to this single purpose. Once war is accepted as the final answer to the problem of history, no other outcome is logically possible. The Fascist, if he is to be consistent, fascists cannot escape the conclusion that not the spiritual the animal elements in the composition of man are man’s true human nature. The totalitarian state can be summed up as the ideal of a pedigree farm dedicated to the raising of a human breed that in case of war will give most trouble to the enemy and least trouble to its rulers. It is this perfect appropriateness of means to ends that makes German Racialism the true form of Fascism.

The incompatibility of market society and democracy At the centre of the second part of Europe To-day, therefore, Polanyi places the role played by the “fascist alternative”, which spread and established itself during the 1930s, when it manifested itself in a disruptive way – as he later thematizes in The Great transformation – the incompatibility between market society and democracy. This agonizing divorce, marked by the course of a deadly economic crisis, buries the mirage in the growth of democracy and leads us to take note, instead, of its bloody and extensive decline (cf. Overy 2016, especially Part 2.6 and 2.7). From distinctly different positions, even one of the greatest exponents of the ‘conservative revolution’, Carl Schmitt, is well aware of the depth of the malaise that grips the liberal system, whose decomposition is accompanied by the recurrence of “total war”, based not on the achievement of a new balance of power between states, sanctioned by peace, but on the annihilation of the enemy. As argued in The Concept of Political, Schmitt (2007 [1932]), who will endorse the Führerprinzip, war is the presupposition and the essence of politics, a field dominated by the irredeemable conflict between friend and enemy. And enemy is the other, the foreigner, not the one who generally is considered an adversary or competitor; from a political point of view, the enemy is the public one, it is the hostis, not the inimicus. 156

Karl Polanyi and the ‘international civil war’

“Only Polanyi, however – as Michele Cangiani (1995: XVIII) points out – defines the new type of war as civil war in the international arena”, using an expression that conceptually seems very similar to the one used, a few decades later, by Ernst Nolte, in a theoretical-political horizon very distant, however, from Polanyi’s. Proponent of the thesis according to which the Gulag is “the logical and chronological prius of Auschwitz”, the leader of the so-called ‘historiographic revisionism’ reads in a unified way the age delimited by the two world wars in the light of the notion of “European civil war” (Nolte 1987), establishing its initial moment in the October Revolution of 1917. Despite what Nolte argues, historiography does in fact agree in identifying the start of what is fundamentally depicted as an ‘age of iron and fire’ not in the taking of the Winter Palace and in the consequent attempt of the communist movement to conquer world power, but in the trauma of August 1914. It is then that the great battle for life and death ignites; it is 1914 that represents the antecedent of the Soviet Revolution, of war against war waged by men and classes sent into jeopardy against enemy fire. As for Karl Polanyi, also for the Otto Bauer the reruns of history reveal how groundless, if not illusory, the hope in a gradual and steady march of democracy towards socialism is. In fact, with the worsening and expansion of the capitalist crisis, the possibility of mediating between the opposing interests fell through, thanks to which the social democratic forces have essentially operated as parties of the system, and it is, instead, fascism that profits of both “the anticapitalist spirit of the masses” (Bauer 1979 [1936]: 279) and the anti-worker hatred of the ruling and middle classes. In his book, Bauer advocates the unitary recompositing of the workers’ movement, to be achieved through the redefinition of the relationship between democracy and socialism and through the common battle against fascism and its warmongering instincts. For Bauer, with the caesura of the early 1930s, an entire historical phase closes and a new one opens, marked by the triple crisis of capitalism, democracy, and reformism. Such crisis implies, logically, the crumbling of the objective conditions for practising policies aimed at improving life of workers through partial conquests. The Great Depression, with its shocking socio-political repercussions that fully affect the democracy-socialism nexus, pushes capitalism and its political forms, as well as the labour movement, to turn the page. Witness and at the same time lucid interpreter of what took shape in the 1930s, when the growing militarization of politics was a painful variable of world “disorder”, Polanyi sees confirmed the conceptual core of the analysis he is tracing in Europe To-Day by the Spanish Civil War, during which the clash between fascism and anti-fascism takes on a scope and significance on a continental scale. In that country, furrowed by old and new fractures, a complex interaction takes place between international dynamics and social contrasts that are increasingly exacerbating. As an acute investigator of the European drama, Polanyi stigmatizes Nazi Germany and fascist Italy as “forces of international anarchy”, induced to intervene, on the one hand, to vanquish the “red Block with the self-set mission saving the world from Bolshevism” (Polanyi 1937: 80), on the other to pursue their imperialist interests. In particular, in his opinion, Italy aims to acquire “political and territorial gains in the Western Mediterranean” (ibid.: 79), to take possession of “bases from where she could threaten Great Britain’s sea routes in the Mediterranean” (ibid.: 80). He spares no criticism of the Franco-British bloc either, underlining the inadequacy of the so-called London Non-Intervention Committee and their inability to revive the LoN, repeatedly humiliated by the fascist states. Faced with a Europe shaken by the exacerbation of national and social conflicts, Polanyi ascribes the dwindling possibilities for peace and the raging winds of war to the ruinous decline of democracy. This being the case, all that remains for him is to hope – but it is a misplaced hope for “a system of collective security, set up by democratic and socialist countries in the framework of the League” (ibid.). 157

Francesco Soverina

Notes 1 The book by the great American foreign correspondent Hubert R. Knickerbocker (1934) is a testimony of the rising war climate. 2 See Chapters 2 and 10 in this volume. 3 This meaningful definition is due to John Maynard Keynes, author of The Economic Consequences of the Peace (1919). 4 See Polanyi’s note (2001 [1944]: 275) “Swings of the Pendulum After World War I”. On the rise and expansion of fascisms see also Woolf 1968; Collotti 1989; Woller 1999. 5 As is known, the term totalitarianism was coined by anti-fascists around the mid-1920s; it was then used, reversing its initial pejorative sense, by Benito Mussolini to designate the claim of fascism to total identification between state and society. On the debate aroused by the introduction and use of this heuristic category, strongly characterized in a political-ideological sense, cf. Forti 2001.

References Bauer, Otto. 1979 [1936]. Tra due guerre mondiali? La crisi dell’economia mondiale, della democrazia e del socialismo. Torino: Einaudi. (Zwischen Zwei Weltkriegen? Die Krise der Weltwirtschaft, der Demokratie und des Sozialismus. Bratislava: Eugen Prager-Verlag). Cangiani, Michele. 1990. “Democrazia e fascismo nel pensiero di Karl Polanyi”. Studi Storici 31/3: 771–808. ——— 1995. Cittadinanza e politica estera. Preface to Karl Polanyi, Europa 1937. Roma: Donzelli. Collotti, Enzo. 1989. Fascismo, fascismi. Firenze: Sansoni. Di Nolfo, Ennio. 2015. Storia delle relazioni internazionali. I. Dalla pace di Versailles alla conferenza di Postdam 1919–1945. Roma-Bari: Laterza. Forti, Simona. 2001. Totalitarismo. Roma-Bari: Laterza. Gualtieri, Roberto. 2001. Introduzione alla storia contemporanea. L’Europa nel mondo del XX secolo. Roma: Carocci. Hobsbawm, Eric J. 1994. The age of extremes: The short twentieth century, 1914–91. New York: Viking Penguin. Kershaw, Ian. 2015. To hell and back. Europe, 1914–1949. London: Penguin Books/Random House. Kervégan, Jean-François. 2011. Que faire de Carl Schmitt? Paris: Gallimard. Keynes, John Maynard. 1919. The economic consequences of the peace. London: Macmillan. Knickerbocker, Hubert R. 1934. Will war come in Europe? Introduction by J. W. Wheeler-Bennett. London: John Lane. Nolte, Ernst. 1987. Der europäische Bürgerkrieg 1917–1945. Nationalsozialismus und Bolschewismus. ­Berlin: Propyläen Verlag. Overy, Richard. 2016. The inter-war crisis. Abingdon and New York: Routledge. Polanyi, Karl. 1928. “Italien und Europa.” Der Österreichische Volkswirt xx/24: 649–650. Now in Polanyi 2003: 70–74. ——— 1933a. “Die geistigen voraussetzungen des faschismus.” Menschheitskämpfer vii/1: 5–8. Now in Polanyi 2005: 216–221. ——— 1933b. “Gegenrevolution.” Der Österreichische Volkswirt xxv/20: 457–459. Now in Polanyi 2002: 182–192. ——— 1935. “Markstein 1935.” Der Österreichische Volkswirt xxviii/12–13: 232–234. Now in Polanyi 2003: 261–266. ——— 1937. Europe to-day. Preface by G. D. H. Cole. London: WETUC. ——— 2001 [1944]. The great transformation. Boston: Beacon Press. ——— 2002. Chronik der großen transformation, Band 1. Michele Cangiani and Claus Thomasberger eds. Marburg: Metropolis-Verlag. ——— 2003. Chronik der großen transformation, Band 2. Michele Cangiani and Claus Thomasberger eds. Marburg: Metropolis-Verlag. ——— 2005. Chronik der großen transformation, Band 3. Michele Cangiani, Kari Polanyi-Levitt and Claus Thomasberger eds. Marburg: Metropolis-Verlag. ——— 2018 [n.d.]. “The fascist virus.” Ms., end 1940s. In Id. Economy and society. Selected writings. Michele Cangiani and Claus Thomasberger, eds. Cambridge: Polity.

158

Karl Polanyi and the ‘international civil war’ Procacci, Giuliano. 1999. Storia del mondo contemporaneo I. Da Sarajevo a Hiroshima. Roma: Editori Riuniti. Rosselli, Carlo. 1988 [1933]a. “Italia ed Europa.” In Id., Scritti dell’esilio Vol. 1, 1929-1934, ed. by Costanzo Casucci. Torino: Einaudi: 203–210. (Originally in Quaderni di Giustizia e Libertà 7). ——— 1988 [1933]b. “La guerra che torna.” In Id., Scritti dell’esilio Vol. 1, 1929-1934, ed. by Costanzo Casucci. Torino: Einaudi: 250–258. (Originally in Quaderni di Giustizia e Libertà 9). Schmitt, Carl. 2007 [1932]. The concept of the political. Chicago, IL and London: The University of Chicago Press. Thompson, David. 1965 [1957]. Storia dell’Europa moderna. Vol. 3. Milano: Feltrinelli. (Europe Since ­Napoleon. New York: Alfred A. Knopf, 1957). Woller, Hans. 1999. Rom, 28. Oktober 1922. Die fasistische herausforderund. München: dtv Verlagsgesellschaft. Woolf, Stuart J. ed. 1968. European fascism. London: Weidenfeld & Nicolson.

159

13 KARL POLANYI’S IDEA OF CO-EXISTENCE War and peace in the international frames of politics and economy in the interwar period Chikako Nakayama Introduction The last project of Karl Polanyi’s lifelong struggle against the utopia of universal capitalism was the journal Co-Existence. The first volume was issued a few days after his death in 1964. In the second volume, Polanyi Levitt (1964/1990) explains his plan. The journal continued to refer to him for long time, until it took into a new style around the middle of 1980s.1 Polanyi’s attempt was regarded in the 1960s as the reemergence of his ‘concern with the problems of socialist economics’ (Humphreys 1969: 174). It was considered in the first place as a project to explore the possibility of co-existence of socialist and capitalist economies. More recently, Gareth Dale (2016a, 2016b) re-examined this point in an article and in a biography of Polanyi, investigating personal letters and other unpublished writings in the archives. Dale partly reduces the conceptual value of co-existence because ‘peace through coexistence’ or peaceful co-existence was the ‘summary soundbite’ (Dale 2016a: 422, 2016b: 272–273) of Khrushchev administration.2 He then indicated that Polanyi was also ‘conscious of the propagandistic aspect to the Kremlin’s coexistence campaign’ (ibid.). He also mentioned the fact that Polanyi had to be disappointed by cold reaction of Edward Hallett Carr to the publication: Carr warned at least once that the journal ‘would be seen as a socialist magazine’ (Dale 2016b: 275) in the sense that the discussion in it would be considered merely as a restricted one within the adherents of the same ideology. ­Polanyi thus changed the subtitle of the journal to drop the word ‘socialist’, but kept the main title unchanged. As was indicated by Polanyi Levitt in the second issue of Co-Existence, Polanyi certainly had an image of co-existence of emerging socialist countries with free (market) economies shortly after the publication of Khrushchev’s idea of peaceful co-existence, but his vision of international order was comprised with ‘pluralist democracy, national independence, industrial culture’ (­Polanyi Levitt 1964: 121). Besides, the idea of co-existence of the USSR at that time was not the one-shot episode, but rather a traditional one that had been strategically used, especially after its appearance at the international level since the late 1920s.3 Polanyi, who kept interest in his contemporaneous situation of the USSR,4 might have watched such development of this idea as well. In any case, Polanyi seems to have had a wider perspective and more expectation for co-existence as a general concept than the Soviet-related one: Co-existence as tolerance for others and for their DOI: 10.4324/9781003336747-17

160

Karl Polanyi’s idea of co-existence

differences. We know that the idea of tolerance is explicitly argued in The Great Transformation in relation to the concept of freedom and peace to be pursued for their own sake. Polanyi distinguishes two levels of freedom and peace – the institutional and the moral/religious – and argues that the balance of freedoms ‘lost and won is significant’ (Polanyi 2001 [1944]: 261) when they are to be attained by regulation of their extension and restriction. Such regulation of freedom can be exercised on the institutional and moral/religious levels and opens some room for other people with different convictions and ways of life. We can interpret tolerance as the spiritual/cultural root of the idea of co-existence, not simply as a fact but rather as a norm. In this perspective, ­Polanyi’s exploration on international politics in the 1930s deserves attention, about the connection between freedom of conscience and tolerance, as he stated that ‘he principle of religious tolerance was transferred from the realm of religious experience to the field of politics […] freedom of conscience was translated into tolerance’ (Polanyi 1938/2014: 81–82). We take the view that ‘he believed that moral tolerance would function in international politics concerning peace and freedom’ (Nakayama 2018: 193). Certainly, tolerance also had important implications for different and possibly mutually exclusive or contradictory rules and institutions, which then served as ‘justification for his historical studies of pre-capitalist societies’ (Dale 2016b: 273). Polanyi mainly engaged in this problem in the 1950s through the comparative economic studies together with his colleagues at Columbia University. But such interest of him in pre-capitalist societies or in anthropology can also be dated back as early as to the 1920s.5 In this sense, Polanyi’s elaboration of co-existence almost continued lifelong without any blank period throughout.

Polanyi’s writings in the 1930s A concise booklet, Europe Today, published in 1937 shows Polanyi’s understanding and framework of the interwar period well. He saw the Second Post-war Period – as distinguished from the First (1919–1933) – as the time of the new alignment in Europe. In fact, 1933 marked decisive turning points, such as the rise of Hitler’s political party, the beginning of New Deal in the USA and its change of stance toward the USSR. Polanyi (1937: 81) makes a list of important historical dates concerning peace and social movements in the Appendix I, focusing much on the situations of Eastern part of Europe and Slavic countries.6 The list starts with the Armistice of the War and Peace Treaties, then regards later regional pacts, cases of functioning and violation of these treaties and pacts, political fluctuations, counter-revolutions, changes of monetary and financial policies, and breakaway from the Treaties (ibid.: 81–84). Here we concentrate on Polanyi’s important writings in the 1930s, and in particular Europe Today. We principally deal with the interwar period, but also refer to the period after World War II, when it is necessary for our consideration of Polanyi’s idea of co-existence. We assume that Polanyi’s potential interest in the idea of co-existence had gradually been molded by his intellectual struggle for peace, starting with his experiences in World War I, the meaning of the latter, and its influences on the post-war societies. He lived in a distinctive ‘interwar’ period, when a disastrous war was followed by the risk of another one. The causes of war and the possibility of peace were, in fact, fiercely discussed among professionals of international politics and economy in Europe, often focusing on the concept of imperialism and colonialism.7 We investigate a possible track for the evolution of Polanyi’s idea of co-existence through his writings on peace (Polanyi 1935–1936/2014, 1938/2014),8 the situations of the USSR (1933/2002, 1934/2002, 1936/2002, 1937–1938/2014, 1940/2017, 1943/2018), and the changes and analyses of Europe that he had experienced (Polanyi 1935b/2003, 1937). 161

Chikako Nakayama

In the 1930s, Polanyi sought for an accurate understanding of ongoing conflicts in international politics and economy as an editor and correspondent of the journal Der Österreichische Volkswirt (The Austrian Economist), first in Austria and then in the UK since 1933. At the same time, he also worked for the Workers Educational Association, participated in the Christian Left group in the UK, giving and attending seminars (Cangiani and Thomasberger 2002: 14–16). Around this time, Polanyi got acquainted with Carr and Harold Laski (Dale 2016a: 417), in addition to his contacts with Guild socialists like G.D.H. Cole. These acquaintances helped further elaborate the vision of socialism Polanyi deployed in his earlier articles on socialist accounting. It was a time of drastic transition from ‘the Conservative Twenties’ to ‘the Revolutionary Thirties’, as he characterized them in The Great Transformation. A relevant event of the Great ­Depression was the bankrupt of a major bank in Austria, Creditanstalt, in 1931, while Austria was threatened by the increase of fascistic tendency both internally and from Italy and Germany. The development of the Soviet Union at this time – in particular the collectivization of agriculture, the Five-Year Plan for industrialization as well as political change – had been paid considerable attention by the Western Europe. Polanyi kept watching these with strong expectation for democratic direction (Cangiani and Thomasberger 2003: 30). He hence paid attention to Stalin’s idea of ‘socialism in one country’,9 as he recalls around the middle of the 1940s: The victory of Stalinism over Trotskyism meant a change in her foreign policy from a rigid universalism, relying on the hope of a world revolution, to a regionalism bordering on isolationism. Trotsky, in fact, followed the traditional line of revolutionary policy, while Stalin was a daring innovator. (Polanyi 1945/ 2018, 234) In any case, these all should have potentially spurred Polanyi’s idea of co-existence in the sense of parallel presence of different political and economic frames of regime in the world. After moving to the UK, Polanyi, as a forced immigrant from Austria, played an important role in reporting and analyzing changing circumstances with the pivot of Austria and its surroundings in Eastern Europe. By the way, the attention to Germany as a defeated country of World War I was explicitly stated by Keynes10 and Carr around the same time. Polanyi was convinced at the beginning of the 1940s that post-war reconstruction is not about ‘What to do with Germany’ but what to do with the unsolved problems of the world. No conceivable treatment of Germany will resolve them. (Polanyi 1941–1943: 180) As we will discuss later, Polanyi’s interest in the 1930s was more generally in fascism, including the German one, as the negation of tolerance and of co-existence.

Struggles for developing the idea of co-existence As Polanyi explains in Europe Today, the first period was continuously faced with conflicts, and the character of these conflicts had gradually shifted from primarily national to national-and-social ones.11 He ascribes such transition to the deficiency of the reconstruction of liberal institutional frames of national and international politics and economy after World War I. Contrasting positions were then directed by different purposes and ideals, both within and between nations. Polanyi hence thought it necessary to investigate not only institutional frameworks but also conflicting 162

Karl Polanyi’s idea of co-existence

philosophies and ideals behind them (Polanyi 1937–1938/2014). We discuss here three aspects of Polanyi’s approach: first, his criticism of the implementation of the Covenant of League of Nations. Then, the failure to seize the growing tendency toward fascism and the misconception of pacifism. Finally, some look into the development of the USSR and the degeneration of new social movements into totalitarianism, mainly accepted at that time as reactive measures to the Great Depression.

Criticism of international frame of the liberal institutions Concerning the institutional frames on the international level, the foremost problem-setting of Polanyi was the question why the Peace Treaties after the Great War ceased to be effective. He indicated several levels of contradictions, which were important for the co-existence both in the positive and in the normative sense, on the verge of bifurcation of two groups of people with conflicting interests. In clarifying these contradictions, Polanyi searched for some possible, realistic way to get out of them. Here we see the initial developments of his idea of peaceful co-existence. First level of contradiction turned out to be the fundamental one lying in the implementation of the Covenant of League of Nations. On the one hand, the League of Nations was grounded on the equality of rights of all member states, on the other hand this foundation could not be conformed with the disarmament provisions, as the political and legal standings of defeated countries were conspicuously lower than countries which won the war and didn’t disarm. As Polanyi stated (1937: 19), ‘membership in the League was based on equality. Only the defeated countries were, by implication, refused an equal status’. This resulted in the second level of contradiction: the primary interest of defeated countries was revision of the Treaties, while the victorious countries aimed at military safeguard and collective security. ‘Here again – Polanyi points out (ibid.: 20) – a deadlock was reached’. In this context, the articles 16 and 19 of the Covenant of the League of Nations became relevant, bringing the contradiction to the third level. Polanyi argues that the Article 16 – the principle of collective action of the League members against an aggressor – was a critical point of conflict of interest between defeated and victorious countries. Victorious countries, most typically France, demanded to strengthen the power of the League ‘by making military sanctions effective’ (ibid.: p. 43) against potential breakers, in addition to keep the status quo of territorial frontiers as the basis of collective security. On the other hand, defeated countries required to revise such status quo, especially concerning the territorial division. As to the Article 19 – the principle that treaties, which had become inapplicable, could be revised – these countries wanted it applied to the Peace Treaties themselves. They ‘rightly contended’ – according to Polanyi (ibid.) – that the Article 19 ‘should be made effective by the adoption of a procedure under which revision claims could be formally raised’.12 Polanyi’s argument for equality of all member states of the League might seem sheer idealistic,13 but it could also be seen as a way of conceiving the need of co-existence already in the postWorld-War-I period. In general, the war inevitably divides two groups of nations with conflicting interests. The Article 19 was meaningful in this sense, inasmuch as it assured some room for the defeated and minorities. For Polanyi, it would be a failure of democratic design of an institution not to give members of different opinions a chance to raise objections within its statutory framework. However, the power to set up agenda was often occupied only in the hand of the stronger or the majority, and the final decision was influenced by the group of victorious states. Polanyi (1938/2014: 85) had to see that ‘the League of Nations as an ideal became separated in the minds of people from the League of Nations as an institution’. 163

Chikako Nakayama

What, then, about peaceful co-existence? Polanyi certainly suggested the importance of recognizing conflicting legitimate interests, concerning the first contradiction (concerning the equality of status). It should have neither meant the pretense of so-called win-win relationship nor sheer silence of defeated countries. Then, in admitting such difference of interests, parallelism concerning revision and security would be performed to break out of the deadlock of the second level of contradiction: Only the simultaneous performance of both […] could have brought a solution. Europe, could, perhaps, have avoided the present deadlock, had revision and collective security been tackled at the same time. (Polanyi 1937: 20) But in implementing such parallelism, there was the intricate problem of disarmament. Polanyi argued that the Versailles System ‘had either to lead to general disarmament or to the rearmament of the defeated countries […] even a partial agreement on the reduction of armaments would have been of great value’ (1937: 39), in order to tackle the contradiction between equality and inequality. He continuously endeavored to find some clue to solve this problem, setting his target of examination on pacifism.

Criticism of pacifism As already indicated above, the idea of peaceful co-existence requires the recognition of conflicting and legitimate interests of different groups of people. However, in the 1930s pacifism proceeded as if there was a win-win solution for all conflicting groups. Polanyi casted his critical eyes on the liberal measures of economic sanctions as a peaceful tool to avoid military measures. Such liberal pacifism had already appeared in the early 1910s thanks to a journalist, Norman Angell, who rejected geopolitical ambitions of colonialism as anachronistic and outdated in the age of networking of international liberal order. His ideas were taken over in Woodrow Wilson’s Fourteen Points and the basic frame of the League of Nations. In fact, the proposal of economic sanctions was implied in the Article 16, in case of an attack to change some territorial boundary.14 Deterrence by sanctions remains a typical measure of liberalism until nowadays. It is possible that sanctions, which serve as warnings to attack, together with the ineffectiveness of the Article 19, might paradoxically bring the defeated countries to the obsession that the only possibility to change any territorial boundary would be to resort to war. Polanyi seems to have been aware of this flaw when he ironically stated that ‘(i)n the Anglo-Saxon part of the world, a pacifistic-sanction-like religion goes around’ (1935b/ 2003: 266).15 Catanzariti places Polanyi’s elaboration in the context of political and legal studies of his contemporary German-speaking countries, especially those of Carl Schmitt and Hans Kelsen, who also criticized the Versailles Treaty. Kelsen in particular ‘criticized the shortcomings of the system of sanctions imposed by the Pact of the League of Nations, proposing instead the Creation of an International Court of Law’ (Catanzariti 2014: 229–230).16 Polanyi, according to her, was rather inspired by ‘a traditional idea of modern politics’ (ibid.: 230). His stance could further be understood to postulate an important foundation of politics to ‘reject the need of war to pursue certain objectives’.17 The political dimension was certainly not independent of economic considerations, particularly in the dominant idea of liberalism at that time; Polanyi continued to follow this line in the 1930s.

164

Karl Polanyi’s idea of co-existence

In the second period, after 1933, when ostentatious geopolitics of both Nazism in Germany and Fascism in Italy were increasing their appeals, the liberal vainly continued to rely on the same pacifism.18 For Polanyi (1938/2018: 85), liberal pacifism not only was ineffective, but also had practically become ‘a chief obstacle to the fulfillment of peace’ under the vindication of peace.19 Not only the former victorious countries had influenced and distorted the institutional frame for their own interests, but liberal pacifism was promoted by the hegemonic powers of the UK and then of the USA: Pax Britannica and Pax Americana.20 In the latter half of the 1930s, Polanyi sought for explanations,21 which he found in the 1940s: in the national and international, political and economic structures of the 19th century, peace was attained only as ‘a welcome by-product of the balance-of-power system’ (Polanyi 1944/2001: 8). It was a fragile peace underwritten by economic interdependence under the gold standard (Hart and Hann 2009: 5) or, more specifically, by the haute finance (Hart 2009: 95). As Polanyi points out (1944/2001: 198), such double standard toward peace and the unintentional attainment of such deceived kind of peace resulted in a lack of realism which infringed people’s consciousness with an ‘insurmountable wall of illusions that hide the facts’. Polanyi warned that, with this unconquerable wall of illusions, ‘awareness of the essential nature of the problems of politics sank to an unprecedented low point’ (ibid.).22 In his understanding, politics should independently stand for the assumption and recognition of difference of interests and ideas, in contrast to the naivety or simple insensibility of liberal pacifism. We can see some germ of his idea of co-existence in the arena of international politics here. In Polanyi’s view, fascism increased its appealing power through a peculiar version of realism absent in liberal pacifism. Realism ‘meant to disapprove utopianism of failing to comprehend ‘the reality’. […] In other words, realism posed a question of how much a human society could be intended and planned’ (Nakayama 2018: 191). Obviously, Polanyi was aware that the realism proposed by Mussolini or Hitler was only a pseudo one – which had nothing to contribute to any kind of peace. On the institutional dimension of policy making for domestic and international matters, fascism contrasted itself to democratic, time-consuming procedure, resorting to its power of swift determination. Polanyi, while investigating fascist philosophy, deepened his own understanding of democracy. Thereby he maturated the idea of tolerance in the sense of co-existence in the 1940s.

Unsolved problem of socialism on a basis of different kind of democracy Finally, Polanyi’s observations on the change and development of the USSR have certainly contributed to the evolution of his idea of co-existence, though we cannot literally or explicitly trace the trail. He wrote only briefly on Trotzky in a memo,23 and he did not write much about the USSR, but rather analyzed their influences on and reactions of Western Europe. It was a time when Soviet Russia became a member of the League of Nations in 1934. The situation potentially required careful consideration on how to find a way of co-existence with different political and economic regimes, with different ideals, but their presence was considered only strategically in the Western liberal perspective. Until 1933 – Polanyi pointed out (1937: 44–45) – ‘Russian Revolution lived in perpetual fear of a repetition of the post-War interventions that had been organized against her by the allied countries’, with repeated invasions of her territory ‘by counter-revolutionary armies supported by French and British reactionary circles’. He then distinguishes two stages of Russian Revolution, the first of which was a modern, bourgeois revolution from the feudal state, a common one also for Western countries, while the second tried to attain a unique socialist nation-state. This attempt led to a tendency toward

165

Chikako Nakayama

a planned economy after 1933. Polanyi grasped it critically in the frame of totalitarianism, and, more generally, as one of the various ‘transformations’ of that period, expressing different, indeed opposed, projects of social organization. The American New Deal, for example, turned out soon after to be a public policy in accordance with Keynes’ idea of capitalism with state planning and policies. Various political setups were possible between the two poles of fascism and socialism. Anyhow, Polanyi maintains (1937: 58), ‘National Socialism is not a form of Socialism. It is the deadly enemy of all Socialism’. And, in contrast to fascism, socialism could be considered an indispensable element for achieving co-existence in the international society, as Polanyi intended to show in his investigation of different kinds of democracy with different ideals of liberty and equality (1937–1938/2014: 177–181). Regarding the USSR, it was his hope that socialism could move on the side of democracy, not ideologically but substantially, and obviously against fascism. Socialism of this kind could be a factor of peace and co-existence: and vice versa, an efficient international co-existence would be favorable to the democratic evolution of socialism within the USSR and other countries. In a lecture of 1940, Polanyi expresses an interpretation of the past, which is also his ardent hope for the future: given a functioning international system, both political and economic, of which Russia could form a part, […] these tensions [within Russia] might well have been overcome in time (Polanyi 1940/2017: 31)

Polanyi’s attainment to the concept of co-existence During World War II, in The Great Transformation (1944/2001: 263), Polanyi came to believe distinctively that peace and freedom as a pair ‘must become chosen aims of the societies toward which we are moving’, since ‘the interest in peace which sprang from nineteenth-century economy has ceased to operate’. In the 19th century, peace and freedom were a ‘corollary’ of the interests of the ‘haute finance’, now they should be pursued as such and per se: the fact that the market economy has had, and cannot but have, a considerably different purpose is a crucial theme of his book. Equally important is the strict connection between internal democracy – where ‘the right to nonconformity must be institutionally protected’ (ibid.) – and a tolerant and reciprocally advantageous international co-existence. Parallel to this line of reasoning, Polanyi poses the following question: ‘how far does commitment to the ideals of British democracy involve insistence on a similar interpretation of democratic ideals in other countries?’ (1944/2018: 187), taking the Russian version of democracy into consideration. At the end of this article, he states that the greatest of all British institutions in the political field and of all contributions this country ever made to the world of political thought, is the idea of tolerance. Above all, let us be tolerant; do not let us think that the British ideal of democracy must be forced upon all other countries. Parliamentary democracy is at its best when it is an embodiment of liberty and tolerance. (Ibid.: 196) After all his struggles and studies, he attained the idea of co-existence in connection with tolerance between different versions of democracy. In this way, his perspective toward the pluralistic world was founded.

166

Karl Polanyi’s idea of co-existence

Conclusion This chapter examined Polanyi’s thoughts and struggle in the 1930s as the decisive source of his pivotal idea of co-existence. The very tense atmosphere in the post-war period urged him as academic-based journalist as well as activist to analyze the problems of international liberal institutions, the ineffectiveness of pacifism, and also the strong tendency toward fascism. Considering these themes, Polanyi’s final ideal of co-existence turns out to have been not confined within the opposition between West and East in the sense of Cold War and their respective ideologies. His idea was more general, as a fundamental stance for human beings in human society. His efforts for effective peace and his conception of co-existence deserve consideration also with regard to the problems of our 21st-century world.

Notes 1 Checking the volumes throughout, we can see that several volumes since the second show the name of Karl Polanyi as a deceased editor, and further volumes have a sentence in the back of the covers that he had “played leading parts in the foundation of the journal” along with other names of deceased editors. 2 Khruschchev emphasized on the importance of sound, peaceful competition between different social and ideological systems without war, in the “age of the H-bomb and atomic techniques” (Khrushchev 1959: 4). Dale (2016b: 365) mentions the fact that Trotsky had used ‘co-existence’ as a watchword at BrestLitovsk, and that the meaning of this term was different at that time. 3 Carr (1979/2000: 250) describes the circumstance in which the representative of the USSR used this keyword at an international meeting in Geneva in 1927. Lerner (1964) examines the transition of the concept of peaceful co-existence in comparison with that of world revolution from the beginning of the USSR to the period of Khrushchev. 4 As is shown below, there were several short articles on the USSR; in the Karl Polanyi Archive, there is a folder (Con_20 Fol_11) containing several drafts Polanyi wrote around 1937–1938, investigating Trotzky, Marx and the possibility of socialism in the USSR. Besides, there is another folder (Con_38 Fol_2) containing several versions (in Italian and in English) of his article “Soviet Thought in Transition” published in Italian in 1962 (Nuova Presenza 5: 39–45). Dale (2016b: 17) suggests a point of connection of Polanyi’s (maternal) family line with the fact that this journal was the final project for Polanyi: “Given the fusion of paternal West and maternal Russia that was so deeply rooted in his psyche, this was a fitting valedictory venture”. 5 For example, Dale 2016c: 24. 6 Polanyi also watched the transition of Asian countries like India, China, Japan, etc. in his articles, but these were not listed here, as the theme is focused on Europe. 7 As I indicated on another occasion, such economists as Lenin, Hobson, Schumpeter, that is, Marxists as well non-Marxists, discussed the issue (Nakayama 2018:187). 8 As the editors indicated, there are versions of manuscript dated 1932 and 1938 (Polanyi 1938/ 2014:. 76). 9 See Lerner 1964: 869. 10 Keynes had set up his purpose to “show that Carthaginian peace is not practically right or possible. […] (It) overlooks […] the deeper economic tendencies which are to govern the future” (Keynes 1919/1971: 23). Carthaginian peace meant merciless treatment, in reference to Carthage, that, after being defeated by Rome, was completely destroyed, under the name of peace. 11 “In the first period of post-War history (1919–1933) national conflict occupies the scene, in the second period (after 1933) social conflict is added unto it” (Polanyi 1937: 14). 12 Catanzariti (2014: 229) mentions this part of Polanyi’s analysis as “a critique of two articles in the Pact”. But Polanyi was not really critical of the Article 19 itself; rather, he supported it in that “Under Article 19 it was their frontiers that would be peacefully revised” (Polanyi 1937: 43). In fact, the Article 19 could assure a procedure in the long run to make a claim to revise some territory generally, even if it could not be directly applied to the Peace Treaties. 13 But as Cangiani and Thomasberger (2003: 23) indicate, Polanyi was also conscious of the worst case of equality, that of “a suicidal armaments race” (Polanyi 1937: 39).

167

Chikako Nakayama 14 We read in the Article 16: “Should any Member of the League resort to war […] (the) Members of the League agree … that they will mutually support one another in the financial and economic measures … in order to minimise the loss and inconvenience resulting from the above measures, and that they will mutually support one another in resisting any special measures aimed at one of their number by the covenantbreaking State…”. 15 Taking over the indication of Cangiani and Thomasberger (2003: 24), Nakayama (2018: 190) briefly discusses this point. 16 Different from our present period, there was at that time a permanent International Court of Justice, separate from the League of Nations. 17 Catanzariti (2022) explores this issue in our contemporary context in her writing, ‘’War in Ukraine’ and distinguished Polanyi’s stance from Kelsen’s more than before. 18 It could be seen in Angell’s getting the Nobel Prize of Peace in 1933 (Nakayama 2018: 186–188). 19 Polanyi hence had an ambivalent critical attitude against naive pacifism, possibly combined with instrumental utilization of peace and freedom, even though he placed high value on these two ideals. Dale explained that Polanyi’s thoughts in the 1930s had been “guided by an underlying philosophy of history organized around two […] drives: toward freedom and ‘unity’” (Dale 2016a: 409–410). And then it “hovered between radical and realist positions” (ibid.: 417), but the problem seems to lie not so much in unsettled stance of Polanyi as in the side of liberalism. 20 Polanyi employs this terminology in an article in 1930 on this transition of hegemonic power (Nakayama 2018: 188). 21 The list of changes of monetary, financial policies at the end of the 1937 pamphlet may suggest that he already explored possible connections between these policies and the problems around peace. 22 Nakayama discussed this point to some extent (2018: 187–188). 23 In his lecture memo in 1940, he wrote very briefly on Trotzky and his “permanent revolution” (Polanyi 1940/ 2017: 33). His unpublished draft on Trotzkyism in his digital archive (cf. note 4) was a summary of discussion with Christian Left Group on Trotzky’s idea of world revolution and socialism and the general tone was critical.

Bibliography Backhaus, Juergen. 1985. “Keynesianism in Germany”. In Keynes’ Economics: Methodological Issues, ­Lawson, T. and Pesaran, H., eds. London/New York: Routledge: 209–253. Cangiani, Michele and Thomasberger, Claus. 2002. “Marktgesellschaft und Demokratie: Die Perspektive der Menschlichen Freiheit. Karl Polanyis Arbeiten von 1920 bis 1945”. In Chronik der Großen Transformation, Band 1, Polanyi, Karl, Cangiani, M. and Thomasberger, C., eds. Marburg: Metropolis-Verlag: 11–44. ——— 2003. “Machtpolitik, Systemkonfrontation und Friedliche Koexistenz: die Bedeutung der Demokratie, Karl Polanyis Analysen der Internationalen Beziehungen”. In Chronik der Großen Transformation, Band 2, Polanyi, Karl, Cangiani, M. and Thomasberger, C., eds. Marburg: Metropolis-Verlag: 11–43. ——— 2018, “Introduction.” In Economy and Society: Selected Writings, Polanyi, Karl, Cangiani, M. and Thomasberger, C., eds. Cambridge: Polity Press: 1–12. Carr, Edward Hallett. 1979/2000. The Russian Revolution from Lenin to Stalin 1917–1929. London: Macmillan Publishers. Japanese translation by Nobuaki Shiokawa. (Iwanami Shoten). Catanzariti, Mariavittoria. 2014. “Postface: Observations on Karl Polanyi’s Juridical-Political Thought”. In For a New West: Essays, 1919–1958, Polanyi, K., Resta, G. and Catanzariti, M., eds. Cambridge: Polity Press: 221– 241. ——— 2022. “A Non-Updated Notion: Pacifism”. In International Karl Polanyi Society, Debate on War in Ukraine, 25th of April, 2022. https://www.karlpolanyisociety.com/ Dale, Gareth. 2016a. “In Search of Karl Polanyi’s International Relations Theory”. Review of International Studies 42: 401–424. ——— 2016b. Karl Polanyi: A Life on the Left. New York: Columbia University Press. ——— 2016c. “Introduction”. In Karl Polanyi: The Hungarian Writings, Polanyi, Karl, Dale, Gareth, eds. Manchester: Manchester University Press: 1–37. Hart, Keith. 2009. “Money in the Making of World Society”. In Market and Society: The Great Transformation Today, Chris, Hann and Hart, Keith, eds. Cambridge: Cambridge University Press: 91–105.

168

Karl Polanyi’s idea of co-existence Hart, Keith and Hann, Chris. 2009. “Introduction: Learning from Polanyi 1.” In Market and Society: The Great Transformation Today, Hann Chris and Hart, Keith, eds. Cambridge: Cambridge University Press: 1–16. Haslam, Jonathan. 1983. “Review: E. H. Carr and the History of Soviet Russia”. The Historical Journal 26/4: 1021–1027. Humphreys, Sally C. 1969. “History, Economics, and Anthropology: The Work of Karl Polanyi”. History and Theory 8/2: 165–212. Keynes, John Maynard. 1919/1971. The Economic Consequences of the Peace. The Collected Writings of John Maynard Keynes, Vol. 2. London: Macmillan and Co. Khrushchev, Nikita Sergeyevich. 1959. “On Peaceful Coexistence”. Foreign Affairs 38/1: 1–18. Lerner, Warren. 1964. “The Historical Origin of the Soviet Doctrine of Peaceful Coexistence”. Law and Contemporary Problems 29/4: 865–870. Nakayama, Chikako. 2018. “Polanyi’s Concept of Peace in a Complex Society”. In Karl Polanyi’s Vision of a Socialist Transformation. Brie, Michael and Thomasberger, Claus, eds. Montreal/ New York/Chicago/ London: Black Rose Books: 185–197. Polanyi, Karl. 1933/2002 “Zweiter Fünfjahrplan Abgebremst”. In Id. Chronik der Großen Transformation, Band 1, Cangiani, Michele and Thomasberger, Claus, eds. Marburg: Metropolis-Verlag: 298–307. ——— 1934/2002. “Wo Halt Sowjetrußland?” In Id. Chronik der Großen Transformation, Band 1, Cangiani, Michele and Thomasberger, Claus, eds. Marburg: Metropolis-Verlag: 308–315. ——— 1935a/2018. “The Essence of Fascism”. In Id. Economy and Society: Selected Writings, Cangiani, Michele and Thomasberger, Claus, eds. Cambridge: Polity Press: 81–107. ——— 1935b/ 2003. “Markstein 1935”. In Id. Chronik der Großen Transformation, Band 2, Cangiani, Michele and Thomasberger, Claus, eds. Marburg: Metropolis-Verlag: 261–266. ——— 1935–1936/2014. “The Roots of Pacifism”. In Id. For a New West: Essays, 1919–1958, Resta, Giorgio and Catanzariti, Mariavittoria, eds. Cambridge: Polity Press: 86–91. ——— 1936/2002. “Russischer Verfassungswandel”. In Id. Chronik der Großen Transformation, Band 1, Cangiani, Michele and Thomasberger, Claus, eds. Marburg: Metropolis-Verlag: 316–317. ——— 1937. Europe Today. London: The Workers’ Educational Trade Union Committee. ——— 1937–1938/2014. “Conflicting Philosophies in Modern Society”. In Id. For a New West: Essays, 1919–1958, Resta, Giorgio and Catanzariti, Mariavittoria, eds. Cambridge: Polity Press: 177–204. ——— 1938/2014. “The Meaning of Peace”. In Id. For a New West: Essays, 1919–1958, Resta, Giorgio and Catanzariti, Mariavittoria, eds. Cambridge: Polity Press: 77–85. ——— 1940/2017. The Present Age of Transformation: Five Lectures by Karl Polanyi Bennington College. Smith, Jeremy and Pettifor, Ann, eds. Bennington and London: Bennington College in cooperation with PRIME. https://www.primeeconomics.org/publications/ the-present-age-of-transformation/ ——— 1941–1943/2018. “Common Man’s Masterplan”. In Id. Economy and Society: Selected Writings, Cangiani, Michele and Thomasberger, Claus, eds. Cambridge: Polity Press: 177–186. ——— 1943/2018. “Why Make Russia Run Amok?” In Id. Economy and Society: Selected Writings, Cangiani, Michele and Thomasberger, Claus, eds. Cambridge: Polity Press: 215–225. ——— 1944/2001. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press. ——— 1944/2018. “The Meaning of Parliamentary Democracy”. In Id. Economy and Society: Selected Writings, Cangiani, Michele and Thomasberger, Claus, eds. Cambridge: Polity Press: 187–196. ——— 1945/2018. “Universal Capitalism or Regional Planning?” In Id. Economy and Society: Selected Writings, Cangiani, Michele and Thomasberger, Claus, eds. Cambridge: Polity Press: 231–240. ——— 1947/2018. “Our Obsolete Market Mentality”. In Id. Economy and Society: Selected Writings, Cangiani, Michele and Thomasberger, Claus, eds. Cambridge: Polity Press: 197–211. Polanyi Levitt, Kari. 1964. “Karl Polanyi and Co-Existence”. Co-Existence 2: 113–121. (A revised version was published as Annex D of The Life and Work of Karl Polanyi, Polanyi-Levitt, Kari, ed. Montréal/ New York: Black Rose Books, 1990: 253–263). Smith, Jeremy and Pettifor, Ann. 2017. ‘Market-Utopia’ -Lessons from the Past, Implications for our Future: Introduction to Karl Polanyi’s 1940 Bennington College lectures by Jeremy Smith & Ann Pettifor, In The Present Age of Transformation: Five Lectures by Karl Polanyi Bennington College, 1940, 3–11.

169

14 AFTER WORLD WAR II Universal capitalism or regional planning? Claus Thomasberger

The year 1945: the international system at a crossroads Of all the great changes witnessed by our generation, none may prove more incisive than that which is transforming the organisation of international life. … the political system of the world as a whole has undoubtedly reached a turning point. (Polanyi 2018b, 231) With these sentences begins Karl Polanyi’s essay titled “Universal Capitalism or Regional Planning?”, written between December 1944 and January 1945, i.e. in a moment when World War II was still going on, but the end was in sight. Polanyi was convinced that the failure to reconstruct the four crucial institutions – the balance-of-power system, the liberal state, the self-regulating market system, and the international gold standard – marked not only the end of 19th-century European civilization, but also the irrevocable collapse of the international economic and political system by which the European empires had dominated the world after the Industrial Revolution. International economic and political relations are a subject to which Polanyi devoted much of his writing during the interwar period. In the 1920s and 1930s, he has written more than 250 articles in the Der Österreichische Volkswirt, the vast majority of which dealt with questions of international politics and economics.1 He published essays in such renowned magazines as Harper’s Magazine or The London Quarterly of World Affairs. It is also no coincidence that his most famous book The Great Transformation (TGT) starts with a section titled “The International System”. When the defeat of Nazi Germany was in sight – and even before the finalization of the manuscript of TGT – Polanyi decided to return from the United States to Europe with the clear intention of intervening into the English debate about the future international order.2 At the beginning of 1945, when the above essay was published, the question of the future shape of the international economic and political order was on the agenda. The Bretton Woods Conference had taken place just half a year earlier; (July 1 to 22, 1944) and the English parliamentary elections were on the horizon. Polanyi saw in this particular historical situation a window of opportunity for a radical transformation of the international system. The simultaneous collapse of the “three competing forms of universalist societies” (Polanyi 2018b, 232) – liberal capitalism, world-revolutionary socialism and racial domination – had opened the chance to establish a new DOI: 10.4324/9781003336747-18

170

After World War II: universal capitalism or regional planning?

multipolar world order, in which regional integration would play a key role. After the failed restoration of the international gold standard, the world economic crisis, the great depression and two world wars within a lifespan, the deeply rooted aspirations of the common people in Europe were directed toward a new beginning. However, Polanyi was well aware that such a perspective was hindered by the ambition of the US administration to revive the universal system under its own direction. The situation in the United States was different from that in Europe. The United States has remained the home of liberal capitalism and is powerful enough to pursue alone the Utopian line of policy involved in such a fateful dispensation – a Utopian line since, ultimately, the attempt to restore the pre-1914 world-order, together with its gold standard and manifold sovereignties is inherently impossible. (Polanyi 2018b, 232–233) Polanyi had lived long enough in the United States to have no illusions. “The United States has no alternative. Americans almost unanimously identify their way of life with private enterprise and business competition – though not altogether with classical laissez-faire. This is what democracy means to them, rich and poor alike” (Polanyi 2018b, 233). While the new dealers had focused primarily on the internal conditions in the United States, the Truman administration, which took power after Roosevelt’s death, prioritized strengthening its international position and containing the Soviet Union. The United States actively worked for taking over England’s role as the center of a global economic system. From Polanyi’s point of view, this meant nothing less than the danger of a new attempt to restore a universal liberal system. Polanyi was convinced that in face of the contrasting interests between Europe and the United States, the United Kingdom had in its hands the key to the future development of the world economy. “Great Britain is now standing at the crossroads” (Polanyi 2018b, 231). The United States was on the one side, England, the European continent and Russia on the other. The mood in England also tended toward a solution that was no longer based on the ideals of economic liberalism. The fact that Polanyi correctly assessed the situation became clear, when in July 1945 the Labor Party under the lead of Attlee won the House of Commons elections against Churchill. Polanyi recognized that overcoming the capitalist market society in Europe and elsewhere could only be successful if the reconstruction of an international economic system according to ideas of Wall Street could be prevented. The English stance was decisive because, even if the United States were to attempt to reconstruct the world on the model of a universal market system, cooperation would allow the European states to form an independent pole capable of placing interregional relations on more democratic foundations. Yet, the obstacle to overcoming the idea of restoring a liberal world order under US hegemony was that not only was England under pressure from the United States, but Churchill and other conservative politicians were also working to undermine the electoral decision and tie England to the United States. Churchill’s intention to rely on Anglo-American cooperation would squander the window of opportunity for overcoming the liberal utopia that had opened after World War II. “The danger was precisely this clandestine co-operation”, Polanyi specified in an article published in The Leeds Weekly Citizen two years later (Polanyi 2018c, 226). Referring to Churchill’s Iron Curtain Speech,3 Polanyi added: Churchill’s plan, which he tried to accomplish via facti, was to join England to America. Not by virtue of declarations, to which neither party would have assented, but through the creation, even before the war was quite over, of a joint army, a joint global strategy, joint 171

Claus Thomasberger

finance, a joint trusteeship system, and a joint foreign policy. He never intended to put this up to considered vote of the English. ... Churchill largely achieved his aim. His plans were well laid. Lend-lease was bound to end soon, and since Churchill’s government made no provision to meet the emergency, Britain would have to ask for American help and thus land herself both in financial and in military dependence from the United States. (Polanyi 2018c, 228–229) In the article, Polanyi underlined the importance of cooperation between the American New Dealers who worked for fending off Republican free trade imperialism, and the forces within the Labor Party that opposed Churchill’s plan to create facts behind Parliament’s back. At the end of World War II, the transformation of the economic and political world order was a topic too important not to engage. It was crucial insofar as regional solutions were on the agenda. From Polanyi’s viewpoint, it was imperative to avoid another attempt to reconstruct the universal system of the 19th century, an initiative that, if successful, would throw the world back decades and revive the dangers of the disasters of the 20th century. In TGT Polanyi remarked that Much of the massive suffering inseparable from a period of transition is already behind us. In the social and economic dislocation of our age, in the tragic vicissitudes of the depression, fluctuations of currency, mass unemployment, shiftings of social status, spectacular destruction of historical states, we have experienced the worst. (Polanyi 2001, 258–259) Should the process have to be repeated? Should all the sufferings of the interwar period have been in vain? Should the great transformation be stifled and the development reversed? Polanyi regarded the possibility that the attempt to establish a universal system according to liberal economic ideas, albeit no longer under European but American leadership, should be undertaken again as an acute danger, an imminent fatal relapse. His contributions to this discussion after World War II should be interpreted as attempts to demonstrate the possibility of an alternative, in which England’s role would be decisive.

The 1930s: the collapse of the liberal world order and the consequent transformation The idea that the world was at a historical turning point played a pivotal role in Polanyi’s thinking already in the interwar period and not just with the end of World War II. In the middle of the 1930s in several essays for the Österreichische Volkswirt and elsewhere he analyzed the collapse of the 19th-century liberal world order and its consequences in great detail. One of these essays with the title Markstein 1935 (Landmark 1935), published in December of the same year, begins with the words: The years of the Paris Peace Treaties have come to an end. The threshold of a new period of history has been crossed. The time of transition is behind us and the outlines of a new epoch are already looming in the shadows. (Polanyi 2003b, 261) The collapse of the pillars on which the international economic organization of 19th-century civilization had been based, unleashed forces that made independent developments of various 172

After World War II: universal capitalism or regional planning?

large state-economic units possible. This is the explanation, Polanyi concludes, for the fact that in many countries within a very short period of time fundamental transformation processes in very different directions had begun. Foreign and domestic economic and political events were much more closely intertwined than the contemporaries of the 19th century had wanted to admit. The international economic liberal system of the 19th century was not only the consequence of the triumph of economic liberalism, but at the same time the basis on which it could have developed at all. “The dissolution of the international system” upon which our (the European civilization of the 19th century – CT) had unconsciously depended” – he will conclude later (Polanyi 2017, 14) – had been the starting point for the sudden changes that turned upside down not only the international political and economic order, but also the internal life in nearly all the nations on both sides of the Atlantic. The Great War itself, as well as the postwar revolutions, were, in Polanyi’s assessment, still a “continuation and conclusion of the era of liberal nationalism” (Polanyi 2003b, 263). A first sign of the upcoming transformations on the political level was the fascist upheaval that began in Italy in the early 1920s. Another step was the transition to the policy of five-year plans (1926–1928) in the Soviet Union, which meant that the Bolshevik revolution had reached its end. In Germany, the new epoch began in 1933 when Hitler came to power. In addition, there was the New Deal in the United States, which was accompanied by an active policy of economic neutrality as well as the electoral victories of the Popular Front first in Spain (Jan. 1936) and then in France (May 1936). In the booklet Europe To-day, published two years later, he returned to the subject from a slightly different perspective by focusing on the distinction between national and social causes of the conflicts that can lead to war. Again, he divided the interwar period into two phases. In the first period of post-War history (1919–1933), national conflict occupies the scene; in the second period (after 1933), social conflict is added into it. ... The social alignment has sprung into international prominence since the establishment of Nazi Germany; essentially it is a conflict between Fascism and Democracy. (Polanyi 1937, 14) The first period, he underlined, had been dominated by the dispute between the ‘revisionist’ states and those who gave priority to ‘collective security’. For the defeated countries, the revision of the unjust and inapplicable aspects of the peace treaties took precedence over the question of collective security, while the victors, France above all, felt the need to proceed in the opposite manner and to secure the status quo. With Adolf Hitler’s rise as Reich Chancellor in Germany, these discussions appeared to be nothing more than a ‘vicious circle’ of European diplomacy. The alliances as well as the conflicts now depended less on the contradictions of the ‘System of Versailles’ than on the opposition between different social visions: democratic and socialist countries on the one hand, Fascism on the other. At the same time, the stage expanded from Europe to the whole world. The perception that after 1933 the confrontation between different social systems overrode the old power politics was dramatically confirmed first in the Spanish Civil War, later in World War II. From the beginning of the second period, the political realignments were accompanied by a fundamental restructuring of international economic relation. Most countries answered to the abandonment of the gold standard by Great Britain and subsequently by other countries with the introduction of new trade barriers. Polanyi observed a strong tendency in direction of the emergence of more or less autarchic empires. Not only the United States, also the European countries strengthened what Keynes in a famous article had called “national self-sufficiency” (Keynes 1933). However, this does not mean that Polanyi agreed with Keynes’ judgment. Polanyi did not 173

Claus Thomasberger

consider desirable what he observed. He did not advocate social closure over market opening. Wolfgang Streeck (2021) misunderstands Polanyi when he interprets his critique of the international gold standard as a plea for autarchy and small states. Indeed, Polanyi is misread if he is considered a defender of societal closure against the liberal demands of market openness. His own position must be understood as a response to the more fundamental conflict between the market system and politics, economic dependency and national autonomy, fascism and democracy. During all his life Polanyi has been a defender of international trade and the division of labor. “International division of labour is an unmitigated boon”, Polanyi (2017, 23) underlined in a lecture held at in 1940 at Bennington College in Vermont. The question that preoccupied him is a different one: “How far can it (the international division of labor – CT) be achieved through a market-economy?” (Polanyi 2017, 23) As long as the nature of international division of labor is organized in form of a competitive market system, external protection of national markets and the limitation of trade are necessary to avoid unsustainable distortions that threaten those who cannot survive under conditions of global competition. Therefore, the international division of labor can develop fruitfully only if it is regulated by political authorities and not left to the command of the market forces alone. The liberal prejudice of regarding any intervention in the market system as harmful made the further deepening of the international division of labor impossible and left only the path toward greater economic self-sufficiency. Polanyi was convinced that the fact that “economic autarchy was the one universally dominant trend in the Thirties” (Polanyi 2017, 16), was the inevitable result of the overwhelming influence of economic liberalism in the field of economic policy. Nevertheless, Polanyi regarded this new trend also as a chance to reorganize the global division of labor in a new and more sustainable way. “The greatest single step towards division of labour and the enlargement of the peace area”, he formulated in a manuscript written also at Bennington College, Is represented by essentially autarchic and essentially peaceful empires the co-operation of which is institutionally safeguarded, empires such as the U.S.A., Latin America, Great Britain, the U.S.S.R. and a similarly peaceful federation of a German Central Europe, China, India, and some other regions. (Polanyi 2018a, 180) Here again he does not defend societal closure against market openness, but underlines the importance of combining the enlargement of the international division of labor with political autonomy and self-determination of regional units. Only by establishing peaceful empires, the economic dependencies that the international gold standard had caused could be overcome. In his eyes it was critical that “self-sufficient empires can regulate their economic life in the way that they please and live at peace with others. The helpless method of free trade must be superseded by direct responsibility of the governments for economic and financial relations with other governments” (Polanyi 2018a, 181). The crucial prerequisites for (a) a peaceful world order after World War II and (b) the possibility of a socialist path in Europe4 were, as he reiterated in the last chapter of TGT, tolerance of other societies’ organization and other peoples’ ways of life. “The primacy of society over the economic system”, he stressed, “may happen in a great variety of ways, democratic and aristocratic, constitutionalist and authoritarian, perhaps even in a fashion yet utterly unforeseen” (Polanyi 2001, 259). For Polanyi the mutual recognition of the variety and heterogeneity of different social orders was

174

After World War II: universal capitalism or regional planning?

the crucial point. The European civilization of the 19th century, with its claim to shape the world according to its model, was the historical exception that could be overcome with the turning point marked by the 1930s. Only from the perspective of market society did what subsequently followed appear as a uniform tendency. “From the viewpoint of human reality that which is restored … lies in all directions of the social compass. In effect, the disintegration of a uniform market economy is already giving rise to a variety of new societies” (Polanyi 2001, 260). With the collapse of the automatic mechanism of the international gold standard, he summed up his vision of the new opportunities after World War II, It will become possible to tolerate willingly that other nations shape their domestic institutions according to their inclinations, thus transcending the pernicious nineteenth-century dogma of the necessary uniformity of domestic regimes within the orbit of world economy. Out of the ruins of the Old World, cornerstones of the New can be seen to emerge: economic collaboration of governments and the liberty to organize national life at will. Under the constrictive system of free trade neither of these possibilities could have been conceived of, thus excluding a variety of methods of cooperation between nations. While under market economy and the gold standard the idea of federation was justly deemed a nightmare of centralization and uniformity, the end of market economy may well mean effective cooperation with domestic freedom. (Polanyi 2001, 262) With the last sentence he alludes to considerations propagated by the Federal Union in the United Kingdom and Lionel Robbins (1972) and Friedrich Hayek (1937, 1980) in particular. Even if the idea of federation is quite close to Polanyi’s thinking, Robbins and Hayek considered federation to be an instrument for limiting, as much as possible, the influence of nation-state policies on the market system and, therefore, the opposite to what Polanyi strived for. Only when the subordination of society to the market mechanism had been overcome, the positive effects of federation could come to the fore. With his emphasis on the collaboration of governments which were able to organize life at will on a regional level he also contradicts Ludwig Mises’ (2002) proposal for a centrally governed Eastern Democratic Union (EDU). Obviously, in the writings of Mises, Hayek, and also Polanyi, the experiences of the Habsburg Monarchy to handle the conflicts that emerge in a region of racially mixed settlements played a key role. It is not that, as Slobodian assumes, they considered the Austro-Hungarian Empire a successful example that could serve as a guide. To the contrary, the Dual Monarchy had demonstrated that it was unable to resolve the tensions and struggles. In the 1945-essay Polanyi himself referred to the importance of greater regional autonomy in central-eastern Europe. He knew what he was talking about having spent most of his life in Hungary and Austria, and during World War I having fought against the Russian army in Galicia. If the introduction of a market-economy “in multinational areas, like the basins of the Vistula and the Danube, … resulted in hysterically chauvinistic states, who, unable to bring order into political chaos, merely infected others with their anarchy” (Polanyi 2018b, 235), the strengthening of regionalism alone would not solve all the problems, he warned. However, it could function as “the cure for at least three endemic political diseases – ­intolerant nationalism, petty sovereignties and economic non-co-operation. All three are inevitable by-products of a market-economy in a region of racially mixed settlements” (Polanyi 2018b, 235). Having overcome the blind faith in the self-regulation of the market system, there was at least a chance not to fall back into the crazy nationalism that had infected the world as a whole.

175

Claus Thomasberger

After World War II: the second attempt to restore the Utopia of universal capitalism under American lead Polanyi’s hope at the beginning of 1945 was that organized international trade and the political control of foreign investment would increase the division of labor without producing the deadly hazards to the fabric of society that self-regulating market system had produced in the decades before. What stood in the way of overcoming those dangers were the new ambitions of the United States, which became apparent already during Roosevelt’s third term and even more evident after his death in 1945. Picking up on Churchill’s depiction of a bipolar world, in March 1947 the successor of Roosevelt announced in his Address before a Joint Session of Congress what became known as the “Truman Doctrine”. After the war, he declared, most nations would have to choose between two alternative ways of life. One way of life is based upon the will of the majority, and is distinguished by free institutions, representative government, free elections, guarantees of individual liberty, freedom of speech and religion, and freedom from political oppression. The second way of life is based upon the will of a minority forcibly imposed upon the majority. It relies upon terror and oppression, a controlled press and radio, fixed elections, and the suppression of personal freedoms. Truman (1947) declared. And he continued: “I believe that it must be the policy of the United States to support free peoples”. In his Inaugural Address on January 20, 1949, he not only renewed his vision that the United States should take the lead in the fight against communism, but he also emphasized that, “we must carry out our plans for reducing the barriers to world trade and increasing its volume” (Truman 1949). Less than three months after the speech, the United States signed the North Atlantic Treaty. Thus, exactly what Polanyi had already feared in 1945 had come to pass. The dangers he described in the article “Universal Capitalism or Regional Planning” in the following decades proved to be true. After World War II, the United States started a new attempt to build a universal market economy system. And in England, notwithstanding the triumph of the Labor Party at the 1945 elections, Churchill’s line prevailed. England and large parts of the European continent, Asia and Africa were integrated in what became the Western world and the Soviet Union, China and other countries that opposed the claim were excluded. The Cold War, then the hot war in Korea, Vietnam, etc., was also the consequence of the policy that claimed to restore the universal system of the 19th century in a modernized form. Polanyi has been interpreted as being in favor of what Ruggie (1982) baptized “embedded liberalism”. According to this interpretation, the Bretton Woods institutions, macroeconomic management, and national protection against the impact of globalization are regarded as instruments of “reembedding” the economy into society. This interpretation is precipitous. On the one hand, it overlooks the fact that Polanyi, until the mid-1940s, sees the New Deal as a possibility – but no more than a possibility – of finding in the United States a new and creative answer to the challenges of an industrial civilization. On the other hand, it negates the fact that with the end of the New Deal this opportunity was lost. Thus, Polanyi wrote in 1945: “The New Deal may well prove the starting point of an independent – American – solution of the problem of an industrial society, and a real way out of the social impasse that destroyed the major part of Europe”. But he

176

After World War II: universal capitalism or regional planning?

also warned, continuing: “That time, however, has not yet come” (Polanyi 2018b, 233). Two years later, he knew that the question had been decided. The replacement of the New Deal policy through Truman’s open market imperialism meant nothing less than a relapse into 19th-century universalism, except that the leadership role passed from the United Kingdom to the United States and US capitalism served now as the model. What the international gold standard had provided in the 19th century was now to be accomplished by an unregulated international economic system, with the US dollar, the Bretton Woods institutions and the General Agreement on Tariff and Trade, introduced only a few years later, at its center. The idea of a universal economy, of which the International Gold Standard had been the “true symbol” (Polanyi 2018b, 232), remained the model to be followed. That is why Polanyi was critical of the compromise negotiated at Bretton Woods. “John Maynard Keynes”, he commented, “destroyed his life’s work by defending what Wall Street firmly intended to be a return to an international gold standard” (Polanyi 2018c, 228). The Bretton Woods System was a new institutional form to “declare war on controlled foreign economies” (Polanyi 2018c, 228). Truman’s speeches confirmed that what the United States was aspiring was – in Polanyi’s words – nothing less than the restoration of “the substance of the gold standard … the balancing of ‘foreign economy’ through automatic movements of trade, i.e., through the undirected trade of private individuals and firms” (Polanyi 2018b, 239). The latter aspect was decisive, insofar as it meant that not states but private companies played the leading role in deciding the direction of production. The objective was to institutionalize within the Western world a system of international relations in which worldwide economic exchange was conceived primarily as a relationship between private corporations. The international economic system was regarded as an automatic mechanism in which neither society nor the state seemed to play a positive role. The downside was that the political scope for democratic decision-making at the national level would once again be restricted by economic constraints. Certainly, it took years, if not decades, to dismantle the capital controls and barriers to international trade that had been erected in the interwar period and during the war. This does not mean to deny the differences between the first attempt to restore the international system in the 1920s and the second attempt in the 1950s and 1960s. While in first period social protection primarily meant adherence to tariffs and other trade restrictions, with the consequence that international trade stagnated, after World War II the United States adopted the opposite strategy. To ensure that international trade and finance could develop unhindered, protection was entrusted to the internal policy of the individual nation states. This is what “embedded liberalism” really meant; and it explains the paradox highlighted by Rodrik that after World War II the welfare state was most advanced in the most open economies. Already in the 1990s Rodrik argued that there is “a surprisingly strong and robust association between an economy’s exposure to foreign trade and the size of its government. The explanation is that government expenditures are used to provide social insurance against external risk” (Rodrik 1998, 997). In other words, social protection did not decline but rather increases as international economic integration became stronger. If Rodrik’s reading is correct, after World War II in most countries of the West the welfare state took over the task of compensating for the negative consequences on society that the expansion of international markets produced. The greater the dangers emanating from global markets, the greater was the need to counteract social disintegration with welfare-state-protective measures. In both the inter-war and post-war periods, supporters of economic liberalism pushed for the opening of international markets. And in both cases, the attempts to transform the world into a global marketplace provoked a countermovement. But while in the 1920s and 1930s, the latter was directed against trade itself, embedded liberalism promised to compensate for the negative, destabilizing

177

Claus Thomasberger

effects of market opening through the expansion of welfare state measures without impairing the expansion of trade. In the 1970s, when major parts of trade had been liberalized and capital controls largely abolished, the conflict between the economic system and democracy broke out on two fronts. On the one hand, the different orientation of national economic policies in the various countries destabilized the international system with the well-known consequence of the collapse of the Bretton Woods fixed exchange rate mechanism. On the other hand, the international markets increasingly restricted the scope for economic policy at the national level, ultimately also for the United States (Vietnam War, Great Society Program, current account deficit and loss of gold). It was these conflicts that created the conditions for the neoliberal counterrevolution (cf. Thomasberger 1991, 1997). Under the pressure of international competition, democracy suffered a new crisis and social protection was reduced. Up to the end of the 1980s the existence of the Soviet Union prevented the full realization of universal capitalism. This changed in the 1990s after the fall of the Berlin Wall. Universal capitalism was now called globalization. In the rush of supposed final victory, the protagonists of universal capitalism proclaimed the “End of History” (Fukuyama 1992). With the economic and financial crisis of 2008, these preconditions no longer existed. It was against this background that the call for customs duties and trade restrictions was once again gaining political reputation. The limits that international competition set to embedded liberalism strengthened the call for tariffs, sanctions and the securing of borders against immigration to ensure a minimum level of social protection that the welfare state was no longer capable of guaranteeing. The strengthening of nationalist protective political forces was not limited to the United States. Similar tendencies, albeit in specific national forms, can be observed on the European continent, in the United Kingdom and in other parts of the globe as well.

Today: the rise of Asia For sure, the situation in the first decades of the 21st century diverges in several ways from the conditions directly after World War II. Geopolitically, the perhaps most important difference is that the decline of Europe in the first half or the 20th century was accompanied by the rise of the United States – a former settler colony with predominantly European roots that defended, even if following its own interpretation, the institutions and the vision of economic liberalism. In the 1990s, the United States had reached its peak in economic, political and military terms. In contrast, today, the United States is in decline, and the center of the world economy is shifting from America to Asia. If we consider gross domestic product (GDP) at current prices, Asia in 2022 with a contribution of almost 35% is far ahead of North America (the United States plus Canada) with 29% and Europe with 23.7% (IMF 2023). The population figures speak an even more clear language. Asia accounts for more than 59% of the world’s population, Africa for nearly 18%, Europe for 9.3% and North America for only 4,7% (Statista 2023). In other terms, the G7 countries together account for less than 44% of global GDP and not more than 10% of global population. The situation is no different if we look at other indicators, such as greenhouse gas emissions. Here, too, can be no solution that does not recognize the importance of the Asian countries. While in 2021, Europe and the United States each contributed slightly more than 14% to global fossil CO2 total emissions, the corresponding percentage for Asia is 59% (EDGAR). This means that China alone (33%) emits more greenhouse gases – and can thus contribute to reducing greenhouse gas emissions – more than Europe and the United States combined.

178

After World War II: universal capitalism or regional planning?

With the rise of Asia, countries that rely on their own traditions and cultural experiences, which are fundamentally different from those of the West, are gaining in importance and influence. Today, at issue is again not only the place of the different nations in a given pattern of power, but also the pattern itself. The seemingly monopolar world order that emerged after the collapse of the Soviet Union and for which the West – its political institutions, its economic order, its values – served as a model, has lost its foundations. Today, no country – or group of countries – is in a position to dominate the world order any longer. Despite increasing economic integration, globalization has not led to the harmonization of social conditions that many expected, but to the emergence of very different strategies for adapting to the pressures emanating from economic integration. More decisive than the question of which country or region will dominate is the question of the characteristics and features that will emerge in the transformation. The world order that the West had sought to establish was based on the idea that only the establishment of self-referential markets for goods and capital, i.e. free trade and borderless international capital movements based on contracts between individuals or private corporations, would allow for peace and civilizational progress. The transformation process taking place before our eyes is challenging these beliefs. With China, a nation is returning to the world stage that is consciously setting itself apart from the Western liberal model and claiming its place. The Silk Road Initiative and the establishment of international institutions such as the Asian Infrastructure Investment Bank show that the period when the countries of the West could believe that the fate of the world was in their hands is a story of the past. Not only the BRICS countries, also Turkey, Iran and other countries are striving to strengthen their role at least on a regional level. However, the United States seems not to be willing to give up their claim to leadership. As Joe Biden declared in a programmatic article even before taking office: “For 70 years, the United States … played a leading role in writing the rules, forging the agreements, and animating the institutions that guide relations among nations and advance collective security and prosperity”, he concluded referring to the situation today: “We must once more … rally the free world to meet the challenges facing the world today. It falls to the United States to lead the way” (Biden 2020). Yet, if at the end of the 1940s, the United States was powerful enough to pursue leadership, today it is ever less able to control the ambitions of regional powers by peaceful means. To defend its position, the United States resorts to instruments that undermine the foundations of the international economic and political order it strives for. By building on military supremacy and politicizing the international economic relations through industrial subsidies, sanctions, import restrictions and export bans, currency freezes and the threat of expropriations, the United States breaks the rules on which the neoliberal order was built. There can be no doubt that globalization as we know it has passed its peak. In this situation, Europe could play a key role again. US policy is well aware of the fact that it needs the support of other countries and continents, esp. Europe, to defend its position as the sole leading power. Consequently, it uses all the means at its disposal to keep Europe in a dependent position. To achieve this goal, it relies on the forces in Europe that – following Churchill’s line analyzed by Polanyi in his 1945/1947 articles discussed above – seek subordination to the United States because they are not sure of popular support and parliamentary majorities in their own countries. The reason for the distrust in democratic majorities is obvious, for a new bloc confrontation is just as little in the interest of the people of Europe as introducing sanctions and export bans against China, Russia, Iran, or other countries unwilling to recognize US supremacy. It is hard to deny that Europe – beyond the nations directly involved – is the loser of the war between Russia and Ukraine. The European countries are worse off not only because of the loss of markets and

179

Claus Thomasberger

competitiveness to producers in the Americas, Asia and Africa, but also because of skyrocketing energy prices, which they now have to import in large quantities directly from the United States. Its own weakness induces US policy to pass on at least part of the costs that result from defending its leadership in other parts of the world to the European countries. Once again, the creation of a multipolar world of a new type, based on mutual recognition and tolerance, controlled trade and peaceful political cooperation between the different social orders, would be in Europe’s interest today. In a manuscript written in the last years of his life, Polanyi observes, following up on his reflections from the 1930s to 1940s: The perspectives in which we grew up have dissolved. Universalism postulated our identification with the wide world, the oikoumenē. Its conquest by a technological civilization is unexpectedly producing separate and distinct cultures, all of them industrial, yet not only different on the capitalism–socialism axis but different, moreover, on other scales, some which are based on incommensurable core values. (Polanyi 2014, 32) And he deduces from this that the countries of Europe, from where modern industry had originated, had the task of integrating themselves as equal members into the community of different societies. Polanyi’s demand is directed at the totality of countries that can look back on common historical experiences and cultural traditions. He aims at a circumscribed, reduced “New West”, at the same time concentrated and radical, adjusted and tolerant, a West that approaches other civilizations as “an equal member of a family of such societies, … (as the) representative of a universalism of a postindustrial type” (Polanyi 2014, 32).

Notes 1 The most important of them have been published in the first and the second volume of our “Chronik der großen Transformation” (Polanyi 2003a). 2 Cf. Kari Polanyi-Levitt: “My father was impatient to return to England in 1943, when it was clear that Nazism has been defeated at Stalingrad, the turning point of the war. He wished to participate in the discussion of the postwar world” (Polanyi-Levitt 2013, xiii). 3 Also called, “The Sinews of Peace”, held on March 5, 1946 at Westminster College, Fulton, Missouri (https://winstonchurchill.org/resources/speeches/1946-1963-elder-statesman/the-sinews-of-peace/). 4 Polanyi’s reflections on the restructuring of international economic relations cannot be separated from his idea of transforming society toward socialism. For him, socialism, as he explained in TGT, meant above all “to transcend the self-regulating market by consciously subordinating it to a democratic society” ­(Polanyi 2001, 242). The liberal utopia of an international gold standard was incompatible with any kind of socialist transformation because it represented the ideal of a self-regulating market system at the global level, in which the interventions of society were reduced to a minimum. The International Gold Standard symbolized the idea of a cosmopolitan world society in which private actors compete with each other unhindered by state or other interventions. The gold standard and socialism are mutually exclusive.

Literature Biden, Joseph R. 2020. ‘Why America Must Lead Again’. Foreign Affairs, March/April. https://www.foreignaffairs.com/articles/united-states/2020-01-23/why-america-must-lead-again. (access July 15, 2022). EDGAR – Emissions Database for Global Atmospheric Research 2022. Fossil CO2 Total Emissions. https:// edgar.jrc.ec.europa.eu/ (access April 26, 2023). Fukuyama, Francis. 1992. The End of History and the Last Man. New York: Avon Books. Hayek, Friedrich A. 1937. Monetary Nationalism and International Stability. London: Longmans, Green and Co.

180

After World War II: universal capitalism or regional planning? ———. 1980. ‘The Economic Conditions of Interstate Federalism (1939)’. In Individualism and Economic Order, edited by Friedrich A. Hayek, 255–272. Chicago: University of Chicago Press. International Monetary Fonds. 2023. World Economic Outlook (April), IMF Datamapper, https://www.imf. org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD?year=2023, (access April 26, 2023). Keynes, John M. 1933. ‘National Self-Sufficiency’. The Yale Review 22 (4): 755–769. Mises, Ludwig. 2002. ‘Guidelines for a NEW Order of Relationships in the Danube Region (1938)’. In Selected Writings of Ludwig von Mises. Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, edited by Richard M. Ebeling, 2: 315–322. Indianapolis, IN: Liberty Fund Inc. Polanyi, Karl. 1937. Europe To-Day. London: WETUC (Workers’ Educational Trade Union Committee). Bennington College. Bennington College Digital Repository. http://hdl.handle.net/11209/8516. ———. 2014. ‘For a New West’ (1958). In For a New West: Essays, 1919–1958, edited by Giorgio Resta and Mariavittoria Catanzariti, 29–32. Cambridge: Polity. ———. 2001. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Paperbac. Boston, MA: Beacon Press. ———. 2003a. Chronik der Großen Transformation: Artikel und Aufsätze (1920–1945). Bd. 2: Die Internationale Politik Zwischen den Beiden Weltkriegen. Edited by Michele Cangiani and Claus Thomasberger. Vol. 2. Marburg: Metropolis. ———. 2003b. ‘Markstein 1935’. In Chronik der Großen Transformation, Bd. 2, Die Internationale Politik Zwischen Den Beiden Weltkriegen, edited by Michele Cangiani and Claus Thomasberger, 261–266. Marburg: Metropolis. ———. 2017. Five Lectures on The Present Age of Transformation (1940). London: Prime. http://www.­ primeeconomics.org/e-publications/. (access February 12, 2022). ———. 2018a. ‘Common Man’s Masterplan (1943)’. In Economy and Society, edited by Michele Cangiani and Claus Thomasberger, 177–186. Cambridge: Policy Press. ———. 2018b. ‘Universal Capitalism or Regional Planning? (1945)’. In Economy and Society, edited by Michele Cangiani and Claus Thomasberger, 231–240. Cambridge: Polity Press. ———. 2018c. ‘British Labour and American New Dealers’. In Economy and Society: Selected Writings, edited by Claus Thomasberger and Michele Cangiani, 226–230. Cambridge: Polity. Polanyi-Levitt, Kari. 2013. From the Great Transformation to the Great Financialization: On Karl Polanyi and Other Essays. London; New York: Zed Books Ltd. Robbins, Lionel. 1972. Economic Planning and International Order (1937). New York: Arno Press. Rodrik, Dani. 1998. ‘Why Do More Open Economies Have Bigger Governments?’ Journal of Political Economy 106 (5): 997–1032. https://doi.org/10.1086/250038. Ruggie, John G. 1982. ‘International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order’. International Organization 36 (2): 379–415. Statista. 2023. Distribution of Global Population by Continent. https://www.statista.com/statistics/237584/ distribution-of-the-world-population-by-continent/ (access April 26, 2023). Streeck, Wolfgang. 2021. Zwischen Globalismus und Demokratie: Politische Ökonomie im ausgehenden Neoliberalismus. Berlin: Suhrkamp Verlag. Thomasberger, Claus. 1991. ‘Globale Märkte und politische Regulierung’. In Marktwirtschaft und politische Regulierung: Beiträge zur Wirtschafts- und Gesellschaftsgeschichte der Bundesrepublik Deutschland, ­edited by Claus Thomasberger, Klaus Voy and Werner Polster, 263–302. Marburg: Metropolis. ———. 1997. ‘Transformation in Progress: The Labour Market and the World Monetary System in the Last Forty Years’. In Milano Papers. Essays in Societal Alternatives, edited by Michele Cangiani, 67–96. ­Montreal: Black Rose Books. Truman, Harry S. 1947. ‘Address before a Joint Session of Congress’. Washington, March 12. https://www. archives.gov/milestone-documents/truman-doctrine. (access June 15, 2022). ———. 1949. ‘Inaugural Address’. Washington, January 20. https://www.trumanlibrary.gov/library/publicpapers/19/inaugural-address. (access June 15, 2022).

181

PART 3

Historical and anthropological studies

15 POLANYI’S ANTHROPOLOGICAL INSIGHTS A comparative-holistic approach Justin A. Elardo

Introduction Karl Polanyi is a unique intellectual. Multiple disciplinary and paradigmatic camps have identified with Polanyi’s ideas and work, claiming Polanyi as one of their own. Polanyi’s approach included the utilization of insights from historical analyses, ethnographies, archeological findings, and an openness to interdisciplinary insights across the social sciences. Polanyi, Rhoda Halperin points out “created a framework for understanding economic systems which changed the development of economic anthropology, economic history, and comparative economics” (Halperin 1984: 249). The eclecticism of Polanyi is as much a byproduct of his broad intellectual curiosity, as it was his central point of interest, the economic history of the origins and socioeconomic and sociocultural impact of market capitalist economic relations. The result of this expansive point of study prompted Polanyi to thread a unique theoretical needle, connecting political economy and economic anthropology. On the one hand, Polanyi sustained a tradition common to political economy, attempting to understand human economic interaction by evaluating a wide variety of phenomena. Political economists are “sensitive to the influence of non-economic factors such as political and social institutions, morality, and ideology in determining economic events” (e.g., Riddell et al. 1998: 37). Throughout Polanyi’s work, there is a care and concern devoted to understanding the interconnectedness of “noneconomic” and “economic” factors in socioeconomic relations. On the other hand, because social characteristics perceived as “non-economic” have been categorized to lay outside of what formal1 economics considers the domain of the discipline of economics, other social science disciplines have had to fill the large theoretical void left by much of the economics discipline. In order to bridge the gap between non-economic, sociocultural factors, and material economic social organization, Polanyi and others in the political economy tradition have often sought insights from anthropology. Anthropology has been described as the Cinderella of the social sciences. Anthropology has had nebulous and malleable theoretical boundaries. Due to the nature of the subject discipline, anthropology has also been shaped by a willingness and openness toward examining a diversity of social stimuli. Although it arose as a byproduct of a tremendous expansion of Western European power, often expressed by colonial endeavors, anthropology has not developed a place of prominence among the other social sciences in bourgeois dominated societies (Wolf 1999). For anthropology this has resulted in the field having limited social and political influence. While this may be

185

DOI: 10.4324/9781003336747-20

Justin A. Elardo

perceived as negative, the fact that anthropology has not been widely embraced by the social elite has meant that the field is also less influenced by the ideological impulses that permeate capitalist societies (Wolf 1999). Anthropologists have Discovered that the different aspects of social and cultural life intertwine – that social relations are simultaneously psychological, economic, political, ideational; and […] [anthropologists] are thus given to combine what others would cut asunder. (Wolf 1999: 132) With its decided emphasis on culture, rituals, customs, social norms, and other “non-economic” social relations, anthropology has often drawn the attention of political economists including Polanyi. The resultant conclusion being that anthropologists and political economists have much in common, particularly with respect to embracing holistic epistemological practices. Holistic pursuits alone do not mean that both anthropology and political economy share identical points of departure. While “in the context of political economy many conventional disciplinary boundaries are seen to be highly arbitrary” (Clammer 1985: 9), economic organization is the focal point of study. The same economic focal point does not hold for anthropologists. Culture, kinship, symbols, political institutions, and religion, represent just a few of the many theoretical points of departure for anthropologists. However, there have been some anthropologists, known as economic anthropologists, that have also made economic factors their point of focus asserting that “the issue for anthropology is to discover the principles that might animate economic organization at every level” (Hart 2000: 1017). Emerging from a different discipline but being borne of comparable interests, economic anthropology is the anthropological parallel of what political economy is to economics. Significantly, Polanyi also identified and utilized this cross-disciplinary pairing. To proceed forward through the remainder of this chapter, following this opening introductory section, the second section seeks to connect Polanyi’s political economic inquiry with the historic origins of market capitalism as well as Polanyi’s exploration of anthropological theory. The third section then seeks to highlight the work of the anthropologist Bronislaw Malinowski as a foundational anthropological antecedent to Polanyi’s anthropology. The fourth section frames and identifies Polanyi’s anthropological exploration as critical to cementing economic anthropology as a unique and viable interdisciplinary epistemological platform. The fifth section provides an overview of how Polanyi’s ideas trigger the seminal economic anthropological argument, the ­substantivist–formalist debate. The sixth section offers a broad outline of Polanyi’s intellectual legacy following the substantivist–formalist debate. Finally, the seventh section provides a conclusion. Before proceeding, the reader should be made aware that this chapter, outside of the occasional example, will not explore in any significant detail the ethnographic body of work that has been developed by those involved in economic anthropology. Instead, this chapter attempts to address interpretations of Polanyi as well as where Polanyi’s ideas fit within the scope of the sometimes loosely defined fields of economic anthropology and political economy. On its own, Polanyi’s body of work, devoted to epistemological critique and the development of methodology, provides substantial subject matter.

The “double movement” necessitates economic anthropological inquiry The Great Transformation undoubtedly represents Polanyi’s most comprehensive work. A historic tour de force in which Polanyi, applying the techniques of political economists and economic anthropologists, sets out to describe the historic origins of market capitalist economies and the 186

Polanyi’s anthropological insights

subsequent impacts on human well-being. Perhaps the most cited aspect of The Great Transformation is Polanyi’s “double movement” hypothesis. The double movement is borne of Polanyi’s political economy, his diverse, holistic, and interdisciplinary method of analysis. In examining the forces and ideology surrounding market capitalism, Polanyi argues that defenders of market capitalism, following Smith, inaccurately suggest that a free-market economy is the ultimate expression of a type of natural order of human existence. Divorced from the actual realities of earlier human experiences that pre-date the emergence of market capitalist conditions, Polanyi argues that while markets have existed throughout human history, economies regulated by market forces are, in fact, unique to our contemporary age. However, the Smithian perspective regarding market economies interprets market capitalism as the ultimate expression of innate human behaviors. Theorists who a-critically adopt such interpretations are opaque to the tendency of market economies, in the rigid pursuit of material outcomes, to inflict damage and destructiveness upon the important social and cultural interconnecting features that bind human societies. Utilizing economic history, Polanyi highlights how the ravenous pursuit of material expansion and monetary gain often causes market capitalist economies to throw asunder other, often vital, aspects of society that do not fulfill or are even apt to resist material and monetary pursuits. It is this destruction of social and cultural ties and interconnections that is unsustainable (Dale 2010: 60). In order to draw the conclusion that there is resistance toward the dehumanizing aspects of the market economy, the inherent premise of the double movement concept is that when faced with the destructive features of the market economy human society will seek mechanisms to re-embed the economy in society. In other words, because prior to market capitalist economic relations economies were embedded in social relations, when contemporary participants in market capitalist economies seek to re-embed the market capitalist economy into society, they are actually seeking to utilize concepts evident in earlier socioeconomic forms, economies that pre-date the advent of market capitalist economies. As such there are often elements of resistance to laissez-faire propositions in market capitalism behaviors prevalent in early pre-market economies, an effort to submerge the economy, or in the case of market capitalism to re-submerge, “re-embed,” the economy into society. It is the fulfillment of social interests and values that condition material interests as opposed to residing secondary to material interests. Polanyi could not, however, merely assert a claim to the failure of orthodox economics to understand economic history, the social embeddedness of economic affairs, and socially disembedded aspects of market capitalism. Polanyi required evidence. Then, he turned to anthropology, with its disciplinary propensity to focus on pre-market based socioeconomic analysis, for evidentiary support (Dale 2010: 91–92). As Polanyi acknowledges in The Great Transformation, there are two theorists in particular, Bronislaw Malinowski and Richard Thurnwald, who significantly influenced his understanding of non-capitalist economies and their relation to capitalist economies (Polanyi 2001 [1944]: Chapter 4). The next section of this chapter will specifically highlight the work of Malinowski.

Bronislaw Malinowski an anthropological precursor In The Great Transformation, as Polanyi begins to outline his interpretation of non-capitalist economic organization, one prominent feature of his analysis is the identification of ceremonial trade relationships that differ from capitalist market exchange relations. In particular, Polanyi begins to elaborate on two types of exchange as alternatives to market exchange, reciprocity and 187

Justin A. Elardo

redistribution. The significance of reciprocity and redistribution are that both are essential to ­Polanyi’s later economic anthropological arguments. However, in The Great Transformation, prior to being the progenitor of the substantivist school of economic anthropology, Polanyi utilized understandings of reciprocity and redistribution to offer explanation for how non-capitalist societies economically function, regulating production and distribution decisions absent market exchange. As an important example providing the anthropological foundation for discussing reciprocity and redistribution, Polanyi discusses the Trobriand islander system of exchange known as the Kula trade. The anthropologist responsible for influencing Polanyi’s understanding of the Kula trade is Malinowski, specifically his 1922 work Argonauts of the Western Pacific. Within the Trobriand tribal system, the Kula ring represented trade between different islands. Malinowski (1968: 21) described the Kula as “extensive,” “inter-tribal,” the movements of “articles of two kinds, and these two kinds only […] traveling in opposite directions.” One of the two kinds of articles are red shell necklaces called “soulava,” the other are white shell bracelets known as “mwali.” As the articles meet at various points along the trade circuit, they are traded for one another in an exchange that is “fixed and regulated” within the context of “traditional rules and conventions” that often entail “magical ritual and public ceremony” (ibid.). Examining the Kula ring gave Malinowski a foothold for better understanding the customs and rituals of the population residing in this archipelago of the South Pacific. Critically, what Malinowski espouses as discovering becomes a foundation for Polanyi as well as the later substantivist versus formalist debate. The Kula ring provides Malinowski with several conclusive interpretations of “primitive2” people. First, there is a propensity for native people to produce agricultural surpluses. “In gardening, for instance, the natives produce much more than they actually require, and in any average year they harvest perhaps twice as much as they can eat […] in the olden days it was simply allowed to rot” (ibid.: 18). In doing so, Malinowski intends to refute the notion of the “happy-go-lucky, lazy child of nature” (ibid.). A second principle that Malinowski espouses is that the “rational” or “utilitarian” concept of human economic existence is a false human behavioral assumption when applied to the economic realities of the primitive peoples of the Trobriand Islands. “Another notion which must be exploded, once and for ever, is that of the Primitive Economic Man of some current economic textbooks” (ibid.: 19). In Malinowski’s experience, the Trobriand Island people would often engage in production for cultural and institutional reasons that eclipsed any premise of production for individual gain. There is a “non-utilitarian element in their garden work” which is performed “for the sake or ornamentation” as well as part of “magical ceremonies” (ibid.: 18). Malinowski explicitly expresses a desire to “deepen the analysis of economic facts” through the study of the Kula trade. From ­Malinowski’s perspective, “the meaning of Kula” may be “instrumental to dispel such crude, rationalistic conceptions of primitive mankind” that are evident in applications of economic theory (ibid.: 38). Malinowski is described in the history of anthropology literature as a “functionalist.” Functionalism is defined as an anthropological interpretation in which “social practices and institutions […] fit together in a functioning whole” (Eriksen and Nielsen 2001: 43). Malinowski’s functionalism recognized Trobriand economic life as representative of unique cultural and institutional norms that specifically fit the Trobriand society. From Malinowski’s perspective, in an argument that is later refined by Polanyi, the utilitarianism of orthodox economic theory, designed to explain actions in a market capitalist economy, cannot be generalized and applied to the study of any economic system. For political economists operating within a holistic epistemological framework and often critical of orthodox economic theory, Malinowski’s ethnographic insights were exciting and revelatory. Anthropologists, on the ground and evidence in hand, generated conclusions that directly 188

Polanyi’s anthropological insights

counter propositions that are essential to orthodox economic theory. For Polanyi, and others, incorporating and utilizing anthropological theories to advance insights into the political economy of capitalist market economies proved to be enticing.

Polanyi’s economic anthropology Polanyi’s economic anthropology should be broken into two parts. First, there is Polanyi’s critique of the application of orthodox economic principles to non-capitalist societies as compared to his broad vision of an alternative approach. Second, there are the specific features of Polanyi’s alternative approach. Regarding the first part, it is generally the case that Polanyi’s disciples in economic anthropology, the substantivists, accepted his critique of orthodox economics as well as the general framing of the argument that Polanyi proposed. However, in terms of the second part, among some of Polanyi’s followers, there was some disagreement as to specific aspects of his argument. For Polanyi, the formal choice-theoretic model “refers to a definite situation of choice, namely, that between the different uses of means induced by an insufficiency of those means” (Polanyi 1968: 122). The formal definition of economics that Polanyi provides is similar to variations on the orthodox definition of economics that appears in most textbooks. Owing its origins to a famous early 20th-century economist, Lionel Robbins. Robbins defined economics as, “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses” (Robbins 1932: 15). To analyze the economic interactions using the formal model would appear to yield a universal understanding of human interaction. However, that appearance is false. The formal model, in fact, presupposes both the undue generalization of the homo œconomicus and “the so-called scarcity postulate.” Concerning the latter, Polanyi explains that, in many cases, it is Easy to see that there is a choice of means without insufficiency […] Choice may be induced by a preference for right against wrong (moral choice) or, at a crossroads, where two or more paths happen to lead to our destination, possessing identical advantages and disadvantages (operationally induced choice). […] Of course, scarcity may or may not be present in almost all fields of rational action. […] Or, to get back to the sphere of man’s livelihood, in some civilizations scarcity situations seem to be almost exceptional, in others they appear to be painfully general. In either case the presence or absence of scarcity is a question of fact, whether the insufficiency is due to Nature or to Law. (Ibid.: 124–125) Starting from the perspective that all economic systems are embodied in institutions (Polanyi 1968: 126), Polanyi argues that the institutional arrangement of the market economy tends to generate a specific type of individual choice. Formal economics, as a model of individual choice, to a degree, does capture the interplay of the institution of the market with economic decision makers in a market economy. Echoing Malinowski, Polanyi (ibid.: 125) emphasizes that in economies not characterized by “price-making markets [this sort of] economic analysis loses most of its relevance.” He constructs, then, an alternative method, requiring a different, “substantive,” definition of the economy: The substantive meaning of economic derives from man’s dependence for his living upon nature and his fellows. It refers to the interchange with his natural and social environment, in so far as this results in supplying him with the means of material satisfaction. (Ibid.: 122) 189

Justin A. Elardo

According to Polanyi, the formal choice theoretic model “naively” compounds the formal and substantive definition of economics. So long as an economy is governed by “a system of price-making markets,” the formal and substantive meanings can merge (ibid.: 123). Many times, however, throughout much of human history, markets were the exception not the rule. Polanyi referred to this as the “economistic fallacy,” “a tendency to equate the human economic with its market form” (Polanyi 1977: 20). From Polanyi’s perspective, because non-capitalist economies differed in kind from capitalist economies, the formal orthodox economic tools utilized to describe market capitalist economies will not be applicable to the study of non-capitalist economies. Noting that anthropologists, sociologists and historians study economies in which “man’s livelihood was embedded” within a plethora of institutions other than markets, Polanyi emphasized that the utilization of a method designed for the specific features of a market economy would be ineffective for conditions that reside outside of market driven economies. As a result, in order to understand any given economy requires that the theorist understands the nature of the “economic” and “noneconomic” institutions that exist in a given social setting. Polanyi sought, by transitioning to a substantive approach to economics, to have an actual, general, approach for explaining socioeconomic relationships across economies characterized by differing institutions. The “substantive definition,” unlike the formal one, can be applied to any “empirical economy.” This gives Polanyi a vantage point to examine the specific way the economy is instituted in any social system. Unconstrained by the pursuit of a specific, optimizing, or as ­Malinowski referred to it, utilitarian type of exchange relationship, Polanyi describes three primary appearances of economic relationships in human history. “Empirically, we find the main patterns to be reciprocity, redistribution, and exchange” (Polanyi 1968: 128). Each pattern is housed within specific social institutions and tends to produce specific individual and social results. Reciprocity denotes a system of mutual obligations: individuals provide something for others, who will reciprocate. Reciprocity can be between two individuals but can also involve multiple parties. For example, A Trobriand man’s responsibility is toward his sister’s family. But he himself is not on that account assisted by his sister’s husband, but, if he is married, by his own wife’s brother – a member of a third, correspondingly placed family. (Ibid.: 129) Additionally, reciprocity does not require a direct one to one reciprocal response; instead, it concerns a symmetrical relationship that could include “three, four, or more groups” (ibid.). Importantly, the key component of reciprocity is the motive that exists behind the exchange. Rather than trading for the sake of the commodity, reciprocal exchange is for the sake of the relationship (Dale 2010: 116). Reciprocity allows important production and distribution to occur without the motive for gain being the driving factor. The second pattern, redistribution, requires, within the context of custom and law, centralized decision making. Polanyi details the idea that redistribution appears in “all civilizations” for “many reasons” (Polanyi 1968: 130). Redistribution can occur because of differentiation of “soil and climate” conditions, due to differences in the time it takes “between harvest and consumption,” as a necessary mechanism to divide the hunt in a hunter-gatherer society so as to avoid the “disintegration of the horde or band,” or as “the fulfillment of the social contract in the modern welfare state” (ibid.: 131). In the case of redistribution, production and distribution are decidedly determined by societal need and want and intended to serve the well-being of society, the reproduction of its organization to begin with.

190

Polanyi’s anthropological insights

For Polanyi, the relevance and prominence of reciprocity and redistribution to nonmarket economies creates a powerful contrast between the social aspects of the economic relationships in nonmarket economies and the conditions evident in market exchange driven capitalist economies. Reciprocity and redistribution are inherently supportive of elevating the well-being of others, maintaining social relations and supporting socially beneficial outcomes – all his being obviously specifically defined within each culture. To the contrary, market exchange elevates the commodity and the relative monetary or individual gain each participant experiences in the exchange process over any potential social benefits of the exchange. As a result, in market driven economies, socially positive results are not an end unto themselves and will only emerge as an inadvertent outcome. Polanyi’s anthropology is able to redefine the study of economics and with it the conclusions that can or should be drawn regarding economic constructs in both nonmarket and market economies. Polanyi uses the substantive definition of economics as a general tool for studying economies across different times and with differing institutional parameters. The outcome is his ability to recognize differing institutional economic structures within differing socioeconomic systems. Human motivation and human behavior are not immutable facts set across all time and place.

Polanyi and the formalist–substantivist debate3 No discussion of Polanyi’s contribution to political economy, economic history, and the history of economic anthropology would be complete without a discussion of the formalist–­substantivist debate. Given the great expanse of ideas that have been developed in economic anthropology, that debate represented a relatively short-lived disagreement. Yet it was and remains important.4 In many respects, for all of the venom exchanged between the participants, “the struggle created a common community” (Wilk 1996: 4) and is likely responsible for the very existence of the field. Polanyi’s “The Economy as an Instituted Process”5 (1968 [1957]) stimulated the debate by identifying the central propositions of the substantivist school. While the debate did not begin in earnest until just a few years later when George Dalton (1961) wrote “Economic Theory and Primitive Society,” it was Polanyi’s arguments that set the stage for Dalton and others to take up the substantive position. As the institutionalist economist Anne Mayhew asserts, “Dalton’s restatement of Polanyi’s argument caused a furor among anthropologists” (Mayhew 1980: 73). The main thrust of the substantivist argument was that the formal neoclassical techniques used in the study of capitalist economies are not applicable to the study of economic phenomenon in noncapitalist economies.6 According to them, in order to correctly grasp the functioning of an economic system the theorist must then perceive the economy as a set of rules of social organization (analogous to polity and political rules), so that each of us is born into a ‘system’ whose rules we learn. It is from observing the activities and transactions of participants that we derive these systematic rules. (Dalton 1969: 66) Social institutions determine the “rules of social organization.” The economy, for instance, may be embedded in “kinship relations, whereas in other places religious institutions may organize the economy” (Wilk 1996: 7). The substantivists adopted Polanyi’s threefold model of reciprocity, redistribution, and exchange, together with his idea that the pattern of exchange becomes a dominant institution in the modern society, whose economy is based on the maximization of gain through the exchange of

191

Justin A. Elardo

commodities. Correspondingly, substantivists went on to emphasize that it is only in an exchange dominant system that the formal choice theoretic model has applicability. The formalists adamantly disagreed with the substantivists’ assertions. While the substantivists tended to be economists dismayed with the narrowness of economic theory, the formalists were anthropologists who sought to incorporate a place for individual rational choice in anthropological analysis. The problem was then, for formalists, to show that the method of neoclassical economics, based on individual rational choice, could have universal implications. To this end, the following solution has been proposed: …it is well to point out that the theory of maximization, which is at the heart of neoclassical economic theory, says nothing about what is maximized. Neoclassical theory generally assumed that profit was maximized, but this represents an application of maximization theory, not maximization theory itself. An individual maximizes something, or different things at different times – presumably those things which he values. General maximization theory could be applied in any case. (LeClair and Schneider 1968: 8) The idea of maximizing behavior as an omnipresent human activity allowed the formalists to counter the substantivist claim about the specific historical relevance of the formal model. For the formalists then, the type of social institutions – then, what Polanyi calls the changing “place” of the economy in society – do not change the fact that individuals maximize “something.” As a result, one leading formalist argued that the formal model is “subinstitutional,” meaning that it has the flexibility to account for any kind of institutions, economic or “noneconomic” (Cancian 1968: 231). In the debate, substantivists and formalists were on opposite extremes in terms of fundamental theoretical and methodological propositions. As a result, the participants tended to talk past one another with neither side truly capable of claiming victory.

Polanyi’s paradigmatic eclecticism and legacy Polanyi’s influence on ideas in economic anthropology was not limited to the substantivists-­ formalists debate. His paradigmatic reach also went beyond economic anthropology. In the heterodox economic tradition, multiple camps have identified with Polanyi’s ideas and work, claiming Polanyi as one of their own. As a political economist, Polanyi can be categorized as an “old” or “original” institutionalist, carrying on traditions that began with Thorstein Veblen. Within the original institutionalist tradition, according to Anne Mayhew (2015: 28), ‘Institutions’, ‘culture’ and ‘values’ have, for more than a century, been key components of the discourse of the social sciences and of social economics […] cultures are conglomerations of institutions that are shared by a group of people. Values are aspects of cultures and of institutional patterns. The Polanyi Group continued the substantivist and institutional tradition,7 especially in connection with the emergence in the 1970s of the French Marxist school of economic anthropology which tied Polanyi to Marxian ideas. The Polanyi group sought to clearly distinguish Polanyi’s insights from Marx and Marxian theorists.

192

Polanyi’s anthropological insights

Our purpose is not to point out the glaring semantic/conceptual ambiguities and misunderstandings […] but rather to convey our astonishment at the extent to which several Marxists claim the work of the Polanyi group as part of their own paradigm, a claim which we think to be utter nonsense. (Dalton and Kocke 1983: 37) For others, however, Polanyi does descend from Marxian lineage.8 For them, both Marx’s and Polanyi’s “critical” approach envisions the “formal” neoclassical approach in economics, though being an expression of a society whose fundamental institutions are the market system and capitalist relations of production, is not able to explain that social form as such, in its historical peculiarity, and in its fundamental traits and dynamics.

Conclusion Karl Polanyi’s ideas provide a multi-disciplinary and multi-paradigmatic interpretation of the characteristics, history and social consequences of market capitalism. Epistemologically, Polanyi’s analysis, perhaps as a serendipitous outcome, generates the foundational principles for defining economic anthropology and framing the history of economic anthropology. Because his methodology emphasizes anthropological queries and, more specifically, seems to call for economic anthropology, Polanyi’s work also codifies a relationship between political economy and economic anthropology with each complementing the other. Polanyi’s contributions demonstrate how political economy and economic anthropology occupy two sides of the same coin. The resultant impact is that Polanyi’s work powerfully acts to shine a spotlight on the unified theoretical space in which economic anthropology and political economy reside. Not only political economy, but also economic anthropology are made possible by our historical experience of industrial capitalism, which brings the bulk of human labor for the first time into the circuit of commodities. The history of precapitalist economies, on the other hand, can reveal elements of the basic categories of economic life (Hart 1983: 108), which are needed for understanding the political economy of market capitalist economies. Evidently, a cross-disciplinary bridge has been built. And Polanyi’s intellectual contributions continue to stimulate more debate, examination, refinement, criticism, as well as acceptance across paradigms.

Notes 1 Polanyi was apt to use the term formal and orthodox interchangeably when describing the dominant neoclassical, laissez-faire oriented, brand of economic theory. As Polanyi’s work evolved and began to be steered toward economic anthropological ideas, Polanyi’s use of the term formal became more prominent and was eventually accepted by his critics, the formalists. 2 The term ‘primitive’ was widely utilized by early 20th -century anthropologists including Malinowski. In anthropological discourse, the term was not intended to be pejorative. Instead, as applied by early anthropologists, ‘primitive’ is descriptive. In a more contemporary period other nomenclature, such as small scale, simple, or kinship, has been substituted for the word primitive. 3 Many different publications have provided summaries of the debate. As a result, this overview of the formalist – substantivist debate is not intended to address all issues of the debate but rather a broad outline of the debate in which the general propositions and methodologies are exposed. For additional and more extensive summaries of the debate see Wilk (1996), Elardo (2003), and Elardo and Campbell (2006). 4 In a forum entitled “Culture and Public Action,” as well as in Wilk (1996), the debate is referred to as the “Great Debate.”

193

Justin A. Elardo 5 Mayhew (1980) and Mayhew and Neale (1983) note the similarity between the substantivists and institutionalist economists. 6 A good source from which to find the featured articles of the formalist–substantivist debate, including Polanyi and Dalton, is LeClair and Schneider’s (1968) book Economic Anthropology: Readings in Theory and Analysis. 7 For more regarding the “The Polanyi Group” see Dalton and Kocke (1983), Halperin (1988), and Isaac (2005). 8 See Halperin (1982) (1984) (1988) (1994), Stanfield (1980) (1999), and Stanfield et al. (2006)

References Cancian, Frank. 1968. “Maximization as a Norm, Strategy, and Theory: A Comment on Programmatic Statements in Economic Anthropology.” In LeClair, E.E. Jr. and Schneider, H.K. (ed.). Economic Anthropology: Readings in Theory and Analysis. New York: Holt, Rinehart and Winston, Inc.: 228–233. Clammer, John. 1978. “Concepts and Objects in Economic Anthropology.” In Clammer, J. (ed.). The New Economic Anthropology. New York: St. Martin’s Press: 1–20. ——— 1985. Anthropology and Political Economy. London: The Macmillan Press, LTD. Dale, Gareth. 2010. Karl Polanyi: The Limits of the Market. Cambridge: Polity Press. Dalton, George. 1961. “Economic Theory and Primitive Society.” American Anthropologist 63: 1–25. ——— 1969. “Theoretical Issues in Economic Anthropology.” Current Anthropology 10/1: 63–102. Dalton, George and Kocke, Jasper. 1983. “The Work of the Polanyi Group: Past, Present, and Future.” In ­Ortiz, S. (ed.). Economic Anthropology: Topics and Theories. Lanham, New York, and London: University Press of America: 21–50. Elardo, Justin A. 2003. “Reformulating the Debate between the Substantivists and Formalists in Economic Anthropology: Is the Neoclassical Model Suitable for Describing Conditions in Nonmarket Economies?” Ph.D. Diss., University of Utah. Elardo, Justin A. and Campbell, Al. 2006. “Choice and the Substantivist/Formalist Debate: A Formal Presentation of Three Substantivist Criticisms.” In Wood, D. (ed.). Choice in Economic Contexts: Ethnographic and Theoretical Enquiries. Amsterdam: Elsevier: 267–284. Eriksen, Thomas H. and Nielsen, Finn S. 2001. A History of Anthropology. London: Pluto Press. Halperin, Rhoda H. 1982. “New and Old Economic Anthropology.” American Anthropologist 84/2: 339–349. ——— 1984. “Polanyi, Marx, and the Institutional Paradigm in Economic Anthropology.” In Barry, L. Isaac (ed.). Research in Economic Anthropology, VI. Greenwich, CT: JAI Press: 245–272 ——— 1988. Economies across Cultures: Towards a Comparative Science of the Economy. New York: St. Martin’s Press. ——— 1995. Cultural Economies: Past and Present. Austin: University of Texas Press. Hart, Keith. 1983. “The Contribution of Marxism to Economic Anthropology.” In Ortiz, Sutti (ed.). Economic Anthropology: Topics and Theories, Lanham, MD: University Press of America: 105–144. ________ 2000. “Comment on Pearson’s ‘Homo Economicus Goes Native’.” History of Political Economy 20/4: 1017–1025. Isaac, Barry. 1993. “Retrospective on the Formalist-Substantivist Debate.” In Id. (ed.). Research in Economic Anthropology, 14. Greenwich, Conneticut: JAI Press Inc.: 213–234. ——— 2005. “Karl Polanyi.” In Carrier, J.G. (ed.). A Handbook of Economic Anthropology, Cheltenham: Edward Elgar: 14–25. LeClair, Edward. E. Jr. and Schneider, Harold K. 1968. “Introduction: The Development of Economic Anthropology.” In LeClair, E. E. Jr. and Schneider, H.K. (eds.). Economic Anthropology: Readings in Theory and Analysis. New York: Holt, Rinehart and Winston, Inc.: 1–13. Malinowski, Bronislaw. 1922. Argonauts of the Western Pacific: An Account of Native Enterprise and Adventure in the Archipelagoes of Melanesian New Guinea. New York: E.P. Dutton & Co. ——— 1968. “Malinowski on the Kula.” In LeClair, E. E. Jr. and Schneider, H.K. (eds.). Economic Anthropology: Readings in Theory and Analysis. New York: Holt, Rinehart and Winston, Inc.: 17–39. Mayhew, Anne. 1980. “Atomistic and Cultural Analyses in Economic Anthropology: An Old Argument Repeated.” In Adams, J. (ed.). Institutional Economics: Essays in Honor of Allan G. Gruchy. Hingham, MA: Martinus Nijhoff Publishing, Kluwer Boston Inc.: 72–81.

194

Polanyi’s anthropological insights ——— 1989. “Contrasting Origins of the Two Institutionalisms: The Social Science Context.” Review of Political Economy 1/3: 319–333. ——— 2015. “Institutions, Culture, and Values.” In Davis, J.B. and Dolfsma, W. (ed.). The Elgar Companion to Social Economics. Northampton, MA: Edgar Elgar Publishing: 33–47. Mayhew, Anne and Neale, Walter.C. 1983. “Polanyi, Institutional Economics, and Economic Anthropology.” In Ortiz, S. (ed.). Economic Anthropology: Topics and Theories. Lanham, MD: University Press of America, Inc.: 11–20. Polanyi, Karl. 1968 [1957]. “The Economy as an Instituted Process.” In LeClair, E.E. and Schneider, H.K. (eds.). Economic Anthropology: Readings in Theory and Analysis. New York: Holt, Rinehart and Winston, Inc.: 122–143. ——— 1977. The Livelihood of Man. Pearson, H. (ed.). New York: Academic Press. ——— 2001 [1944]. The Great Transformation. Boston: Beacon Press. Riddell, Tom, Shackelford, Jean and Stamos, Stephen. 1998. Economics: A Tool for Understanding Society. Reading, MA: Addison-Wesley Publishing Company. Robbins, Lionel. 1932. An Essay on the Nature & Significance of Economic Science. London: MacMillan & Co. Stanfield, Ron J. 1980. “The Institutional Economics of Karl Polanyi.” Journal of Economic Issues XIV/3: 593–614. ——— 1999. “The Scope, Method, and Significance of Original Institutional Economics.” Journal of Economic Issues 32/2: 231–255. Stanfield, Ron, Carroll, Michael C. and Wrenn, Mary V. 2006. “Karl Polanyi on the Limitations of Formalism in Economics.” In Wood, D. (ed.). Choice in Economic Contexts: Ethnographic and Theoretical Enquiries. Amsterdam: Elsevier: 241–266. Wilk, Richard R. 1996. Economies & Cultures: Foundations of Economic Anthropology. Boulder, CO: Westview Press. Wolf, Eric. 1999. Envisioning Power: Ideologies of Dominance and Crisis. Oakland: University of California Press.

195

16 KARL POLANYI AND THE STUDY OF THE ANCIENT MEDITERRANEAN AND WESTERN ASIA David W. Tandy Introduction Karl Polanyi’s greatest contribution to the study of preindustrial social and economic history, generally and specifically that of the ancient Mediterranean and Near East, was his demonstration of the fundamental differences between modern capitalist market society and the pre-capitalist societies of the ancient Mediterranean world in the second and first millennia BCE. His insistence on this position aligned him with established historians of antiquity, including Marx and Weber, and with the original institutional approach in the social sciences. Much work has appeared since the assessment of Polanyi’s contributions by Tandy and Neale in 1994; indeed, the fields of ancient Mediterranean and Near Eastern history have changed profoundly in the last 30 years and so has Polanyi’s place in the scholarly landscape. We will also see that in several ways his influence has grown since his death in 1964. Two extreme approaches to the ancient economy were caught up in the 19th-century collision between Karl Bücher and Edouard Meyer. Bücher and his disciples were among the first ‘primitivists’; Meyer led the ‘modernizers.’ (The essential pieces of the Bücher-Meyer debate are collected in Finley 1979.) I and others who have been associated with the primitivist (perhaps more accurately ‘anti-modernist’) approach use much comparative material from cultures at other times and places to shed light on ancient economic behavior. This has drawn criticism (most prominently perhaps from anthropologist Jack Goody (2006: 44–46)). Among the most prominent modernizers today is Morris Silver (1983, 2004), whose work has been admired by some, but suffers (as does all modernizing) from the very economistic fallacy that Polanyi warned all historians against: the belief that the way we do things is the natural way to do things. Johannes Hasebroek (1933) and Moses Finley, in one of his earliest publications (Finkelstein 1935: 320), anticipated Polanyi’s position on the economic solipsism by arguing strongly against the use of modem economic terms such as ‘firm’ and ‘capitalism.’1 Polanyi’s most succinct treatment of the fallacy is Polanyi 1977: 14–17 (extracted from his 1947 Columbia lecture notes and so hardly his last words on the topic (Mayhew, Neale, and Tandy 1985: 129; Tandy and Neale 1994: 10 with n. 6)). This debate yielded its prominent place to the more constructive debate between the substantivists and the formalists (treated elsewhere in this volume). Those practicing formalism interpret economic activities of the past by applying the same categories of analysis that we use to study DOI: 10.4324/9781003336747-21

196

Karl Polanyi and the study of ancient history

today’s economy. Polanyi spoke for the substantivists, insisting that in pre-industrial societies the economy is routinely ‘embedded’ in non-economic social institutions.2 One brings no improvement to our understanding by applying neoclassical economic analysis to the ancient world.

Forms of integration Polanyi’s most important strategy of economic analysis of pre-industrial societies was unveiled in chapters 4 and 5 of The Great Transformation (Polanyi 1944, hereafter GT) and subsequently tested at the Columbia seminar sponsored by the Ford Foundation, which ran from the beginning of Polanyi’s appointment to a visiting professorship in 1947 through to the other side of Trade and Market in the Early Empires (Polanyi et al. 1957, hereafter TMEE). There are essentially three forms of economic integration (fuller discussion in Polanyi 1957B: esp. 250–256; Tandy 1997: 84–88, 94–106), each not a monolith of organization but a collocation of institutions that collectively act in concert to produce a structure or form within which items change hands. It is usual in any society that all three forms can be seen operating but that the society itself can be dominated by a single form of economic integration. When individuals and families depend predominantly on one form of integration for their food, shelter and clothing, it is appropriate to call that form of integration the society’s dominant form. (As Polanyi acolyte George Dalton put it, “By dominant is meant that [form of integration] which provides the bulk of material livelihood” (Dalton 1962: 361 n. 4)). Reciprocity (Polanyi 1957B: 253) denotes movements between correlative points of symmetrical groupings; its outstanding characteristic is symmetry. It has often been called ‘gift exchange’ (Mauss 1970 [1925]), describing a closed system of the circulation of goods along the lines of a grid of kinship or other relationships. Gifts create a social bond or respond to an existing social requirement. It is easy to see that the reciprocal economy is embedded in family and other social relations. What anthropologists call an egalitarian society is typically dominantly reciprocal. Redistribution (Polanyi 1957B: 253–254) designates appropriational movements toward a center and out of it again; its outstanding characteristic is centricity. A ranked society, one with more qualified persons than positions of leadership, is often redistributive. Leadership positions are often short-lived, as circumstances change. Redistributive formations are deeply embedded in society; the folkways of such a community assert that the center is good. The goat that travels as tribute or tax from the periphery to the center is an indicator that the people respect the center; when the chief throws a feast for the community, the consumed goat becomes a symbol of the chief’s generosity. In reciprocity and redistribution every change of hands is connotatively weighed down by its social context. Exchange (Polanyi 1957B: 254–255) refers here to vice-versa movements taking place as between hands under a market system. The economy is entirely disembedded; this is captured with Polanyian concision by James Redfield: “In gift exchange the exchange is (at least ideally) for the sake of the connection; in market exchange the connection is for the sake of the exchange” (Redfield 2003: 160; cf. Redfield 2003: 35, 1983: 401). In market exchange there is virtually no connotation: items have a price and the relationship between the two parties terminates with the transaction. The heuristic value of Polanyi’s Forms of Integration was recognized early on, and they were appropriated, adapted, and made more complex by Marshall Sahlins in his analysis of reciprocity among Melanesians and Polynesians (1965: 147–149 [= 1972: 193–196]), and further adapted across all forms by Walter Donlan (1982) for the world that Homer presents in the Iliad and Odyssey. Donlan’s contribution was received well by the audience of specialists focused on early 197

David W. Tandy

Greek history who had already internalized the sociology of the early Greek world presented in The World of Odysseus (Finley 1954), in which Moses Finley showed that economic behaviors and choices in early Greece were driven by a variety of social forces. This approach profoundly influenced Polanyi even though Finley withheld from TMEE the paper on Aristotle he had presented to the Columbia seminar, saving (and reworking) it for another day (Finley 1970).3 Finley and Polanyi were both allergic to the market, Polanyi (over)stating that there was no physical evidence of market places in the Near East and no market-dominant exchange system in the Mediterranean world until nearly 300 BCE, Finley by making a point to avoid bringing up the topic of the market at all if possible. While they did not have precisely parallel visions, the two friends nevertheless were sympatico in a number of respects,4 and especially in their antipathy to the market as a productive category of historical inquiry. Polanyi’s work was not initially embraced in the field of Near Eastern studies. One early accomplishment was convincing Leo Oppenheim to join the Columbia project and to contribute a brief chapter to TMEE. But Oppenheim himself had only in 1950 received a permanent appointment at the University of Chicago, at the age of 46, and his chapter in TMEE (Oppenheim 1957) was hardly a full-throated endorsement of Polanyi’s approach to the economy. TMEE was recognized by the population of educated readers as an important contribution to economic history, but it fell relatively flat among ancient historians of both the Near East (Dewey 1958; Jones 1958) and Greece (de Ste. Croix 1960 with some sympathy; Heichelheim 1960 with none). In 2005, the same year that Jérôme Maucourant edited volume 12.1 of the journal Topoi devoted to Polanyi’s work, Johannes Renger reviewed the Nachleben of GT and TMEE in the scholarly treatment of the Ancient Near East and concluded that any shortcomings in Polanyi’s efforts were caused by the limited resources available to him when he did his thinking within the Columbia project rather than by the imperfections of his ideas or methods (Renger 2005).5 As a young Turk who had broken new ground by using anthropology to study contemporary, non-exotic human groups such as the Irish (Arensberg 1937), Arensberg brought his reputation to bear on the Columbia project focused on the ancient world (his participation was more genuine than Oppenheim’s). But Polanyi did not make it easy for those around him. As I already mentioned, Finley did not contribute to the project’s publication and Oppenheim’s chapter was not as enthusiastically ­Polanyian as the rest of the volume. Polanyi could be criticized for not defining clearly an opponent’s position – this was Finley’s criticism of Polanyi’s Near East work in 1954, as Finley accused Polanyi of seeming “to be disguising the fact that the ‘new historical insights’ are exclusively your own, unknown to nearly all Assyriologists and shared by none (on the record, that goes for Leo [Oppenheim] too).”6 Polanyi and his coauthors of TMEE were accused of setting up straw men easily brought down (Dewey 1958: 377). There was the related difficulty of Polanyi’s style, which was often overly didactic and forceful (Tandy and Neale 1994: 10–14). Polanyi was especially keen to tackle the worlds of the ancient Greeks and the Assyrians, but he was ignorant of the languages spoken and written by them, which is no way to gain the respect of the ‘experts.’ One example of the language problem arose in Polanyi’s engagement with the early documents from second-millennium Mycenae in Greece. He alleged that there were no prices in the Bronze Age world but there were ‘equivalencies’ (TMEE: index, s.v. equivalencies for many examples). Two trading parties in a world without prices could agree on equivalencies or have equivalencies imposed on them; they then exchanged their goods according to the agreed values until one party was out of goods, which meant the end of the ‘contract’ (e.g. Polanyi 1960: 345). Polanyi found this in the new Mycenaean documents only just deciphered in the early 1950s and still a decade away from robust agreement on many of the linguistic challenges presented by the tablets. Polanyi spoke several modern languages, but he never showed any inclination to master Greek or Akkadian or 198

Karl Polanyi and the study of ancient history

any other ancient tongue whose mastery might make his job easier, whether that was to bolster his arguments or merely to earn the attention of the experts in the field in which he sought membership if not standing. But Polanyi’s persistence proved efficacious.

The port of trade The most enduring of Polanyi’s specific contributions to the discipline of ancient history is the port of trade, a phenomenon older than the arrival of price-making markets, which were “characterized by competing groups of buyers and sellers, whose activities are governed by market prices. “In the port of trade, administration prevailed over the ‘economic’ procedure of competition” (Polanyi 1963: 30). Prices were controlled and outside participants screened as strategies to protect the people and interests of the host territory against outside influences and unfair trade outcomes advantaging outsiders. As it headed toward publication, the chapters in TMEE tilted toward descriptions of ports of trade, beginning with Polanyi’s (1957A) own account of administered trade at Kanesh, an Assyrian-­ controlled merchants’ community in central Anatolia in the Middle Bronze Age (roughly the first half of the second millennium BCE ). Kanesh was followed by chapters on ports of trade on the coast of the eastern Mediterranean from southeastern Anatolia down to Egypt, both in the Middle Bronze Age and later in the 7th century BCE (Revere 1957); ports of trade among Aztecs and Mayans (Chapman 1957); ports of trade on the Guinea coast of Africa (Arnold 1957A, 1957B; to be followed later by Polanyi and Rotstein’s Dahomey volume in 1966); in the Berber highlands of Morocco (Benet 1957); in 20th-century India (Neale 1957). Anthony Leeds (1962), in a conference paper responding to TMEE, added his own analysis as he described unambiguous port-of-trade locations on the Malabar coast of southwest India and in Ceylon (now Sri Lanka); these operated for over 1500 years. Kanesh fascinated Polanyi; leaning heavily on the work of Paul Koschaker (1942), Polanyi saw in the written evidence at Kanesh a chance to articulate a commercial setting that was without price-setting mechanisms and traders who plied their trade without risk, since all the goods that entered Kanesh were either tribute or priced in advance. It was not just a matter of there being no ‘market place’; there was no market of any kind, as men called tamkaru’s oversaw and directed exchanges on behalf of and with the support of the King of Assyria.7 This ‘administered trade’ became the starting point for subsequent analysis of both Old and Neo-Assyrian trade and an approach that could not be easily gainsaid. By the time the distinguished Assyriologist Karen Radner took up the matter of administered trade, Polanyi’s approach had become nearly the default analysis. Radner (1999: 106–169) decided to search for the tamkaru in the cuneiform texts and reported that she was able to count 67 distinct, named tamkaru’s and six unnamed; she identified twenty documents that described loans in support of the activities of the tamkaru’s, all told 18 loans of silver, one each of copper and barley, dating between 717 and 614 or 613 (Radner 1999: 110–115). Let me stay with the 7th century for a few words to help us see how these new settlements in western Asia worked. When Shalmaneser V died in 722, Sargon II took the throne of Assyria and continued the imperial restructuring that Tiglath-pileser III (r. 745–727) had started. After an early clash with Babylon and Elam, Sargon initiated a campaign into Syria. In 720 he trounced allied forces at Qarqar (on the Euphrates) and marched south to take Gaza and defeat the Egyptian army at Raphia, farther south. In 716 he set up a garrison and trading post at the Egyptian border at the Wadi el-Arish, where Tiglathpileser had earlier set up a trading station in about 730 – right on the only road linking Africa and Asia, at the very border dividing the continents. (We have Tiglath-Pileser’s official account of this: 199

David W. Tandy

Tadmor and Yamada 2011: no.42.14’–15a’). This action appears to have been executed in order to control the entrance of goods from the outside (both the Mediterranean and Egypt) and to assure their movement from el-Arish to Mesopotamia. In Sargon’s words: I had the awesome radiance of (the god) Ass[ur], my lord, overwhelm the people of Egypt and the Arabs. At the mention of my name, their hearts pounded (and) their arms grew weak. I opened up a sealed-off [harbor] district of Egypt, mingled [together [the people] of Assyria and Egypt, and [allowed (them) to eng]age in trade].8 The goods were transported by government agents, the same tamkaru’s of the administered trade of a thousand years earlier. A clear and concise discussion of the market city phenomenon, firmly defined by Shigeo Yamada (2005; reprised in 2019), is synopsized by Michael Kozuh (2015: 82), who emphasizes that the goods moved into and through these communities included both trade and tribute: the communities existed to gather and coordinate the logistics to move goods forward further into Asia to the great cities of Assyria.9 Kar-Shalmaneser (Shalmaneser III, r. 858–824) at Til-Barsip across the Euphrates from Carchemish and Kar-Esarhaddon (Esarhaddon, r. 680–669) at Tyre are two other executions of this policy. Yamada (2005: 58–61) counts 36 toponyms with the prefix Kar-, and there are many more places that clearly served the same purpose, e.g. al Mina10 (= Assyrian Ahta) at the mouth of the Orontes in Syria and el-Arish at the easternmost boundary of coastal Egypt. These communities were no different than the karu at Kanesh in central Anatolia a millennium earlier that first attracted Polanyi’s attention. Although Polanyi’s name does not appear in the discussions of administered trade by Radner and Yamada, it is clear that these karu’s in western Asia are precisely what Polanyi (1957A) was talking about in his search for marketless trading arrangements, the best evidence being the complete mingling of the fruits of tribute and trade, any differentiation between them utterly lost once the goods were loaded on the caravan heading east. All of it belonged to the King. Thus time and the knowledge that came with it ultimately vindicated Polanyi’s marketless trading and his port-of-trade model. Polanyi’s port of trade has done even better recently among historians of the ancient Greek world. In the first half of the first millennium BCE, Greeks sent out new communities first into the western Mediterranean and later northward to the northern Aegean and then the Black Sea, and finally eastward to the Syrian coast and the Nile Delta by the 7th century. Some of these new communities later Greeks called apoikiai (“homes away from home,” sing. apoikia), others emporia (“trading places,” sing. emporion). Modern historians and archeologists have struggled to distinguish between the two types of settlement, which could be predominantly Greek or predominantly indigenous. Polanyi’s port-of-trade model was followed by several decades in which this model and the increasing archeology finds persisted on parallel tracks until the lightbulb moment arrived: so that’s what an emporion is! The emporia supplied outsiders with limited access to the bounty of the interior and protected the inhabitants of the interior from the evils of the outside world. This facilitated the outside acquisition of extractables (metals, timber), of agricultural product, and in some locations of labor (in the form of enslaved persons); in exchange the outsiders brought in items in short supply, be that agricultural product, fine ceramics, or exotica such as artwork from Syria and Egypt. But the host political power controlled everything that was going on. The implementation of Polanyi’s port of trade began to accelerate with the publication of L’Emporion (Bresson and Rouillard 1993) and La Cité Marchande (Bresson 2000); Bresson articulates clearly the importance of Weber and Polanyi to the work of Finley and his own (esp. 2000: 252–256, 293–297) and emphasizes that we are to distinguish from a distance the difference between communities that contained emporia and communities that were emporia. There soon 200

Karl Polanyi and the study of ancient history

followed Astrid Möller’s detailed and sturdy study of Naukratis in Egypt, a Greek community founded under Egyptian protection in about 625.11 The Greeks were bringing in predominantly silver, wine (for the Greeks there – Egyptians were beer drinkers) and olive oil; the Egyptians were exporting linen for clothes and ropes, and papyrus for ropes (later for rolls to write on), as well as various minerals, the valuable hardwood ebony, ivory and other African exotica, certain resins unavailable elsewhere, and the soft mineral alabaster for perfume containers.12 Denise Demetriou’s 2012 monograph that built on Polanyi and Bresson (Demetriou 2012: 17–18) was an impressive comparison of Greek emporia with a focus on ethnic identity: 7th-century Emporion in Iberia; 6th-century Gravisca in Etruria; Naukratis; 4th-century Pistiros in Thrace near the Aegean coast; and Peiraieus, the market-port of Athens. A most recent important work on emporia is the 2018 collection edited by Gailledrat, Dietler and Plana-Mallart, which surveys the state of what has become its own subdiscipline: ports of trade in the western Mediterranean from the Phoenician ports of trade beyond the Pillars of Hercules in Africa and Iberia, some of them as early as the 10th century, down to the understudied Greek emporia on the Adriatic and on Sardinia. Karl Polanyi’s place in the study of the ancient Mediterranean and western Asia has survived the vicissitudes of criticism and the corrosive passage of time.

Coda Polanyi and Finley were pushed off center stage by the adoption by many practitioners of various branches of ancient studies of the New Institutionalist Economics (NIE) associated with Ronald Coase and Douglass North. The first important splashes of NIE arrived with the publications of The Ancient Economy: Methods and Models (Manning and Morris 2005) and of the Cambridge Encyclopedia of the Greco-Roman World (Scheidel et al. 2007). Especially influential were the materials that had been coming out of the sands of Egypt for over a century; these are documents articulating economic transactions, one after another indicating clearly the influence of various structural institutions, of notarial powers, of the changing position of the courts on this or that transaction. What has been demonstrated by such scholars as J. G. Manning (2018) and the authors of the chapters in Kehoe et  al. 2015, is that economic decisions and outcomes were routinely shaped by the ubiquitous institutions that surround these ancient players, especially the authors in the latter volume who emphasize the role of transaction costs in Hellenistic (323–31 BCE) and Roman Egypt (after 31). Alain Bresson’s magisterial 2007/2008 and 2016, now the standard economic history of ancient Greece, are clearly allied with the landscape of the substantivist New Institutionalists, yet Bresson again uses as his starting point the work of Karl Polanyi (2007/2008: 1.18–20, 2016: 11–13). In the course of presenting the important quotidian role of transaction costs (no better examples of which are the chapters in Kehoe et al. 2015), the New Institutionalists have limned a portrait of economic life in the ancient Mediterranean and Near East with a granularity of detail that brings with it institutions that we see in the modern world – lawyers, law courts, notaries, complex contracts. The NIE practitioners are not intentionally or necessarily modernist, but this portrait of the ancient world of financial institutions evokes the many moving parts of modern (market) capitalism. Were he here, Polanyi would say that this undermines the essential responsibility of the historian to bring lessons from the past to the present to make our world a better place to live for everyone in it. Abbreviations GT = Polanyi 1944. TMEE = Polanyi et al. 1957. 201

David W. Tandy

Notes 1 Marx had worked through much of this in his analysis of pre-capitalist formations in the Grundrisse (Marx 1973: 471–514), which was not readily available until 1953. While on the subject, it is fair to point out that Polanyi has been criticized, by Marxists mostly, for failing to acknowledge the notion of exploitation and for emphasizing ‘patterns of allocation’ rather than ‘relations of production’ (Cartledge 1983: 6); Godelier (1981), however, defends Polanyi on this particular point, as would Karatani (e.g. 2014), who also concentrates on allocation. 2 Polanyi 1944: 43–55, 1947, 1953; TMEE. Polanyi originally used the term ‘submerged’ in Chapter 4 of GT, though he did use the term ‘embedded’ in his notes (e.g., p. 272, note f); it is ‘embedded’ that has caught on over the decades. 3 Polanyi (1957C) and Finley (1970) differed on the significance of making money in Aristotle; where they agreed was in the conclusion that Aristotle was incapable of economic analysis because he was expected to use classical economic analyses to parse the economy around him, which was not subject to modern analysis. Finley in a letter admitted to G. E. M. de Ste. Croix that his 1970 paper would “set KP’s shade spinning” (Tompkins 2008: 134). 4 Finley thanked Polanyi warmly in the preface of all editions of The World of Odysseus, including those that followed Polanyi’s death. 5 Compare Larsen’s approval of Veenhof’s rejection of Polanyi’s general theory (Veenhof 1972) and his surprise that it has survived for so long in the field of Assyriology (Larsen 2015: 278). 6 Letter from Finley to Polanyi, 27 June 1954, quoted more fully in Tompkins 2008: 127. 7 It is certainly not Polanyi’s fault that he was unable to know at this early date what later Assyriologists figured out, that the tamkaru’s had a military role as well as the trading one; this means that these figures were integral pieces in the imperial government, not merely peripheral players. See Radner 1999: 102 n. 5 with bibliography there. 8 Frame 2021: no.74 42–49; Tadmor’s (1958: 34) translation of the same text offers “forced” in the place of “allowed”; perhaps “arranged for” would accommodate both meanings. The event is narrated elsewhere in terms of entrusting the community to a local sheik: “I deported] from the la[nd ... and] I settled (them) in the land that/of […] on the border of the city of the Brook of Eg[ypt, a district which is on the shore of the] Western [Sea. I assigned them to the authority of a qipu-official of mine], the sheikh of the city Laban” (Frame 2021: no.63 2’–7’). Dezsö and Vér (2013) date Sargon’s new karum to the year 712. This looks like another example of a centrally planned karu designed to funnel goods at border communities or emporia into the interior, in this case Egyptian goods exchanged into Arab hands and then carried onward to Mesopotamia. 9 On the lack of distinction between trade goods and tribute see Radner 2004: 155, where she reminds us that tribute was generously reciprocated by military and political protection. Tribute from the west was often comprised of resources required by the empire but were unavailable in Assyria itself, a notoriously poor region: timber and metals were the most important resources. 10 Al Mina had been an important port of trade in the Old Assyrian period (as Polanyi saw (1957A: 53)), providing an entryway for goods into Asia from the Mediterranean. A thousand years later al Mina fell to Tiglath-pileser probably in 738, at the start of his sweep through the Levant that captured the attention and tribute of nearly every port there (van de Mieroop 2007: 247–252). Al Mina was thereafter kept under close watch by Assyrians for the next (and last) 125 years of the Assyrian empire. 11 Möller 2000; she went on to publish many follow-up studies, among them Möller 2001A, 2001B, 2005. 12 Möller 2000: 211–212 with n. 208. It was long thought that Naukratis was a nearly exclusively Greek settlement (with a few Phoenicians and Cypriots), but now the archeology forces us to recognize that the settlement was mixed Greek and Egyptian; see Möller 2019.

Works cited Arensberg, Conrad M. 1937. The Irish Countryman: An Anthropological Study. New York: Macmillan. Arnold, Rosemary. 1957A. “A Port of Trade: Whydah on the Guinea Coast.” TMEE: 154–176. ———. 1957B. “Separation of Trade and Market: Great Market of Whydah.” TMEE: 177–187. Benet, Francisco. 1957. “Explosive Markets: The Berber Highlands.” TMEE: 188–217. Bresson, Alain. 2000. La Cité Marchande. Paris: de Boccard. ———. 2007/2008. L’Économie de la Grèce des Cités. 2 vols. Paris: Armand Colin.

202

Karl Polanyi and the study of ancient history ———. 2016. The Making of the Ancient Greek Economy. Translation of Bresson 2007/08 by Steven Rendall. Princeton: Princeton University Press. Bresson, Alain, and Pierre Rouillard, eds. 1993. L’Emporion. Paris: de Boccard. Cartledge, Paul. 1983. “‘Trade and Politics’ Revisited: Archaic Greece.” In Peter Garnsey, Keith Hopkins, and C. R. Whittaker, eds., Trade in the Ancient Economy, 1–15. Berkeley: University of California Press. Chapman, Anne C. 1957. “Port of Trade Enclaves in Aztec and Mayan Civilizations.” TMEE: 114–153. Dalton, George. 1962. “Traditional Production in Primitive African Economies.” Quarterly Journal of Economics 76: 360–378. Reprinted in Dalton, ed. 1967. Tribal and Peasant Economies: Readings in Economic Anthropology, 61–80. Garden City, NY: Natural History Press. Demetriou, Denise. 2012. Negotiating Identity in the Ancient Mediterranean. The Archaic and Classical Greek Multiethnic Emporia. Cambridge, MA: Cambridge University Press. de Ste. Croix, G. E. M. 1960. “Review of TMEE.” Economic History Review 12: 510–511. Dewey, Donald. 1958. “Review of TMEE.” American Historical Review 63: 376–378. Dezsö, Tamás, and Ádám Vér. 2013. “Assyrians and Greeks: The Nature of Contacts in the 9th–7th Centuries.” Acta Antiqua Academiae Scientiarum Hungaricae 53: 325–359. Donlan, Walter. 1982. “Reciprocities in Homer.” Classical World 75: 137–175. Finkelstein, Moses I. 1935. “Emporos, Naukleros, and Kapelos: A Prolegomena to the Study of Athenian Trade.” Classical Philology 30: 320–336. Finley, Moses I. 1954. The World of Odysseus. New York: Viking. 2nd rev. ed. 1978. London: Penguin. ———. 1970. “Aristotle and Economic Analysis.” Past & Present 47: 3–26. Reprinted in M. I. Finley, ed., Studies in Ancient Society, 26–52. London: Routledge and Kegan Paul, 1974. ———. 1973. The Ancient Economy. Berkeley: University of California Press. ———, ed. 1979. The Bücher-Meyer Controversy. New York: Arno. Frame, Grant. 2021. The Royal Inscriptions of Sargon II, King of Assyria (721–705 BC). University Park, PA: Eisenbrauns. Gailledrat, Éric, Michael Dietler, and Rosa Plana-Mallart, eds. 2018. The Emporion in the Ancient Western Mediterranean. Trade and Colonial Encounters from the Archaic to the Hellenistic Period. Montpellier: Presses Universitaires de la Méditerranée. Godelier, Maurice. 1981. “Discussion.” Research in Economic Anthropology 4: 64–69. Goody, Jack. 2006. The Theft of History. Cambridge: Cambridge University Press. Hasebroek, Johannes. 1933. Trade and Politics in Ancient Greece. London: G. Bell and Sons. Reprint Chicago, IL: Ares, 1976. Heichelheim, Fritz. 1960. “Review of TMEE.” Journal of Economic and Social History 3: 108–110. Jones, Tom B. 1958. “Review of TMEE.” Archaeology 11: 293. Karatani, Kojin. 2014. The Structure of World History. Durham, NC: Duke University Press. Kehoe, Dennis P., David M. Ratzan, and Uri Yiftach, eds., 2015. Law and Transaction Costs in the Ancient Economy. Ann Arbor: University of Michigan Press. Koschaker, Paul. 1942. “Zur Staatlichen Wirtschaftsverwaltung in Altbabylonischer Zeit, Insbesondere nach Urkunden aus Larsa.” Zeitschrifi für Assyriologie 47: 135–180. Kozuh, Michael. 2015. “A Hand Anything but Hidden: Institutions and Markets in the First Millennium BCE Mesopotamia.” In Timothy Howe, ed., Traders in the Ancient Mediterranean, 73–100. Chicago, IL: Ares. Larsen, Mogens Trolle. 2015. Ancient Kanesh. A Merchant Colony in Bronze Age Anatolia. Cambridge: Cambridge University Press. Leeds, Anthony. 1962. “The Port-of-Trade in Pre-European India as an Ecological and Evolutionary Type.” Proceedings of the Annual [1961] Spring Meeting of the American Ethnological Society, 26–48. Mimeograph available in the Digital Archive of the Karl Polanyi Institute of Political Economy at Concordia University, Montreal: https://www.concordia.ca/research/polanyi/archive.html (accessed 13 October 2023). Manning, J. G. 2018. The Open Sea. Princeton, NJ: Princeton University Press. Manning, J. G., and Ian Morris, eds. The Ancient Economy. Evidence and Models. Stanford, CA: Stanford University Press. Marx, Karl. 1973. Grundrisse. Foundations of the Critique of Political Economy. Translated by Martin Nicolaus. New York: Vintage. Mauss, Marcel. 1970 [1925]. The Gift. Forms and Functions of Exchange in Archaic Societies. Translated by Ian Cunnison. London: Routledge and Kegan Paul. Mayhew, Anne, Walter C. Neale, and David W. Tandy. 1985. “Markets in the Ancient Near East: A Challenge to Silver’s Argument and Use of Evidence.” Journal of Economic History 45: 127–134.

203

David W. Tandy Mōller, Astrid. 2000. Naukratis. Trade in Archaic Greece. Oxford: Oxford University Press. ———. 2001A. “Naukratis, or How to Identify a Port of Trade.” In David Tandy, ed., Prehistory and History: Ethnicity, Class and Political Economy, 145–158. Montreal: Black Rose. ———. 2001B. “Naukratis-Griechisches Emporion und Ägyptischer ‘Port of Trade’.” In Ursula Höckmann and Detlev Kreikenbom, eds., Naukratis: die Beziehungen zu Ostgriechenland, Ägypten und Zypern in Archaischer Zeit, 1–25. Möhnesee: Bibliopolis. ———. 2005. “Naukratis as Port of Trade Revisited.” Topoi 12/13: 183–192. ———. 2019. “Naukratis — Yet Again.” In Rui Morais, Delfim Leão, Diana Rodríguez Pérez, with Daniela Ferreira, eds., Greek Art in Motion. Studies in Honour of Sir John Boardman on the Occasion of his 90th Birthday, 355–357. Oxford: Archaeopress. Neale, Walter C. 1957. “Reciprocity and Redistribution in the Indian Village: Sequel to Some Notable Discussions.” TMEE: 218–236. Oppenheim, A. L. 1957. “A Bird’s Eye View of Mesopotamia.” TMEE: 27–37. Polanyi, Karl. 1944. The Great Transformation. New York: Holt, Rinehart and Winston. = GT ———. 1947. “Our Obsolete Market Mentality.” Commentary 13: 109–117. ———. 1953. “Anthropology and Economic Theory.” In Morton Fried, ed., Readings in Anthropology. Vol. 2. 2nd ed., 216–238. New York: Crowell. Reprint of Semantics of General Economic History. New York: Columbia University Research Project on “Origins of Economic Institutions.” ———. 1957A. “Marketless Trading in Hammurabi’s Time.” TMEE: 12–26. ———. 1957B. “The Economy as Instituted Process.” TMEE: 243–270. ———. 1957C. “Aristotle Discovers the Economy.” TMEE: 64–94. ———. 1960. “On the Comparative Treatment of Economic Institutions in Antiquity, with Illustrations from Athens, Mycenae and Alalakh.” In Carl H. Kraeling and Robert M. Adams, eds., City Invincible, 329–350. Chicago, IL: University of Chicago Press. ———. 1963. “Ports of Trade in Early Societies.” Journal of Economic History 23: 30–45. ———. 1977. The Livelihood of Man. New York: Academic Press. Polanyi, Karl, Conrad Arensberg, and Harry W. Pearson, eds. Trade and Market in the Early Empires. Glencoe, IL: Free Press. = TMEE Polanyi, Karl, with Abraham Rotstein. 1966. Dahomey and the Slave Trade. Seattle: University of Washington Press. Radner, Karen. 1999. “Traders in the Neo-Assyrian Empire.” In J. G. Dercksen, ed., Trade and Finance in Ancient Mesopotamia, 101–126. Leiden: Nederlands Instituut voor het Nabije Oosten. ———. 2004. “Assyrische Handelspolitik: Die Symbiose mit Unabhängigen Handelszentren und ihre Kontrolle durch Assyrien.” In Rollinger and Ulf 2004: 152–169. Redfield, James M. 1983. Review of Louis Gernet, The Anthropology of Ancient Greece. Baltimore, MD: Johns Hopkins University Press, 1981. American Journal of Philology 104: 398–403. ———. 2003. The Locrian Maidens. Love and Death in Greek Italy. Princeton, NJ: Princeton University Press. Renger, Johannes. 2005. “K. Polanyi and the Economy of Ancient Mesopotamia.” In Ph. Chancier, ed., Autour de Polanyi: Vocabulaires, Théories et Modalités des Échanges, 45–65. Paris: de Boccard. Revere, Robert B. 1957. “‘No Man’s Coast’: Ports of Trade in the Eastern Mediterranean.” TMEE: 38–63. Rollinger, Robert, and Christoph Ulf, eds. 2004. Commerce and Monetary Systems in the Ancient World: Means of Transmission and Cultural Interaction. MELAMMU 5. Stuttgart: Steiner. Sahlins, Marshall. 1965. “On the Sociology of Primitive Exchange.” In Michael Banton, ed., The Relevance of Models for Social Anthropology, 139–236. London: Tavistock. ———. 1972. Stone Age Economics. Chicago, IL: Aldine. Scheidel, Walter, Ian Morris, and Richard Saller, eds. 2007. The Cambridge Economic History of the GrecoRoman World. Cambridge: Cambridge University Press. Silver, Morris. 1983. “Karl Polanyi and Markets in the Ancient Near East: The Challenge of the Evidence.” Journal of Economic History 43: 795–829. ———. 2004. “Modern Ancients.” In Rollinger and Ulf 2004: 65–87. Tadmor, Hayim. 1958. “The Campaigns of Sargon II of Assur: A Chronological-Historical Study.” Journal of Cuneiform Studies 12: 22–40, 77–100. Tadmor, Hayim, and Shigeo Yamada. 2011. The Royal Inscriptions of Tiglath-pileser III (744-727 BC), and Shalmaneser V (726-722 BC), Kings of Assyria. Winona Lake, IN: Eisenbrauns. Tandy, David W. 1997. Warriors into Traders. Berkeley: University of California Press.

204

Karl Polanyi and the study of ancient history Tandy, David W., and Walter C. Neale. 1994. “Karl Polanyi’s Distinctive Approach to Social Analysis and the Case of Ancient Greece: Ideas, Criticisms, Consequences.” In Colin A. M. Duncan and David W. Tandy, eds., From Political Economy to Anthropology, 9–33. Montreal: Black Rose. Tompkins, Daniel P. 2008. “Weber, Polanyi, and Finley.” History and Theory 47: 123–136. Van de Mieroop, Marc. 2007. A History of the Ancient Near East ca. 3000–323 BC. 2nd ed. Oxford: Blackwell. Veenhof, Klaas. 1972. Aspects of Old Assyrian Trade and its Terminology. Leiden: Brill. Yamada, Shigeo. 2005. “Karu’s on the Frontiers of the Neo-Assyrian Empire.” Orient 40: 56–90. ———. 2019. “Neo-Assyrian Trading Posts on the East Mediterranean Coast and ‘Ionians’: An Aspect of Assyro-Greek Contact.” Orient, Supplement I: 221–235.

205

17 KARL POLANYI ON MONEY Jérôme Maucourant

Introduction: pragmatics of money The enigma of money has frequently been brought back to a principle deemed fundamental: value. An external and rational meaning thus seems to determine the life and evolution of this institution. Polanyi wrote a rather disconcerting sentence about the strong will to return to the gold standard after the First World War: “the war between heaven and hell ignored the money issue, leaving capitalists and socialists miraculously united” (Polanyi 2001 [1944]: 26). This means, in his view, that it did not matter whether economic value was thought of in terms of work or scarcity, by Marxist or neoclassical economists: monetary prices seemed to them to express something deeper, as if they were only the manifestation of a hidden essence. Such prevailing view can thus be described as essentialist. Polanyi prefers to explore a more recent approach that can be described as pragmatic. Against what he calls “pseudo-philosophies of money”, he writes (1968b: 175): “Money is an incompletely unified system. A search for its single purpose, a blind alley. This accounts for the many, unavailing attempts of determining the ‘nature and essence’ of money”. He celebrates the “Keynesian system”, in which “the role of money is purely pragmatic. No attempt is made to deduce its presence from the allocation of scarce resources” (ibid.: 196). According to this perspective, money is a system of action integrating the functions of account and payment, which can be found in almost all societies.1 These functions are linked to social imperatives – not necessarily to economic reasons. The symbolic and political dimensions of money are thus highlighted, even if what Polanyi calls “the changing place of the economy in society” – i.e. the specific way the economy is organized in each social system – has consequences for money. First, I shall outline Polanyi’s hypotheses on the diverse origins of the uses of money and their place in pre-capitalist societies. Second, the new role of money is highlighted during the great mutation leading to the market society: the fragmentation, which characterized money until then, gives way to a unification structured by the imperatives of market exchange. Finally, the question of money in the crisis of the market society is examined via the Polanyian conception of the “double movement”. The conclusion draws some topical lessons from this problematic.

DOI: 10.4324/9781003336747-22 206

Karl Polanyi on money

Money, economy and society Origins and functions of money Polanyi (1977: 102–103) defines money as a set of “money uses” performing four functions: (1) the function of a standard of value, which raises the question of the unit of account; (2) the function of payment, which implies the issue of debt; (3) the function of a means of exchange, linked to market transactions; (4) the function of store of wealth. It is immediately apparent that the typical monetary instrument of the market society fulfils all these functions: it is the “all-purpose money”. The use of money as a medium of exchange unifies and determines all the functions that are derived from the imperatives of the market: this is the consequence on money of the organizing and unifying (“integrative”) character of the market system. Such “modernising approach” is relevant for contemporary times, but it is incongruous with respect to “primitive money” (ibid.: 104–105). Yet, as early as the publication of The Great Transformation, Polanyi is struck by a particular character of money: in primitive societies, this institution exists independently of markets; its presence, like that of markets for that matter, does not economically distinguish the groups that use it. He writes (2001 [1944]: 61): The presence or absence of markets or money does not necessarily affect the economic system of a primitive society – this refutes the nineteenth-century myth that money was an invention the appearance of which inevitably transformed a society by creating markets, forcing the pace of the division of labor, and releasing man’s natural propensity to barter, truck, and exchange. But then, what is the function of these monetary tools and how did they emerge? It is difficult to answer this question within the framework of conventional ideas: these assume a situation of original barter, i.e. a community of economic agents who want to maximize their satisfaction by exchanging their respective goods. But the problem of the “double coincidence” of needs arises: a goat farmer, say, who wants to have bovine cheese, would be legitimately concerned about having bananas, which he is not sure of being able to exchange for a certain quantity of bovine cheese, etc. (see Neale 1976: 24–25). This is economists’ primitive scene. It would in fact be unwise to produce any product in such a particularly uncertain context! The origin of money cannot therefore be deduced from this ad hoc hypothesis of the individualistic ‘savage’, naturally inclined to barter (Polanyi 2001 [1944]: 46); this idea that money is an institution whose purpose is to reduce ‘transaction costs’ seems to be a view saying much about our time, but anachronistic as to others. The example of pre-colonial India shows that such problems did not arise, because redistribution was encompassing all social hierarchies. There was no free peasantry having to deal with the vagaries of the market, but a set of payments in kind whose terms governed the existence of each caste. The division of labour was ensured by customary routines governing the sharing on the scale of society (Neale 1957). There were therefore no inherent forces leading to the emergence of the all-purpose money. On the other hand, as history attests in this period, fiscal reasons can push political power to transform the system of redistribution in kind into a monetary levy. It is therefore clear that conventional hypotheses and controversies about the origin of money or monetary uses are frequently misleading.

207

Jérôme Maucourant

In order to better pose the problem, we therefore need a diversion through history and anthropology showing that money, (foreign) trade and the market can exist independently and have separate origins: Trade, as well as money uses, are as old as mankind; although meetings of an economic character may have existed as early as the Neolithic, markets did not gain importance until comparative late in history. (Polanyi 1968b: 157) It is in the market system that the three elements – money, trade and market – form a “catallactic triad”, in which each element implies the other, and which is fundamentally determined by the market. It is, then, time to think about money before and outside the market system (or, in Polanyi’s words, the “self-regulating market”). Polanyi warns about the projection of the catallactic triad onto historical materials: “Where trade was seen, markets were assumed, and where money was in evidence, trade was assumed and therefore markets” (Polanyi 1977: lii). As a result, markets were deduced where they did not exist! Indeed, “over the greater part of economic history trade, the various money uses and market elements should be regarded as separate occurrences” (ibid.). It is therefore not so much a question of denying the antiquity of the principle of commercial exchange as of emphasizing the anteriority of money and trade with regard to the market. Polanyi highlights a salient feature of archaic societies, the institutional division of trade and local markets. In this connection, he defines the port of trade as follows: Previous to modern times, so it appears, the typical organ of overseas trade was an arrangement capable of dealing with the security requirements of trade under early state conditions [...] the port of trade was often a neutrality device […] the archaic syndrome comprised a trade carried on at set prices, and by other administrative means […] competition was avoided as a mode of transaction. (Polanyi 1968b: 238–239) Clearly, no individualist, spontaneous exchanger, and no exhaustive explanation of money can be found in the archaic forms of exchange or trade. Monetary payments seem, at the origin, to result from a number of obligations which are not necessarily economic. Admittedly, the economic origin of the uses of money via indebtedness seems obvious; Polanyi (1968a) specifies, however, that it is the extreme precariousness of the living conditions that pushes to loans of subsistence: the spirit of enterprise is not the root cause of indebtedness.2 It is therefore necessary to think of money outside and before the domination of market relations. The necessities of the management of the system of redistribution constitute another origin of the currency. The accounting of such an economy requires the use of money, at least as an accounting practice, without which it is not possible to measure the weight of taxation on economic units or to estimate the yield of this taxation. Without a system to homogenize products, it is difficult to make payments in an economy of a certain extent (Polanyi 1977: 65). A totally unifying unit of account is not required, but “substitutive equivalencies” are necessary to determine the quantitative relationships between the measures of goods. Polanyi then evokes the case of the Ancient Near East and the Mycenaean tablets.3 Besides, the principle of redistribution is not the only “form of integration” leading to the institution of these equivalences: there is of course also the principle of reciprocity (Polanyi 1968b).

208

Karl Polanyi on money

Polanyi’s hypothesis is, then, that redistribution drives the account function of money independently of its function as a medium of exchange: How, for instance, can money objects be in use for payment, other money objects in use for as a ‘standard’, while no exchange of appreciable amount is carried on? The role of treasure and stored staple in archaic society may provide part of the answer. (Polanyi 1977: 79) With regard to the exchange function, ancient societies thus knew pure “ideal units” employed during redistribution practices, when no monetary object was in use (see Gentet and Maucourant 1991). What is therefore striking in pre-capitalist uses of money is their fragmented character and the various necessities, economic or not, which led to the birth and consolidation of this institution. Non-modern societies are thus characterized by a fragmentation of their monetary tools: Polanyi speaks of “special purpose money”. For example, one type of monetary object can perform the function of accounting, another that of payment, etc. The situation may be even more complex. The slave, for example, could serve as a unit of account and a means of external payment, while shells served as a means of payment for local transactions limited to a certain value, the large local values being expressed in slaves. Then, an ideal type of slave had been elaborated. The fragmentation of currencies according to uses and the separate institution of functions show the very particular nature of non-modern money. Conversely, with the all-purpose money of market societies, the exchange function fundamentally determines all the other functions, to the point of unifying them. Moreover, when a modern society gives birth to currencies for specific uses, it is because modernity experiences the crisis of the market system: in Nazi Germany, Polanyi recalls (1957: 179–180), “Half a dozen ‘marks’ were current under Hitler and each of them was restricted to some special purpose or other”.

Money between exchange and power Polanyi, then, supports the hypothesis of the manifold origins of money and suggests that, comparable to “a semantic system” (ibid.: 176), it makes it possible to produce socio-economic meaning through symbols that represent the value of the debts that are not a priori economic, and can pay them off: Payment is a discharge of an obligation through the handing-over of quantifiable objects, which then function as money. The connectedness of payment with money and the obligations with economic transactions appears to be modern mind self-evident. Yet, the quantification, which we associate with payment, operated already at a time when the obligations discharged were quite unconnected with economic transactions [...] Rather, obligations may have different origins different from guilt and crime, such as wooing and marriage; punishment may spring from other than sacral sources, such as prestige and precedence. (Ibid.: 181) Money is not a thing measuring things, but an institution evaluating the importance of a defined choice. In “unstratified primitive society, as a rule, – Polanyi points out (ibid.: 194) – payments are made in connection with the institution of bridewealth, bloodwealth and fines”, while “in stratified, and especially in archaic society, institutions as customary dues, taxes, rent and tribute similarly give rise to payments”. These forms of debt explain that money, before being linked to productive

209

Jérôme Maucourant

and market demands, has its origin in exigences relative to kinship, religion or power. Money is the institution that expresses a measure of debts arising from social transactions. Payments between individuals and social groups make possible a logic of appeasement. This is the etymology of ‘pay’ and the properly symbolic dimension of money, that of the alliance of individuals and groups (as the etymology of the word symbol indicates, in turn). It is through money that society carries out a work of codification and rationalization on itself: this brings us back to the general problematic of money as a system of action, which is already that of an eminent member of historical institutionalism, Wesley Clair Mitchell (1944). This activity of measuring social obligations is part of processes of social differentiation and even hierarchization, that are part of the dynamics of the “evolving state structure” (Polanyi and Rotstein 1966: 192). Such evolution is one of the conditions of the great shift from ‘primitive’ to ‘archaic’ society, characterized by the emergence of politics, i.e. the state (ibid.: 173). Ethnographic observation suggests, in this respect, that goods offered to chiefs during ceremonial exchanges can become currency through the authority with which they are invested. These uses of money have, in turn, irreversible effects on the social structure: Now, archaic money has the singular effect of solidifying the social structure. Institutions tend to be strengthened by the quantitative identification of obligations and rights resulting from the introduction of numerals. Sociological features to which institutions attach are mainly status and state building. (Ibid.: 174) The status dimension of the uses of money can be linked to the institution of specific monetary forms for each stratum of society. Thus, in the Mali Empire, around 1352, there was a ‘poor man’s money’, a thin copper wire of a defined weight, and a ‘rich man’s money’, a large copper wire of an equally defined weight; the former could only buy rudimentary consumer goods, while the latter could also acquire goods intended for the elite. Money (in its archaic form) thus may accentuate a specific feature of non-modern societies: the extraordinary stability of consumption norms. Examples from the historiographic and anthropological literature lead Polanyi to believe that lower class status, too, is maintained by restricting living standards to the coarse food and bare necessities that native money is allowed to purchase (poor man’s money) […] The variety and often minute articulations of money institution thus help to achieve integration and stabilize status privileges without the use of open force. (Polanyi 1977: 120) His description of the economy of Dahomey in the 18th century demonstrates the political importance of money, as evidenced by the royal institution of markets, the cowry-money, etc. The study of these archaic markets shows that they are based on specific determinations, such as the proclamation of equivalence, the absence of credit and the prohibition of barter, i.e. the obligatory use of money. The monarch preferred the cowry shell as money to gold, which was widely available in the region, because no one could become secretly rich (Polanyi and Rotstein 1966: 178). Polanyi (ibid.: 185) also relates an enlightening myth according to which the first king of Dahomey ‘invented’ a market. Having seen a people not practising monetized exchange, he forced them to do so, while consecrating a market place with a sacrifice and making cowries spring from the ground. This myth is a good metaphor for the “embeddedness” of the economy in society, by which pre-modern societies were characterized. 210

Karl Polanyi on money

More generally, imposing the use of money and constraining market exchange constitute an incentive for monetary circulation, the growth of which is beneficial to tax revenues, which is a principle of Western mercantilism too. In the case of Dahomey, the decline of royal power condemned the monetary use of the cowry because the capacity was lacking to establish its rarity. In this sense, ‘laws of the market’ seem applicable for the ‘cowry commodity’: but the determinant fact was that a social universe was in deliquescence. Socio-economic cohesion was, in reality, the secret of that African currency. At this point, the multifaceted and complex character of the monetary institution is revealed. To better understand this original approach of Polanyi, it is not enough to underline the skilful ­mobilization – opposed to the preconceptions of the market society – that Polanyi makes of anthropological and historiographical materials. It should also be noted that he critically reinterprets founding texts on exchange and money that have shaped the perception that Western modernity has of its history, and also of other civilizations. The ‘Aristotle moment’ is essential. Polanyi exposes the Aristotelian conception of “natural” exchange which includes the “barter” of barbarians: it is in keeping with “nature”, according to Aristotle, to preserve the autarky of the community in spite of demographic growth, thanks to reciprocity (Polanyi 1977: 68–69, 1957). Furthermore, the barter is in no way here an individualistic institution: it rather expresses a relation by which the needy, even a needy group, will be able to repay their debt to the members of the extended community according to the equivalences in force. It is thus useless to interpret ‘barters’ within the framework of a supposed universality of commercial exchange. Moreover, reciprocity does not exclude accounting practices: the gift creates a socially measurable debt: “In primitive societies, credit, through which debt is formalized, is provided originally by the reciprocity practiced within clan and neighborhood” (Polanyi 1977: 141). So the gift was linked to the uses of account and payment of money. Going deeper into this question, Polanyi criticizes the equivalence assumed by translators between metadosis and “exchange or barter, while patently meaning its opposite, namely, ‘giving one’s share’” (Polanyi 1957b: 91). Consequently, if metadosis is translated by exchange or even by barter, it would mean that the exchange comes from the exchange: which is only a truism, writes Polanyi, according to whom, instead, The derivation of exchange from contributing one’s share to the common pool of food was the linchpin that held together a theory of the economy based on the postulate of self-­sufficiency of the community and the distinction between natural and unnatural trade. (Ibid.: 93–94) The social world, that becomes visible through Polanyi’s new reading of the Aristotelian text, allows us to free ourselves from our prejudices in relation to the original ‘barter’ etc., source of so many misunderstandings about the origin and functions of money.

Money, capitalism and crises Currency at the time of the market capitalist system The mutation of Western societies, with the triumph of the Industrial Revolution and the market-­ capitalist system, implied a redefinition of the place of money in society. Money should no longer remain subject to politics. The institutional separation between economy and politics is, according to Polanyi, a fundamental principle of the market society. The generalization of market 211

Jérôme Maucourant

corresponds to the great moment of the commodity money: any particularly exchangeable and fungible commodity can become money. There is, then, a shift from the social to the natural terrain: money acquires the characteristics of a thing characterized by a particular rarity or needing much productive effort. The political and symbolic dimensions of the institution of money are – in ­principle – expelled by modernity; money would perform the functions of account, payment and store of value as a pure medium of exchange. Everything happens as if money would be produced to be sold, like any ordinary commodity. In the world of commodities, according to Polanyi, money, like land and labour, becomes a “fictitious commodity” (Polanyi 2001 [1944]). In fact, at the international level, national currencies seem to be exchanged like simple commodities. However, the “international monetary system” has a “political function” which is little understood, according to Polanyi: Gold standard and constitutionalism were the instruments which made the voice of the City of London heard in many smaller countries which had adopted these symbols of adherence to the new international order. The Pax Britannica held its sway sometimes by the ominous poise of a heavy ship’s cannon, but more frequently it prevailed by the timely pull of a thread in the international monetary network. (Ibid.: 14) Once this monetary regime has been adopted and the principle of free trade established, it is clear that the debtor countries on the periphery of world capitalism have no choice but to submit their economic policies to the conceptions and requirements of the centre. The political dimension of money can also be observed at the national level: Now the institutional separation of the political and the economic spheres has never been complete, and it was precisely in the matter of currency that it was necessarily incomplete; the state, whose mint seemed merely to certify the weight of the coins, was in fact the guarantor of the value of the token money, which it accepted for the payment of taxes and otherwise. This money was not a means of exchange, it was a means of payment; it was not a commodity, it was purchasing power, far from having utility itself, it was merely a counter embodying a certain quantified claim to things that would be purchased. (Ibid.: 205) To regulate the functioning of this monetary system, it becomes essential to have national central banks capable of carrying out a real monetary policy. The active policy of interest rates constitutes a necessary rationalization: “Central banking reduced the automatism of the gold standard to a mere pretence” (ibid.: 204). By organizing, in fact, the fall in prices by raising interest rates, the constraint of convertibility into gold of national currencies does not constitute an economic disaster, at least for a time. Undoubtedly, the liquidation of the less efficient firms is the price to pay for this policy; but the national central bank thus insulates the internal economy from dangerous external shocks. Polanyi even speaks of “monetary protectionism”, because monetary policy is a form of social protection. More generally, “social protection was the accompaniment of a supposedly self-regulating market” (ibid.: 211). The rise in power of central banks can therefore be considered as an instance of the “counter-movement”, that is to say of what spontaneously results from the inconsistencies and damages created by the penetration and extension of the market.

212

Karl Polanyi on money

Polanyi therefore does not conceive of a modern currency without the public regulation exercised by central banks, even under a gold standard regime. He points out that monetary policy is in no way a purely technical issue, because “social forces” structure the institution of money. To turn from mechanisms and concepts to the social forces in play, Polanyi writes (2001 [1944]: 206) that it is important to realize that the ruling classes themselves lent their support to the management of the currency through the central bank. Such management was not, of course, regarded as an interference with the institution of the gold standard; on the contrary, it was part of the rules of the game under which the gold standard was supposed to function. The abandonment of the gold standard by the United Kingdom in 1931 marked the end of an epoch of the history of money and the international financial setup. Its abandonment by the United States in 1933, at the origin of the New Deal, was an important achievement of the counter-movements protecting society. The fact remains that monetary policy has a class content, since the dominant interests are not considered, in market societies, as interferences of politics in the economy. The class content of monetary policy is, however, part of social compromises that vary. In the United States, the postulate of sound money was refused under the New Deal; “the United States went off gold in time” and, as a result, the “eclipse of Wall Street in the 1930s saved the United States from a social catastrophe of the Continental type” (ibid.: 238). In a different economic and political situation, in France, “the so-called Blum experiment (1936)” had to stop: an example of “how crippling the effect of the sound currency postulate was on popular policies” (ibid.: 237). The “great transformation” in its democratic version (however limited the New Deal actually turned out to be) was, then, possible only thanks to the exclusion – or, at least, a severe control – of the imperatives of financial markets. Emancipating society from the gold standard – a monetary framework constraining economic policies – was, for Polanyi, a promise of democracy and efficiency. This is still a topical lesson: also in the sense that the New Deal was an exceptional case among the diverse ways the transformation was realized elsewhere.

The crisis of the 1930s, a monetary crisis? In an article of 1933, some elements of which he takes up ten years later in The Great Transformation, Polanyi offers a monetary interpretation of this crisis, on the condition, of course, of thinking of money as an institution: it is not a question of a ‘monetary theory of crisis’ in the sense of traditional economics. He observes (1933: 67) that the costs of the war, including “convulsive strains on the common life, […] far exceeded the economy’s supply capacity”. The scale of human and societal destruction was “of such magnitude that the social fabric could no longer withstand the forced restoration of economic equilibrium”. Polanyi adds a political diagnosis to economic analysis: the war and the maintenance of social order during peace imposed a new balance of power between classes. Such balance too required the creation of debts, whose accumulation was not compatible with the proper functioning of the convertibility of currencies. All countries, victors or vanquished, Polanyi points out, had to face three kinds of claims: of the bondholder (rentier), of the worker, who was promised “more rights and more bread”, and of the peasant, as a “bulwark against social revolution” (ibid.: 68). On the one hand, “the democratisation of the public life” had made great strides. On the other, bondholders’ interests had priority, especially in the victorious states: “their financial

213

Jérôme Maucourant

sacrifices had won the war, and the possibility of restarting the economy depended on their unbroken faith in the currency and credit” (ibid.: 69). The need to respond at least in part to the three contrasting social claims led to over-­ consumption. The increase in aggregate demand, without a sufficient capital formation, fuelled the growth of the 1920s, but was only made possible by the extraordinary elasticity of the international credit system, allowing itself of new modalities, and much more receptive than before to political motives: “never in the history of modern capitalism has credit been so politicized” (ibid.: 72).4 European imbalances were postponed thanks to international credit, an unprecedented elasticity of the financial system obscuring structural problems. On both sides of the Atlantic, there were short-term benefits. It would have been better for America to abandon its war credits, even if it meant lowering the standard of living with tax levies. But the United States preferred to maintain the status quo at the cost of extravagant credit inflation. Even if debt inflation was no longer encouraged in February 1928 by monetary policy, the process of indebtedness and stock market madness had gone so far that the liquidation crisis was inevitable. This process provoked the credit crisis in 1931 and the monetary crisis of 1933. The shortage of credit forced companies to practise liquidation prices to obtain the necessary change. Hence the general deflation. Conversely, the French case showed, in 1928, that it was possible to organize the devaluation of the financial rent by devaluation. It was thus the policy of the dominant power, the United States, which had serious consequences: it was not possible to maintain financial rent, the control of immigration and a complete freedom of capital flows without causing a crisis.

Conclusion. An institutional analysis Let us summarize Polanyi’s double contribution of to the money issue. First, a new understanding of the monetary phenomenon, both in pre-capitalist era and ours. Second, methodological consequences for monetary thinking. According to the economic ideology, money seems to be a market institution. However, societies have been able to have highly refined uses of money long before the institution of the market system: money regulated very complex statutory obligations, which were not of economic origin or nature. Money, through its various uses, was a means of codification, providing an institutional measure for social obligations. The market society, which has taken hold of this multi-millennial institution, has never been able to completely conceal these political and symbolic dimensions of money. Such concealment – an expression of the market mentality typical of a “dis-embedded” economic system – supplied a justification of the gold standard. This monetary regime, which originated together with industrial capitalism, has been a utopian attempt to separate politics from the economy. It actually worked as a reaction to the principle of popular sovereignty. On the other hand, the emergence of national central banks can be seen as a countermovement to the extension of capitalist markets. And the crisis of the 1930s harshly sanctioned the institutional separation. Nineteenth-century culture included theoretical illusions, Polanyi highlights (2001 [1944]: 198): A hundred years’ peace had created an insurmountable wall of illusions which hid the facts. The writers of that period excelled in lack of realism. The nation-state was deemed

214

Karl Polanyi on money

a parochial prejudice by A. J. Toynbee, sovereignty a ridiculous illusion by Ludwig von Mises, war a mistaken calculation in business by Norman Angell. Awareness of the essential nature of the problems of politics sank to an unprecedented low point. That era is over, but the liberal revival of the 1980s, in the era of the second globalization, illustrates the relevance of Polanyi’s analysis. The creation of a single European currency, with the rule of central bank independence, is, in fact, a return to the ideal underlying the gold standard. This project neglects the lessons of history and also the economic, institutional and cultural differences that make this continent unique. The half-century peace in Europe in the second half of the 20th century had similar consequences. Polanyi’s statement regarding the times of gold standard era retains its relevance to the current neoliberal era: “The blind spot of the marketing mind was equally insensitive to the phenomena of the nation and of money. The free trader was a nominalist in regard to both” (2001 [1944]: 212). At a time when the concept of popular sovereignty is being undermined by all those who want the mechanisms of competition to replace politics, this reading of history to which Polanyi invites us is important. The single European currency is not the result of economic rationality, but of political rationality: the increase in monetary constraint and the extension of the field of competition, that the monetary unification favours, are considered by neoliberals as a means of disciplining the social state (considered too invasive) and as a way of subjugating national sovereignties (considered archaic). In the mid-2010s, exceptional measures were taken, because the collapse of the single currency was imminent. But this other figure of the countermovement was made at the cost of other perverse effects; one can fear aggressive policies against the social state, on the pretext of fighting against a debt deemed unsustainable, inflation, etc. As for the methodology of monetary thought: The historical and anthropological facts mentioned above invalidate the idea that money is a way of solving the embarrassments of barter encountered by the ‘primitives.’ More generally, Polanyi (ibid.: 46) shows that it is no longer possible to accept “Adam Smith’s hypothesis about primitive man’s alleged predilection for gainful occupations” – that is to say, a widespread axiom of utilitarianism. These Polanyi’s reflections are also corroborated by works on the border between anthropology and economics (see Servet 1984). Money is a complex institution, with its own meaning, depth and dynamics. This is why Polanyi proposes to think of it as a “semantic system”, a system also characterized by being historical. Money will not stop having its pitfalls, but we will probably be better equipped to understand it now, thanks to this detour through anthropology and history. The hypothesis according to which we gain by thinking of money as an institution and not as a commodity – or even a simulacrum of it – is an important Polanyian legacy to the social sciences. This original approach is neither structuralism nor cultural relativism, as Anne Chapman points out (2005: 31): Not only did he defy the economist of capitalism, he also employed a method of analysis which offers an alternative to the usual search for isolated origins without becoming trapped in relativism, where each culture or ethnic group is viewed as a special or privileged case. This method remains very useful at a time when the various derivations of postmodernism are powerfully rehabilitating relativism.

215

Jérôme Maucourant

Notes 1 In 1992, Abraham Rotstein explained to me that Polanyi was inspired by the adage “money is what it does” (Francis A. Walker). Far from preconceived ideas, such an approach seems preferable to all essentialisms. For a different view, see Servet, 1993. 2 For the Ancient Near East, see Renger 1994, 197. 3 Polanyi 1968b, 321 sq., in particular on the “Submonetary devices” reigning in Mycenae. 4 How not to qualify as ‘credit politicization’ the exceptional means implemented in the 2010s to save the Euro from the imbalances that its very existence caused? Without forgetting the crisis of 2008… Each time money and credit are in reality at the service of a policy of preservation of vested interests, the medium-term negative consequences being largely socialized. For a neo-Polanyian view of money and debt in contemporary capitalism, see Maucourant and Plocinizcak 2013.

References Chapman, Anne. 2005. “Karl Polanyi (1886–1964) for the Student.” In Autour de Polanyi – Vocabulaire, Théorie et Modalités des Échanges, Philippe Clancier, Francis Johanès, Pierre Rouillard and Anne Tenu, eds., 17–32. Paris: de Boccard. Gentet, Didier and Jérôme Maucourant. 1991. “Une Étude Critique de la Hausse des Prix à L’ère Ramesside.” Dialogues D’histoire Ancienne 17/1: 13–31. Maucourant, Jérôme and Sébastien Plociniczak. 2013. “The Institution, the Economy and the Market: Karl Polanyi’s Institutional Thought for Economists.” Review of Political Economy 25/3: 512–531. Mitchell, Wesley Clair. 1944. “The Role of Money in Economic History.” Journal of Economic History 4/ Supplement, December: 61–67. Neale, Walter. 1957. “Reciprocity and Redistribution in The Indian Village.” In Karl Polanyi, C.M. Arensberg and H.W. Pearson, eds., Trade and Market in the Early Empires. New York: Free Press., 218–237. ——— 1976. Monies in Societies. San Francisco: Chandler and Sharp. Polanyi, Karl. 1933. “The Mechanism of the World Economic Crisis.” In Id., Economy and Society. Selected Writings, M. Cangiani and C. Thomasberger, eds., 2018, 66–80. Cambridge: Polity Press. ——— 1957. “Aristotle Discovers the Economy.” In Polanyi, Arensberg and Pearson eds., Trade and Market in the Early Empires. New York: Free Press., 64–94. ——— 1968a. “Karl Bücher.” In International Encyclopedia of the Social Sciences Vol. II, 163–165. ——— 1968b. Primitive, Archaic and Modern Economies, George Dalton ed. Boston: Beacon Press. ——— 1977. The Livelihood of Man. New York: Academic Press. ——— 2001 [1944], The Great Transformation – the Political and Economic Origins of Our Time. Boston: Beacon Press. Polanyi, Karl and Abraham Rotstein. 1966. Dahomey and the Slave Trade. Seattle: University of Washington Press. Renger, Johannes. 1994. “On Economic Structures in Ancient Mesopotamia.” Orientalia 63: 158–208. Servet, Jean-Michel. 1984. Nomismata – état et Origines de la Monnaie. Lyon: PUL. ——— 1993. “L’institution Monétaire de la Société Selon Karl Polanyi.” Revue Économique 44/6: 1127–1149.

216

PART 4

Methodology and political philosophy

18 FREEDOM AND SOCIALISM Michael Brie

Introduction The relationship between freedom understood as personal responsibility for the outcomes of one’s actions and the inescapable reality of complex societies was the great moral-cultural problem to which Karl Polanyi was committed throughout his life. His quest to solve the problem of this relationship formed the normative standpoint from which he looked upon “the streams of events from the heights of thought” (Weber 1949: 112). Starting in the early 20th century, Polanyi developed a research program that he would recast from decade to decade, adapting it to the changing conditions of his times and the harsh ruptures he encountered. In the late 1930s, in immediate preparation for The Great Transformation, Polanyi reflected quite thoroughly on the question of why scholarship or “science” so often becomes detached from the problems that really matter. In his view, these problems as research questions form a “matrix” in which science is embedded, defining its object from the outside. This matrix is the basis on which the intrascientific object is constructed via a specific method. Such processes of construction, however, may become independent from the matrix to an extent that the initial questions are progressively lost (Polanyi 2014: 109f.). Polanyi’s own work has evidently not escaped the destruction of its underlying research question concerning the possibility of freedom in modern complex societies: this question has largely been neglected in the reception of Polanyi. But in view of the existential crisis faced by human civilization today, it could be the case that Polanyi’s “attempt to give a new meaning to the concept of freedom […] turns out to be the most far-reaching aspect” (Cangiani and Thomasberger 2002: 42) of his work. Drawing out this aspect requires recognizing the inseparable connection between Polanyi’s normative question, his socialist orientation, and his research process. In the following, an attempt is made, first, to outline the genesis of Polanyi’s research question in the years before and immediately after World War I, second, to delineate the philosophical challenge of Mises’ attack on the concept of socialism and Polanyi’s answer, and third, to identify the basic contours of Polanyi’s conception of socialism as a response to the dangers that capitalist market society poses to human freedom.



219

DOI: 10.4324/9781003336747-24

Michael Brie

Boredom of a world without meaning Polanyi’s guiding question was formed in the particular political-intellectual milieu of early 20thcentury Budapest. Located on eastern edge of Central Europe, Budapest was at the time the second capital of the Austro-Hungarian Empire and characterized by its second- and third-generation assimilated Jewry. In this period, Polanyi formulated a series of antinomies. These concerned the relationship between freedom and the reality of complex societies, between normative orientation and scientific analysis, and between political commitment and the social conditions of modern societies.1 First, from the very beginning, Polanyi placed the “ideal of moral freedom” (Polanyi 2016h: 52) at the center of his thinking and contrasted it with coercive relations in existing liberal societies. As he emphatically wrote in 1911: There is no tradition the antiquity of which can absolve us from self-determination; no authority whose loftiness can eliminate the consequences of our behaviour. Behind us lies the bridge, which we have burned, along which one could have escaped to safe shores, choosing the cowardly but comforting path of refusing responsibility. (Polanyi 2016e: 51) Based on this, Polanyi formulated the inseparable unity of freedom and responsibility: “within the circles of our moral life, the will is free, and […] this freedom is, at the same time, the highest social obligation” (Polanyi 2016j: 59). Second, Polanyi opposed the transformation of Marx and Engels’ “historical materialism” into a scientific worldview in which the goals of action and the values underlying those goals can be derived from the analysis of objective reality. For Polanyi, like many others, the orthodox Marxism of the Second International had been transformed from a social-scientific current, capable of providing a uniquely useful system for political methods […] into a bedtime compendium of political goals, from which superstitious believers await enlightenment, in vain. (Polanyi 2016d: 62) This raised the question of how to develop social sciences that could organically combine the analysis of complex societies with a normative orientation toward freedom. Third, in Polanyi’s view, the deadly confrontation of military machineries in World War I had marked the logical extreme of the opposition between individual freedom and social forces that had lost all reference to positive values. For him, nothing could be more absurd than the contradiction between the free will of the many hundreds of millions who participated in the war in one way or the other and the utter futility of that war (Polanyi 2016k: 66). The expression of this contradiction was “the boredom of a world without meaning” (Polanyi 2016k: 67). At the same time, he saw the fundamental assumption common to both liberalism and orthodox Marxism refuted: “The blind, materialist faith in automatic progress was broken forever on 4 August 1914” (Polanyi 2016a: 197). Fourth, on the tenth anniversary of the Galileo Circle, Polanyi wrote an article on the opposition between the “reality of society” and individuals. Therein, he rejected the idea “that only society is real,” “that human existence in itself is devoid of significance” and “that mankind must adjust to the reality of society” in order to arrive at “the promised land of unbelief, the world of perfect institutions” (Polanyi 2016i: 76, 77). His article culminated in the words: 220

Freedom and socialism

No science can alter, but can only affirm the truth that the bird flies not in accordance with the law of gravity but in spite of it; that the tree does not spread its foliage according to the law of economic maximisation but according to the law of creative abundance; that society rises to higher spiritual levels not in accordance with material interests but in disregard of them; and that human faith and self-sacrifice bear us aloft not by the downward-bearing gravitational force of material interests but by force of the hallowed laws of the spirit which defy them! (Ibid.: 77).

Misesʼs challenge to socialism and Polanyi’s recognition of the reality of complex societies Polanyi’s article “The Test of Socialism” appeared in October 1918. In this article, he stated: “The outbreak of the war and the Russian adventure: these are the two crucial issues that were selected to reveal the meaning of the working-class struggle” (Polanyi 2016m: 90). The article started with the insight: The problem lies not with Bolshevism, but with socialism itself. Today, the only serious representative of socialism is Bolshevism. Its programme is nothing but the practical realisation of Marxian socialism. Any type of socialism which is not Bolshevik is nothing but the abdication of the programme, a repetition of 4 August 1914. This fact can be distorted, concealed or denied – but the contrary argument cannot legitimately be made. (Ibid.: 86) In Polanyi’s view, only the Bolsheviks adhered to scientific socialism with absolute determination. Like other socialists of the time – from Karl Kautsky to Rosa Luxemburg – Polanyi noted that the real policies of the Bolshevik government were contrary to its stated goals: It is undoubtedly the case that the Russian Bolsheviks set sail in the name of peace, internationalism, democracy and socialism. However, in place of peace they have brought a series of wars; instead of internationalism they have brought the right to self-determination, that is the resurrection of nationalism; instead of democracy, the dictatorship of the proletariat; and, most crucially, instead of socialism, the maintenance of a decaying and impotent, but economically unaltered capitalism. (Ibid.: 87) The open question was what this reversal of means and ends meant for the socialist vision. To Polanyi, the socialist workers’ movement seemed similar to early Christianity: the Catholic Church remained from the latter, the trade unions from the former (ibid.: 91). During this period, Polanyi searched intensively for conceptual approaches that understood socialism not as a dictatorship, a centrally administered economy, or an organized bureaucratic machinery (the emergence of which he had already predicted in 1910), but as a society in which freedom is exercised collectively. In reviews of the writings of Sidney and Beatrice Webb, G. D. H. Cole, and Karl Kautsky, Polanyi’s basic socialist ideas become visible (Polanyi 2016c, 2016f, 2016g, 2016l). Taking their cue from guild socialism, these ideas aim at a social order characterized by the democratic representation of the various functions in society (production, consumption, community life, etc.). This social order would be one in which various interests are 221

Michael Brie

articulated transparently and mediated through forms that are agreed upon in a democratic process involving all of society. Like many others, Polanyi analyzed both the defeats and reformist containments of socialist movements and projects, following the internal debate among socialists both approvingly and critically. For Polanyi, such movements and projects were fundamentally subject to a degree of indeterminacy, historically fated neither to succeed nor to fail. This space of relative indeterminacy, however, was foreclosed by the positions which Ludwig von Mises developed on the basis of his analysis of Soviet wartime communism. From the point of “pure science” Mises tried to prove that any attempt to establish a complex society on the basis of common property and to shape it in a socialist way – completely independent of intentions and conditions – would in fact make rational action and thus freedom impossible. In his 1922 book Socialism: An Economic and Sociological Analysis, Mises comprehensively developed the critique of socialism he had formulated earlier (Mises 1920, 2012). On the one hand, Mises assumed that socialism was the “watchword” of the present: “for more than a generation the policies of the civilized nations have been directed toward nothing less than a gradual realization of Socialism” (Mises 2010: 25). On the other hand, he maintained and systematically elaborated his 1920 judgment that a socialist economic order could not possibly be a rational order (see the article “The socialist calculation debate and the problem of modern civilization” by Claus Thomasberger in this volume). While Mises believed that opinions could differ as to whether a socialist society should be pursued, he thought that one thing was irrefutable: socialism was not characterized by a greater degree rationality and oversight than capitalism, but rather by the total destruction of the conditions of rational action and thus of human freedom itself. Polanyi’s critique of Mises’ position that human freedom based on rational action is impossible in a socialist society (Polanyi 1979, 2005a) dragged on for almost a decade. In the end, Polanyi had to acknowledge that the complexity of modern societies – and thus the stubbornness of objectified relations embodied in prices, legal forms, and state institutions – could be eliminated neither by Neurath’s theory of a centrally administered natural economy (Neurath 1919; see critically Polanyi 2005a: 72f.) nor by the functional representation of different interests of citizens in the form of guilds or other bodies. He realized that the Marxian position that there would be an immediate correspondence between individual and social interests in a communist society was irredeemable: Although “Marxist Socialism silently assumes that society can be perfect,” Polanyi maintained, “no society can be the realisation of community. Power and value are inherent in society; political and economic coercion belong to any and every form of human co-operation” (Polanyi 2018c: 152). The antinomy between responsible freedom and the complexity of modernity that he had already confronted in the preceding decades could not be avoided but would instead have to be mediated in a new way. In a 1929 letter to his friend Donald Grant, Polanyi wrote: “Society is no less terrible than death itself. But just as life derives meaning from death, so the meaning of life in society derives from the inevitability of social existence” (Polanyi 1929: 4). According to Polanyi, one has to resign oneself to this fact. His understanding of resignation as the precondition of effective action consisted in renouncing the impossible identity of free community and society in order to achieve what is possible: So-called community for community’s sake is a poisonous beverage that makes us dream of the things it prevents us from achieving. […] Both the temptation of the perfect society (in the future) and of the perfect community (in the present) must be resisted for universal community’s sake. (Polanyi 2018c: 153) 222

Freedom and socialism

The last paragraph of the concluding chapter of The Great Transformation expresses the same spirit: Resignation was ever the fount of man’s strength and new hope. Man accepted the reality of death and built the meaning of his bodily life upon it. He resigned himself to the truth that he had a soul to lose and that there was worse than death, and founded his freedom upon it. He resigns himself, in our time, to the reality of society which means the end of that freedom. But, again, life springs from ultimate resignation. Uncomplaining acceptance of the reality of society gives man indomitable courage and strength to remove all removable injustice and unfreedom. As long as he is true to his task of creating more abundant freedom for all, he need not fear that either power or planning will turn against him and destroy the freedom he is building by their instrumentality. This is the meaning of freedom in a complex society; it gives us all the certainty that we need. (Polanyi 2001: 268)

The philosopheme of the murdered Chinese and Polanyi’s socialist alternative for freedom in complex societies In the manuscript of his 1927 lecture “On Freedom,” Karl Polanyi wrote: You have all probably heard of the philosopheme of the murdered Chinese, which goes as follows: If we were given the possibility of immediately having every wish granted by simply pressing a button, but on condition that at each press of the button one of 400 million Chinese people would die in far-off China, how many people would abstain from pressing the magic button? (Polanyi 2018a, 308) This “philosopheme” goes back to François-René de Chateaubriand (1768–1848), the founder of literary Romanticism in France and an avowed royalist who converted back to Christianity after having left the faith of his childhood (Chateaubriand 2004: 169; for Chateaubriand’s significance for the history of philosophy, see Ginzburg 1994). This “philosopheme” found its way into literature through Honoré de Balzac (Balzac 1971: 168 f.; Falaky 2011). Against the background of his own experiences of a liberal market society and World War I, Karl Polanyi drew from this parable a new interpretation of the relationship between freedom, responsibility and social transformation: This odd philosopheme gives us a true allegory of the situation in which even the best person finds himself in relation to his co-citizens. Anyone who is able to offer an appropriate price on the market can promptly conjure up everything that humanity can create. The consequences of this trick take place on the other side of the market. He does not know anything of these; he cannot know anything of them. Today, for every single one of these human beings, all humanity consists of nameless Chinese whose life he is ready, without batting an eye, to snuff out in order to fulfil his wishes, and this is what he in fact does. (Polanyi 2018a: 308) Adam Smith’s invisible hand kills – or at least it can, only we don’t know it concretely. The “coal that we have just thrown onto the stove, the light with which we now see,” may contain according 223

Michael Brie

to Polanyi “a part of a human life” (ibid.: 309) by workplace accident. Regardless of any intention, the consequences of action under the given conditions of a capitalist market society can limit or destroy the freedom of others. Starting from this insight, Karl Polanyi formulates a radical new concept of freedom that simultaneously includes the demands to shoulder individual responsibility as well as to commit oneself to a fundamental social transformation. His definition of the connection between freedom and responsibility takes the ‘negative’ freedoms of the individuals as given while inquiring after the social conditions under which people can exercise this freedom in a way that does not harm others but rather benefits them. He wants to clarify what a society would look like where people are enabled to act responsibly to the greatest extent possible, to stand up for the consequences of their own decisions, and – he adds – “where no choice is possible” that would allow “us to shoulder consciously the inevitable burden of our responsibility for coercion and interfering with the lives of our fellows” (Polanyi 2018c: 152). This understanding of freedom would become the focus from which Polanyi addressed the question of a post-capitalist society: The idea of being responsible for our personal share in the life of ‘others,’ that is, in social realities, and incorporating it into the realm of freedom cannot be realized in the bourgeois world. But it is just as impossible to renounce and thus to arbitrarily limit our responsibility and thus our freedom. The bourgeois world’s idea of freedom and responsibility points beyond the boundaries of this world. (Polanyi 2018a: 304) Although the idea of individual freedom originated in bourgeois society, it cannot be realized in this society. But no form of state socialism provides an alternative either. Here, all responsibility is delegated to the state “as the general scapegoat from all suffering” (ibid.: 308). Polanyi’s understanding of capitalist societies gave rise to the demand for a far-reaching social transformation that would enable one to reasonably assume personal responsibility for the consequences of one’s own actions; only if this demand were fulfilled would it become possible to demand, in turn, that one shoulder this responsibility. Social change must concentrate on expanding the concrete individual freedoms in a complex society and on creating the institutional conditions these freedoms require. These insights provided the basis upon which Polanyi formulated guidelines for a new Great Transformation. For Polanyi, the goal of this transformation was linked to a vision of a socialist society, which he saw as the way to reconcile freedom and the reality of complex societies. In the following, four such guidelines are briefly presented.

A new relation between community and society For Polanyi, leading a responsible and meaningful life within modernity requires the social forms of community and society. In his view, community and society are mutually dependent and cannot be reduced to one another. Polanyi came to this position by drawing on the work of Ferdinand Tönnies (see Brie 2023), on left-wing Christian discussions of his time (see Lewis, Polanyi, and Kitchin 1935), and increasingly also on anthropological research by Richard Thurnwald and Bronisław Malinowski, among others (Polanyi-Levitt 2014: x). Polanyi regarded a socialist society as a nexus of three social forms. Firstly, it would be based on new forms of immediate community capable of overcoming the atomization of bourgeois society. Instead of individuals being made into competitive subjects committed exclusively to their 224

Freedom and socialism

own well-being, they would participate with each other in a rich world of work, play and leisure. It appears that Polanyi began to more strongly emphasize the idea of community precisely under the influence of the Christian left in Britain. In his notes on discussions in these circles, he wrote: The doctrine of love, of brotherhood, of the fatherhood of God, are parts of a definition of this kind of relationship between human beings which belongs to the essence of society. No word in the English language seems to designate unambiguously this aspect of social existence. The nearest approach to it is community in the sense of an affirmative personal relationship of human individuals, i.e. of a relationship which is direct, unmediated, significant for its own sake, ‘a personal response to a demand of persons.’ (Polanyi 2018b: 155) It is in these relationships, Polanyi argues, that responsible freedom is most likely to be realized, thanks to the clarity and immediacy of direct personal relationships. Secondly, insofar as complex societies are a reality that cannot simply be willed away within the framework of industrial modernity, Polanyi believed that a post-capitalist society would only be institutionally possible on the basis of radically transformed forms of sociality. These would no longer reduce people to mere means for fulfilling ends, and they would allow for a high degree of oversight while securing personal freedom. From this standpoint, Polanyi developed a radical opposition to the self-regulating market economy and to social-scientific systems that formulate their own findings as laws of nature and claim to “derive” moral objectives from these laws. This position also implied a distancing from those Marxist conceptions of a “perfect society” in which all “objectifications,” such as markets, law, state, public opinion, etc., would die off as superfluous, since the interests of the individual and of society would coincide directly. Thirdly, for such a transformation of the totality of social institutions to take place, Polanyi believed that human consciousness would itself have to be fundamentally transformed. Specifically, the horizon of consciousness would have to transcend the realm of the social and expand to that of the universal community, which would encompass both immediate forms of communality and the mediating forms of society. The universal community can be described as the horizon of a humanity living in solidarity. Polanyi defined the universal community in the following way: The universal community is the fulfilment of the Will of God. Society defined as a relationship of individuals, and extended so as to include the whole mankind (irrespective of class, race, nation, adored): What we call Internationalism today. What we call an egalitarian society, the completeness of political and economic democracy today. (Polanyi 1936: 1) Radical insistence on individual freedom and orientation toward the comprehensive solidary, i.e., socialist, organization of all social living conditions were inseparable for Polanyi: “Socialism […] must always be thought of as the solidary life form, as the living family extended to humanity” (Polanyi 2018a: 313). It is this horizon of solidarity that calls for the tensions between individuals as individuals and as members of complex societies to be navigated in a socialist way. Free responsible individuality and free community are the two poles of Polanyi’s conception of socialism. They are to be mediated by institutions which, first, ensure social control over the framework of economic (as well as political and cultural) action, second, guarantee a high degree of freedom for actors, and third, grant transparency. It is this oversight about the consequences of one’s actions that imposes the highest responsibility for solidary action on 225

Michael Brie

individuals as well as on all organizations formed by them: “It is to this realm of community beyond society that man yearns to travel” (Polanyi 2018c: 152).

Democratic steering of the economy Polanyi’s main focus in his debate with Mises was the specific accounting system of a socialist economy. While the accounting concepts of the capitalist economy focus on the benefit of private actors, socialist accounting concepts would capture “social productivity” as well. In his reflections on socialist accounting systems, Polanyi very clearly distinguished between “natural costs,” or costs that result from the technical character of production, and “social costs,” or costs that result from the specific social objectives of a socialist economic order. Hence for Polanyi, a socialist society would have a different measure of productivity than does capitalist society. This measure would have to be expressed in new accounting terms, because social costs would be at its center: Leaving aside technical productivity, the capitalist economy is subject to another critique, which concerns the social utility of the goods produced, i.e., the ‘social productivity’ of the capitalist economy. The anarchic basis of this mode of production precludes at the outset any guarantee of the orientation of goods production to social utility in a higher sense. The significance that man as a conscious social being bestows upon goods remains absolutely without influence compared to that significance he ascribes to them as an isolated individual. Here there is no means by which the social valuation of goods in any particular situation can be enforced over their individual valuation. It is not the nobler and more enlightened needs, but only the more vulgar and greedy needs, that dominate production. […] The production thus brought into existence when higher values are excluded in turn undermines the morality of needs and leads them astray by artificially stimulating false needs and disorienting the healthy sense of the hierarchy of natural needs. (Polanyi 2016b: 404f.) In a complex society, Polanyi maintained, the effort and benefit of individual actors (whether producers or consumers of goods) diverges from the effort and benefit of society as a whole, conflicting with the values of justice and community, the wellbeing of nature, etc. After all, the interests of individuals (or individual companies) cannot coincide directly with the interests of the broader community, as the rational pursuit of individual interests requires the maximalization of one’s own benefit at the expense of others. Polanyi believed that society would be destined to develop in a fundamentally destructive direction if it failed to address this contradiction in a solidary manner. For Polanyi, the specificity of a socialist economy consisted above all in the fact that demand for goods would be determined not by the needs of isolated consumers in competition with each other as it is in a capitalist market economy, but by the needs of associated members of society. It would entail a changed “direction of production” (Polanyi 2005c: 133), and this would be of far greater importance than an increase of technical productivity. Common goals would be formulated and then pursued by the different actors through economic planning, while prices that reflect the true costs of realizing these common goals would be enforced. Polanyi’s focus was not the transfer of all enterprises into state ownership. Rather, he primarily advocated democratic decision-making at all levels of the economy, beginning with enterprises and local communities. This would require labor, nature and money to no longer be private property, subsumed under the commodity form. In The Great Transformation, Polanyi gave a strikingly succinct definition of his understanding of socialism formed in the decades before: “Socialism 226

Freedom and socialism

is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society” (Polanyi 2001: 242). The idea of subordinating the economy to a democratic society was developed in the 1920s largely under the influence of the model of guild socialism. The most famous representative of this tendency, H. D. G. Cole, had chosen the question of freedom versus control as the starting point of his reflections (Cole 1920: 9f.) and argued that no social body could represent individuals in all their various concerns. Rather, for Cole, individuals only gain representation in relation to the particular functions that they perform, i.e., as producers, consumers, users of services, residents in a neighborhood, etc.: All true and democratic representation is […] functional representation. [...] It follows that there must be, in the Society, as many separately elected groups of representatives as there are distinct essential groups of functions to be performed. (Cole 1920: 33) Polanyi observed that it was crucial for Cole and the other guild socialists to develop a concept of socialism that united individual freedom and democracy on the basis of the real aspirations of workers who had organized themselves into trade unions and felt their own power in World War I. This “new functional social theory,” which started from “the lives of the individuals who constitute society” (Polanyi 2016l: 122), was summarized by Polanyi as follows: The different functions of individuals are: production, consumption, neighborly relations, intellectual life and their flourishing. These are the functions that encourage people to form associations: collective production, collective consumption, common neighborhoods and intellectual associations. The contemporary incarnations of these natural associations are the trade unions, the cooperatives, community organizations, ideological and cultural groups, each of which expresses a function of individual life. One and the same individual can belong to more than one group, depending on which function of his life is served by the association. In a truly democratic society, no violence or privilege of property will disturb the natural right of individuals to form associations; thus, harmony rules between the associations of which society is comprised. How could it be otherwise? After all, the same individuals constitute them. (Ibid.) But according to Polanyi, a society is socialist not only if it exhibits a synthesis of politics and economy and comprehensive democratization, but also if “this synthesis […] comes into existence as the direct expression of living human wills” (Polanyi 2005b: 150). In Polanyi’s later works, guild socialism recedes into the background as the focus shifts to the many different ways that complex economic activities can be subordinated to the common will with regard to various questions of production, consumption, conservation of nature, global solidarity, etc. However, the importance of democracy as the free expression of the will of all members of society remained central for Polanyi.

The framework of a socialist economy In his dispute with Mises, Polanyi attempted to develop a socialist form of economic accounting. He recognized that the prices of important goods are influenced in both capitalist and socialist economies by the “framework [Rahmen] of the economy” (Polanyi 2016b: 412). This is associated with what Polanyi referred to as “framework costs” – costs such as wages as well as “the setting of raw materials prices, such as for iron ore or coal; or those costs that arise from the effect of the 227

Michael Brie

legal establishment of a land monopoly via pure land rent” (ibid.). Yet whereas framework costs are externally imposed on the economic enterprises, Polanyi theorized that under socialism, there would be further costs arising from conscious decisions made by society regarding production and equitable distribution. These costs, which Polanyi referred to “intervention costs” (ibid.: 410), would be on the “society account”: The society account contains all allocations (apart from wages), which are intended to ensure just distribution through case-specific, temporally or regionally distinct measures. It also includes supplemental costs (apart from the social price for raw materials), which are intended to bring about socially beneficial production. (Ibid.: 420) Thus, for Polanyi, total production costs under socialism would consist of both “natural costs” incurred by economic units independently of conscious, goal-directed intervention and redistribution as well as of additional “social costs” stemming from the pricing in of “higher” social goals. Many of these considerations anticipate discussions of economic reform that took place in state socialist countries and of socioecological transformation under present conditions that are ongoing today. In his manuscript “On the Question of Socialization,” which was probably written in the second half of the 1920s, Polanyi further developed his considerations on the framework of a socialist economy: The framework for raw materials is created by the public pricing of certain raw materials. (This presupposes in part the expropriation of their deposits, in part the socialization of their wholesale trade, and especially the socialization of imports and exports). Since these raw materials are generally at the beginning of the natural production process (i.e., they are the most general alternative goods), price determination acts here not as an ‘intervention in the economy’ but a general prerequisite of production, as a ‘framework of the economy,’ within which further processing moves. By means of this framework, the principle of profitability (in the sense of covering one’s own costs or achieving desired surpluses) is deliberately brought into line with the principle of productivity and kept there. This framework interferes with neither the calculation of costs nor the rational pricing of goods that remain marketable (e.g., certain finished products, etc.). (Polanyi 2005c: 126f.) Polanyi thus theorized socialist ideas of indirect economic management that would leave enterprises a high degree of autonomy while simultaneously subordinating them to the standards of “higher” social productivity. Polanyi summarized his reflections in his dispute with Mises with the following sentences: It is evident that separate quantitative recording of these cost groups (natural and social costs) is the main, practical task of socialist accounting. Without the recording of natural costs, production would have no reliable, infinitesimally precise guidelines, operating instead on intuition and approximation. We wish to point out here with particular emphasis that without the recording of social costs, the political-moral side of socialism would be no more realizable than the technical side would be without the recording of natural costs. Humanity will only be free when it understands what it must pay for its ideals. (Polanyi 2016b: 422) 228

Freedom and socialism

The relationship between freedom and socialism for different peoples Polanyi’s basic understanding of the relationship between freedom and socialism remains completely incomprehensible absent the concept of the people alongside the concepts of freedom and responsibility, community and society. Polanyi began a 1943 college lecture at Bennington on Rousseau (later reworked several times) with the words: Opposite interpretations of the paradox of freedom divide our world in two. They represent the horns of the Rousseauean dilemma – the individualistic and the totalitarian. Traditionally, they are summed up as the two meanings of democracy: liberty and equality. (Polanyi 2018d: 167) Rousseau’s philosophy was based on “a vision of a new hero” (ibid.) – the peoples and their different cultures. What appears to be an absolute opposition in the abstract, Polanyi argues, can be mediated in the concrete realm of a popular culture: “Within a popular culture – an entity to which we all contribute – liberty and equality may be principles not quite so antagonistic as they must seem in pure logic” (ibid.: 168). In contrast to the hubris of Western societies, which imagine themselves to have found the ultimate solution to the universal aporias of modernity in the general framework of liberal capitalism, Polanyi acknowledged that the relationship between freedom and equality, society and community, is negotiated in various ways by different peoples and cultures: When all is said, Jean Jacques Rousseau indissolubly linked the concept of a free society with the idea of a popular culture. The contradiction between freedom and equality which the polis had only partially resolved was bound to come to a head in any community larger than ‘Our Town.’ England, America, France, Russia, China and India mean by democracy very different ways of life. (Ibid.: 175f.) The concept of “tame empire,” which Polanyi emphasized repeatedly in the 1940s (Polanyi 2017), was intended to provide a framework that would allow both for very different cultural forms of living freely and peacefully in complex societies as well as for the self-determination of different peoples in the spheres of economic, political, and cultural development. In his provocative article of 1945 “Universal capitalism or regional planning” (Polanyi 2018e), Polanyi outlined his vision of co-development of different regions of the world. His last project, the journal Co-Existence (Levitt 1964), was an attempt to contribute to this vision. *** While searching in the 1920s and 1930s for socialist social forms that would make responsible freedom possible in complex societies, Polanyi developed essential foundations for his critique of capitalist economics that are today more important than ever. He outlined an economic order characterized by a high degree of conscious social intervention, one in which goals are jointly formulated and the framework in which the individual economic processes are embeddeded is democratically negotiated. He developed ideas on how the basic goods of the economy can be removed from the “self-regulation” of markets. He showed how living communities of peoples, starting from their own value orientations, can shape their economic life and economic exchange with other peoples in distinct ways. Based on this, he formulated concepts to prove why the utopia of a capitalist, self-regulating economic system leads to catastrophe. Criticism of capitalism and development of socialist alternatives that create conditions to reconcile freedom and the 229

Michael Brie

complexity of modern societies form an inseparable unity in his work. Polanyi’s understanding of socialism is not a marginal feature of this work, but its essential component (see Brie und ­Thomasberger 2018).

Note 1 In Polanyi’s work, according to Kari Polanyi-Levitt, the poles of “Empirical and Normative,” “Community and Society,” “Science and Religion,” “Efficiency and Humanity,” and “Technological and Social Progress” provide the categorical framework to capture the contradictions of modern societies (Polanyi Levitt 2018: 45).

References Balzac, Honoré de. 1971. Vater Goriot. Berlin und Weimar: Aufbau. Brie, Michael. 2023. “Freiheit in einer Komplexen Gesellschaft und der Horizont der Gemeinschaft. Das Erbe von Ferdinand Tönnies im Werk von Karl Polanyi und Dessen Bedeutung für die Große Sozialökologische Transformation”. In Ferdinand Tönnies‘ Politisches Denken und Öffentliche Meinung, edited by Carsten Schlüter-Knauer. Wiesbaden: VS Verl. für Sozialwissenschaften (forthcoming). Brie, Michael, and Claus Thomasberger, eds. 2018. Karl Polanyi’s Vision of a Socialist Transformation. Montreal: Black Rose Books. Cangiani, Michele, and Claus Thomasberger. 2002. “Marktgesellschaft und Demokratie. Die Perspektive der Menschlichen Freiheit. Karl Polanyis Arbeiten von 1920 bis 1945”. In Chronik der großen Transformation: Artikel und Aufsätze (1920–1945). Bd. 1: Wirtschaftliche Transformation, Gegenbewegungen und der Kampf um die Demokratie, edited by Michele Cangiani, Claus Thomasberger and Kari Levitt, 11–44. Marburg: Metropolis. Chateaubriand, François-René de. 2004. Geist des Christentums Oder die Schönheiten der Christlichen ­Religion. Berlin: Morus. Cole, George Douglas Howard. 1920. Guild Socialism Re-Stated. London: L. Parsons. Falaky, Faycal. 2011. “Reverse Revolution: The Paradox of Rousseau’s Authorship”. In Rousseau and Revolution, edited by Mikkel Thorup and Holger Ross Lauritsen, 83–97. London and New York: Continuum. Ginzburg, Carlo. 1994. “Killing a Chinese Mandarin: The Moral Implications of Distance”. Critical Inquiry 21/August: 46–60. Levitt, Kari. 1964. “Karl Polanyi and ‘Co-Existence’”. Co-Existence. A Journal for the Comparative Studies of Economics, Sociology and Politics in a Changing World 1/November: 113–121. Lewis, John, Karl Polanyi, and Donald K. Kitchin. 1935. Christianity and the Social Revolution. Freeport: Books for Libraries Press. Mises, Ludwig von. 1920. “Die Abschaffung des Geldes in Russland”. Neue Freie Presse, 17/November. https://www.mises.de/public_home/article/97/9. ———. 2010. Socialism: An Economic and Sociological Analysis. New Haven, CT: Yale University Press. ———. 2012. Economic Calculation in the Socialist Commonwealth (1920). Auburn: Ludwig von Mises Institute. Neurath, Otto. 1919. Durch die Kriegswirtschaft zur Naturalwirtschaft. München: Georg D. W. Callway. Polanyi, Karl. 1929. “Letter to Donald Grant, December 7, 1929”. Con_56_Fol_13. Karl Polanyi Digital Archive. ———. 1936. “Christianity and the Social Order, Lecture, Liverpool”. Con_22_Fol_02. Karl Polanyi Digital Archive. http://hdl.handle.net/10694/744. ———. 1979. “Die funktionelle Theorie der Gesellschaft und das Problem der wirtschaftlichen Rechnungslegung (Eine Erwiderung an Professor Mises and Dr. Felix Weil).” In Karl Polanyi. Ökonomie und Gesellschaft, 81–90. Frankfurt am Main: Suhrkamp, 1979. ———. 2001. The Great Transformation. The Political and Economic Origins of Our Time. Boston, MA: Beacon Press. ———. 2005a. “Sozialistische Rechnungslegung.” In Chronik der großen Transformation: Artikel und Aufsätze (1920–1945). Bd. 3: Menschliche Freiheit, politische Demokratie und die Auseinandersetzung zwischen Sozialismus und Faschismus, edited by Michele Cangiani, Kari Polanyi-Levitt, and Claus Thomasberger, 71–113. Marburg: Metropolis, 2005.

230

Freedom and socialism ———. 2005b. “Über die Freiheit.” In Chronik der großen Transformation: Artikel und Aufsätze (1920– 1945). Bd. 3: Menschliche Freiheit, politische Demokratie und die Auseinandersetzung zwischen Sozialismus und Faschismus, edited by Michele Cangiani, Kari Polanyi-Levitt, and Claus Thomasberger, 137–70. Marburg: Metropolis. ———. 2005c. “Zur Sozialisierungsfrage”. In Chronik der Großen Transformation: Artikel und Aufsätze (1920–1945). Vol. 3: Menschliche Freiheit, Politische Demokratie und die Auseinandersetzung Zwischen Sozialismus und Faschismus, edited by Michele Cangiani, Kari Polanyi-Levitt and Claus Thomasberger, 126–136. Marburg: Metropolis. ———. 2014. “How to Make Use of the Social Sciences”. In For a New West. Essays, 1919–1958, edited by Giorgio Resta and Mariavittoria Catanzariti, 109–118. Cambridge: Polity. ———. 2016a. “Manual and Intellectual Labour (1919)”. In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 197–203. Manchester: Manchester University Press. ———. 2016b. “Socialist Accounting”. Theory and Society 45/5: 398–427. ———. 2016c. “The Constitution of Socialist Britain” (1922). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 108–110. Manchester: Manchester University Press. ———. 2016d. “A Lesson Learned” (1913). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 60–63. Manchester: Manchester University Press. ———. 2016e. “Credo and Credulity” (1911). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 49–51. Manchester: Manchester University Press. ———. 2016f. “Karl Kautsky and Democracy” (1922). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 114–117. Manchester: Manchester University Press. ———. 2016g. “Law and Violence” (1918). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 92–94. Manchester: Manchester University Press. ———. 2016h. “On the Destructive Turn” (1911). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 52–54. Manchester: Manchester University Press. ———. 2016i. “Oration to the Youth of the Galilei Circle” (1919). In Karl Polanyi. The Hungarian Writings. Edited by Gareth Dale, 74–78. Manchester: Manchester University Press. ———. 2016j. “Speech on the Meaning of Conviction” (1913). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 55–59. Manchester: Manchester University Press. ———. 2016k. “The Calling of Our Generation” (1918). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 64–73. Manchester: Manchester University Press. ———. 2016l. “The Historical Background of the Social Revolutionaries” (1922). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 123–126. Manchester: Manchester University Press. ———. 2016m. “The Test of Socialism” (1918). In Karl Polanyi. The Hungarian Writings, edited by Gareth Dale, 86–91. Manchester: Manchester University Press. ———. 2017. “The Common Man’s Masterplan” (1943). In Karl Polanyi in Dialogue: A Socialist Thinker for Our Times, edited by Michael Brie, 79–94. Montreal: Black Rose Books. ———. 2018a. “On Freedom” (1927). In Karl Polanyi’s Vision of a Socialist Transformation, edited by ­Michael Brie and Claus Thomasberger, 293–319. Montreal: Black Rose. ———. 2018b. “Christianity and Economic Life” (1937). In Economy and Society. Selected Writings, edited by Claus Thomasberger and Michele Cangiani, 154–164. Cambridge, MA: Polity. ———. 2018c. “Community and Society. The Christian Criticism of Our Social Order” (1937). In ­Economy and Society. Selected Writings, edited by Claus Thomasberger and Michele Cangiani, 145–153. ­Cambridge, MA: Polity. ———. 2018d. “Jean-Jacques Rousseau, or Is a Free Society Possible?” In Economy and Society. Selected Writings, edited by Claus Thomasberger and Michele Cangiani, 167–176. Cambridge, MA: Polity. ———. 2018e. “Universal Capitalism or Regional Planning?” (1945). In Economy and Society. Selected Writings, edited by Claus Thomasberger and Michele Cangiani, 231–240. Cambridge, MA: Polity. Polanyi-Levitt, Kari. 2014. “Preface”. In For a New West. Essays, 1919–1958, edited by Giorgio Resta Mariavittoria Catanzariti, iix–xv. Cambridge, MA: Polity. ———. 2018. “Freedom of Action and Freedom of Thought”. In Karl Polanyi’s Vision of a Socialist Transformation, edited by Michael Brie and Claus Thomasberger, 18–50. Montreal: Black Rose Books. Weber, Max. 1949. “‘Objectivity’ in Social Science and Social Policy”. In The Methodology of Social Sciences, translated and edited by Edward A. Shils and Henry A. Finch, 50–112. Glencoe: The Free Press.

231

19 POLANYI VERSUS HAYEK. THE PROBLEM OF FREEDOM AND DEMOCRACY IN THE MARKET SOCIETY Paula Valderrama Introduction Karl Polanyi (1886–1964) and Friedrich Hayek (1899–1992) are both today acknowledged as two of the most influential political thinkers of the 20th century. Their social philosophies are rightly considered to be diametrically opposite. While Hayek is regarded as the “architect of the neoliberal creed” (Polanyi-Levitt 2013: 23) and the “father of neoliberalism” (Block 2001: xx), Polanyi is considered one of the most fervent critics of free-market capitalism and an advocate of an “embedded,” i.e., regulated market economy (Ruggie 1982: 385 f.; Munck 2004: 251 f.). More recent studies (Filip 2013; Novy 2020) have gone further and examined the different concepts of freedom used by Polanyi and Hayek. Other authors (Migone 2011; Mirowski 2021) have pointed out the parallels between Polanyi’s and Hayek’s political theories. The fact that Polanyi and Hayek develop their arguments building on similar premises is not surprising, for both authors share a common historical and theoretical background. Both spent most of the 1920s in Vienna. During the 1930s they moved to London and afterwards to the United States. They are particularly influenced by the political events and the intellectual debates which took place in the so-called “Red Vienna” (Polanyi-Levitt 2013: 23–37). Both are familiar with the insights of Austro-Marxism as well as with the classical theories of the Austrian School of Economics, in particular with the work of Carl Menger, Eugen von Böhm-Bawerk, and Friedrich von Wieser (Filip 2013: 71; Polanyi-Levitt 2013: 30). Additionally, both refer in their texts to the socialist calculation debate initiated by Hayek’s mentor Ludwig Mises in 1920. Karl Polanyi actively participates in this dispute, responding directly to Mises, first in his 1922 article “Socialist Accounting” (Bockman et al. 2016), and later in “The Functionalist Theory of Society and the Problem of Socialist Economic Accounting” (Polanyi 2018g). Out of the discussion about the difficulties of socialist accountancy, Polanyi (2018f: 41) develops his conception of the overview problem (Übersichtsproblem) in complex societies. Hayek refers to the socialist calculation debate only in the 1930s, while he is working in London. He summarizes the debate in his essays “The Nature and History of the Problem” (1935a) and “The Present State of the Debate” (1935b), and he further develops, as we will see later in this chapter, his theory of “competition as discovery procedure” based on some features of this dispute.

DOI: 10.4324/9781003336747-25

232

Polanyi versus Hayek. Freedom and democracy

Although Polanyi and Hayek share similar intellectual training, they arrive at opposite conclusions concerning the vision of modern society. It is the interpretation of the events occurring in the interwar period that makes the difference (Novy 2020: 120). While Polanyi admires the social and socialization policies of Red Vienna and considers the reforms as democratic progress, Hayek criticizes socialist policies as a threat to modern civilization. Hayek seems to miss the old political order given by Imperial Vienna (Polanyi-Levitt 2013: 24). 1944 was the publication year of Polanyi’s most known work The Great Transformation, in which he severely criticizes the market system of the 19th century that led ultimately to socioeconomic crisis and fascism in Europe. The same year, Hayek’s The Road to Serfdom was published, a book, which is considered the bible of neoliberalism and the antithesis to Polanyi’s work. Hayek postulates exactly the opposite theory to Polanyi: it is socialism and social democratic reforms which lead to crisis and totalitarianism. Whether Polanyi and Hayek ever personally met, is not known. However, Polanyi refers directly to Hayek in two of his writings. In “Our Obsolete Market Mentality” (2018k: 209 f.), under the heading “The Problem of Freedom”, Polanyi criticizes authors “like Hayek,” who fear a loss of freedom, once the market economy is overcome. These authors fail to understand, Polanyi asserts, that the economic determination of market laws is valid only within the institutional framework of a market economy, i.e., one dominated by capitalistic market prices. In “On Belief in Economic Determinism” (2018l: 250), Polanyi argues similarly. He states: “Hayek’s fear of serfdom is the illogic application of economic determinism of a non-market economy.” In this chapter, I intend to present the differences between Polanyi and Hayek by taking ­Polanyi’s texts of the interwar period into account. The goal is to point out that the main difference between the theories of Polanyi and Hayek cannot be reduced to the issue of market regulations (“embedded versus dis-embedded liberalism”). The capitalistic market economy, according to ­Polanyi, is a threat to human freedom. Capitalist market prices set, as Polanyi shows, an inherent limit to individual responsibility, and therefore, inhibit the possibility of freedom based on social awareness. This important point has hardly been considered in the current literature. The reason is that most of these investigations are limited to the insights presented in The Great Transformation. ­Polanyi’s social philosophy is, however, quite more complex and richer. I believe that the arguments in The Great Transformation can only be well-understood by analysing them in connection with Polanyi’s early writings. These texts cover a series of themes concerning morals, philosophy, politics, and economics. I appreciate very much that some important texts of the interwar period have been recently published in the English language (See e. g. Polanyi 2014; Bockman et  al. 2016; Dale 2018; Brie/Thomasberger 2018: 264–324; Polanyi 2018). The original texts are available in the Karl Polanyi Digital Archive at Concordia University. Polanyi and Hayek defend fundamentally different visions of modern society. Their social philosophies should be seen as radical opposite answers to very similar questions. The main question is: How to organize the complex modern society in order to preserve personal freedom? More specifically: Which are the main facts of a complex society that set a limit to democratic politics and human intentions? These questions and their respective answers can be better understood by analysing Polanyi’s and Hayek’s shared main convictions. Polanyi and Hayek assume that societies are not a mere result of historical laws, but mainly an outcome of political beliefs and institutional arrangements (Section “Introduction”). The market society in the 19th century was for Polanyi a result of the set of institutions strongly influenced by the politics of economic liberalism. Of course, economic

233

Paula Valderrama

liberalism as theory and politics was itself a result of the social realities that emerged out of the industrial revolution. Hayek, on his part, criticizes the emergence of socialist policies as a result of popular belief in these ideas. For both authors, it is evident that the institutional framework which derives at least partially from political action is an important factor determining society’s outcome. However, Polanyi and Hayek do not fall into idealism nor into political constructivism, i.e., both authors are aware that not every political belief turns out to be a social reality. In this sense, Polanyi argues, there is an inevitable gap between the political goal of a self-adjusting market economy and its real societal results. On the contrary, Hayek asserts that the socialist goals of technical efficiency, freedom, and social justice cannot be achieved in a complex society. Both authors intend to criticize specific utopic experiments (Polanyi: the market system, Hayek: socialism) by judging these towards their real consequences. The limits of the complex society and the consequent problem set by the lack of overview into human needs and capacities is the starting point of both Polanyi’s and Hayek’s social philosophies (Section “The Relationship Between Political Beliefs and Social Reality”). Hayek believes that the capitalist market prices are the only suitable institution to deal with the problem of knowledge set by complexity. Market-based competition is for Hayek (2002) a “discovery procedure,” and the market order constitutes the indispensable precondition of wealth and freedom. On the contrary, Polanyi indicates that the very possibility of human freedom is endangered by the market system. The market system poses an obstacle to individual responsibility, and therefore to the realization of freedom based on social awareness (Section “The Overview Problem in a Complex Society”). Market prices not only pose a moral problem for the individuals but also solve neither the economic nor the political problem of modern society, as Hayek believes. The market society risks to cause social dissatisfaction, political instability, and to lead to totalitarian doctrines such as fascism. Democracy itself is at stake in a market society (Section “Market Prices as a Limit to Moral Progress: Freedom Without Social Awareness”).

The relationship between political beliefs and social reality The principles of naturalism and determinism in social science which were dominant among liberal and Marxist intellectuals of the 19th century are left behind by many intellectuals during the first decades of the 20th century (Thomasberger 2013: 18–21). Polanyi (2018a: 266, 2018c: 287–290) and Hayek (2007: 57–59), such as many other political philosophers of the time, reject the conviction that natural laws determine societal organization. Nor do they agree with the postulate of historical materialism as presented by popular Marxism. The Russian revolution of 1917 and the later emergence of mass democracies all over Europe turn the prevailing intellectual preconditions upside down. Polanyi and Hayek conclude that the social order was primarily dependent on the institutional arrangement which is itself partly influenced by the political convictions which dominate public opinion (Lippmann 2014). Polanyi (2018a: 266) considers the Bolshevik revolution and the events which followed a “turning point for all capitalist and Marxist thinking” for it is obvious that “it is not the material world but the conception of it” that determines history. He further postulates that “the question whether being determines consciousness or consciousness determines being” is too short-sided (Polanyi 2018c: 287–290). Social reality and political beliefs, although ontologically different, are interdependent. Institutions depend on dominating theories, but theories are also dependent on existing institutions. Polanyi (2018b: 268–274) criticizes further what he calls the “scientific worldview” (wissenschaftliche Anschauung), i.e., the conviction that political problems concerning human lives can 234

Polanyi versus Hayek. Freedom and democracy

be solved by scientific theories. This one-sided ideology is false for it underestimates the interdependence between social realities and prevailing thought. Sociologic laws in general, and economic laws in particular, are a result of the attempt to objectify human actions. These laws are not eternal as often assumed but depend on the institutional framework. As Polanyi (2001: 5, 79) points out, it was the “idea of a self-adjusting market system” and the “blind faith in spontaneous progress” which characterized the civilization of the 19th century. The market society was sustained by the shared convictions and the corresponding politics of economic liberalism. Although the idea of organizing the whole society as a market system was a utopian experiment, the mere attempt to do so determined the main features of the society of the time. The goal of creating a self-regulating market system had real and, as Polanyi shows, catastrophic consequences for society. Fascism is one of the main outcomes of the political attempt to organize society as if it were a market. Polanyi (2001: 32) writes in this respect: “In order to comprehend German fascism, we must revert to Ricardian England.” In contrast to Polanyi, the target of Hayek’s critique is the ideal of socialism. Hayek (1949, 2007: 58 f.) fears that socialism becomes partly a real system when the idea of socialism dominates intellectual elites and political discourse. His goal is to criticize this political ideal at an intellectual level to transform corresponding policies. The role of political beliefs and worldviews in the constitution of the social order is for Hayek fundamental. Bruce Caldwell (2007: 33) comments on this respect, “perhaps no person better represents the notion of the power of ideas in the twentieth century than does F.A. Hayek.” In this context, the role of a political philosopher is for Hayek (2003: 67) to create utopias which serve as a guide for the development of societies. Utopian thinking is for him not only the precondition of a successful political theory but also the main contribution that political philosophy can make to the solution of political problems (ibid). Hayek (1978: 114) writes: “If politics is the art of the possible, political philosophy is the art of making politically possible the seemingly impossible.” He leads a crusade against the political model of socialism. His main goal is to spread the utopian idea of a free society based on a market order. Hayek is aware that the institutional framework needed for the development of markets has to be politically enforced. For him (2007: 85), it is evident that the “dogmatic laissez faire attitude” has to be overcome in favour of state action to promote market competition. Market politics is the foundation of a market system. Without “planning for competition”, as Hayek (ibid.: 90) calls it, no market order emerges. Polanyi and Hayek are both aware that political visions can endanger society. If false beliefs and world interpretations dominate public opinion and ultimately the political sphere, human freedom and progress can be destroyed. For Polanyi, the great danger for society originates out of the dystopic model of the self-regulating market economy. For Hayek, it is socialist policies that threaten human civilization. The starting point of both arguments is the fact of dispersed information and the problem of lack of overview in a complex society.

The overview problem in a complex society One of the first answers to the question about the limits to the realization of the political vision of socialism is given by Ludwig Mises (1935) in his article “Economic Calculation in the Socialist Commonwealth” published in 1920. Mises criticizes socialist models as totalitarian and inefficient: totalitarian because not the consumers but a state agency decides about the direction of economic development; inefficient because, in the absence of market prices, the administrative authority does not dispose of the tools to devise a rational economic plan. In a socialist society, there is no information about the economic values of the factors of production. Therefore, the 235

Paula Valderrama

central authority cannot decide rationally about their efficient allocation. If there are no market prices, Mises (1935: 96, 105) states, the socialist state must act arbitrarily. Hence, socialism is necessarily inefficient and totalitarian. I will not go into details concerning this discussion, but I would like to shortly present one feature of Mises’ argumentation, which influences Polanyi and later Hayek. Mises supports his conclusions by introducing what might be called the complexity argument. He asserts that in a small context where simple conditions prevail “it is possible to review the process of production from beginning to end” (Mises 1935: 103, emphasis added). Under these circumstances, there would be no need for market prices to act rationally, though, in larger economies, it is not possible to acquire centralized knowledge about the economic values of the factors of production. In complex societies, Mises argues, a calculation unit is needed to compare alternative costs. Marginal utility and use values are based on subjective judgements and cannot fulfil the requirements of a unit of account (ibid.: 96 f.). Only exchange values as given in a capitalist market economy can serve as a basis for the economic calculation, Mises states. Ergo: the capitalist market system is indispensable to solving the economic problem of a large, complex society. Polanyi and Hayek agree with Mises’ argument that centralized systems are not suitable to deal with the problem of dispersed information. However, they disagree about which decentralized system would the best alternative. Hayek follows Mises’ argument that capitalist market prices should be the organizational foundation of complex societies. Polanyi accepts the critique of central planning but rejects Mises’ and Hayek’s conclusion that market prices are the solution to the economic and political problem posed by complexity. Polanyi deals in his early writings directly with the problem of socialist accountancy as stated by Mises, but later he generalizes the “problem of overview” to an issue concerning all complex societies, in particular, regarding the capitalist market economy. The lack of overview, as ­Polanyi (2018d: 312, 2018f: 41) describes it, or as Hayek (1945: 519) later states, the problem of knowledge caused by the dispersed information, is a fact in all complex societies. Not only state socialism, but generally all political action can cause non-intentional consequences. Therefore, the question for Polanyi is, which institutions are helpful to increase transparency and diminish the lack of overview as much as possible? Capitalistic market prices, as we will see in the next section, cause exactly the opposite effect: they increase the lack of overview and decrease the possibility of responsible individual and political action. Hayek goes even further and partly modifies Mises’ argument (1935a: 3–6). He asserts that the economic problem is not only the technical problem of determining an efficient allocation of means of production for known goals, for there are neither given goals nor given resources. Hayek (1935a: 6, 1935b: 210 f., 1945: 519 f.) argues that the economic problem for the political authority is much more the problem of the efficient allocation of unknown resources for unknown goals; therefore, it is a knowledge problem. To rationally rule, the political authority would have to discover endless individual preferences and operational resources, which are dynamic categories. In reaction to societal change, human beings develop what Hayek (1945: 521) calls their “knowledge of the particular circumstances of time and place.” This kind of knowledge, although not “scientific,” involves valuable information concerning personal circumstances and the own capacity for adaptation (ibid.). It is specific knowledge only available to the individual; therefore, it can neither be captured by statistics nor collected by a central authority (ibid.: 524). Only a decentralized mechanism can offer a solution to the organizational problem of modern society (ibid.). Hayek argues that the capitalist market system is the only process that achieves this goal. Competitive markets enable the utilization of dispersed knowledge by human beings, who do not possess the whole information. The capitalist market system communicates relevant information and 236

Polanyi versus Hayek. Freedom and democracy

coordinates the decisions of individuals dispersed in the world (ibid.: 526). If market agents act according to prices, they utilize the endless information about human circumstances contained in prices, though without being aware of these circumstances (ibid.: 525 f.). The fact of the dispersion of knowledge remains; the lack of overview is not overcome by the market system, but the economic problem of allocating resources has been “solved” through individual action, Hayek believes. Hayek draws on methodological individualism for his examination. According to this method, social phenomena are to be explained as a result of individual action. Polanyi, on the contrary, relies on a more historical and holistic approach, through which social phenomena are to be explained as such. However, individualism as a method must be distinguished from ontological individualism. Hayek is fully aware of the interaction and interdependency between individuals and institutional systems (Migone 2011: 363). For Hayek, the individual is also a moral agent, and the market system is an institution which does not only provide efficiency and wealth but also guarantees the achievement of moral-political goals, in particular human freedom. It is important to remark that Hayek considers freedom primarily as the absence of coercion exercised by human beings and organizations. Therefore, the market system, as a mechanism that is not controlled by human decisions, cannot execute by definition any kind of coercion. The provision of minimal living standards has for Hayek (1978: 12) no connection with the issue of freedom too. Politics and social reform become under the rule of the Hayekian market system superfluous: once the market system is enforced, it becomes the perfect substitute for political coordination. In contrast to Hayek, Polanyi argues that the prices generated by the market system are neither the solution for the economic problem of society nor are they compatible with the democratic and moral-political goals of modern society. In fact, for Polanyi, there is an antagonism in principle between the market society on the one hand, and human freedom and democracy on the other hand (Cangiani et al. 2005: 16).

Market prices as a limit to moral progress: freedom without social awareness The principle of human freedom and the capitalist market laws are located, according to Polanyi’s analysis, at opposite poles (Cangiani et al. 2005: 16). Their relationship is antagonistic, as human beings cannot strive for freedom in a context of self-made arbitrary restrictions. Polanyi (2018j) uses the term freedom in the tradition of Kant’s and Rousseau’s concepts of autonomy and selfdetermination. According to this view, human beings can only be free first, by accepting their innersocietal status and consequent restrictions of being a society member and, second, by actively participating in the law-making of society, i.e., in democratic legislation. In this way, citizens are free, if their actions take place in the context of self-given regulations. Assuming responsibility for their actions at an individual and also at a social level is a precondition of freedom. Freedom in the sense of autonomy implies what Polanyi (2018d: 304 f.) calls social knowledge or the awareness of socialisation. These concepts indicate the individual’s consciousness of the fact that social reality is a result of human decisions. Social awareness also includes the insight that each human being is at least partially co-responsible for the results of society. Socio-economic phenomena like poverty, unemployment or climate crisis are for Polanyi not “given,” but a direct consequence of existing institutions. In a progressive society, Polanyi argues, it is not possible to escape social responsibility: The true concept of social freedom is based on the real relation of men to men. It forces this demand on us through the twofold insight that there is, on the one hand, no human behaviour that is completely without social consequences and that, on the other hand, there is no 237

Paula Valderrama

existing entity, no power, no structure and no law in society, nor can there be, that is not in some way based on the behaviour of individual human beings. For the socialist, “acting freely” means acting while conscious of the responsibility we bear for our part in mutual human relationships – outside of which there is no social reality – and realizing that we have to bear this responsibility. (Polanyi 2018d: 304) Under capitalist conditions, the striving for freedom is vain, as markets and capital set the law and determine the basic structure of society. Market prices, interest rates, profit, etc. become objective entities under capitalism; they are given realities beyond human control. Moreover, in market societies, it is impossible to be well informed about the indirect, but real consequences of human action. Individuals in capitalism are meant to be “free to choose,” but the circumstances which lead to the market prices as well as the consequences of these prices remain for them unknown. The wealth of richer countries depends largely on inhuman working conditions in the Global South. Although we deeply know that this is the case, we cannot achieve, under global capitalism, exact information about the production conditions of our consumption goods. The catastrophic effect on the environment is another issue. Consumption habits in the Global North, as they are today, are definitely not sustainable. This means that the so-called “free” actions are currently causing dramatic disruptions to earth systems, which in the medium term threaten human survival. Polanyi’s point is that under the institutional arrangement of the capitalistic market economy, individuals are given the false impression of acting freely, though they are not able to inform themselves about the real social and global effects of their actions. Without knowledge of the consequences of human decisions, there cannot be responsibility, Polanyi states; without responsibility, freedom is an “illusion” (Polanyi 2018d: 305). Hayek (1978: 83 f.) deals as well with the fact of lack of knowledge and the problem of social responsibility. He agrees that under the context of the free-market system there is no possibility to be well informed about the circumstances behind the market prices. He understands that for the unknown social consequences of human action, no responsibility can be assumed. However, he does not attempt to solve the problem by removing obstacles to transparency. Hayek reduces instead the range of responsibility to the functioning of the market system. He writes in this regard: Freedom demands that the responsibility of the individual extend only to what he can be presumed to judge, that his actions take into account effects which are within his range of foresight. […] While we can feel genuine concern for the fate of our familiar neighbours and usually will know how to help when help is needed, we cannot feel in the same way about the thousands or millions of unfortunates whom we know to exist in the world but whose individual circumstances we do not know. (ibid.: 83, 84) Hayek’s concept of responsibility and thus his concept of freedom are adapted to the functioning of the market system. The market prices solve the economic problem of dispersed tacit information, according to him. They do so not by providing information to the market actors, but by coordinating behaviour through price movements. In this context, individuals remain ignorant about the manifold circumstances which determine prices (Hayek 1945: 525). The real, catastrophic consequence of Hayek’s system of thought is that unwanted social phenomena such as global poverty or ecological devastations seem to be nobody’s responsibility. Furthermore, Hayek contradicts himself by postulating that the market institution is an automatic 238

Polanyi versus Hayek. Freedom and democracy

mechanism beyond human control. It is true that the market functioning as such, understood as price adjustments between supply and demand, cannot be predicted nor controlled. However, the institutional framework under which the market system functions is the result of political will. The market society is a political project. Not only its outcome can be corrected by meaningful policies, but also the political framework out of which this outcome emerges can and must be transformed.

The political consequences of the market system Polanyi’s critique of the market society is grounded on a moral dimension. Polanyi, however, goes further and criticizes the market ideal also in its economic and political dimensions. The market system does not solve the economic problem of the complex society, for the aggregate result of the individual decisions does not guarantee an economic result “from the viewpoint of society” (Bockman et al. 2016: 403). Today, for example, in a neoliberal world in which the capitalist market system is meant to organize the distribution of basic goods such as education, pensions, health, energy, housing and foodstuff, it is clear that market prices have reached levels which make these basic goods unaffordable for large parts of the population. Housing and energy prices are exploding. The infrastructure in schools and hospitals is dilapidated. A large part of pensioners cannot afford a decent life. The capitalist market economy as such is inappropriate for the task of providing basic goods and services for all. It does not have a suitable “sensory organ” to perceive social issues, as Polanyi states (ibid.: 405). The capitalist process of production and allocation of goods is based solely on the decisions of the individuals as market agents. Their values and judgements as society members, i.e., as social and political beings, are not taken into consideration by the market process (ibid.). In the context of capitalist free markets, without politics neither social nor ecological goals can be achieved. Under these circumstances, the market economy as such does not provide the minimal economic standards expected in modern democracies. For Polanyi, it is evident that the market system not only doesn’t solve the economic problem of modern societies, but also endangers them politically. Wealth, productivity, political stability, democracy, and freedom are the promises of the capitalist market economy. Financial and political crises, global poverty, famine, ecological disaster and the decay of democracy and morality are, however, the facts. The Great Transformation is an attempt to explain these social phenomena as results of the institutional framework of the 19th-century market economy. Polanyi is convinced that, even when the process of self-regulation of markets cannot be achieved entirely, the very attempt to transform the economy into a self-regulating market system leads to unexpected and often harmful consequences for society, among others, the devastation of nature and the destruction of human values and human relationships. The concept of a self-regulating market system is only another expression for what Polanyi (2001: 74) calls the “institutional separation of society into an economic and a political sphere.” Economy and politics are different dimensions of society, but historically, both areas were always interconnected with each other. As Polanyi shows, it is the economy which is usually a function of the social order (ibid.). The embeddedness of the economy into society is denied by economic liberalism. Based on their scientific ideology, they postulated the complete autonomy of the economic sphere (Polanyi 2018k: 200). According to this view, the market-based economy functions according to specific economic motives and “objective” laws (Polanyi 2018l: 245 f.). The laws of the capitalist market economy thus become the basic criteria of state action in the 19th-century European societies. The institutional separation of the political and economic spheres is the main characteristic of the market society. The concept of political intervention has here its roots (Polanyi 2001: 231). Social protection systems that existed already in the 15th century or even earlier are rejected by 239

Paula Valderrama

the advocates of economic liberalism, as the free-market argument states that these systems “interfere” with the natural self-regulation of the economy. It is important to notice that without the belief in an autonomous, self-regulating economic sphere, the term “state intervention” would have no meaning at all. The politics of laissez-faire is the political leitmotif in the European 19th-century civilization. This principle involved the removal of all obstacles that interfered with the self-regulation of the market system. The culmination of this principle was the organization of the production ­factors – labour, land and money – as if they were commodities (Polanyi 2018k: 199). In particular, the creation of a so-called free labour market caused the ultimate transformation of society into a market-led one. The postulate of laissez-faire, although it was meant to separate the economy from the political sphere, had the unintentional consequence of making society dependent on the market. The politics of self-regulation missed the mark. To achieve economic autonomy, greater state action in society was required. “[L]aissez-faire itself was enforced by the state,” Polanyi (2001: 145) writes, and it had real, dramatic consequences for society. In the 19th century, the emergence of the counter-­ movement is the main effect of the attempt of organizing society as if it were a market system. The counter-movement reacts to the financial, but also to the social consequences of the expansion of markets into society. Social protection is the main claim of the counter-movement (ibid.: 138). Polanyi observes that during the interwar period in Europe, the democratic demands for social reforms caused financial panic, as they were perceived as disturbing the functioning of capital markets. The antagonism between social demands on the one side, and market requirements on the other was here real, and it ended up in a socio-economic crisis, which in some European countries led to fascism. Fascism responded to the deadlock that emerged out of the conflict between democracy and market society (Polanyi 2018h: 105, 2018i: 126). The fascist doctrine is based on the rejection of the principles of freedom and equality and it, therefore, implies the conscious abolition of democracy and the political sphere as such (2018h: 106). Not wealth, peace, and freedom are the real consequences of the market society, as Hayek maintains, but crises, totalitarianism, and moral regress.

Conclusion In this chapter, I argue that the social philosophies of Karl Polanyi and Friedrich Hayek are radically opposite answers to the question concerning the organization of modern society under the condition of complexity. Although both authors argue out of the same intellectual context, they arrive at fundamentally different conclusions which cannot be reduced to the issue of market regulations. For Hayek, state planning is only legitimate, if it is designed to create and support market competition. Hayek postulates the market utopia as a scientifically proven model to be followed by politics. He supports the ideal of a system of self-regulating markets as proposed by classic economic liberalism, though he rejects laissez-faire as the politics of merely removing obstacles against the alleged natural development of markets. Hayek does not believe in naturalism or historical determinism; he supports a strong state whose goal is the preservation and expansion of competitive markets into all societal spheres: not only money, land, and labour should be organized as commodities, but also pensions, education, energy, raw materials, housing, and health. Hayek’s model is, therefore, the renewal and culmination of economic liberalism. Polanyi, on the contrary, warns about the real consequences of the market utopia. The market prices act like an invisible barrier preventing moral responsibility and obstructing social and 240

Polanyi versus Hayek. Freedom and democracy

ecological reform. Furthermore, Polanyi shows that the attempt of organizing society as a market involved in the 19th century and parts of the 20th century the emergence of a counter-movement. The latter is not a result of envy, ignorance or conspiracy, as economic liberals suggest, but rather a spontaneous reaction of self-protection. Hence, it is not the counter-movement which has to be limited, but the utopian thinking of market advocates. The real political consequences of the market system established in the 19th century are, for Polanyi, socio-economic crisis and fascism. Polanyi does not construct a counter-utopia. He rather supports “a more realistic vision of the human world,” (2018k: 198) in which we face the fact of socialization and accept the restrictions of complexity. Starting from this reality, we can search for ways to improve transparency and ­enlarge freedom as much as possible.

Bibliography Block, Fred. 2001. “Introduction.” In Polanyi 2001, xviii–xxxviii. Bockman, Johanna, Ariane Fischer, and David Woodruff. 2016. “Socialist Accounting” by Karl Polanyi: with preface “Socialism and the embedded economy.” Theory Sociology 45: 385–427. Brie, Michael, and Claus Thomasberger eds. 2018. Karl Polanyi’s Vision of a Socialist Transformation. ­Montreal: Black Rose Books. Caldwell, Bruce. 2007. “Introduction.” In The Collected Works of F.A. Hayek, vol. II, ed. Bruce Caldwell. London: University of Chicago Press, 1–33. Cangiani, Michele, Kari Polanyi-Levitt, and Claus Thomasberger. 2005. “Die Polarität. Menschliche ­Freiheit – Marktwirtschaftliche Institutionen. Zu den Grundlagen von Karl Polanyis Denken.” In Chronik der Großen Transformation, vol. 3, eds. Michele Cangiani, Kari Polanyi-Levitt and Claus Thomasberger. Marburg: Metropolis, 15–64. Dale, Gareth ed. 2018. Karl Polanyi. The Hungarian Writings. Manchester: Manchester University Press. Filip, Birsen. 2013. “Polanyi and Hayek on Freedom, the State, and Economics.” International Journal of Political Economy 41/4,: 69–87. Hayek, Friedrich. 1935a. “The Nature and History of the Problem.” In Collectivist Economic Planning, ed. Friedrich Hayek. London: Routledge and Kegan, 1–40. ——— 1935b. “The Present State of the Debate.” In Collectivist Economic Planning, ed. Friedrich Hayek. London: Routledge and Kegan, 201–243. ——— 1945. “The Use of Knowledge in Society.” American Economic Review 35/4: 519–530. ——— 1949. “The Intellectuals and Socialism.” The University of Chicago Law Review 16/3: 417–433. ——— 1978. The Constitution of Liberty. Chicago: University of Chicago Press. ——— 2002. “Competition as a Discovery Procedure.” The Quarterly Journal of Austrian Economics 5/3: 9–23. ——— 2003. “Recht, Gesetz und Freiheit.” In Gesammelte Schriften in Deutscher Sprache, vol. 4, ed. Viktor Vanberg. Tübingen: Mohr Siebeck, 3–484. ———. 2007. “The Road to Serfdom. Text and Documents.” In The Collected Works of F.A. Hayek, vol. II, ed. Bruce Caldwell. London: University of Chicago Press, 37–241. Lippmann, Walter. 2014. Public Opinion. Mineola/New York: Dover. Migone, Andrea. 2011. “Embedded Markets: A Dialogue Between F.A. Hayek and Karl Polanyi.” Review of Austrian Economics 24: 355–381. Mirowski, Philip. 2021. “Polanyi vs Hayek?” In Questioning the Utopian Springs of Market Economy, eds. Damien Cahill, Martijn Konings and Adam David Morton. London/New York: Routledge, 26–52. Mises, Ludwig. 1935. “Economic Calculation in the Socialist Commonwealth.” In Collectivist Economic Planning, ed. Friedrich Hayek. London: Routledge and Kegan, 87–130. Munck, Ronaldo. 2004. “Globalization, Labor and the ‘Polanyi Problem’.” Labor History 45/3: 251–269. Novy, Andreas. 2020. “Friedrich Hayek and Karl Polanyi. Defining Freedom: What Kind of Freedom? And Whose Freedom?” In Karl Polanyi: The Life and Work of an Epochal Thinker, eds. Brigitte Aulenbacher, Markus Marterbauer, Andreas Novy, Kari Polanyi-Levitt and Armin Thurnher. Wien: Falter, 119–131. Polanyi, Karl. 2001. The Great Transformation. Boston: Beacon Press. ——— 2014. For a New West. Essays, 1919–1958, eds. Giorgio Resta and Mariavittoria Catanzariti. Cambridge: Polity Press.

241

Paula Valderrama ——— 2018. Economy and Society: Selected Writings, eds. Michele Cangiani and Claus Thomasberger. Cambridge: Polity Press. ——— 2018a. “Ideologies in Crisis.” In Brie/Thomasberger 2018, 264–267. ——— 2018b. “Science and Morality.” In Brie/Thomasberger 2018, 268–286. ——— 2018c. “Being and Thinking.” In Brie/Thomasberger 2018, 287–292. ——— 2018d. “On Freedom.” In Brie/Thomasberger 2018, 298–319. ——— 2018e. “Freedom in a Complex Society.” In Brie/Thomasberger 2018, 320–324. ——— 2018f. “New Reflections Concerning our Theory and Practice.” In Polanyi 2018, 41–50. ——— 2018g. “The Functionalist Theory of Society and the Problem of Socialist Economic Accounting.” In Polanyi 2018, 51–58. ——— 2018h. “The Essence of Fascism.” In Polanyi 2018, 81–107. ——— 2018i. “Fascism and Marxian Terminology.” In Polanyi 2018, 125–129. ——— 2018j. “Jean Jacques Rousseau, or Is a Free Society Possible?” In Polanyi 2018, 167–176. ——— 2018k. “Our Obsolete Market Mentality. Civilization Must Find a New Thought Pattern.” In Polanyi 2018, 197–211. ——— 2018l. “On Belief in Economic Determinism.” In Polanyi 2018, 243–250. Polanyi-Levitt, Kari. 2013. “Hayek from Vienna to Chicago.” In Id. From the Great Transformation to the Great Financialization. London/New York: Zed Books, 23–38. Ruggie, John. 1982. “International Regimes, Transactions and Change: Embedded Liberalism in the Postwar Economic Order.” International Organization 36/2: 379–415. Thomasberger, Claus. 2013. “The Belief in Economic Determinism, Neoliberalism, and the Significance of Polanyi’s Contribution in the Twenty-First Century.” International Journal of Political Economy 41/4: 16–33.

242

20 MARX AND POLANYI A philosophical encounter Hüseyin Özel

Possible connections Even at a first glance, some interesting and important connections and even overlaps between Karl Polanyi’s and Karl Marx’s overall accounts and their respective social theories can be seen (Özel 1997). In this respect, two aspects of Polanyi’s system that correspond to that of Marx are worth mentioning: First, the “substantive” understanding of economics that appears to be quite similar to Marx’s conception of historical materialism, and second, Polanyi’s notion of “fictitious commodities,” as the differentia specifica of the market system, corresponds, or at least can be integrated, to Marx’s analysis of commodity fetishism (Özel 2019). These points, it can be contended, rest on a deeper philosophical conviction about the notion of human nature. Polanyi, just like Marx, always emphasizes the universal character of human life activity, and his own critique of capitalism rests on the general aspects of the “human condition.” In both, capitalism violates essential powers of human beings, and “dehumanizes” them. The institutional separation between the economic and the political spheres in the market society causes the human “totality,” the unity of human essence to be broken down into separate and autonomous entities, and among these entities, the economic one becomes dominant; humans, then, tend to be converted to mere “economic” beings. As opposed to this, both emphasize the fact that the human being is essentially a “political animal,” a conception which requires a “societal approach,” to use Polanyi’s expression. Still, both insist on, as Polanyi recognizes, “the totality of society and noneconomic nature of man” (Polanyi 1957 [1944]: 151). This totality of human “livelihood,” to use a favorite expression of Polanyi’s, against the primacy of the “economic,” informs their respective analyses of capitalism. Nevertheless, there are still some discrepancies and even incompatibilities between the two, although there is no agreement on this matter among the interpreters of Polanyi’s work. In this respect, as Gareth Dale (2016a: 33–35) observes, three different interpretations of the relationship between Polanyi and Marx can be distinguished. First, there are people, like George Dalton, who argue that Marx and Polanyi are incompatible and conflicting. For them, Marx was committed to economic determinism and to “economistic fallacy” (Dalton 1981; Dalton and Köcke 1983; Block and Somers 1984). Dalton, for example, claims that “Marx and Polanyi definitely represent rival (alternative, disagreeing, contradictory) paradigms or theoretical systems” (1981: 75).



243

DOI: 10.4324/9781003336747-26

Hüseyin Özel

Second, there are those, like Fred Block and Margaret Somers, who believe that Polanyi held a Hegelian-type of Marxism in the 1930s whereas, during the writing of the Great Transformation (Polanyi 1957 [1944]), he shifted away from Marxism and started to develop an independent research program (Block and Somers 2014: Chapter 3). Polanyi developed a Hegelian Marxist version, akin to that of György Lukács, a founder of ‘Western Marxism,’ in his book History and Class Consciousness (1971), but in the early 1940s he changed his theoretical framework (Block and Somers 2014: 73; see also Block and Somers 1984: 76–77; Dale 2016a: 40). For them too, Polanyi’s critique is directed to “the economic determinism of both liberalism and orthodox Marxism” (Block and Somers 2014: 59, 1984). Finally, there are those, like Lucette Valensi (1981: 9) and Rhoda Halperin (1984, 1988, 1994), who argue that Polanyi was actually a Marxist. Polanyi had to mask his Marxism because of the political climate in the forties and fifties in the US (Halperin 1984: 249). Polanyi belongs to the “institutional” paradigm that was “originated with Marx and was elaborated by Polanyi and others, most notably by Max Weber” (Halperin 1984: 246). According to her, Polanyi’s “substantivist” definition of the economy and Marx’s historical materialism are different ways to express the same thing. Still, nearly all the above interpretations recognize two important points: First, Polanyi is careful to distinguish between Marx and the Marxists in general, and he criticizes Marxists for being determinist, but not Marx himself. Such an observation implies that some cooperation and even integration between the two accounts is possible. Saving historical materialism from economic determinism, and the analysis of fictitious commodities and commodification is the first one that comes to mind (Özel 1997, 2019). As Halperin observes, the relationship between the two is complex, changing from interpretation to elaboration and even critique on Polanyi’s part, and “a reading of Polanyi enables us to read Marx differently, and vice versa. The issue is not simply whether or not Polanyi was a Marxist” (Halperin 1984: 268). The second important point is that Polanyi’s view on Marx has undergone some significant changes throughout his life. According to Gareth Dale (2016b: 136–137), for example, there are three distinct phases in Polanyi’s life: in his twenties, he was quite critical of Marx and Marxism, but in his thirties, when he was in Vienna, he came close to the Austro-Marxist position, and in his forties, he became a “critical but loyal friend” (Dale 2016a: 33). This aspect of Polanyi’s is also documented by Kari Polanyi-Levitt and Mendell (1987) and Lee Congdon. First, in his youth (in 1913), Polanyi rejects the “fatalism” and exclusion of human purposeful activity of historical materialism: “In order to transform society, men must establish moral goals and employ political means in the service of their attainment,” Congdon points out (1976: 175); likewise, he argues in 1919 “that the bird soars despite rather than because of the law of gravity” and “that society soars to stages embodying ever loftier ideals despite rather than because of material interest” (ibid.: 178). The emphasis here is on the contradictions between free will and moral individual responsibility, or between “determinism and free moral will” (ibid.). Also in 1919, Polanyi argues that Marxism is built on three pillars, namely, “the utilitarian ethic, the materialist conception of history, positivist epistemology and the determinist philosophy” (Polanyi 2018a: 267). Later, in the 1920s, he returned to Marx, this time to his commodity fetishism in Capital: this notion is considered as an application of the principle of alienation in a capitalist society (PolanyiLevitt and Mendell 1987: 27–28). But the most significant was his third encounter with Marx: after the publication of Marx’s 1844 Manuscripts (Marx 1975: 279–400) for the first time in Germany by S. Landshut and J. R. Meyer in 1932 (Polanyi 2018b: 9): Polanyi rejected the ‘break’ between the ‘mature’ and the ‘early’ Marx and thought that alienation and fetishism were central in Marx’s argument. This theme was also pursued by him in the Great Transformation, for it explains how

244

Marx and Polanyi: a philosophical encounter

human beings “were dehumanized, degraded, decultured, reduced to toilers in William Blake’s ‘dark satanic mills’” (Polanyi-Levitt and Mendell 1987: 28). Therefore, we need to have a closer look to this encounter.

Polanyi on Marx Polanyi’s daughter, Kari Polanyi-Levitt, says that “my father’s intellectual ancestry, I suggest, runs from Karl Marx to Max Weber, Ferdinand Tönnies, and […] Thurnwald of Germany and Malinowski of Vienna” (Polanyi-Levitt 2014: x). This “institutional” tradition criticized economic determinism, as the sole explanation of society and history. For Polanyi (2014: 59), while “Economic institutions are institutions comprising a concentration of economic elements,” they do not “consist of economic elements only, nor are economic elements found only in economic institutions.” Marxism, however, rejects this non-economic emphasis on institutions, and it was such a mistaken belief in economic determinism as a general law that made many Marxists – not, to my knowledge, Marx himself – prophesy that our personal freedom must disappear together with the free enterprise system. (Polanyi 2018b: 42) Polanyi thinks that there are two types of determinism, “Marxist determinism of the powers of darkness and the laissez-faire determinism of the seraphic host,” that correspond to two kinds of inevitabilities: “Marxist inevitability” and “laissez-faire inevitability,” both of which are “merely two different forms of the same creed of economic determinism – a materialistic legacy of the nineteenth century” (Polanyi 2014: 40). In the Great Transformation, he acknowledges that “the essential philosophy of Marx centered on the totality of society and noneconomic nature of man” (Polanyi 1957 [1944]: 151); but he also writes that with the advance of capitalism, “naturalism haunted the science of man,” and “Marxian economics […] was an essentially unsuccessful attempt to achieve that aim, a failure due to Marx’s close adherence to Ricardo and the traditions of liberal economics” (ibid.: 126). Likewise, in a class note written by himself, he argues that Marx represents a return to the “societal” approach, as opposed to the “economistic” one, but “at the same time he also involuntarily strengthened the economistic position” (Polanyi 1968: 121–138). Closely associated with economic determinism is, of course, the alleged class reductionism in Marx. For Polanyi, class interests by themselves cannot be “a satisfactory explanation for any long-run social process,” for the emergence of classes need explanation in the first place, and the existence of class interests does not necessarily imply successes or failures (Polanyi 1957 [1944]: 152–153). Besides, the “doctrine of the essentially economic nature of class interests” is mistaken because economic factors by themselves are not enough to determine the motives of humans, and “that nineteenth century society was organized on the assumption that such a motivation could be made universal was a peculiarity of that age” (ibid.: 153). As can be seen, Polanyi explicitly rejects class reductionism in the sense that social classes are the ultimate explanatory variables, but he immediately adds Marx’s theory of the class war is usually misrepresented as contending that the economic interest of classes is the ultimate driving force in history, and that, accordingly, the explanation of historical progress must be found in the sectional interests of economic classes. (Polanyi 2018b: 151)

245

Hüseyin Özel

For him, such a theory itself needs an explanation about how classes are formed and become ­effective. Instead, Polanyi (ibid.) argues that Marxist theory asserts that the interests of society as a whole are the decisive factors in history; that these interests coincide with the best use of the means of production; that, therefore, that class is destined to lead society which can safeguard the best method of production [… and that] the interests of this class will then represent the direction in which society as a whole must be moving if economic progress is not to be artificially checked. Polanyi’s own analysis of the “double movement,” the protective countermovement against the extension of the market, in the Great Transformation, is a class analysis par excellence: the “agents” carrying both of these movements were classes themselves. Polanyi (1957 [1944]: 133) argues that “the emphasis on class is important. The services to society performed by the landed, the middle, and the working classes shaped the whole social history of the nineteenth century.” The history of the double movement shows that it is quite a complicated process, which transgresses the boundaries between the economic and the political spheres in the society, even though the main form of agency that carried it out is class conduct, since the social classes could convey the struggle back and forth between these two spheres. Such a tension, however, had to create strains not only in the economic sphere but in the whole society including the state, for the state itself had been an “arena” of class struggle. Nevertheless, it is interesting to observe that Polanyi’s views on class interest has also a strong holistic, or a Hegelian, tone emphasizing the “interest of society as a whole” (Polanyi 2018b: 133). He argues that in order for class interest to play some significant role, it should represent the interest of the whole of society, which is the “ultimate reality” for him (ibid.). If the interest of a class in a concrete situation coincides with that of the society, this class in question would become the leader and capable of making social transformation (ibid.). Such coincidence allows that class “to lead society which can safeguard the best method of production” (ibid.: 151). Such Hegelian reading is reminiscent of Lukács’ interpretation of Marx. The reason for this is that, firstly, Lukács too argues that capitalism is characterized by the institutional separation between the economic and the political spheres, in the essay “Changing Function of Historical Materialism,” the latter being nothing but “self-knowledge of capitalist society” (Lukács 1971: 229). It is no accident that economics became an independent discipline under capitalism. Thanks to its commodity and communications arrangements capitalist society has given the whole economic life an identity notable for its autonomy, its cohesion, and its exclusive reliance on immanent laws. This was something quite unknown in earlier forms of society. (Ibid.: 231–232) This is not to minimize Polanyi’s role in drawing his own distinction between the “embedded” and “disembedded” economies, for it presupposes both Maine’s distinction between “status” and “contractus” and Tönnies’ distinction between Gemeinschaft and Gesellschaft, which are quite similar, if not identical (Polanyi et al. 1957: 68–70; Polanyi 1977: 48–50). The point is that this thought can be traced back to Marx, and Hegel before him, both of whom were important sources for Polanyi and Lukács as well. Polanyi says (1957 [1944]: 111): “Ricardo and Hegel discovered from opposite angles the existence of a society that was not subject to the laws of the state, but, on the contrary, subjected the state to its own laws.” Marx, on the other hand, argues, in his “On 246

Marx and Polanyi: a philosophical encounter

the Jewish Question” (1975: 211–242), that in the civil society the human being lives an egotistic life, thereby becoming an “isolated monad who is withdrawn into himself” (ibid.: 229). That is to say, the individual in capitalism has two distinct forms of existence: an “earthly” existence in the economic sphere and a “heavenly” existence characterized by the abstract “citizen” in the political (Macmurray 1935: 226). At the same time, Polanyi, in his writing “Marx on Corporativism” (2018b: 135–143) mentions Marx’s 1842 manuscript on Hegel’s views about corporativism, and asserts that Marx showed an almost prophetic insight. No one before him, and for a long time none after him, had recognized the importance of the institutional separation of the political and economic sphere in society. Such a separation is the true characteristic of liberal capitalism. (Ibid.: 137) This separation, first noted by Marx, is itself, in fact, the result of the fetishism process that Marx develops.

Alienation and fetishism In Polanyi’s reading of Marx, another Hegelian inspiration can be discerned: Lukács’ theory of “reification” as the extension of Marx’s analysis of alienation and fetishism. For Marx, capitalism is characterized by labor-power’s becoming a commodity, which requires the category of “free” labor as a precondition. What characterizes this commodification process is actually commodity fetishism, in the sense that the commodity form and the value-relation of the products of labor is a definite social relation between individuals themselves which seems to be a relation between things. This “fetishism” is part and parcel of the production of commodities. Yet, not the production of commodities per se but the peculiar social, abstract character of the labor which produces them gives rise to the fetishism of the world of commodities (Marx 1976: 165). That is to say, labor as an abstract category comes to be completely separated from its “bearer,” human being, and it becomes a “thing.” Therefore, we have a twofold process here: on the one hand things seem to acquire human attributes while on the other human relations take on the character of things and thus have a “phantom objectivity,” i.e., these relations are “reified” (Lukács 1971: 83). Human relations, however, appear as relations between things only when both the products of labor and labor power itself become alienated. In other words, whereas the objects produced by humans appear as the bearers of social relations, i.e., fetishism, the social relations between real people appear as the relations between things, i.e., reification. In fact, Polanyi had an excellent grasp of the theory of fetishism: commodities […] take on a semblance of life. They follow their own laws; rush in and out of the market; change places; seem to be masters of their own destiny. We are in a spectral world, but in a world in which specters are real. For the pseudo-life of the commodity, the objective character of exchange value, are not illusion. (Polanyi 1935: 375) For him, the theory of the fetish character of commodities is rightly regarded as the key to Marx’s analysis of capitalist society. It is, in fact, another outcome of Marx’s basic distinction 247

Hüseyin Özel

between economics as a relation between man and Nature and economics as a relation between man and man […] Of all fetishes the fetish of Capital is the most disastrous to the emancipation of mankind. Past labour assumes in the shape of Capital a semblance of independent existence and poses as the third original factor of production alongside of Man and Nature. (Polanyi 2018b: 148) As to fetishism, capital, the accumulation of past labor, or “dead labor” one can say, confronts the living labor and control both human labor and its products. Polanyi explains that this confrontation forms the “capital relation between the workers – whose past labour (the means of production) has been alienated from them – and those who are in possession of that past labour, that is, the capitalists” (ibid.: 17). Fetishism represents violation of the essential powers of human beings, or of human freedom. This “un-freedom” (ibid.), caused by alienation and fetishism, is a pervasive feature of capitalism. In this process, being separated from his product, the worker is in a sense separated from himself. A part of himself – his past work – is being alienated from him. The worker is in part alienated from himself. And, in the end, this part of his life, which is alienated from him, is in control of the remaining part of his life. (Ibid.) Polanyi argues that freedom and humanness are equivalent for Marx. Instead of a bourgeois society, he wants a ‘human society’. The more directly, the more meaningfully, the more lively the human essence emerges in social relations, the freer is the human being and the more human is his society. (Ibid.: 19) According to Polanyi, a human being is also the embodiment “of Being and Ought in the same breath” (ibid.: 36). This implies that human beings are both free and “historical” beings: Between the realms of nature, where necessity reigns, and the human realm, where freedom reigns, there is […] ‘the realm of history’. Or, according to Marx, between being and consciousness there is the world of ‘social being’. (Ibid.: 18) At the same time, “between the realm of Being and of Consciousness,” there is a third one that is called by Marx as the “phenomenal world of the social Being” (ibid.: 38). Polanyi here refers to Marx’s conception of the “species-being,” as referring to “a universal and therefore free being” (Marx 1975: 327), who is the unity of individuality and sociality, and who “must confirm and realize himself both in his being and in his knowing” (ibid.: 391). In capitalism, however, real, direct relations among individuals transform into “the ghostlike and feigned realities of society controlling us today,” which can be resolved, only under socialism, into “the direct relation of human being to human being” (Polanyi 2018b: 18).

248

Marx and Polanyi: a philosophical encounter

In other words, fetishism has a disintegrating effect on the social bond because the “social objectification” it creates functions to “separate individual lives,” but at the same time, “internally splits each individual life.” Throughout this objectification process, the direct connection between the individual lives becomes a mediated one, because the individual lives are no longer related to each other but to their objectifications, by way of which their community is mediated. (Ibid.: 39) Also, “the individual life itself is split.” These two simultaneous processes show the existence of “two different contents of consciousness” that “belong to our active relation to the objectifications [acting on them] and to our passive relation to the objectification [being acted upon by it].” This implies that the unity of personality is split, and social institutions, laws, reifications, all these phenomenal forms of social objectification have in common that they insert themselves between Man and Man, on the one hand, and between the diverse volitions of one and the same person on the other hand. (ibid.) The result, of course, is the monstrous concept of two humanities as thing-like realities: of an egoistically active humanity that limits the other helplessly passive humanity in its freedom and pushes it into ­misfortune – without the ability of the theoretical knowledge to counteract against this semblance, that what is involved here is just two directions of intent of one and the same humanity. (Ibid.: 40) In this exposition, the Hegelian tone is clear, but, at the same time, Polanyi seems to use the terms “objectification” and “alienation” and even “fetishism” almost interchangeably, a use that reminds us of Lukács, which seems to be against what Marx intended in the 1844 Manuscripts: contrary to Hegel, the concept of alienation is used by Marx to refer to the violation of human freedom, or the prevention of self-realization (Marx 1975: 332). On the other hand, the concept of “objectification” refers to the process of human self-expression through projecting their essences into the world. As Lukács observes in the Preface of the second edition of his book (Lukács 1971), this distinction does not exist in Hegel, and he, just like Polanyi, was not aware of it until the publication 1844 Manuscripts in 1932. The notion of alienation in Hegel refers both to self-expression and the “inhibition” of this self-realization, so to speak, whereas Marx emphasizes the importance of the difference between these two understandings continuously. However, later, Marx abandoned the term “alienation” and switched to “commodity fetishism.” Although both alienation and fetishism refer to the same process, alienation seems to focus on the subject herself, whereas fetishism considers some general social process: alienation is conceived of not as the state of a certain being, but as the form of social relations that are separated from, opposed to and that transcend the individuals taking part in production and exchange. (Zoubir 2018: 733)

249

Hüseyin Özel

Thus, fetishism is a manifestation of a historical reality of production, the reality of wage labour; it is not part of the relation between people and things as such, but rather of the relation between man and a particular kind of objectivity: the commodity form. (Musto 2021: 34) If this interpretation is correct, it provides us with a hint for Polanyi’s preference of this usage. He may have thought that Marx’s philosophical construction of human essence, with his notion of the “species-being,” remains somewhat unfinished and was not carefully pursued in his later work. That is to say, under capitalism, since both labor power, “the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being” (Marx 1976: 270), and the productive activity, or the labor process itself, become commodities, it is not easy, if not impossible, to distinguish between the “objectified” types of social activity and the “alienated” types. This ambiguity is noted by Adam Schaff (1980: 136) with his concept of “alienation of tradition,” or of the social relations themselves as having some reificatory character. But this kind of reificatory aspect of a social relation can be prevalent in any society, like the “unintended consequences” argument, irrespective of its specific mode of production. In this, Marx does not seem specific enough. Polanyi here sounds like criticizing Marx of not pursuing his early, philosophical views on human nature, which is reminiscent of the Althusserian argument about the existence of some “epistemological break” between the young Marx and the “mature” Marx (Althusser 1969). However, as Block and Somers (2014: 75) assert, “Polanyi’s reading of Marx was almost the opposite of Althusser’s; for Polanyi the humanism of the young Marx was the missing key to the mature Marx.” In any case, Marx did not stick to his philosophical conceptions and theses he developed in his earlier writings. That is, whereas Althusser reads Marx in a “backward” way, from Capital to the Manuscripts, Polanyi’s reading runs from the earlier work to the later ones. Yet, for Polanyi, no break between the humanistic philosophy and political economy as a “science” exists, but Marx did not pursue his earlier project and changed his focus from the general aspects of the human existence to the particular analysis of capitalism, even though the former depends very much on the latter. In any case, we can assert, Marx never completed his analysis of the human essence, neither in his earlier writings nor in his “mature” work. I believe, this is what Polanyi has in mind when he remarks that “Marx nowhere systematically developed a conception of the Being of the Human” (Polanyi 2018b: 37). This failure also undermines Marx’s analysis of capitalism in his Capital. For a good critique of capitalism along the lines of fetishism requires an understanding of the general human nature, or of the “species-being,” which can constitute an appropriate philosophical foundation. In fact, Polanyi’s own analysis of the double movement offers both such a critique and also a “collapse” mechanism. The notion of double movement can be seen as “reclaiming of humanity” against the extension of the market, or to the commodification process (Özel 2019). Although the fictitious commodities, labor, land and money, are understood in the “empirical” sense, and kept distinct from commodity fetishism by Polanyi (1957 [1944]: 72n), the extension of the market that absorbs all human institutions, including marriage and the rearing of children, the organization of science and education, of religion and arts, the choice of profession, the forms of habitation, the shape of settlements down

250

Marx and Polanyi: a philosophical encounter

even to the aesthetics of every-day life […which] must be moulded according to the needs of the system. (Polanyi 1947: 100) This is nothing but a commodification process. Throughout this process, human beings are reduced to “bearers” of commodities, including their own labor-power, and their relations appear as the relations among “things.” In this process, while the “fear of hunger and hope of gain” govern the extension of the market, the protective countermovement is prompted by the fact that human beings are basically “political animals.” In other words, the protective countermovement against the extension of the market sphere represents a moral resistance against “dehumanization” created by the commodity fictions, rather than representing a mere class movement driven by “economic” interests. That is to say, the protective countermovement of the 19th century represents the “interest of society” which is expressed by the working and the landed classes (Polanyi 1957 [1944]: 132), even if the result of the double movement could be destructive to humanity as in the rise of fascism. In other words, Marx’s analysis of fetishism can easily be integrated to Polanyi’s analysis and critique of capitalism. Such an integrated analysis must start, of course, from a proper understanding of the nature of humans as political or “species beings.” In short, once again Marx and Polanyi complement each other in their respective attempts to devise a deeper understanding of human nature.

Conclusion It has been frequently observed that Polanyi chose to distance himself from Marx, beginning with the Great Transformation. Underlying such an observation could be Polanyi’s own feeling that Marx’s analysis of “human being” is not complete on the one hand, and, on the other, his “difficulties in engaging in Marxist polemics while attempting constructive work along independent lines” (Sievers 1949: 307). However, first, that he had a fair and profound understanding of Marx’s overall project, and, second, that he shared a common philosophical foundation with Marx and developed a similar analysis of capitalism should lead us to think that their similarities are much more important than their differences. In this respect, it could be fair to claim that Polanyi’s attitude toward market system and his argument that the market system, if unchecked, would lead to the destruction of society and humanity should be seen as radical as Marx’s critique of capitalism. Therefore, the distance between the two should not prevent us from using both of them together. Not only they complement each other in many respects, but also reading one will enable us the other in a different, more enlightening way. Thus, while Polanyi can be useful to keep our distance from “economic determinism” and some “scientistic” reading of society and history, Marx, especially his theory of fetishism, could also be useful for Polanyi, in developing a deeper understanding of the “dehumanizing” aspects of capitalism, and of capitalism in general at a deeper level.

References Althusser, Louis. 1969. For Marx, translated by B. Brewster. London: Verso, 1996. Block, Fred and Margaret R. Somers. 1984. “Beyond the Economistic Fallacy: The Holistic Social Science of Karl Polanyi.” In Theda Skocpol, ed., Vision and Method in Historical Sociology. New York: Cambridge University Press, 47–84. ——— 2014. The Power of Market Fundamentalism: Karl Polanyi’s Critique. Cambridge, MA: Harvard University Press.

251

Hüseyin Özel Congdon, Lee. 1976. “Karl Polanyi in Hungary, 1900–19.” Journal of Contemporary History 11: 167–183. Dale, Gareth. 2016a. Reconstructing Karl Polanyi: Excavation and Critique. London: Pluto Press. ——— 2016b. Karl Polanyi: A Life on the Left. New York: Columbia University Press. Dalton, George ed. 1981. Research in Economic Anthropology 4. Greenwich: JAI Press. (Discussion by Maurice Godelier: 64–69; comment by Dalton: 69–94). Dalton, George and J. Köcke. 1983. “The Work of the Polanyi Group: Past, Present and Future.” In S. Ortiz, ed. Economic Anthropology: Topics and Theories. Lanham, MD: University Press of America, 21–50. Halperin, Rhoda. 1984. “Polanyi, Marx, and the Institutional Paradigm in Economic Anthropology.” In B. L. Isaac, ed., Research in Economic Anthropology 6: 245–272. ——— 1988. Economies Across Cultures: Towards A Comparative Science of the Economy. New York: St. Martin’s Press. ——— 1994. Cultural Economies: Past and Present. Austin: University of Texas Press. Lukács, Georg. 1971. History and Class Consciousness: Studies in Marxist Dialectics, translated by Rodney Livingstone. Cambridge, MA: MIT Press. ——— 1986. George Lukács: Selected Correspondence, 1902–1920, edited and translated by J. Marcus and Z. Tar. New York: Columbia University Press. Macmurray, John. 1935. “The Early Development of Marx’s Thought.” In John Lewis, Karl Polanyi, and Donald K. Kitchin, eds., Christianity and The Social Revolution. London: Victor Gollancz Ltd., 209–236. Marx, Karl. 1975. Early Writings. Translated by R. Livingstone. London: Penguin. ——— 1976. Capital, Vol. I, transl. by B. Fowkes. London: Penguin. Musto, Marcello, ed. 2021. Karl Marx’s Writings on Alienation. Springer Nature Switzerland for Palgrave: Macmillan. Özel, Hüseyin. 1997. Reclaiming Humanity: The Social Theory of Karl Polanyi. Doctoral Dissertation, The University of Utah. ——— 2019. “Commodification.” In C. Holmes, G. Dale and M. Markantonatou, eds., Exploring the Thought of Karl Polanyi. London: Agenda Publishing, 131–149. Polanyi, Karl. 1935. “The Essence of Fascism.” In J. Lewis, K. Polanyi, D. K. Kitchin eds., Christianity and The Social Revolution. London: Victor Gollancz Ltd., 359–394; reprinted in Polanyi 2018b: 81–107. ——— 1957 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Boston, MA: Beacon Press. ——— 1947. “On Belief in Economic Determinism.” The Sociological Review 39, Section One: 96–102. ———1968. Primitive, Archaic, and Modern Economies: Essays of Karl Polanyi, edited by George Dalton. New York: Anchor Books. ——— 1977. The Livelihood of Man, edited by Harry W. Pearson. New York: Academic Press. ——— 2014. For a New West: Essays, 1919–1958, edited by G. Resta and M. Catanzariti. Cambridge, MA: Polity Press. ——— 2018a. “Ideologies in Crisis.” In M. Brie and C. Thomasberger, eds., Karl Polanyi’s Vision of a ­Socialist Transformation. Montreal: Black Rose Books, 264–267. ——— 2018b. Economy and Society: Selected Writings, edited by M. Cangiani and C. Thomasberger. Cambridge, MA: Polity. Polanyi, Karl, Conrad M. Arensberg and Harry W. Pearson eds. 1957. Trade and Markets in the Early Empires: Economies in History and Theory. New York: The Free Press. Polanyi-Levitt, Kari. 2014. “Preface.” to Polanyi. In Giorgio Resta and Mariavittoria Catanzariti eds., For a New West Essays, 1919–1958. Cambridge: Polity Press, viii–xv. Polanyi-Levitt, Kari and Marguerite Mendell. 1987. “Karl Polanyi: His Life and Times.” Studies in Political Economy, 22, Spring, 7–39. Schaff, Adam. 1980. Alienation as a Social Phenomenon. Oxford: Pergamon Press. Sievers, Allen M. 1949. Has Market Capitalism Collapsed? A Critique of Karl Polanyi’s New Economics. New York: Columbia University Press. Valensi, Lucette. 1981. “Economic Anthropology and History: The Work of Karl Polanyi.” In George Dalton ed. Research in Economic Anthropology, vol. 4, Greenwich: JAI Press, 3–11. Zoubir, Zacharias. 2018. “‘Alienation’ and Critique in Marx’s Manuscripts of 1857–58 (Grundrisse)”. The European Journal of the History of Economic Thought 25/5: 710–737.

252

21 POLANYI READS MARX Michele Cangiani

Steps towards a new social science The exciting situation of “Red Vienna”, where he lived from 1919 to 1933, prompted Polanyi to improve his economic and social knowledge. He principally addressed his study to AustrianSchool economics, on the one hand, and, on the other, to socialist authors, such as the AustroMarxists Max Adler and Otto Bauer, British Guild Socialists, Rudolf Hilferding. Besides, he resumed his reading of Marx. In this new phase of his intellectual and political journey, Polanyi overcomes his earlier critical stance towards Marxism regarding positivist scientism and historical determinism. He realizes that, precisely for the aims of personal freedom and moral commitment, which he contrasted with those trends, the “reality of society” cannot be overlooked, if only because it defines the opportunities and limits of freedom. A social science – a new one – is needed, concerning the organization of the present society, to be able to question it and prefigure a different social organization. The goal to reach, or at least the horizon to pursue, is the full and ‘positive’ freedom Polanyi calls “socialist freedom” in his manuscript “Über die Freiheit” (On Freedom) (2018 [1927]). Freedom cannot be realized as long as human beings are dominated by “the law of value (the law of the accumulation of capital)” – he maintains (ibid.: 19). According to him, Marx “understood that capitalist society is not only unjust but also un-free” and built his theory as a necessary premise for “the leap from the realm of necessity to the realm of freedom” (ibid.: 37, 15). The necessity to be overcome is that of “the historic laws of the capitalist economy, which operate as the natural laws of this society”. Marx explains, Polanyi continues (ibid.: 16), that, in the absence of critical awareness of such laws, “capitalists and workers alike, human beings in general, appear as mere players on the economic stage”. In this situation, “the free will of human beings is only a mirage, only a semblance” (ibid.). The metaphor of the stage is employed by Marx (1977: 179): “the characters who appear on the economic stage are merely personifications of economic relations”. The first two Parts of Marx’s Capital, Vol. 1 are, in fact, important sources for Polanyi’s 1927 manuscript. Marx’s theory – he points out (2018 [1927]: 38) – unveils the market-capitalist social organization, which normally is unknown by people who blindly accept its norms like “a mysterious script of knots that they had unconsciously tied themselves”. Yet, “knowledge of society” – Polanyi maintains in the closing page of The Great Transformation (2001 [1944]: 267–268) – “is the

253

DOI: 10.4324/9781003336747-27

Michele Cangiani

constitutive element in modern man’s consciousness”. In Chapter 10 of that book, he credits classical political economists for the needed “discovery of society”. However, like Marx, he highlights their tendency to naturalize social-historical norms, thereby supplying an ideological support to capitalism – to the institution of labour market in the first place. Naturalism is inherent in the “economistic approach”, Polanyi maintains (1968: 123); only the opposite “societal approach” – still traceable in Adam Smith, fully developed by Marx’s critique, tentatively implemented by Robert Owen’s industrial organization – achieves the “discovery of society” in its true, full sense. Polanyi’s critique of political economy borders on political philosophy, where he finds a significant correspondence with Marx. An “enormous awareness” – required to recover a full and conscious control of social production, including the production of social institutions – becomes possible, though normally repressed, as “the product of capitalist mode of production” (Marx 1993: 463). Through such control, according to Marx (ibid.: 832), individuals, as “social individuals”, could realize what Polanyi describes as their ‘positive’ “socialist freedom” on the ground of the modern “discovery of society”– of the discovery that the human nature is social, and society is made and changed by its members. This is what Marx means by “human” society, Polanyi observes (2018 [1947]a: 144), explicitly referring to Marx’s Theses on Feuerbach (1845): “the relationship of human beings”. This is human emancipation, a great opportunity offered by modernity; so great, however, that it risks being unattainable, thereby turning in a mortal bet: “man is not a simple being and can die in more than one way” (Polanyi 1947a: 197). When Polanyi was writing The Great Transformation, hopes and opportunities for a radical change of societal setup – still alive in the Red Vienna, and in general in the period of “social unrest” around WWI – were lost. The transformation of liberal 19th-century capitalism was prevalently accomplished, in Europe, by limiting democracy and freedom, even in the rare countries where authoritarian regimes, and fascism, did not prevail. However, the years Polanyi spent in Vienna remained a decisive and permanent step in his formation. He never gave up on his ideals, as it is evident – together with the awareness of current economic and political drifts – in an article he wrote when WWII was over. In the concluding page, he contrasts two tendencies: Some believe in elites and aristocracies, in managerialism and the corporation. They feel that the whole of society should be more intimately adjusted to the economic system, which they would wish to maintain unchanged. […] Others, on the contrary, believe that in a truly democratic society the problem of industry would resolve itself through the planned intervention of the producers and consumers themselves. (Polanyi 1947a: 210–211) The first tendency corresponds to basic features of neoliberal capitalism, early recognized by ­Polanyi. The second one represents the ideal he keeps alive, despite his acknowledgement of the defeat of the socialist alternative. Let us note the similarity of his expression to that Marx employs (1977: 173): “production by freely associated men […] under their conscious and planned control”. Besides, also in the last pages of the First Chapter of Capital, Marx connotes such desired society as “durchsichtig” (transparent) – an attribute which has a key role in Polanyi’s above cited 1927 manuscript.

Resist fascism, overcome capitalism Polanyi’s transfer from Vienna to England in 1933 was caused by the rising of fascism in ­Austria. In England, he participated in the activities of a group of the Christian Left, for which he led a collective reading of recently published Marx’s manuscripts (Marx 2007 [1932]). These, together with 254

Polanyi reads Marx

Marx’s Theses on Feuerbach (1845) and, inevitably, the First Chapter of Capital, are m ­ entioned and commented in Polanyi’s writings of the 1930s. With his 1841–1842 manuscript on Hegel’s Philosophy of Law, Marx joins the Hegelian Left in opposing the Prussian absolutism and supporting the definitive overcoming of the ancien-­régime corporatism in favour of a free and competitive economy, where free individuals composing the “civil society” supplant ranks (estates) and corporations as economic and political subjects (­Polanyi 2018 [n.d.]: 138–139). Marx explains, according to Polanyi, that in Hegel’s times corporativism, by establishing “economic life as the State”, prevented political democracy from growing. Presently, he observes, in the times of the irreversible crisis of liberal capitalism, corporativism has been revived, albeit based on industrial development: with the result of uprooting political democracy and attributing all powers to capitalists. Polanyi finds in Marx key ideas for his own interpretation of the development, crisis and transformation of liberal capitalism. At the beginning, “economic life” and “the political sphere of government” were to be institutionally separated from each other, with the aim of implementing both free economy and political democracy. However, “Hegel, so Marx says, justly feels that the separation of economic life from political life is an anomaly” (ibid.: 138). It was a 19th-century utopia, Polanyi explains in The Great Transformation, definitively overcome as a matter of fact, but still working as an ideological weapon in the 20th century – and beyond, we may add. The following commentary is important, because it reveals Marx’s influence on a key ­Polanyian concern, that of the “place of the economy in society”, then of its “autonomy” and “dis-­ embeddedness” as a characteristic of market society: We are hinting here at Marx’s insistence on the tendency of market-economy to destroy the unity of society by establishing a distinct economic sphere in society. For such development must lead to an institutional separation of the political and the economic sphere, which could only be transitory and necessarily raises the fundamental question on what basis the unity of society shall be restored. Eventually, it was to this issue that socialism and fascism offered opposite and mutually incompatible answers. Marx indeed hit on a crucial problem. (Polanyi 2018 [n.d.]: 140) A new “integration” of society should be attained: new in comparison to premodern integration, in a future ideal society constituted as an association of free individuals. Polanyi – like Marx – ­unreservedly embraces the modern ideal of individual freedom. His opposition to free-market ideology does not concern that ideal, but the illusion that freedom is possible regardless of the “reality of society”: society inevitably has an institutional organization, a particular instance of which is the market-capitalist system. As we have seen, he shares, in general, Marx’s “societal” approach, including his conception that in the present “social formation” freedom is limited, insofar as “the process of production has mastery over man, instead of the opposite” (Marx 1977: 175). However, such kind of societal order gains consent and support precisely by creating the illusion of a society “shaped by man’s will and wish alone”, an illusion resulting from “a market view of society which equate[s] economics with contractual relationships, and contractual relationships with freedom” (Polanyi 2001 [1944]: 266). Indeed, not only “the idea of freedom […] degenerates into a mere advocacy of free enterprise”, but free enterprise “is today reduced to a fiction by the hard reality of giant trusts and princely monopolies” (ibid.: 265). A further connection with Marx’s thinking is Polanyi’s thesis that capitalist development itself, through “technical and economic concentration and centralization”, makes “a comprehensive overview [Übersicht] of the economy as a whole” both needed and easier. A “consciously 255

Michele Cangiani

constructed” organization may replace the “blind laws” of capitalist economy (Polanyi 2018 [1925]: 41). The “institutional separation of the political and economic sphere” would thereby be abolished, through political control. But the question was for Polanyi – and still is – that indicated, for instance, by John Kenneth Galbraith (1973): how such control is implemented: either by a capitalist “plan” also involving political bodies, or by democratic institutions for “public purpose”. The need for “integration” of economics and politics already manifested itself in the 19th century, when “the attempt to establish a separate market economy within society” caused a “countermovement” addressed to “defend” society, its members, its natural environment, and capital itself against their being “subordinated to the needs of the market system”: to its “blind mechanism removed by its very nature from the needs of the living community embodied in every human society” (Polanyi 2017 [1940]: 20). But it was a “false integration”, Polanyi maintains (ibid.). Why? An explanation may start from a key-point of Polanyi’s theory: the “separation” was caused by the progressive becoming autonomous of the economic activity – a general characteristic of the market-capitalist economy. Basic references for Polanyi were Max Weber’s theory of “­modern rationalization”, and the historical reconstruction, by Richard Tawney (1926), of the gradual untangling of the economic activity from non-economic norms. The “rationalization”, for Weber, regards the economy in the first place, but also the other social functions and institutions, which differentiate from each other and acquire a relative autonomy. This means that problems are “social–­political”, since the solution is neither given nor purely technical, but values are in question (Weber 1968: 153). “Only in the political sphere can the whole of society be reunited”, Polanyi states, in turn (2018 [n.d.]: 138). However, if, how, and to what extent the integration is realized depends on the existing social order, whose need to reproduce itself constitutes an inevitable constraint. The capitalist market society being “an unheard-of thing […] an economic society”, “the whole of society must be subordinated” to its peculiarly ‘economic’ requirements (Polanyi 2017 [1940]: 19). Only limited and biased political interventions are allowed. Thence the “dilemma”, that characterizes in general this society, but becomes evident when, “in post-war Europe” (WWI), the clash between classes threatens the very existence of the system: “either to continue on the paths of a utopia bound for destruction, or to halt on this path and risk the throwing out of gear of this marvellous but extremely artificial system” (ibid.: 21). The root of the dilemma is the paradox that marks our society. On the one hand, politics – understood in a broad sense as a conscious choice not only of means, but also of ends and social-cultural institutions themselves – acquires an essential role. On the other hand, this occurs in a situation in which “social relationships” are “embedded in the economic system”; in which social institutions and their dynamics are directly or indirectly “determined by the market mechanism” (Polanyi 2018 [1947]a: 206). The dilemma – being inherent in the system, in its fundamental institutional characteristics – cannot be overcome if the system itself is not overcome. The transformation, that the definitive crisis of liberal capitalism made necessary, must restore some kind of “integration”. However, with fascist corporatism, this end was pursued, ironically, by “the abolition of the democratic ‘political sphere’ altogether”, instead of “the extension of the democratic principle from politics to economics”: as a result, “Capitalism as organised in different branches of industry becomes the whole of society” (Polanyi 1935: 105–106). “Fascism arises out of the mutual incompatibility of Democracy and Capitalism in a fully developed industrial society”; “that solution of the deadlock […] leaves Capitalism untouched”, while democracy is abolished (Polanyi 2018 [1934]: 129). (Let us note that this incompatibility is an aspect of the paradox just mentioned). The “transformation” became “inevitable” – Polanyi argues (2001 [1944]: 228) – when “the conflict of class forces entered decisively” into the “final phase” of liberal capitalism: when 256

Polanyi reads Marx

capitalism itself was questioned. Polanyi repeatedly deals with the role of classes in history. Marx believed, he says (2018 [1934]), that what matters are not classes as such, but is the situation of society as a whole, including its contradictions – the contradiction between productive forces and relations of production in the first place. In the manuscript “Marx on Self-Estrangement” (1937) Polanyi shares Marx’s connection between (a) “the improvement of actual or virtual means of production”, (b) the consciousness of a class, and (c) the possible leadership of that class in the interest of society as a whole. Polanyi’s non-deterministic standpoint is that the ability of a class to change society depends on its ability to understand the situation, problems, and contradictions of society; besides, the interest of other social strata should be considered, in order to convince them to join the struggle. This theme also recurs in a cyclostyled sheet (2018 [1937]a) and in The Great Transformation, Chapter 13. Society found itself in a “deadlock” owing to the impossibility of coordinating the economic and political spheres with each other. Indeed, they were contrasting each other: “Labour entrenched itself in parliament where its numbers gave it weight, capitalists built industry into a fortress from which to lord the country”, Polanyi says (2001 [1944]: 244) – being clearly influenced by his Austrian experience, including the Austro-Marxist radical socialist position. He also accurately analyses, in The Great Transformation, the far origins and diverse causes of the crisis, and its acceleration starting from the last decades of the 19th century. The “self-­ regulating markets” turned out to be a utopia in the face of capital concentration and financialization, monetary policies and protectionism undermining the effectiveness of the gold standard, imperialistic rivalries, wage and normative achievements of the working classes. But the further, decisive problem was that any compromise by the “double movement” became impossible in the face of the growing power of the working classes and the (real or imaginary) risk of socialism. There was not only the nightmare of the revolution, but also the threat of “popular democracy” when universal suffrage was finally conquered – after many decades of struggles, Polanyi notes (ibid.: 234). The premise of the “institutional separation” between economy and politics, characterizing the “liberal state”, was, in fact, that the same class had firm control over both.

Power and value Polanyi deems Marx’s theory relevant as a “philosophy of history and […] of society”, as an “anthropology”: “What Marx aimed at – he writes (2018 [1937]a: 149–150) – was not a theory of an economic system, but a key to a society”: a key to be found, concerning our own society, “in the economic system”. Marx’s theory – he adds, in pre-Sraffian times – can be “insufficient as a theory of prices”, but it is “of great scientific value in two other respects”: 1) The trends and tendencies of Capitalism were forecast by Marx with the most surprising accuracy; viz., the accumulation of capital, centralisation of production, recurrent trade depressions, the contradictions inherent in liberal capitalism […] 2) The predominant forms of consciousness in our time were shown to be the inevitable results of the private ownership of the means of production. (Ibid.: 150) As to the first point, Polanyi appreciates Marx’s analyses at that middle level of abstraction, where the functioning and dynamics of capitalist production are explained – not capitalism as such, as a specific “form of society”. He takes those middle-level analyses into account in his explanation, at a lower level of abstraction, of historical process of the capitalist society, without going himself into the matter of a general theory of capitalist economic dynamics. He says that Marx’s theory of 257

Michele Cangiani

prices is “insufficient”, but he does not deal with this topic nor with economists’ debates on it. It is obvious to him that prices can only be determined in theory, under unreal, extremely simplified assumptions: this is a honourable task, but not one of his own. His analysis concerns two other levels, one less and one more abstract. On the one hand, he comments economic events from a historical, complex, and dynamic viewpoint, also including political considerations. On the other hand, he is interested in Marx’s theory of value as the definition of a “form of society” at the most abstract analytical level, where the general and permanent characteristics of this society, distinguishing it from any other, are in question. At that level, the problem of value is not how much, but why and how goods are socially valuable in the market capitalist society, differently from any other. This is what Marx’s “critique of political economy” is about, the question that, he says, classical economists failed to raise. According to Polanyi’s comparative approach, this is the issue of the fundamental, historically specific institutions through which societies are organized: the issue of the “reality of society”. In this sense he affirms (2001 [1944]: 267) that “power and economic value are a paradigm of social reality”. How is social order established and maintained? How do societies institutionally define and achieve their economic goals? With what criterion, then, is value attributed to everything? Polanyi’s conception of the “market system” connotes a given “social nexus” – like Marx’s analysis of the “value form” from “simple circulation” to capital valorization. The market capitalist system is one way of organizing power and value. In this kind of society, goods have social value because they are produced by a fraction of social labour – labour being productive of value when capital uses it for the purpose of its valorisation. Polanyi speaks in this sense of a form of society where “the law of value (the law of the accumulation of capital)” dominates (1927: 19). The reference to the private ownership of the means of production – to which Polanyi alludes in the second point of the passage quoted at the beginning of this Section – shows that, at the root of his theoretical and political reflection, like in Marx’s theory, there is capitalism as a “form of society” to be considered as a whole and in its historical-institutional specificity. The generalization of wage labour as a “fictitious commodity” is a fundamental factor of the system, obviously connected with private property and the dominant goal of capital valorization. Labour is in general productive of monetary value within a given social organization of production. Attributing this capacity to labour per se, as if it were its intrinsic quality, would mean having a fetishist vision of it. A specific institutional connotation of labour should not be confused with labour as “human action” in the “process of production” in its general meaning of interaction with nature (Polanyi 2018 [1937]b: 159). The reference here is Marx’s distinction between “labour process” and “valorization process” (Capital Vol. 1, Chapter 7) and his statement that “labour is not the source of all wealth” at the beginning of the Critique of the Gotha Programme (Marx 1875). Again, a reference can be made to the second point of the passage cited above, where the “forms of consciousness” inherent in the market capitalist institutional system are mentioned. Polanyi explicitly refers to Marx when speaking of “fetishization” as a “form of consciousness”. “The relations between the human beings engaged in the production” are “crystallised […] into a semblance of an objective entity as, for example, commodity value, interest rate, capital” (Polanyi 2018 [1937]a: 147–148). Among fetishes, “the most disastrous” is that of “Capital […] as the third original factor of production alongside of Man and Nature”; this is the appearance, “due to the private ownership of the means of production”, while the reality is that capital (with a small c, i.e. the means of production) is, generally speaking, “the outcome of past labour that is being used by present live labour” (ibid.: 148). ‘Capital’ (with a capital C) is a historical institution, ‘capital’ is a general condition of production, with no institutional connotation. 258

Polanyi reads Marx

Fetishist appearance – the value of commodities residing in themselves, profit justified as a produce of capital – depends, according to Polanyi (2018 [1937]b: 160–162), on the reality of price formation in the market, “behind the back” of individuals, and on the institution of private property of the means of production. The consequence is “self-estrangement” – a concept that Polanyi obviously draws from Marx – of labour under capital’s power, and also of society as a whole: “Under this system” – Polanyi (2018 [1937]a: 146) points out – economic activities form “a separate and autonomous sphere within the body social”. Then, the means tend to rule over the ends. Grotesque perversions of common sense take on a semblance of rationality under the sway of what is supposed to be an economic law. A symbolic instance is the treatment of human labour as a commodity. (Ibid.) Polanyi (1937) contrasts this situation with the horizon which socialism should strive for: “the final overcoming of self-estrangement and the establishment of a human society (in the Marxian sense of the term) by the abolition of class society”. (The Tenth of Marx’s Theses on Feuerbach is mentioned by Polanyi in this connection). In such utopian society “the relationships of human beings” would be direct and conscious, based on the acknowledgment of the responsibilities inherent in the common belonging to the human species. In such authentically “human” society, people would freely and democratically decide about the institutions defining “power and value”.

Market and capital Rightly Ron Stanfield (1977) argues that by “market society” Polanyi means “market capitalist society”. This is consistent with, indeed part of, Stanfield’s interpretation of Polanyi’s approach as institutional, holistic, and comparative (see Stanfield 1986). For both Marx and Polanyi, contemporary society is basically connoted as a society whose fundamental institutions – the market system and capitalist relations of production – are linked to one another and evolve in parallel. Polanyi points out that the market system becomes “self-regulated” – generalized, autonomous, dominant – when it also includes the means of production: “The self-regulated system of markets emerges from the fact that the factors of production, too, have markets (market economy)” (Polanyi 2014 [1950–1952]: 135). Instituting labour, land and money as commodities is decisive for the genesis of capitalist society, remains its basic characteristic, and confirms that we are dealing with a society which is at the same time, inextricably, a market society and a capitalist society. The special relevance in this regard of the institution of the labour market explains why this is a main theme of The Great Transformation. In a later passage, Polanyi (1977: 9) couldn’t state the connection between generalization of market and capitalist production more clearly: Within a generation – say, 1815 to 1845 […] – the price-making market […] showed its staggering capacity for organizing human beings as they were mere chunks of raw material and combining them, together with the surface of mother earth, which could now be freely marketed, into industrial units under the command of private persons mainly engaged in buying and selling for profit. “This structure [that is, the capitalist market society] represented a violent break with the conditions that preceded it”; “the very substance of human society” was “transformed” (ibid.: 10, 9). Polanyi is as concerned as Marx in defining the specific difference of this society from any other: 259

Michele Cangiani

the transformation has been “not a matter of degree but of kind”, he observes (1947b: 248). Marx, in turn, argues (1977: 274) that the availability on the market of “this peculiar commodity, labourpower” is so a fundamental “historical precondition” of capitalism, that it connotes “a world’s history”: a new kind of social organization marking a historical break. Polanyi’s concept of market system – as essentially different from markets in previous societies and connoting a specific, typically ‘economic’ form of society – draws its method and meaning from Marx’s critique starting in the First Chapter of Capital and continuing with the theory of capital and capital’s circulation and accumulation implying its continuous entering the market and coming out of it. For Polanyi, like for Marx, the theory of the market system is part of the overall theory of the organization of a given mode of production; therefore, it makes no sense to criticize him for giving too much, if not exclusive, importance to the circulation process, to the detriment of the production process. The similarity between Polanyi’s and Marx’s conception of “the world of commodities” as a capitalist society can be extended to Thorstein Veblen, who considers the “price system” as a “business situation” with its “pecuniary exigencies” (Veblen 1994 [1901]: 286, 1994 [1909]: 245). For Max Weber as well, an epochal break takes place, which is characterized by the systematic connection between “commercialization” of the economy, capitalist enterprise and free labour (see, e.g. Weber 1961 [1923]: 208).

An ‘economic’ society The market system and production for the sake of production, i.e. of profit, have become an unavoidable constraint, determining society’s basic dynamics. As a result, Polanyi writes (2018 [1947]a: 200), we have “an ‘economic’ society to a degree previously never even approximated”: a society whose fundamental organization (Marx’s Form) is typically constituted by economic institutions. Given the “vital importance” of economic activity, Polanyi observes, its control by the market “means no less than the running of society as an adjunct to the market. Instead of the economy being embedded in social relations, social relations are embedded in the economic system” (2001 [1944]: 60). As for Marx the value-form (from the “simple circulation” to the valorization of capital) is the institutional heart of the bourgeois society, so for Polanyi the way the economy is instituted – by the market system and capitalist relations of production – makes it “entrusted to a self-acting [that is, autonomous] device” (Polanyi 1947a: 200). “While social classes were directly, other institutions were indirectly determined by the market mechanism”, he points out (ibid.: 206). And more generally and radically: the “market economy” gives rise to “a whole society embedded in the mechanism of its own economy – a market society” (Polanyi 1977: 9). This assumption may be specified as follows: tendentially self-referential economic institutions constitute the fundamental and permanent features of the social system and therefore a constraint that social subsystems and dynamics, even if relatively autonomous, must necessarily respect. This further explains the sense of the “dilemma” above considered. In this kind of society, economic activities and relationships seem basically inspired by ‘economic’ motives – hunger and gain. However, these motives are economic not in general, not per se, but only in such society: hunger and gain become economic motives when they are so determined within a specific social organization, where “the need of ‘earning an income’” in the market has become widespread, indeed unavoidable (Polanyi 2018 [1947]a: 201). The economic connotation does not pertain to hunger and gain in themselves, but to their institutional quality as interdependent organizational factors, in a “market situation” (Weber). The paradox can thereby be revealed of hunger, which is a problem to be faced and, at the same time, a component 260

Polanyi reads Marx

of the institutions that should solve it. Polanyi, like Weber, recalls in this sense the classical expression of ‘the whip of hunger’ as an essential factor of the creation and functioning of the labour market. Marshall Sahlins – who met Polanyi at the Columbia University and mentions him as a fundamental reference for his research in “anthropological economy” as opposed to any economistic “economic anthropology” – affirms that contemporary society “is the era of hunger unprecedented. Now, in the time of the greatest technical power, is starvation an institution” (Sahlins 1972: 36). In pre-modern societies, economic activities had different institutional-cultural motives, corresponding to the way in which the participation of every individual in economic activities was organized. Individual activity and fruition of resources were assured by a system of traditional obligations grounded on kinship, religious beliefs, ethical values and social hierarchies: by relationships of status, not of contractus, as Polanyi notes (1947b: 248), with reference to the opposition proposed by Henry Sumner Maine. The ‘economic’ form in which the economy is socially instituted in the market capitalist society determines its peculiarity of being separated – differentiated – from all other aspects of social life. This reality suggests, Polanyi remarks, the “economistic fallacy”, consisting in understanding this specific form of economy as the economy in general. Such criticism recalls that Marx addresses to classical economists. Besides, Polanyi’s conception of ideology is similar to Marx’s: ideology, being a ‘true’ expression of historical reality, on the one hand effectively performs an apologetic function by its misleading representation of society; on the other hand, deciphering it allows to reveal the reality producing it. This results from Polanyi’s commentary on Marx’s concept of fetishism (see above, where Polanyi 2018 [1937]a and 2018 [1937]b are cited).

Fictitious commodities With the concept of “catallactic triad” Polanyi means that the market, historically instituted as a generalized market or “market system”, determines the other two elements of the triad – trade and money – that in other societies had diverse origins, functions and meanings. ‘Catallactics’, as denoting an economy based on exchange, is a term with a pluri-secular tradition. Polanyi was probably aware that, for instance, Mises too employs it in Human Action (1949), meaning “the analysis of market phenomena”. What radically distinguishes Polanyi is, once more, the intent to define a specific social system, in historical-institutional terms. Typically, he affirms (1957: 256–257), in the market system, since trade is directed by prices and prices are a function of the market, all trade is market trade, just as all money is exchange money. The market is the generating institution of which trade and money are the functions. […] Viewed as an exchange system, or, in brief, catallactically, trade, money and market form an indivisible whole. Their common conceptual framework is the market. Polanyi’s theory of money is grounded on a survey of ethnological literature, allowing him to highlight, through comparison, the specific features of money in the historical context of the market capitalist society. According to him, the institutional traits of modern money, “all-purpose money”, are determined by its belonging to the market system. The similarity is evident with Marx’s basing the explanation of money on the “general value-form” in a situation characterized by the general circulation of commodities, inevitably producing the money-form – which, in turn, preludes to the employment of money as capital. 261

Michele Cangiani

There is a substantial reference to Marx also concerning the other two Polanyi’s “fictitious commodities”, namely labour and land, which, like money, are, so to say, captured/produced by the market. Polanyi notes, like Marx, that both workers and natural environment are put at risk by their parallel becoming commodities: when labour was separated “from other activities of life” and subdued to “the laws of the market”, “all organic forms of existence” were annihilated and replaced “by a different type of organization, an atomistic and individualistic one” (Polanyi 2001 [1944]: 171). The institution of the labour market requires “the smashing up of social structures, in order to extract the element of labour from them” (ibid.: 172), and to use it as a factor of an economic activity carried out in view of profit. In this connection, Polanyi depicts the diffusion of capitalism as a “social and cultural catastrophe”. The creation of “a market for labour” – he points out (ibid.: 81) – “implied no less than the wholesale destruction of the traditional fabric of society”. This recalls both Marx’s statement (1993: 472) that “the positing of the individual as a worker, in this nakedness, is itself a product of history”, and his analysis of the “So-Called Primitive Accumulation” (Capital, Vol. 1, Part 8). For both Marx and Polanyi, the reduction of labour and land to commodities is a decisive factor of the shift from embedded to dis-embedded economy. Polanyi’s opposition between embedded and dis-embedded economy – in its deepest, wide-comparative meaning – finds not only an affinity, but also a root in Marx’s view of the peculiarly economic structure of capitalist society, explained by the various stages of his analysis of value and abstract labour, from the simple circulation to capital valorization. That affinity is often underestimated, if not denied, by Polanyi’s interpreters. Correspondingly, the most general-abstract theoretical level of Polanyi’s analysis, his comparative theory of the market capitalist society, is repressed. It is at this level that the problem can be raised of the economic system becoming autonomous, thence dis-embedded and dominant, when it is fundamentally organized, instituted, by the market system and profit as an unavoidable constraint. Indeed, the economic system is even capable of strengthening its autonomy and dominance by widening and managing its relationship with its social and political context. This already happened in 19th-century liberal capitalism, and becomes systematic in transformed, neoliberal capitalism. Fascism is presented by Polanyi as the extreme, total implementation of this tendency: fascism, he writes (2005 [1933]: 219), “wants to abolish politics, absolutize the economy, seize the State from it, ‘separate’ it from the economy”. Polanyi means here that the fascist integration between economics and politics is false: in reality, the economy could not be more ‘separate’, i.e. dis-embedded and therefore dominant, since democratic control, i.e. politics in the proper sense, disappears. We have here the opposite of a “human” society. The economy is never ‘separated’ concretely, de facto; then, obviously, it cannot be empirically found as such. It is ‘separated’ in the sense that, being endowed with ‘laws’ and therefore with a ‘rationality’ (Weber) of its own, it tends to be self-referential in its relationship with its environment, which it determines, influences, constrains. An economy institutionalized by the market, Polanyi maintains (2001 [1944]): 60), is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system. Such self-referentiality is clearly indicated when Polanyi argues that considering the consequences for human beings and society of “the treatment of human labour as a commodity” tends to be “beyond the scope of the system” (Polanyi 2018 [1937]a: 146). In general, 262

Polanyi reads Marx

The commodity fiction […] supplies a vital organizing principle in regard to the whole of society affecting almost all of its institutions […] the principle according to which no arrangement or behavior should be allowed to exist that might prevent the actual functioning of the market mechanism on the lines of the commodity fiction. (Polanyi 2001 [1944]: 76) Polanyi’s ‘critique of political economy’, like Marx’s, consists of a comparative theory of the most general characteristics of capitalist society. On this ground, the need can be faced of explaining why the relationship between the productive system and its human and natural environment seems unable to avoid a cumulative process of dis-adaptation: a need more topical today than ever before. The institutional autonomy of the economic system implies an inversion in the relationship between means and ends – “the means tend to rule over the ends” in Polanyi’s expression above quoted – which is evident in Polanyi’s conception of “fictitious commodities”. Included in the “catallactic triad”, i.e. in the market system, money becomes an end per se. Polanyi notes, like Marx, that both workers and natural environment are put at risk by their parallel becoming commodities. In its “capitalist form” – Marx points out (1977: 621) – “the worker exists for the process of production, and not the process of production for the worker”. A basic point of Polanyi’s theory – and political commitment – is that the commodification of labour and land reduces them to means for the functioning and reproduction of a given social organization. It is, on the contrary, the latter that should be the means to pursue ends established by associated individuals, including workers. The inversion between ends and means is also involved in Max Weber’s distinction between “substantive” and “formal” economic rationality. The latter, in the market capitalist society, by determining substantive choices, tends to go beyond its instrumental function. Productive choices – Weber points out (1978 [1922]: 94) – depend “on the profitability of production”: and “profitability is indeed a formally rational category”.

Closing note: the place of Polanyi’s economics Polanyi highlights a surprising attempt by the founder of the neoclassical Austrian School of economics, Carl Menger, in the revised posthumous edition of his Grundsätze der Volkswirtschaftslehre (1923). There he tries to distinguish between the concept of the economy in general and “our current economic organisation” (ibid.: 50). Menger, Polanyi comments, was looking for the “distinctive determination” of modes of production: and “an economy instituted through a competitive market system” is a specific mode (Polanyi 1971: 19, 20, 22; cf. Cangiani 2010). This is precisely Polanyi’s concern as well as the achievement of Marx’s “critique of political economy”. Polanyi follows Marx’s method also by considering economic ideologies as an expression of a given form of society. We have seen above his reading of fetishism. Also conventional “economistic” theories, the homo œconomicus ideology, methodological individualism, and the “formal definition” of economy are, for him (1957: 243 ff.), cultural traits historically produced by the development of capitalist production and market-individual rationality. For both Marx and ­Polanyi, the autonomy acquired by the economy in the capitalist society is the root of the tendency to explain historical economic institutions in terms of general-natural economic laws. In the ‘critical’ theory, instead, even scarcity is to be studied as an institution characterizing an economy historically marked by the motives of hunger and gain. It should be evident, at this point, that Polanyi’s approach is at odds with the neoclassical one. Regarding Menger, Polanyi demonstrates that the revision of his 1871 Grundsätze was an attempt to take a direction opposite to that taken by neoclassical economics. Menger, on the one hand, 263

Michele Cangiani

clarifies the ‘subjective’ approach to the economy as a choice of economic subjects. On the other hand, he poses the problem of the institutional context of the choice, noting, for example, that, in the current system, workers, to the extent that they are excluded from choices, are not economic subjects. This distinction is a basic point also for Polanyi. As far as the economy in general is ­concerned – including his ideal of a “human” economy – the question is if and how do human subjects choose. Precisely this question, however, for him like for Marx, implies that explaining every specific historical setup is the fundamental scientific task. Therefore, concerning the capitalist market society, the ‘objective’ labour theory of value plays an indispensable role; and the specificity of the institution of surplus value as to other forms of labour exploitation and ‘social surplus’ is brilliantly argued by Harry Pearson (1957), Polanyi’s collaborator in the research at the Columbia University. A historical-institutional, ‘objective’ theory of the current social organization is a necessary premise to understand not only its dynamics, but also why it should be overcome, and in what direction.

References Cangiani, Michele. 2010. “From Menger to Polanyi: The Institutional Way”. In Austrian Economics in Transition: From Carl Menger to Friedrich Hayek, H. Hagemann, T. Nishizawa, Y. Ikeda, eds. Houndmills, Basingstoke and New York: Palgrave Macmillan. Galbraith, John K. 1973. Economics & The Public Purpose. Boston: Houghton Mifflin. Marx, Karl. 1845. Thesen über Feuerbach (Theses on Feuerbach). www.marxists.org/archive/marx/ works/1845/theses/index.htm. ——— 1875. Critique of the Gotha Programme. www.marxists.org/archive/marx/works/1875/gotha/ch01. htm. ——— 1932. Der Historische Materialismus: Die Frühschriften, S. Landshut and J. P. Mayer, eds. Leipzig: Kröner. (English trans. Economic-Philosophical Manuscripts of 1844, Martin Milligan, ed. Mineola, NY: Dover Publications, 2007). ——— 1977. Capital. Volume One. New York: Vintage Books. ——— 1993. Grundrisse. Foundations of the Critique of Political Economy. London: Penguin Books. Menger, Carl. 1923. Grundsätze der Volkswirtschaftslehre, Karl Menger, ed. Vienna & Leipzig: HölderPichler-Tempsky & G. Freitag. Mises, Ludwig. 1949. Human Action. A Treatise on Economics. New Haven: Yale University Press. Pearson, Harry W. 1957. “The Economy Has No Surplus; Critique of a Theory of Development”. In Trade and Market in the Early Empires. Economies in History and Theory, Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson, eds. New York & London: The Free Press. Polanyi, Karl. 1937. “Marx on Self-Estrangement”. Ms. Karl Polanyi Archive, 20–11. ——— 1957. “The Economy as Instituted Process”. In Trade and Market in the Early Empires. Economies in History and Theory, Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson, eds. New York & London: The Free Press. ——— 1968. Primitive, Archaic and Modern Economies, George Dalton, ed. New York: Doubleday & Co. ——— 1971. “Carl Menger’s Two Meanings of ‘Economic’”. In Studies in Economic Anthropology, George Dalton, ed. Arlington, VA: American Anthropological Association. ——— 1977. The Livelihood of Man, Harry Pearson, ed. New York: Academic Press. ——— 2001 [1944]. The Great Transformation. Boston: Beacon Press. ——— 2005 [1933]. “Die Geistigen Voraussetzungen des Faschismus”. In Id., Chronik der Großen Transformation, Band 3, Michele Cangiani, Kari Polanyi-Levitt and Claus Thomasberger, eds. Marburg: Metropolis Verlag. (Originally in Menschheitskämpfer 7/1: 5–8). ——— 2014 [1950–1952]. “General Economic History”. Ms. In Id. For a New West, Giorgio Resta and Mariavittoria Catanzariti, eds. Cambridge: Polity Press. ——— 2017 [1940]. “The Trend toward an Integrated Society”. In Id. The Present Age of Transformation. Five Lectures. Introductions by Kari Polanyi Levitt, and Jeremy Smith & Ann Pettifor. Prime (primeeconomics.org).

264

Polanyi reads Marx ——— 2018. Economy and Society. Selected Writings, Michele Cangiani and Claus Thomasberger, eds. Cambridge: Polity Press. ——— 2018 [1925]. “New Reflections Concerning our Theory and Practice”. In Polanyi 2018: 41–50. ——— 2018 [1927]. “On Freedom” (“Über die Freiheit”, ms.). In Polanyi 2018: 15–40. ——— 2018 [1934]. “Fascism and Marxism”. In Polanyi 2018: 125–134. Originally in New Britain III/57–58–59. ——— 2018 [1935]. “The Essence of Fascism”. In Polanyi 2018: 81–107. ——— 2018 [1937]a. “Community and Society. The Christian Criticism of our Social Order.” Cyclostyled sheet. In Polanyi 2018: 144–153. ——— 2018 [1937]b. “Christianity and Economic Life”. Ms. In Polanyi 2018: 154–164. ——— 2018 [1947]a. “Our Obsolete Market Mentality”. Commentary 3 (2). In Polanyi 2018: 197–211. ——— 2018 [1947]b. “On Belief in Economic Determinism”. The Sociological Review 39. In Polanyi 2018: 243–250. ——— 2018 [n.d.] “Marx on Corporativism”. Ms. (Middle 1930s). In Polanyi 2018: 135–143. Sahlins, Marshall. 1972. Stone Age Economics. Chicago: Aldine Atherton. Stanfield, J. Ronald. 1977. “Institutional Economics and the Crises of Capitalism”. Journal of Economic ­Issues XI/2: 449–460. ——— 1986. The Economic Thought of Karl Polanyi. Houndmills and London: Macmillan. Tawney, Richard H. 1926. Religion and the Rise of Capitalism. New York: Harcourt, Brace & Co. Veblen, Thorstein. 1994. The Place of Science in Modern Civilization. London: Routledge/Thoemmes Press. ——— 1994 [1901]. “Industrial and Pecuniary Employments”. In Veblen 1994: 279–323. ——— 1994 [1909]. “The Limitations of Marginal Utility”. In Veblen 1994: 231–251. Weber, Max. 1961 [1923]. General Economic History. New York: Collier Books. ——— 1968. “Die ‘Objektivität’ Sozialwissenschaftlicher und Sozialpolitischer Erkenntnis”. In Id. Gesammelte Aufsätze zur Wissenschaftslehre, ed. by Johannes Winckelmann. Tübingen: J.C.B. Mohr: 146214. ——— 1978 [1922]. Economy and Society, Guenther Roth and Claus Wittich eds. Berkeley, Los Angeles: University of California Press.

265

22 POLANYI’S INSTITUTIONALISM BETWEEN THE LINES Sabine Frerichs

Introduction: institutions matter across the social sciences Institutions are a central subject matter of the social sciences. Especially sociology can be understood as a science of institutions par excellence. As a self-proclaimed science of society, the sociological discipline focused from the outset on the social forces that structure individual behaviour. According to Durkheim’s classical conception, they do so as if working from the outside, or behind the backs of individuals: as objective “social facts” (Durkheim 1982). However, institutions are a matter of interest also in other disciplines, and ‘institutionalisms’ abound, in which institutions are a key theoretical concept and explanatory factor of how humans (inter)act in different circumstances. Institutions can broadly be defined as social rules or rule-systems that are routinely reproduced and generally taken-for-granted (Jepperson 1991; Hodgson 2006b). This includes very complex institutions, such as states and markets, even though in today’s new institutionalisms the focus is often less on comprehensive institutional and organisational structures than on specific ‘rules of the game’ (cf. Blondel 2009). These may consist in formalised rules of a law-like nature as well as more informal rules, such as social norms, conventional standards, and behavioural routines (cf. Mantzavinos 2011: 44). A key claim of institutionalisms of different kind and pedigrees is that ‘institutions matter’, both as dependent and independent variables. Apart from new institutionalisms in sociology and political science, there is also a strand called ‘new institutional economics’, which lays emphasis on the effects of institutions on economic behaviour, but also explains institutions as the result of rational choice (cf. Furubotn and Richter 2010; Hodgson 2006a). In this regard, new institutional economics can still be understood as an extension of standard microeconomic models, in which everything features as factors in rational decision-making, in the form of individual preferences and restrictions (cf. Kirchgässner 2008). However, this is not the only institutionalist tradition in the economic discipline. There is also an older one referred to as ‘old’ or ‘original’ institutionalism, which went further in acknowledging that institutions have a reality of their own. One of the representatives of this tradition described institutions as “collective action in control of individual action” (Commons 1959: 69), which captures the top-down effect of institutions as well as their shared quality. This chapter complements earlier attempts in relating Karl Polanyi’s work to institutional economics, especially the older tradition, which he became familiar with as a scholar working on two DOI: 10.4324/9781003336747-28 266

Polanyi’s institutionalism between the lines

continents (Frerichs 2019; cf. Cangiani 2021). The aim of the following sections is to contextualise Polanyi’s institutional approach by going through different steps in its development in his life and writings. In a first step, the chapter discusses early influences, which may have had an impact on Polanyi’s institutional understanding of social reality. This is before he became engaged with distinctly anthropological and sociological literatures, where institutional thinking is a mainstay. Subsequently, the chapter outlines the historical-comparative account of institutions, which Polanyi put forward in The Great Transformation, and explores its philosophical underpinnings. Leaving aside more straightforward links with scholarship in economic anthropology and sociology, one question will be whether Polanyi’s approach shows affinities with Commons’ institutional economics in emphasising the voluntaristic side of institutions without subtracting from their collectivist properties. In the last step, the chapter takes up later works and writings, which demonstrate further maturation and reflection of Polanyi’s approach in that institutionalist terminology (“institutedness of the economy”, “institutionalisation of the economic process”) has become even more explicit. The conclusion briefly turns to the question of how Polanyi’s institutionalism differs from contemporary economic variants.

Early influences: first contacts with institutionalist perspectives Polanyi’s work forms part of classic scholarship in economic sociology, now sometimes referred to as ‘old’ economic sociology. As a 20th-century scholar, he could already build on the work of the founding figures of sociology, who also advanced sociological thinking about the economy. At the same time, his academic work and life precede the beginnings of the ‘new’ economic sociology, which developed in the late 20th century. The first ambition of this chapter is to better understand some of the formative influences on Polanyi’s scholarship, which brought him into touch with institutionalist thinking in the sociological discipline but also beyond. As a discipline taught at universities, sociology only came into existence at the turn of the 20th century. In France, the first sociological course was given by Emile Durkheim (1974) in the late 1880s. This specific course offer in “social science” was integrated in the programme of the faculty of law, which already included economics as a subject, and it was first of all taught to law students (cf. Alpert 1937). In Germany, Max Weber, who helped to advance sociology as an academic discipline, was actually a professor of economics, and until the First World War, there was no chair of sociology (Gerhardt 1998: xi–xii). Polanyi experienced this period of sociology as a fledgling discipline while still in Hungary. When he turned eighteen in 1904, he chose one of the educational pathways open to members of the educated class and enrolled in the law faculty. In 1909, he completed his studies as a doctor of law. Until the First World War, Polanyi’s professional career was that of a lawyer (Frerichs 2019: 198). In Hungary, the first steps in institutionalising sociology as an academic discipline were taken with the foundation of a new journal, Huszadik Század [Twentieth Century], whose first issue was published in January 1900, and the foundation of a professional association, Társadalomtudományi Társaság [Society of the Social Sciences], in 1901, the predecessor of the Hungarian Sociological Association. This institutionalisation of the new discipline took place a couple of years earlier than in Austria and Germany, and the sociological development could be seen as on the height of its time (Saád 2002: 99, 105). Moreover, the student-run Galilei Circle, formed in 1908 and first headed by Karl Polanyi, offered an important forum for the self-education of the academic youth in scientific thinking, which included illuminating the dynamics and tensions of 20th-century society by way of sociological perspectives. The immediate background of this extracurricular initiative was to provide 267

Sabine Frerichs

a space for the teachings of Gyula Pikler, whose theories about the evolution of law and society seemed to clash with more conservative political ideals. In the heated atmosphere of the time, his university lectures had become the target of protests and disruptions (Stanfield 1986: 3–4; Frerichs 2019: 198). A professor of legal philosophy, Pikler assumed the role of the president of the Society of the Social Sciences in 1905, after a period of being the vice-president. The first president of the association had been Ágost Pulszky, a legal philosopher whose work had a great impact on Pikler. Somewhat curiously, but also apt in the given academic context, these two great figures in Hungarian legal philosophy were probably the first to exert a sociological influence on Polanyi’s intellectual formation as a legal student and economic sociologist to-be. Pulszky and Pikler promoted a philosophy of law that can best be described as sociological positivism (Saád 2002: 100; cf. Szabadfalvi 2001, 2002). The older of the two, Pulzyky, translated and commented on Henry Sumner Maine’s Ancient Law (Szabadfalvi 2001: 112), a legal-historical treatise which is known for its influence on sociological thinking about the law. Thus, Maine’s thesis of a transition from ‘status’ to ‘contract’, as prevailing legal categories ordering social relations, forms the basis of Ferdinand Tönnies’ distinction between community (Gemeinschaft) and association (Gesellschaft), which became core concepts of the latter’s theory of the modernisation of society. Similar ideas of the evolution of legal norms and institutions can also be found in Pulszky’s theory of law (Saád 2002: 100). While Pulszky took inspiration from Auguste Comte and Herbert Spencer in his work, his legal theory “has its own place among the evolutionary grand theories of the 19th century”, including a distinctive understanding of societal progress (Saád 2002: 102). In political terms, his legal positivism anticipated an increasing role for social regulation: “Clearly perceiving tendencies in the development of contemporary capitalism, [Pulszky] outlined the idea of early social state beyond the classical liberal theoretical trend” (Szabadfalvi 2002: 171). Following in the latter’s footsteps, Pikler defended the role of the state and its law in promoting the modernisation process (Szabadfalvi 2001: 113, 118). At the same time, “he reformulated the theory of his master in even more radical terms, freeing it from its metaphysics” (Saád 2002: 103). In other words, he strengthened its positivistic underpinnings, which meant to provide the evolutionary theory of law with proper ‘microfoundations’, as economists today might say. To this effect, he linked the theory of law as a social institution with a theory of individual choice (Saád 2002: 103–104). As Szabadfalvi (2002: 171) summarises: [Pikler] believes that people act not by instincts but by purposeful discretion […], and according to this, people realize and develop norms and institutions satisfying their needs more and more perfectly. In this way people establish society, institutions and law which are considered rational and purposeful by them. Pikler sought to corroborate the utilitarian or pragmatic underpinnings of his theory with “psychophysiological experiments” later on (Saád 2002: 108). It is hard to tell what Polanyi made from this, whether Pikler’s lectures were (only) a source of inspiration for institutionalist thinking about law and society, or whether the “frivolous and provocative examples” (Saád 2002: 108) (also) raised his criticism. At any rate, it can be assumed that Polanyi took due notice of Pikler’s work in the years around the foundation of the Galilei Circle. It was also by Pikler’s example that Polanyi got interested in the work of Ernst Mach, a physicist and philosopher of science, and translated the first three chapters of the latter’s Analysis of Sensations (Mach 1984). Dale (2011b: 151–152) speaks of 268

Polanyi’s institutionalism between the lines

an “infatuation with Mach” that Polanyi revealed in “a series of articles in 1907–1911”, which would be surprising for those who know Polanyi’s later criticisms of one-sided conceptions of economic man. Arguably, Mach’s philosophy helped to pave the way for Austrian economics, which is known for its methodological individualism (Dale 2011b: 152). At the same time, it has been suggested that Polanyi actually remained a “good student of Mach” in his later work distinguishing between a formal definition and a substantive definition of the term ‘economic’: “one can safely state that the reason why K. Polanyi emphasized the comprehension of economic society from the substantial = real viewpoint was the influence of Mach” (Akiyama and Egashira 2006: 8). This material and institutional understanding of economic life came to be a trademark of Polanyi’s approach. It can also be assumed that Polanyi was at least somewhat aware of the debate on sociological methodology which set Oszkár Jászi, one of the founders and editors of Huszadik Század, a friend of the family and mentor of Polanyi, against Pikler at that time. Jászi had spent the years 1905– 1907 in France, where he got acquainted with Durkheim’s school of sociology (Saád 2002: 100, 107). Back in Hungary, Jászi presented this as a more developed stage of the social sciences compared to which domestic scholarship was lagging behind (Dániel 2008: 70, 72). His propagation of a Durkheimian approach, which builds on objective social facts that are depicted as external to individuals (Durkheim 1982: 50–51), provoked Pikler’s response. Drawing on his correspondence with Mach, Pikler defended the place of subjective experience and intuition in the social sciences. What sounds like a phenomenological (and hence somewhat less positivistic) argument is made against the backdrop of a monistic understanding of reality, which presumes a link between mind and matter (Mitoma 2000: 377, 379, 381–382). One cannot infer from all this that Polanyi was more impressed with the Pikler-Mach connection than with Durkheimian institutionalism at that time. However, as Dale (2011b: 162, n. 29) notes for Polanyi’s early work, “there is no evidence, archival or otherwise, to suggest that the French sociologist figured prominently in his thinking”. This aspect will be taken up, again, at the end of this chapter.

Great transformation I: institutions in historical-comparative perspective Whereas the concept of embeddedness, which Polanyi is often associated with, is only referred to a couple of times in The Great Transformation (Krippner and Alvarez 2007: 228, n. 9; Dale 2011a: 319–320), references to institutions are quite frequent. This matters inasmuch as Polanyi’s argument and approach is actually about institutional embeddedness (cf. Polanyi 1957: 245). The first reference to institutions can be found in the third sentence of the first chapter of the book. On the following page, Polanyi (2001: 4) characterises his approach as follows: “Ours is not a historical work; what we are searching for is not a convincing sequence of outstanding events, but an explanation of their trend in terms of human institutions”. To put it differently, his aim is not to give a well-balanced historical account but to shed light on institutional developments in the 19th and 20th centuries, which may help to understand the actual course of events. This institutional approach, as we may call it, draws on “several disciplines in the pursuit of this single aim” and is attributed explanatory power (Polanyi 2001: 4). Polanyi does not offer any more details in this context, but the rationale of his approach could be seen in a two-fold question: what history can tell us about institutions (by way of empirical analysis and theory development) and what institutions can tell us about history (facilitating both the explanation of past events and anticipation of future developments). This resonates with Cangiani’s (2012: 41) characterisation of Polanyi’s approach as “historical-institutional method, 269

Sabine Frerichs

allowing for a comparative theory of social systems in their specificity and wholeness”. In the notes section of the book, Polanyi (2001: 287) speaks of an “institutionalist approach to economic history”, but this time not with reference to his own starting point but with regard to a line of scholars including Marx and Engels. At any rate, the approach outlined at the beginning of The Great Transformation provides the historical and conceptual backdrop against which the market society is described in its institutional preconditions and consequences. Writing at the height of the Second World War, Polanyi (2001: 5) was convinced that one had to go back to the “institutional origins of the crisis” to understand what had brought about the catastrophe which humanity found themselves in at that time. However, Polanyi’s institutional approach reached much beyond “nineteenth century civilisation”, where the origins of the crisis were to be found, and also encompassed the very “origins of institutions”, which Polanyi was interested in from the broader point of view of economic history and cultural anthropology (Con 07, Fol 09).1 His interest in this period and throughout the rest of his academic life was in “[t]he study of human institutions”, both “economic and social” (Con 15, Fol 10), or in the analysis of socioeconomic institutions at different times and places, with the modern market economy featuring as a special case. With reference to the international political-economic framework within which 19th-century civilisation unfolded, Polanyi (2001: 3) distinguishes between (international and national) political and economic institutions: “balance-of-power system”, “liberal state”, “gold standard”, and “selfregulating market”. However, elsewhere in the book he also exposes the “institutional separation of society into an economic and political sphere” as something that cannot be taken for granted and should, indeed, be regarded as a historical specificity (Polanyi 2001: 74). Thus understood, the liberal state and the self-regulating market are two sides of the same coin, or one is the condition of possibility of the other. They form part of the peculiar institutional set-up of the market society, which Polanyi seeks to accentuate and illuminate in its consequences (Frerichs 2016). Polanyi (2001: 269–273) does not really define his concept of institutions in The Great Transformation, but his lengthy notes on chapter one outline his understanding of the balance-of-power system as an institution. Accordingly, it is the acceptance of balance of power as a principle and policy to be adhered by – hence, as a legitimate form of order – which stabilises international relations in the political-economic context of the time. What is informally accepted may eventually “[reach] the institutional stage” (ibid.: 271): become organised, formally recognised, assume legal quality. While this use of terminology highlights the logical end of an institutionalisation process, the phenomenon that Polanyi seems interested in is the normative force of a mutually acknowledged system here, no matter if this system is still informal in nature or has eventually become formalised. One could thus speak of an institutional continuum, which includes – and does not exclude – convention, custom, and tradition (cf. Polanyi 2001: 271–272). Moreover, institutional terminology can also be found in the core argument of the book concerning the self-regulating market and its eminent status in the market economy. For Polanyi, the market is, in principle, but an institution among others, albeit one that gained a dominant position as a form of social organisation in 19th-century civilisation. To make this point, he distinguishes between “institutional patterns” of symmetry, centricity and/or autarchy, which were supported by the “principles of behavior” of reciprocity, re-distribution and/or householding (Polanyi 2001: 49–51). These institutional patterns would usually coexist next to the “market pattern”, which rests on the behavioural principle of “[b]arter, truck, and exchange” (Polanyi 2001: 59). Polanyi emphasises that market institutions and market behaviours are not confined to the modern market society, but it is here where they have become singled out, with fateful consequences. Again, he refers to institutional separation as a historical turning point: 270

Polanyi’s institutionalism between the lines

For once the economic system is organized in separate institutions, based on specific motives and conferring a special status, society must be shaped in such a manner as to allow that system to function according to its own laws. (Polanyi 2001: 60) For Polanyi (2001: 74), this ultimately implies the subordination of society to the rule of the market. Accordingly, earlier economic systems would have rested on other “institutionalized” principles of behaviour as well, which seems tantamount to saying that they were (formally or informally) “organized” around institutional patterns of reciprocity, redistribution, and/or householding (Polanyi 2001: 57), and not based on market exchange only. In turn, the economic system that Polanyi is concerned with is characterised by an institutionalisation of the self-regulating market as a dominant form of social organisation. In a market economy, the rule of the market is formally regulated, but going beyond that, in a market society, the “market mentality” is also informally widely accepted (Polanyi 1996).

Great transformation II: exploring the voluntaristic dimension of institutions It has been suggested that Polanyi’s concept of institutions has a pragmatist flavour (Cangiani 2021: 80) which links it with a “political philosophy of freedom” (Cangiani 2012: 41). The backdrop to this interpretation is given by the ways in which Polanyi understood and aimed to solve the dilemma of “Freedom in a Complex Society”, which is the title of the last chapter in The Great Transformation. It is in this context that one finds a definition of institutions as “embodiments of human meaning and purpose” (Polanyi 2001: 262). This is unpacked insofar as freedom would have to be promoted both on the institutional level (freedom has to be institutionalised in the way that it substantively increases for all) and on the moral level (freedom has to be understood differently than the competing ideologies of the time would have it) (Polanyi 2001: 262–266). Cangiani (2012: 39, 2021: 80) links this conception of institutions as embodying human meaning and purpose to the ultimate goal of the survival of society (or humanity). He also cites ­Polanyi’s aim in a later work (1977: xliii) “to enlarge our freedom of creative adjustment, and thereby improve our chances of survival” as supportive of this understanding (Cangiani 2012: 44). This is consistent as such; however, identifying the roots for such a conception of institutions proves more difficult. Cangiani (2021: 80) points to Polanyi’s early interest in Mach, and Polanyi’s (2016: 45) reference to a “similar school of thought” in the US in his preface to Mach’s book: to American “pragmatism”. From there, it is only a small step to American institutionalism, or ‘old’ institutional economics, which draws on pragmatist ideas. Also Pikler (1909), who had introduced Polanyi to Mach, was concerned with questions of pragmatism (cf. Mitoma 2000: 372–372). But whether Polanyi’s pragmatist notion of institutions in the cited context was (also) inspired by American institutionalism is not easy to establish. Polanyi’s affinity with American pragmatism and institutionalism has occasionally been addressed, albeit with little evidence of a direct influence (Stanfield 1980; Neale and Mayhew 1983; Neale 1994; Samuels 1995; Thompson 2011; Frerichs 2019). References to American institutionalism seem largely absent from Polanyi’s writings, except for some notes on Thorstein Veblen (cf. Polanyi 2014b). It is also evident from archived materials that Polanyi’s work group did engage with the writings of American institutionalists, albeit these activities are documented only for the late 1950s (Con 33, Fol 06). As to earlier influences, Dale (2011a) is most explicit in linking Polanyi’s concept of institutional embeddedness not only to the German historical school of economics (also referred to as German institutionalism in this context) (cf. Gemici 2008: 20) but also 271

Sabine Frerichs

to American institutionalism. He even suggests that “from the 1940s onwards Polanyi’s work was already situated within that organism” (Dale 2011a: 316). However, the evidence that he cites to this effect is weaker than claimed, namely concerning the question whether and to what extent Polanyi himself critically engaged with the work of John R. Commons. The “documentary evidence” invoked (Dale 2011a: 316) does not show that Polanyi actually studied Commons’ work, but only proves that he read a review article by Gruchy (1940), which Polanyi summarises in his notes and takes some references from (Con 09, Fol 07). Entirely following Gruchy’s exposition, Polanyi notes down elements of Common’s conception of institutional economics which he seems interested in and supportive of, partly comparing them with his own concepts, and he also includes some direct quotes that Gruchy rendered from Commons’ original work. In the end, the few handwritten pages show no more and no less that Polanyi was aware of the “locus classicus for J.R. Commons” – referring to the latter’s article entitled “Institutional Economics” in the American Economic Review (Commons 1931), and not the two-volume book published later under this title (Commons 1959) – which would contain “[h]is whole sociology condensed” (Con 09, Fol 07). Whether Polanyi eventually read a shorter or longer version of Institutional Economics and whether he followed up on the reference to the Legal Foundations of Capitalism (Commons 1924), which he took down as well, remains open. This uncertainty notwithstanding, Polanyi’s notes on Gruchy’s review of Commons’ work reveal that he was interested in the latter’s “voluntaristic” conception of economic institutions. A passage from Gruchy, which Polanyi most certainly read, contains a relevant definition of the ‘going concern’, one of the concepts developed by Commons which are difficult to translate (Gislain and Théret n.a.): The going concern – whether it be the economic system, an economic institution, or a corporative enterprise – is essentially purposive in its nature, is directed by the human will, and is always looking to the future. (Gruchy 1940: 827) This is not so far from the definition of institutions that Cangiani pointed out. Moreover, Gruchy’s (1940: 843) review article also discusses how Commons’ institutional economics shares ideas with American pragmatism. If this paper taught Polanyi something about “volitional economics” made in America (Gruchy 1940: 837, 844), this could well have inspired the voluntaristic twist in his conception of institutions in The Great Transformation.

Late career: coming to terms with the institutionalist approach Polanyi assumed a position as visiting professor of economics at Columbia University in 1947, a university which had been one of the centres of American institutionalism in earlier decades (Rutherford 2016: 314), and he remained active as a research leader after his formal retirement in 1953. Rutherford (2004: 67) reports that Polanyi had enquired about the possibility to visit a US university based on his research interest in applying “the institutional method” to the English history of political and social thought, which led to his invitation to Columbia. It is in this period and context, here referred to as Polanyi’s late career, that his institutional approach became methodologically speaking still more explicit and more self-reflective in its terminology (cf. Frerichs 2019). His teaching materials of that time include an outline of “The Tool Box of Institutional Analysis” (Con 31, Fol 01), which builds on the distinction between two meanings of what is 272

Polanyi’s institutionalism between the lines

economic – a formal and a substantive one – that Polanyi (1957: 245–250, 1977: 19–34) further developed in his writings. Accordingly, the formal definition is what (neo)classical economic theory usually starts from. It takes the problem of scarcity as given and is all about economising, or optimising, means-ends relationships. In contrast, the substantive definition is what institutional economics à la Polanyi would be about. It centres on the material and institutional realities of the economy: The substantive economy must be understood as being constituted on two levels: one is the interaction between man and his [natural] surroundings; the other is the institutionalization of that process. (Polanyi 1977: 31) This comes close to what is today referred to as the social provisioning approach, which does not focus on market exchange only but all possible forms of organising the economic process. The distinction between formal and substantive understandings of economics is inspired by a critique of Carl Menger’s approach, but it also resonates with what Polanyi may have learnt from Mach (Akiyama and Egashira 2006: 8) or Weber (Cangiani 2012: 42), whose intellectual connections with Menger could be further elaborated as well. However, what is more relevant in the present context is Polanyi’s reference to American institutionalism in his report on a term paper assignment in which students were supposed to make use of his tool box of institutional analysis. Here, he claims that American institutionalism as conceived by Veblen, Mitchell or Clark, and historical institutionalism of the Weberian type are converging towards a general theory of economic institutions, the main methodological instrument of which is institutional analysis. (Con 31, Fol 01) The two traditions of thought would share a commitment to the historical-comparative study of economic institutions, which Polanyi identifies as the substantive approach. In a lecture given at Columbia University in 1950, which is entitled “The Contribution of Institutional Analysis to the Social Sciences”, Polanyi (2014a: 58; original emphasis) provides a very similar explanation of the institutional approach: Institutional analysis stands here as an abbreviation for a more definite approach to the economic aspects of human society in general than formal or scarcity economics could provide. Essentially, it is that variant of institutional economics that represents a shift back from the formal to the more popular substantive meaning of ‘economic’. It deserves highlighting that this approach is presented as a variant of institutional economics here, which may be taken as an indicator of Polanyi’s perceived proximity to American institutionalism, including Commons’ work. The aim of institutional analysis in the context of Polanyi’s writings is further explained in the chapter “The Economy as Instituted Process” (Polanyi 1957). This points to an important aspect of institutional analysis from a historical-comparative point of view, which is to make sense of the “changing place of economies in societies as a whole” (Polanyi 1957: 241). This shows the continuity in Polanyi’s thinking with his earlier account of the rise and fall of market economy in The Great Transformation, but the institutionalist approach has become more accentuated in that 273

Sabine Frerichs

its subject matter is now described as “the manner in which the economic process is instituted at different times and places” (Polanyi 1957: 250; emphasis added) or, simply, “the institutionalizing of the economic process” in different historical contexts (Con 37, Fol 14; emphasis added). Moreover, the institutionalist perspective has also become more refined as to how the relation between institutional patterns (symmetry, centricity, autarchy, market) and principles of behaviour (reciprocity, redistribution, householding, exchange) is understood. Polanyi (1957: 251–252) makes clear that it is not that aggregate individual behavior creates, as such, prevailing institutional patterns, but that institutions come first, so to say: “the societal effects of individual behavior depend on the presence of definite institutional conditions” which may rest on “elements of organization and validation […] contributed by an altogether different type of behavior”. This clarification distinguishes Polanyi’s approach from more bottom-up perspectives in institutional analysis (cf. Hodgson 2017: 5–6). While his is not necessarily a top-down approach emphasising centralised authority and regulation, the idea that preceding patterns of social organisation and acceptance stabilise the translation of behaviours into institutions and of institutions into behaviours is reminiscent of Durkheim’s (1984: 218) argument on the non-contractual foundations of contracts: that it is in an existing society that certain individual behaviours can arise and stabilise in the form of new social institutions.

Conclusion: Polanyi’s variant of institutional economics Polanyi’s institutional approach can be located between different lines of thought, and it is a challenge to trace back all possible influences. This chapter did not focus on Polanyi’s proximity with classical accounts of institutions, or institutional realities, in economic anthropology and sociology. This has more or less been taken for granted. Instead, the aim was to better understand how less documented academic influences may have shaped Polanyi’s thinking about institutions and in institutionalist terms. What is missing in his references, can only be assumed to be there between the lines. As argued above, there are at least some hints that allow to situate his variant of institutional economics in a pragmatist line of thought, even though much of this remains conjecture. This research orientation notwithstanding, a question to be raised at the end of this chapter is to what extent Polanyi’s institutional approach is actually ‘Durkheimian’ in orientation. To give an example, Dale (2011b: 156) speaks of a “striking resemblance” of Polanyi’s sociology “to that of Emile Durkheim”. For this purpose, Wolfgang Streeck’s distinction between two types of ­institutions – “Durkheimian” vs “Williamsonian” – provides a good entry point, as these are also linked to two different forms of institutionalism. In his book Re-forming Capitalism, Streeck (2009: 154–157) characterises Durkheimian institutions as obligatory, collectively enforced, and top-down, whereas Williamsonian institutions would be of a more voluntary, privately contracted, and bottom-up nature. Durkheim’s name stands here for a classical sociological approach to institutions; Oliver Williamson is referred to as one of the masterminds of new institutional economics. Streeck (2009: 156) argues that advanced political economies experienced “a move from Durkheimian to Williamsonian institutions” in the last few decades. The rise of new institutional economics and its popularity in the field of the social sciences (as an approach combining more economic with more sociological elements) can also be understood in this context (cf. Frerichs 2021): as a reflection of changing socioeconomic realities in the world of ideas, or as the intellectual backdrop for institutional adaptations as depicted by Streeck. With regard to Polanyi’s analytical categories and his normative vision, Streeck (2009: 252; original emphasis) states at the end of his book:

274

Polanyi’s institutionalism between the lines

Polanyian institutions that are market-breaking rather than market-making probably need to be Durkheimian in character: public rather than private, obligatory rather than expedient, and political instead of economic. While this claim is convincing in the context of Streeck’s book, the present chapter can add two qualifications with regard to where Polanyi’s approach differs from a Durkheimian one (which is taken very schematically here). One is offered by a pragmatist reading of his notion of institutions as embodying human meaning and purpose, which gives them a voluntaristic flavour, in contrast to more rigid notions of external social facts. However, being less Durkheimian in this respect does not mean to become more Williamsonian in return. Given that agency is found in collective action and the institutionalisation of freedom rather than in individuals’ rational decisions to delegate or pool sovereignty, there is a difference also with regard to institutionalism of the Williamsonian kind. A second qualification which briefly deserves mentioning concerns Marxian or post-Marxian elements in what Lacher (2019: 690; original emphasis) eventually refers to as “Polanyi’s critical institutionalism”. This links Polanyi’s work to yet another tradition of thought, which was certainly important for developing his own perspectives, but which again has not been the focus of this chapter. May and Nölke (2015: 89) depict critical institutionalism as a historical-comparative approach to studying complex institutional configurations – the rise and fall of the market economy, in Polanyi’s case, or the co-existence of different ‘varieties of capitalism’, in more contemporary research – if and inasmuch as this includes the normative ambition to expose the asymmetrical power relations inherent to capitalist political economies. Such an approach is commonly recognised as Marxian rather than Durkheimian in orientation, and one could start another discussion to locate Polanyi somewhere in between. At the centre of Polanyi’s critical institutional analysis is that, in modern capitalism, market exchange had become the dominant form of social organisation, with what seemed to be catastrophic effects. While the former aspect links him to Marx, it can be debated whether Polanyi’s notion of the self-defence of society against economic liberalism refers to “dominated groups” only or involves a “Durkheimian collectivity” (Hann 2010: 196). Suffice to say here that a certain critical bent can be found in old institutionalism as well, but hardly features in new institutional economics.

Note 1 References in the form of “Con[tainer] [No.]…, Fol[der] [No.]…” are to materials in the Karl Polanyi Digital Archive, which is accessible online at http://kpolanyi.scoolaid.net:8080/xmlui (last accessed: 17 Nov. 2023). Please insert the reference as follows in the search form: Con_XX_Fol_YY.

References Akiyama, Misako, and Susumu Egashira. 2006. “Ernst Mach and the Origin of the Knowledge Theory in the Former Austrian Empire.” In OUC Economic Research Papers. Otaru University of Commerce. Alpert, Harry. 1937. “France’s First University Course in Sociology”, American Sociological Review, 2: 311–17. Blondel, Jean. 2009. “About Institutions, Mainly, but not Exclusively, Political”, in Sarah A. Binder, R. A. W. Rhodes and Bert A. Rockman (eds.), The Oxford Handbook of Political Institutions. Oxford University Press: Oxford. Cangiani, Michele. 2012. “‘Freedom in a Complex Society’: The Relevance of Karl Polanyi’s Political ­Philosophy in the Neoliberal Age”, International Journal of Political Economy, 41: 34–53.

275

Sabine Frerichs ———. 2021. “Market Society and the Institutional Theory of Karl Polanyi”, in Charles J. Whalen (ed.), Institutional Economics. Routledge: London. Commons, John R. 1924. Legal Foundations of Capitalism. Macmillan Company: New York. ———. 1931. “Institutional Economics”, The American Economic Review, 21: 648–657. ———. 1959. Institutional Economics: Its Place in Political Economy. University of Wisconsin Press: Madison. Dale, Gareth. 2011a. “Lineages of Embeddedness: On the Antecedents and Successors of a Polanyian Concept”, American Journal of Economics and Sociology, 70: 306–339. ———. 2011b. “Positivism and ‘Functional Theory’in the Thought of Karl Polanyi”, 1907–1922, Sociology Compass, 5: 148–164. Dániel, Frank D. 2008. “Durkheim Magyarországon”, Világosság, 49: 67–80. Durkheim, Emile. 1974. “Course in Social Science ‐ Inaugural Lecture”, Sociological Inquiry, 44: 193–204. ———. 1982. The Rules of Sociological Method. Free Press: New York. ———. 1984. The Division of Labour in Society. Macmillan: Houndmills. Frerichs, Sabine. 2016. “The Law of Market Society: A Sociology of International Economic Law and Beyond”, in Jarna Petman (ed.), Finnish Yearbook of International Law 2012/2013. Hart Publishing: Oxford. ———. 2019. “Karl Polanyi and the Law of Market Society”, Österreichische Zeitschrift für Soziologie, 44: 197–208. ———. 2021. “Transnational Law and Economic Sociology”, in Peer Zumbansen (ed.), Oxford Handbook of Transnational Law. Oxford University Press: Oxford. Furubotn, Eirik G., and Rudolf Richter. 2010. Institutions and Economic Theory: The Contribution of the New Institutional Economics. University of Michigan Press: Ann Arbor. Gemici, Kurtuluş. 2008. “Karl Polanyi and the Antinomies of Embeddedness”, Socio-Economic Review, 6: 5–33. Gerhardt, Uta. 1998. “Introduction”, in Uta Gerhardt (ed.), German Sociology: TW Adorno, M. Horkheimer, G. Simmel, M. Weber, and Others. Bloomsbury: London. Gislain, Jean-Jacques, and Bruno Théret. n.a. “Note sur la Traduction: Compte-rendu d’une Odysée (on the translation of Commons’ Institutional Economics into French)”. Manuscript (on file with author). Gruchy, Allan G. 1940. “John R. Commons’ Concept of Twentieth-Century Economics”, Journal of Political Economy, 48: 823–849. Hann, Chris. 2010. “Moral Economy”, in Keith Hart, Jean-Louis Laville, Antonio Cattani and David (eds.), The Human Economy. Polity Press: Cambridge. Hodgson, Geoffrey M. 2006a. “Institutional Economics, Old and New”, in Jens Beckert and Milan Zafirovski (eds.), International Encyclopedia of Economic Sociology. Routledge: London. ———. 2006b. “What Are Institutions?” Journal of Economic Issues, 40: 1–25. ———. 2017. “Karl Polanyi on Economy and Society: A Critical Analysis of Core Concepts”, Review of Social Economy, 75: 1–25. Jepperson, Ronald L. 1991. “Institutions, Institutional Effects, and Institutionalism”, in Walter W. Powell and Paul J. DiMaggio (eds.), The New Institutionalism in Organizational Analysis. University of Chicago Press: Chicago, IL. Kirchgässner, Gebhard. 2008. Homo Oeconomicus: The Economic Model of Behaviour and Its Applications in Economics and Other Social Sciences. Springer: New York. Krippner, Greta R., and Anthony S. Alvarez. 2007. “Embeddedness and the Intellectual Projects of Economic Sociology”, Annual Review of Sociology, 33: 219–240. Lacher, Hannes. 2019. “Karl Polanyi, the ‘Always-Embedded Market Economy’, and the re-writing of the Great Transformation”, Theory and Society, 48: 671–707. Mach, Ernst. 1984. The Analysis of Sensations and the Relation of the Physical to the Psychical. Open Court: La Salle. Mantzavinos, Chrysostomos. 2011. “Institutions”, in Ian C. Jarvie and Jesús Zamora-Bonilla (eds.), The Sage Handbook of the Philosophy of Social Sciences. Sage: Los Angeles, CA. May, Christian, and Andreas Nölke. 2015. “Critical Institutionalism in Studies of Comparative Capitalisms: Conceptual Considerations and Research Programme”, in Matthias Ebenau, Ian Bruff and Christian May (eds.), New Directions in Comparative Capitalisms Research: Critical and Global Perspectives. Palgrave Macmillan: Houndmills.

276

Polanyi’s institutionalism between the lines Mitoma, Tamio. 2000. “The Social Theory of Gyula Pikler: The Cross Section of Modern Thoughts in Budapest Around the Turn of the 19th-20th Century” (translated from Japanese), Slavic Studies (Hokkaido University), 47: 367–384. Neale, Walter C. 1994. “Institutions”, in Geoffrey M. Hodgson, Warren J. Samuels and Marc R. Tool (eds.), The Elgar Companion to Institutional and Evolutionary Economics: A – K. Edward Elgar: Aldershot. Neale, Walter C., and Anne Mayhew. 1983. “Polanyi, Institutional Economics, and Economic Anthropology”, in Sutti Ortiz (ed.), Economic Anthropology: Topics and Theories. University Press of America: Lanham, MD. Pikler, Julius. 1909. “Die Funktion des Interesses beim Streben und die Pragmatistische Streitfrage”, in Theodor Elsenhans (ed.), Bericht über den III. Internationalen Kongress für Philosophie (Heidelberg, 1. bis 5. September 1908). Carl Winter’s Universitätsbuchhandlung: Heidelberg. Polanyi, Karl. 1957. “The Economy as Instituted Process”, in Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson (eds.), Trade and Market in the Early Empires: Economies in History and Theory. Henry Regnery Company: Chicago, IL. ———. 1977. The Livelihood of Man. Academic Press: New York. ———. 1996. “Our Obsolete Market Mentality”, in Richard Swedberg (ed.), Economic Sociology. Edward Elgar: Cheltenham. ———. 2001. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press: Boston, MA. ———. 2014a. “The Contribution of Institutional Analysis to the Social Sciences”, in Giorgio Resta (ed.), For a New West: Essays, 1919–1958, Karl Polanyi. Polity Press: Cambridge. ———. 2014b. “Culture in a Democratic England of the Future”, in Giorgio Resta (ed.), For a New West: Essays, 1919–1958, Karl Polanyi. Polity Press: Cambridge. ———. 2016. “Preface to Ernst Mach’s The Analysis of Sensations”, in Gareth Dale (ed.), Karl Polanyi. The Hungarian Writings. Manchester University Press: Manchester. Rutherford, Malcolm. 2004. “Institutional Economies at Columbia University”, History of Political Economy, 36: 31–78. ———. 2016. “Institutionalism”, in Gilbert Facarello and Heinz D. Kurz (eds.), Handbook on the History of Economic Analysis, Vol. II: Schools of Thought in Economics. Elgar: Cheltenham. Saád, József. 2002. “The Centenary of Hungarian Sociology”, Review of Sociology, 8: 99–111. Samuels, Warren J. 1995. “The Present State of Institutional Economics”, Cambridge Journal of Economics, 19: 569–590. Stanfield, James Ronald. 1980. “The Institutional Economics of Karl Polanyi”, Journal of Economic Issues, 14: 593–614. ———. 1986. The Economic Thought of Karl Polanyi: Lives and Livelihood. Macmillan: Basingstoke. Streeck, Wolfgang. 2009. Re-Forming Capitalism: Institutional Change in the German Political Economy. Oxford University Press: Oxford. Szabadfalvi, József. 2001. “Some Reflections on the Anglo-Saxon Influence in the Hungarian Legal Philosophical Traditions”, Acta Juridica Hungarica, 42: 111–119. ———. 2002. “Transition and Tradition: Can Hungarian Traditions of Legal Philosophy Contribute to Legal Transition”, Rechtstheorie, 33: 167–185. Thompson, Paul B. 2011. “Economics”, in Sami Pihlström (ed.), The Continuum Companion to Pragmatism. Bloomsbury Publishing: London.

277

23 KARL POLANYI’S INSTITUTIONALIST APPROACH AND ITS CONTEMPORARY VALUE FOR THE SOCIAL SCIENCES Giorgio Resta Introduction Why should Karl Polanyi, an economic historian (who majored in law),1 be read by legal scholars, as well as by other social scientists, today? What contribution shall his works offer to contemporary theories (and practices) on law as a system of social governance? Shall Polanyi’s thought be regarded as a powerful counter-model to mainstream law & economics? In this paper, I will try to answer these questions, arguing that Polanyi’s criticism of ‘economistic’ intellectual frameworks has lost none of its relevance even under today’s deeply changed social and economic conditions. Paradoxically, the growing influence of neo-institutionalist paradigms in economics, while it apparently undermines the more abstract and formalist approaches to human behaviour and makes economic reasoning more easily accessible to other social sciences, has not made Polanyi’s criticism superfluous or outdated (Cangiani 2002: 751; Caillé – Laville 2008: 565). On the contrary, it is exactly this disciplinary convergence that makes a return to Polanyi, and namely to his peculiar institutionalist perspective, even more urgent and necessary.

‘Institutions matter’: in what sense? As Ha-Joon Chang, among others, has well illustrated, the role of political and legal institutions has now become central not only in academic debates on development economics and economic history, but also with regard to the policy choices of large supranational organisations (Chang 2005: 69; Krever 2011: 303). Especially since the end of the 1990s, the idea that the poor quality of institutions is the main cause of the development lag of less industrialised countries, as well as of the different economic performances of the more advanced countries, started to consolidate. Consistent with this perspective, organisations such as the World Bank and the International Monetary Fund have begun to introduce various forms of conditionality, whereby the country receiving a credit line obliges itself to change its institutional set-up, as to ensure better governance performance (Chang 2011: 473). The same strategy has been pursued by the most advanced countries in the context of bilateral development aid agreements and by various multilateral fora, as in the case of the WTO with respect to the intellectual property regime enshrined in TRIPS (Ajani 1995: 110–114; Chang 2008: 31, 122). The wide scholarly production that preceded the elaboration of DOI: 10.4324/9781003336747-29

278

Karl Polanyi’s approach and contemporary social sciences

the World Bank’s (in)famous Doing business reports2 – and similar ranking mechanisms based on global legal indicators – hinges on the assumption that ‘better’ institutions are the main recipe for improving the economic performance of any country (Infantino 2019: 145). Obviously, the crux of the matter – assuming, but not conceding, the validity of the starting hypothesis about the existence of a unilinear derivative link between institutions and economic performance – is what is meant by ‘better’ institutions, often referred to as ‘Global Standard Institutions’ (Chang 2011: 474). The answer is simple, as it boils down to the alliance between freedom of contract and strong protection of property rights, intended in conformity to the basic tenets of Anglo-American law (Pistor 2019). The criticisms that could be made of these development aid policies are manifold: from the absence of any empirical evidence about the causal link between institutions modelled on the basis of the global standard and economic performance; to the underestimation of the inverse relationship, whereby it is the level of wealth and economic development of a country that affects the conformation of its institutions and not necessarily the other way around; to the underestimation of the social and economic costs inherent in institutional change; to the short-sightedness of the one-size-fits-all logic, which underestimates the weight of cultural paradigms and traditions with respect to the functionality of institutions (for a general critical framework see Chang 2011: 475–494). In this Chapter, I have no space to deal with the merits of such criticism. I would rather focus on the theoretical assumptions of such an approach, which has a huge impact not only on the specific development policies, but also, and more generally, on the interdisciplinary dialogue between law and economics (Calabresi 2015).

The neo-institutionalist framework The ultimate roots of the described approach can be found in the transaction cost economics of Oliver Williamson (1992, 2005) and in Douglass North’s neo-institutional economic history (1992, 1994, 2006). According to these perspectives, institutions, and legal institutions in particular, set the rules of the game that frame individual actions. Being built in such a way as to reduce the obstacles arising from imperfect information, limited rationality, and transaction costs in general, they tend to establish an incentive structure capable of guiding behaviour, favouring (if well designed) cooperative action and in particular establishing a system of sanctions to ensure the reliability of promises (Faundez 2016: 381). Therefore, one could not effectively understand the process of economic change by paying attention only to traditional factors of production, without adequately considering the institutional framework. Hence, the thesis that the efficiency of the economic process is a function of the efficacy of the initial institutional set-up; and the important corollary that legal reforms would be the most effective lever to enhance the market process, thereby triggering economic growth (Gambaro 2009: 19). Williamson’s and North’s neo-institutionalism represents, as is well known, an important step towards the narrowing of the gap between economic theory and economic facts (Coase 1998), an intellectual process which has brought the spatio-temporal dimension back to the limelight, leading economists to look at the market as a socially conditioned reality and no more as the natural state of things (Harris 2003: 300; Cucinotta 2009), and opening the field to intellectual recombination with political science and sociology (Crouch 2005). The rediscovery of institutions, which can already be traced back to Ronald Coase’s early essays on the nature of the firm (1937, 1995), reached one of its heydays in the 1970s, when not surprisingly the most important works of economic analysis of law saw the light of day (Calabresi 2015: 11–17). 279

Giorgio Resta

Such an approach brought law back to the centre of the theoretical agenda of economists and economic historians of the North American school, laying the groundwork for a rapprochement between disciplines that had previously only dialogued at a distance (Harris 2003: 298, 322). However, the interaction that is established today does not always follow canons of reciprocity, nor is it in any case mutually profitable, as the reactions of jurists to the project of ranking legal systems according to their efficiency, sponsored by the World Bank as part of the Doing Business reports, well demonstrate (Michaels 2009; Infantino 2019: 279–286). On the contrary, the intellectual exchange established, on this basis, between legal science and economic science appears in several respects unbalanced and one-sided.

A different perspective: Polanyi’s institutionalist approach It seems to me that the greatest conditioning stems from neo-institutionalism’s uncritical acceptance and generalisation of two theoretical cornerstones of neoclassical economics, namely price theory and rational choice theory, albeit revised in the light of the transaction cost model (à la Coase) and bounded rationality (à la Simon) (Ménard – Shirley 2014: 11). Such analytical tools and the correlative ideological background could offer a valuable aid for understanding reality, as long as the focus is on systems that can be traced back to the pole of the liberal market economy. This, moreover, cannot be taken for granted either, if it is true that the neo-institutional approach fails to grasp the fundamental dilemma in which modern capitalist economies find themselves, namely the tragic incompatibility between democracy and the logic of a self-regulating market; an incompatibility emphatically and repeatedly underlined by Polanyi (2014: 214–219, 2015: 255–259), and which lies beneath the recurring crises of democracy (Cangiani 2017: 29). However, even setting aside this consideration, it is questionable whether such analytical tools can really be relied upon when the analysis is extended – as some of the landmark essays on law & finance actually do (La Porta et al. 1998; Glaeser and Scheifer 2002: 1123; La Porta et al. 2008) – to periods and contexts prior to the Industrial Revolution and the advent of modern capitalism; or, synchronically, on cultural contexts foreign to the Western tradition and its peculiar balance between the economic sphere and other social spheres. This is one of the preliminary objections that Polanyi would probably raise today against the approach summarised above. This issue deserves to be taken seriously, not only because it goes to the heart of the problem of comparison in the legal-economic sphere, but also because it is precisely from this question that an important part of Douglass North’s reflection originates. In 1977, in fact, North published an important essay entitled: “Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi” (North 1977). The Polanyi, whose challenge North intended to take up, is not only that of The Great Transformation and of the critique of the utopia of the self-regulating market, but also the post-WWII Polanyi, author of fundamental research in economic history and anthropology, culminated in the collection Trade and Market in the Early Empires (Polanyi – Arensberg – Pearson 1957).3 The heart of his argument is that the self-regulating market constituted the predominant mechanism of resource allocation only in a very short period of human history, namely throughout the 19th century. Before that time – and in the Braudelian dimension of the longue durée – other integration tools governed the economic system and none of them was based on the logic of maximising behaviour. Consequently, the analytical and theoretical apparatus of both neoclassical and Marxist economists,4 being based on the postulate of scarcity and the theory of rational choice, would only be able to explain a small portion of the five millennia of human history (Polanyi 1977: 6). 280

Karl Polanyi’s approach and contemporary social sciences

A portion characterised, precisely, by the disentangling of the market from the whole network of social relations, as well as by the commodification of labour, land and money (socially constructed, in Polanyi’s jargon, as “fictitious commodities”).5 This implied the generalisation of the maximising behaviour of the rational individual, forced to do so by the risk of starvation (Polanyi 2014: 35, 2015: 315). Such an analytical apparatus would instead be inappropriate for the study of ancient societies and non-Western civilisations, and chthonic civilisations in particular. For the understanding of such systems, Polanyi relies on a different theoretical framework, which dispenses with the centrality of the market and assigns autonomous prominence to three main ‘forms of integration’: reciprocity, redistribution and exchange (Polanyi 1977: 250). Such allocative systems – which he studies with reference to chthonic civilisations, ancient Mesopotamian and Greek economies, and the ‘ports of trade’ system practised in various parts of Africa and India (Lombardi and Motta 1980: 237) – do not rely on the maximising behaviour of individuals but respond to the Maussian logic of “total social facts” (Mauss 2009: 71). They cannot be effectively understood unless an articulated perspective is adopted, where the economic dimension is not dissociated from the cultural, social and psychological dimensions.

The distance between Polanyi’s institutionalism and North’s neo-institutionalism North acknowledges that Polanyi’s challenge must be taken seriously, because it is indisputable that the market has played a marginal role in the history of the human economy – unlike alternative models such as the fiefdom, the family, corporations, etc. – and is still complemented by different allocative mechanisms such as reciprocity or redistribution (North 1977: 703–707). What Polanyi does not explain, according to North, is how the description of alternative models can be formalised through hypotheses susceptible to falsification and, above all, what factors explain the transition from one to the other allocative system (ibid.: 715). On this point the approaches of the two authors diverge substantially and exemplify the differences that separate the ‘new’ from the ‘old’ economic institutionalism. North proposes an economistic explanation of the non-mercantile institutions found in history (for further discussion Thomasberger 1997: 60–62; Faundez 2016: 387). Starting from the assumption that an essential precondition of the self-regulating market is the existence of well-defined and protected property rights, he defends the thesis that the existence of institutions operating outside the price system and functionally alternative to the market should be causally traced back to the presence of excessive costs in the conformation and protection of these property rights, and thus to the transaction costs involved in the implementation of market fundamentals (North 1977: 710). One of the examples proposed by North is that of the circular kula exchange, studied in the field by Malinowski and later taken up by Polanyi in The Great Transformation (2001 [1944]: 50). According to North, the choice of the allocative system based on reciprocity – rather than being noted for its symbolic and spiritual value, for the establishment of hierarchies and alliances in contiguous communities, etc. – constitutes an efficient model, because it elides the transaction costs involved in a system of reciprocal exchanges, in the absence of a political authority to ensure compliance with the terms of the agreement (North 1977: 713). The social institution of the gift should thus be understood, from his viewpoint, as a rational response to the problem of the costs inherent in the price formation. Analogous then is North’s explanation of the historical cases, already discussed by Polanyi, of the free port and administered trade (ibid.: 713–715. In short, alternative institutions to the market would be rewarded by the rational calculation of actors whenever they prove to be more efficient than the market itself on a cost/benefit level. 281

Giorgio Resta

This explanatory model thus revolves around the idea that it is the change at the margin of transaction costs that leads to pressure for change in the institutional set-up. The ‘efficient’ institutions would thus ultimately be the result of the rational calculation of the actors and not vice versa (Thomasberger 1997: 61). It is true, and it cannot be overlooked, that this reading was later made more complex and articulated by North himself, especially through the addition of the ‘ideology’ element and the consideration of multiple constraints of an informal nature, so that the positions of the ‘earlier’ North do not always coincide with those taken in the later phase of his scholarly production (North 2005, 2006: 19); on this point Krul 2016: 14). However, what remains essentially unchanged, not only in the reconstructions of the late North, but especially in the many studies of a neo-institutionalist stamp that have been inspired by his work, are some basic analytical assumptions consistent with the mainstream. They can be reduced, as Faundez (2016: 386) has elucidated, to the following propositions: (a) the elementary unit of analysis is the individual, whose action explains the emergence of institutions, as a deliberate product of human action (methodological individualism); (b) the behaviour of individuals responds to rational choice theory (declined in the more specific sense of bounded rationality and enriched by reference to beliefs and ideologies); (c) scarcity and transaction costs are theoretical tools that can be transposed to any socio-economic context; (d) property and contract are considered as fundamental legal institutions, substantially invariant in the different eras and cultures of reference.

The danger of the “economistic prejudice” Several elements, first and foremost the considerable influence that his theses have had with various supranational organisations, and first and foremost the World Bank (Krever 2011: 303–304; Bates 2014: 61), suggest that D.C. North’s thought, once an expression of heterodoxy, has today risen to the mainstream in the field of development economics (Faundez 2016: 410). Polanyi’s thinking, on the other hand, an expression of the ‘old’ and not the ‘new’ economic institutionalism (Stanfield 1999; Cangiani 2011: 177, 2008: 25), is confined to a small circle of scholars, particularly sociologists, anthropologists, and economic historians. Outside these disciplines, it has remained much more peripheral. It is the writer’s opinion, however, Polanyi’s thought represents an invaluable tool to properly address many of the problems that the social scientist, and first and foremost the jurist, is called upon to confront today. In fact, it outlines a particularly effective counter-model in order to escape the pitfalls of a misleading functionalist rationalism, which proposes a reductive and one-­ dimensional reading of legal institutions, insofar as they are only aimed at the pursuit of ‘efficient’ objectives, within a framework of economic or political competition. In particular, one of the reasons for the enduring relevance of his work lies in the fact that it pushes any scholar to critically scrutinise, and thus relativise, the weight of ‘economistic’ arguments, which are often presented as neutral, apolitical and universally valid axioms, whereas in reality they represent the specific product of a particular historical phase and a peculiar phenotype of capitalism, that nonetheless continue to shape the dominant approaches to the problems of society.

Market economy as a contingent historical form One of the elements that most clearly distinguish North’s perspective from Polanyi’s is the acceptance of a ‘formal’ paradigm of the economic, and in particular the use of the analytical toolkit of neoclassical economics as a “grid of intelligibility” (Foucault 2007: 198–200) of the totality of social relations today and in the past: thus, not only of economic relations in a framework of 282

Karl Polanyi’s approach and contemporary social sciences

advanced capitalism, but also of the non-economic sphere, and thus also of the economic relations of pre-capitalist societies. In the reading of North and the neo-institutionalists, the market is, in fact, the universal cornerstone for scientifically understanding any social relationship (Thomasberger 1997: 62–63; Ménard – Shirley 2014: 11). This is because it is believed, on the one hand, that the laws of supply and demand are universally valid in contexts of scarcity and, on the other hand, that individuals are naturally inclined to maximise their own utilities, namely utilities of an economic nature. Polanyi moves from a radically divergent perspective (Cangiani 2011: 177). He never contested that markets also existed in ancient economies, but he emphasises that their social significance was profoundly different from today. The markets of the pre-capitalist era were constitutively embedded in a network of social relations, such as religion, politics and social hierarchies, and thus were independent of the device of self-regulation that is the characteristic product of the modern order (Polanyi 2014: 141). All the forms of social integration previously evoked, such as reciprocity, redistribution and exchange, were part of a system of relations that determined their structure and meaning. The economy in the substantive sense – i.e. the “instituted economic process of interaction between man and his environment, which results in a continuous supply of want satisfying material means” – has always constituted, for Polanyi, an “instituted process” (Polanyi – Arensberg – Pearson 1957: 243). This condition changes radically in the 19th century as a result of the commodification of land, labour and money and the advent of the self-regulating market system. It is at this point that a radical shift occurs from the economy constitutively embedded in social relations to society constitutively embedded in economic relations (this is the market-society paradigm, famously described by Polanyi in The Great Transformation). It is only at this stage that the anthropological model of the homo oeconomicus emerges and spreads in the social sciences, and hunger and profit are elevated to explanatory motives for individual behaviour (Polanyi 1977: 6). Polanyi does not deny that this archetype has an actual basis in such a socio-economic set-up, but disputes its generalisation outside the spatio-temporal boundaries defined by the market-society model (Polanyi 2014: 50, 139, 148). In fact, the maximising behaviour represents the result of the specific institutional mechanism established since the industrial revolution: it does not predate it. That is why, according to Polanyi, one cannot extend to pre-capitalist societies the analytical toolbox and ideological apparatus that is formed with the advent of the self-regulating market, and which finds in the axioms of scarcity and utilitarian rationality its distinctive elements (Humphreys 1979: 197). Otherwise, one would run into the oft cited “economistic fallacy” (Polanyi 1977: 6). In particular, as Polanyi notes, the other forms of social integration observable in ancient civilisations cannot be explained as ‘alternatives’ (and thus functional homologues) to the market, as they were ‘antecedents’ (and thus ontologically incompatible) to the self-regulating market (Polanyi 2014: 60–61, 148).

“Laissez faire was planned, planning was not”: the institutional set-up of market economy Looking at the capitalist market economy as a contingent historical form that is not susceptible (like its analytical background) to uncritical generalisation, Karl Polanyi accords to the historical problem more proper consideration than is the case with North’s reflection, which appears instead largely driven by theoretical concerns inherent in the falsifiability of individual assertions. Incidentally, this raises the issue of the so-called neutrality of the social sciences, which occupied Polanyi since the earlier phase of his extraordinary intellectual career, during the years spent in Vienna.6 283

Giorgio Resta

It was precisely the historical problem – and we leave aside the historiographical criticism levelled at various junctures of its reconstruction (Dale 2010: 72) – that characterised the layout of The Great Transformation. The book was, in fact, preordained to the reconstruction of the “political and economic origins of our time” (as it is stated in the subtitle). It is significant that in this regard Polanyi came to radically divergent conclusions from those of his contemporary von Hayek (Polanyi-Levitt – Mendell 1989: 11), particularly in relation to the decisive question of the ‘naturalness’ of market arrangements. Polanyi insisted, in fact, on the profound artificiality of the self-regulating market mechanism, which was by no means the product of a spontaneous order. Rather, it was the result of a specific series of legal and political decisions, surrounded by a new ideological framework. Particular importance is given in this regard not to the body of judge-made law – which, in Hayek’s reading (2000: 109), would be the institutional projection and at the same time the guarantee of the spontaneous order – but to parliamentary legislation, which was decisive for the establishment of the prerequisites of the market economy. When he analyses the demise of the Speenhamland system following the Poor Law Amendment Act of 1834 (Polanyi 1974: 99), Polanyi recalls how in reality the English courts strenuously defended the pre-modern system of assistance. By contrast, it was only thanks to the legislative reform, sponsored by the new landowning classes now represented in Parliament and corroborated by the famous Royal Commission enquiry, that it was possible to institutionalise a proper labour market, the first of modern times (Block – Somers 2014: 114, 148). Based on these and similar considerations, Polanyi famously concluded that while laissez faire was planned, planning was not (Polanyi 1974: 180). The Hayekian dichotomy between cosmos and taxis (Hayek 2000: 48) is thus radically inverted. Taxis for Polanyi was not the heteronomous intervention, the disrupter of the market equilibrium, but rather the complex of the forces that actually led to the establishment of the market itself. By contrast, cosmos, the spontaneous order, is not associated in Polanyi’s framework with the autonomous market tools, but with the natural defensive reaction of society (from worker’s protection legislation to the various forms of administrative regulation of the markets involved, to the control of monetary flows), summed up in the famous metaphor of the “double movement” (Polanyi 1974: 167; Frerichs 2011: 81).

The enduring relevance of Polanyi’s framework for the social sciences Already from these brief remarks the added value of Polanyi’s reflection not only for economics but also for other social sciences, and among them the law, becomes clear. Polanyi’s reading is more adherent to the historical method (as well as to the comparative method) because it takes the utmost care to avoid transposing to temporally and culturally distant contexts reading grids peculiar to the contemporary institutional set-up and ideological baggage (Berthoud 1990: 171). Furthermore, moving from the thesis of the economy as an “instituted process”, it acknowledges the typically ‘multifaceted’ character that capitalism can assume both on a temporal and spatial scale, and allows for a deeper understanding of the resilience of pre-capitalist forms of social organisation even within the Western landscape (on both aspects Streeck 2011: 419). Polanyi’s criticism of “formalist” approaches and his preference for a “substantive” reading of the notion of “economic”, originally formulated in the essay “The Economy as Instituted Process” published in the collection Trade and Market in the Early Empires (Polanyi – Arensberg – Pearson 1957: 243) and then taken up in various subsequent studies (Polanyi 1971: 16, 2014: 55, 2019: 257), is consistently framed within this approach. In this way, one avoids the “economistic prejudice” (Polanyi 2014: 51, 56), which connotes much of the neo-institutionalist literature often 284

Karl Polanyi’s approach and contemporary social sciences

received with insufficient awareness by jurists and other social scientists. Many forms of criticisms levelled against the idea of ranking (and reforming) legal systems on the basis of a homogeneous scale of global indicators (Infantino 2019), could be effectively reformulated in Polanyian terms, as the very assumption of a hierarchical classification and the specific nature of the indicators chosen for such an exercise intimately reflect an economistic prejudice. Polanyi’s approach is also more realistic, as it does not postulate an artificial separation of the economy from other social spheres. Polanyi’s comparative economic history is indebted to anthropology, keeping at the centre of the stage ‘culture’ as a vector of meaning for economic relations. It also brings back to the limelight the decisive question of power (and therefore of conflict) as a variable capable of explaining the structure and changes in institutions, stripping the interpretative framework of the irenic dimension inherent in the evolutionary paradigm shared by a large part of the neo-institutionalist literature (Cangiani 1998, 2008; Harriss 2008: 44–47). Furthermore, it reverses the relationship between the theory of individual behaviour and institutions: it is not institutions that constitute the product of rational actions, as assumed by the system of thought that refers to transaction cost economics, but it is the opportunistic and maximising behaviour action that represents the product of a given institutional set-up (Polanyi 1947: 110). Said otherwise, institutions precede and condition the type of incentives underlying individual action and its model of rationality, and not the other way around. Thus, while one can say that marketsociety induces economising calculations, it is not possible to explain institutional change and the emergence of a self-regulating market in the light of the logic of utility-maximisation alone (for a similar order of considerations, in the specific context of development economics, Chang 2011: 489–490). The recent findings of the cognitive and behavioural sciences, which have led to a critical review of the foundations of the homo oeconomicus model,7 confirm that Polanyi was perfectly right in his criticism of the economistic prejudice. Therefore, it is fair to say that Polanyi’s reading of institutions is considerably more articulate and above all less ‘depoliticising’ than that of the neoinstitutionalist orthodoxy. As such, it is also more valuable to the jurist, who is constantly engaged in the planning of institutional reforms. Finally, the importance attributed by Polanyi to the “double movement” (1974: 167), as an explanatory factor of the crises experienced by Western political systems following the establishment of the market economy, brings the multidimensionality of the forms of rationality inherent in legal interventions back to centre stage. Contrary to the assumptions of comparative law & economics (Djankov et al. 2003), it cannot be reduced to the establishment of market-friendly frames of interaction. Rather, it can – and indeed it must, if the contradictions created by the market’s selfregulating logic have to be overcome – operate in exactly the opposite sense. The bumpy history of the last century shows, in fact, that the development of capitalism is intrinsically characterised by an enduring tension between the continuous expansion of market frontiers and the disembedding of the economy, on the one hand, and the opposing reactions of society, bent on the activation of devices to contain commodification and the re-integrate the social spheres artificially subjugated by the economic form, on the other (Streeck 2011). The law participates in this ambivalence. No comparative analysis can therefore disregard the complexity of the forms of rationality inherent in legal institutions. As Polanyi most clearly demonstrated in The Great Transformation (see Frerichs 2019: 205), these institutions on the one hand contribute to the implementation of the conditions necessary for the establishment of the market system (Pistor 2019), and on the other hand preside over the maintenance of spheres of relations shielded from the logic of universal commodification. Therefore, they work at the same time as market enablers and as indispensable factors for controlling the anarchic impulses of the market. 285

Giorgio Resta

As Stefano Rodotà has masterfully shown in many studies, one of the most important results of modern constitutionalism has been to introduce certain boundaries against economic imperialism, isolating a specific gamut of material and immaterial goods that should be protected from the market mechanism. Among many others, the prohibition of making the human body source of profit, enshrined in art. 3 f the EU Charter of fundamental rights, deserves to be specifically mentioned, as it starkly contrasts against a wide economic literature arguing for a market in human body, organs and tissues (Rodotà 2012). To underestimate the conflictual dimension inherent in the process of capitalist expansion is also to obliterate the role of power and politics in the design of institutions, and thus in their process of change (Chang 2011: 489–490). Polanyi’s lesson, from this point of view, is a profoundly humanist and anti-determinist one. It should never be disregarded, not only for the sake of defining appropriate systems for the understanding of social phenomena, but also to design more just institutions.

Notes 1 Polanyi studied law at the Universities of Budapest and Kolozsvár (Humphreys 1979: 169; Dale 2016: 41). 2 Following a public scandal which emerged when intentional data irregularities were uncovered, the World Bank announced on September 2022 that the Reports would have been discontinued (see Broome 2022). 3 I am following in the text the periodisation of Polanyi’s intellectual experience proposed by Dale 2010: 137. 4 Polanyi’s critique of Marxist determinism deserves to be underlined. In various parts of his work he traced a parallel between the Marxist approach and the laissez-faire approach, by noting that both “mirror nineteenth-century conditions. A market economy is an economy organised through markets, i.e. through a supply–demand–price mechanism. No one can, in principle, exist under such conditions unless he buys goods on markets with the help of income derived from selling other goods on other markets. But what makes a market economy is its self-regulating character. This springs from the inclusion of the factors of production, labor, and land into the system. No society before our own ever permitted the fate of labor and land to be decided by the supply–demand–price mechanism. Once this is the case, society is economically determined. Why? Because labor is only another name for man, and land for nature. Market economy amounts to the handing over of man and his natural habitat to the working of a blind mechanism running in its own grooves and following its own laws. No wonder that the picture of economic determinism arose for a society governed by the action of an economic mechanism. This was a picture of actuality” (Polanyi, 2014: 41). 5 On the notion of “fictitious commodities”, see the essay The Trend Toward an Integrated Society (Polanyi 2014: 217), where Polanyi observes: “Among the factors of production there are land and labor, both of which can be treated as commodities only on a more or less fictitious basis. For labor means the human beings of whom society consists, and land is only another word for mother earth, on which they subsist. In the attempt to establish a separate market economy within society, the whole of society is thus subordinated to the needs of a market economy”. 6 Since the very early works of his Vienna phase, Polanyi underlined the normative character of the social sciences. In particular, in his essay “How to make use of the social sciences” (2014: 109), Polanyi contrasted the natural sciences with the social sciences, observing that whereas “man’s attitude towards his material environment is directed by definite ends which are but little influenced by the rise of [the natural] sciences”, the social sciences “have a massive influence on man’s wishes and purposes”, so much so that they impact his very existence “radically and immediately”. Therefore the usefulness of the social sciences must be judged considering both aspects: “it is not enough to inquire how far do they assist us in attaining our ends; we must also ask how far they help or hinder us in clarifying them”. 7 A significant amount of empirical and experimental research has shown that in many social settings selfinterest coexists with altruism and other-regarding preferences (Elster 2009; Resta 2014: 55–64). As summarised by Fehr and Schmidt (2006: 617), this literature demonstrates that “many people are strongly motivated by other-regarding preferences and that concerns for fairness and reciprocity cannot be ignored in social interactions”.

286

Karl Polanyi’s approach and contemporary social sciences

Bibliography Ajani, Gian Maria. 1995. “By Chance and Prestige: Legal Transplants in Russia and Eastern Europe”. American Journal of Comparative Law 43: 93–117. Bates, Robert. 2014. “The New Institutionalism”. In Sebastian Galiani and Itai Sened eds., Institutions, ­Economic Growth, and Property Rights: The Legacy of Douglass North. Cambridge: CUP, 50. Berthoud, Gérald. 1990. “Toward a Comparative Approach: The Contribution of Karl Polanyi”. In Kari ­Polanyi-Levitt ed., The Life and Work of Karl Polanyi. A Celebration. Montréal–New York: Black Rose Books, 171–182. Block, Fred – Somers, Margaret R. 2014. The Power of Market Fundamentalism. Karl Polanyi’s Critique. Cambridge-London: Harvard University Press. Broome, André. 2022. “Doing Business: How Countries Gamed the World Bank’s Business Rankings”, ­accessible at https://blogs.lse.ac.uk/politicsandpolicy/world-bank-business-rankings/ Caillè, Alain and Jean-Louis Laville. 2006. “Actualité de Karl Polanyi”. In Michele Cangiani and Jerome Macourant eds., Essais de Karl Polanyi. Paris: Seuil, 565–585. Calabresi, Guido. 2015. The Future of Law & Economics. Essays in Reform and Recollection. New Haven, CT: Yale University Press. Cangiani, Michele. 1998. Economia e Democrazia. Saggio su Karl Polanyi. Padova: Il Poligrafo. ——— 2002. “L’inattualità di Polanyi”. Contemporanea 5/4: 751–757 . ——— 2008. “The Forgotten Institutions”. In Mark Harvey et al. eds., Karl Polanyi. New Perspectives on the Plac-e of the Economy in Society. Manchester – New York: Manchester University Press, 25–42. ——— 2011. “Karl Polanyi’s Institutional Theory: Market Society and Its ‘Disembedded’ Economy”. Journal of Economic Issues 45: 177–197. ——— 2017. “Economia, Diritti Sociali, Finalità Pubbliche. Federico Caffè e la Crisi del Welfare State”. In P. Ramazzotti ed., Stato Sociale, Politica Economica e Democrazia. Trieste: Asterios, 29–62. Chang, Ha-Joon. 2005. Kicking Away the Ladder. Development Strategy in Historical Perspective. London: Anthem Press. ——— 2008. Bad Samaritans. The Guilty Secrets of Rich Nations & The Treat to Global Prosperity. London: Random House. ——— 2011. “Institutions and Economic Development: Theory, Policy and History”. Journal of Institutional Economics 7/4: 473–498. Coase, Ronald. 1937. “The Nature of the Firm”. Economica 4: 386–405. ——— 1995. Impresa, Mercato, Diritto. Bologna: il Mulino. ——— 1998. “New Institutional Economics”. The American Economic Review 88: 72–74. Crouch, Colin. 2005. Capitalist Diversity and Change. Recombinant Governance and Institutional Entrepreneurs. Oxford: Oxford University Press. Cucinotta, Antonio. 2009. Mercato Regole Conoscenza. L’analisi Giuridico-Economica tra Neoistituzionalismo e Market Process. Milano: Giuffrè. Dale, Gareth. 2010. Karl Polanyi. The Limits of the Market. Cambridge: Polity Press. ——— 2016. Karl Polanyi. A Life on the Left. New York: Columbia University Press. Djankov, Simon et al. 2003. “The New Comparative Economics”. Journal of Comparative Economics 31: 595–619. Elster, Jon. 2009. Le Désintéressement. Traité Critique de L’homme Economique, I. Paris: Éditions du Seuil. Faundez, Julio. 2016. “Douglass North’s Theory of Institutions: Lessons for Law and Development”. Hague Journal of Rule of Law 8: 373–419. Fehr, Ernst and Klaus M. Schmidt. 2006. “The Economics of Fairness, Reciprocity and Altruism – ­Experimental Evidence and New Theories”. In Serge-Christophe Kolm and Jean M. Ythier eds, Handbook of the Economics of Giving, Altruism and Reciprocity. Amsterdam: Elsevier: Vol. I: 615–691. Foucault, Michel. 2007. Nascita della biopolitica. Corso al Collège de France (1978-1979). Milano: Feltrinelli. Frerichs, Sabine. 2011. “Re-embedding Neo-Liberal Constitutionalism: A Polanyian Case for the Economic Sociology of Law”. In Christian Joerges and Josef Falke eds, Karl Polanyi, Globalisation and the Potential of Law in Transnational Markets. Oxford-Portland: Hart: 65–84. ——— 2019. “Karl Polanyi and the Law of Market Society”. Österreichische Zeitschrift für Soziologie 44: 197–208.

287

Giorgio Resta Gambaro, Antonio. 2009. “Common Law e Civil Law: Evoluzione e Metodi di Confronto”. Quaderni della Rivista Trimestrale di Diritto e Procedura Civile 63/extra4: 7/39. Glaeser, Edward and Andrei Shleifer. 2002. “Legal Origins”. The Quarterly Journal of Economics 117/4: 1193–1229. Harris, Ron. 2003. “The Encounters of Economic History and Legal History”. Law & History Review 21: 297–346. Harriss, John. 2008. “Institutions, Politics and Culture: A Polanyian Perspective on Economic Change”. In Mark Harvey et  al. eds, Karl Polanyi. New Perspectives on the Place of the Economy in Society. ­Manchester – New York: Manchester University Press, 43–53. Hayek, Friedrich A. 2000. Legge, Legislazione e Libertà. Critica Dell’economia Pianificata. Milano: Il Saggiatore. Humphreys, Sally C. 1979. “History, Economics, and Anthropology: the Work of Karl Polanyi”. History and Theory 8/2: 165–212. Infantino, Marta. 2019. Numera et Impera. Gli Indicatori Giuridici Globali e il Diritto Comparato. Milano: Franco Angeli. Krever, Tor. 2011. “The Legal Turn in Late Development Theory: The Rule of Law and the World Bank’s Development Model”. Harvard International Law Journal 52/1: 288–319. Krul, Matthijs. 2016. Institutions and the Challenge of Karl Polanyi: Economic Anthropology After the Neoinstitutionalist Turn. Max Planck Institut Social Anthropology, Working Paper 168, Halle-Saale. La Porta, Rafael et al. 1998. “Law and Finance”. Journal of Political Economy 106/6: 1113–1155. ——— 2008. “The Economic Consequences of Legal Origins”. Journal of Economic Literature 46/2: 285–332. Lombardi, Franco e Riccardo Motta. 1980. “Traffici e Mercati. L’istituzionalismo di Karl Polanyi”. Materiali per una Storia della Cultura Giuridica 10: 231–270. Maine, Henry S. 1895. Village-Communities in the East and West. With Other Lectures, Addresses, and Essays (1871), 7th ed. London: John Murray. Mauss, Marcel. 2009. Essai sur le don. Forme et Raison de L’échange dans les Sociétés Archaïques (1925). Paris: PUF. Ménard, Claude and Mary M. Shirley. 2014. “The Contribution of Douglass North to New Institutional Economics”. In Sebastian Galiani and Itai Sened eds, Institutions, Economic Growth, and Property Rights: The Legacy of Douglass North. Cambridge: CUP, 11–29. Michaels, Ralf. 2009. “Comparative Law by Numbers? Legal Origins Thesis, Doing Business Reports, and the Silence of Traditional Comparative Law”. American Journal of Comparative Law 57: 765–795. Milanovic, Branko. 2020. “The Clash of Capitalisms: The Real Fight for the Global Economy’s Future”. Foreign Affairs 99: 10–21. North, Douglass C. 1977. “Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi”. Journal of European Economic History 6: 703–716. ——— 1992. “Institutions and Economic Theory”. The American Economist 36/1: 3–6. ——— 1994. Istituzioni, Cambiamento Istituzionale, Evoluzione Dell’economia. Bologna: il Mulino. ——— 2005. “Institutions and the Performance of Economies Over Time”. In Claude Ménard and Mary Shirley eds, Handbook of New Institutional Economics. Berlin, Heidelberg: Springer: 21–30. ——— 2006. Capire il Processo di Cambiamento Economico. Bologna: Il Mulino. Peukert, Helge. 2001. “Bridging Old and New Institutional Economics: Gustav Schmoller and Douglass C. North, Seen with Old Institutionalists’ Eyes”. European Journal of Law and Economics 11/2: 91–130. Pistor, Katarina. 2019. The Code of Capital: How the Law Creates Wealth and Inequality. Princeton, NJ: Princeton University Press. Polanyi, Karl. 1947 “Our Obsolete Market Mentality”. Commentary 3: 109–117. ——— 1971. “Carl Menger’s Two Meanings of ‘Economic’”. In George Dalton ed., Studies in Economic Anthropology. Washington, DC: American Anthropological Association: 16–24. ——— 1977. The Livelihood of Man, ed. by Harry Pearson. New York, San Francisco, London: Academic Press. ——— 2001 [1944]. The Great Transformation. The Political and Economic Origins of Our Time. Boston, MA: Beacon Prss. ——— 2014. For a New West. Essays 1919–1958, ed. by Giorgio Resta and Mariavittoria Catanzariti. Cambridge, MA: Polity Press.

288

Karl Polanyi’s approach and contemporary social sciences ——— 2015. Una Società Umana, Un’umanità Sociale. Scritti 1918–1963, ed. by Michele Cangiani and Claus Thomasberger. Milano: Jaca Book. ——— 2019. L’obsoleta Mentalità di Mercato. Scritti 1922–1957, ed. by Michele Cangiani. Trieste: Asterios. Polanyi, Karl, Conrad M. Arensberg and Harry W. Pearson. 1957. Trade and Market in the Early Empires. Glencoe, IL: The Free Press. Polanyi, Karl. 1974. La grande trasformazione. Le origini economiche e politiche della nostra epoca (italian translation). Turin: Einaudi. Polanyi-Levitt, Kari and Marguerite Mendell. 1989. “The Origins of Market Fetishism”. Monthly Review 41: 11–22. Resta, Giorgio. 2014. “Gratuità e Solidarietà: Fondamenti Emotivi e ‘Irrazionali’”. Rivista Critica del Diritto Privato 32/1: 25–64. Rodotà, Stefano. 2012. Il Diritto di Avere Diritti. Roma e Bari: Laterza. Rosser Marina, Barkley Rosser and Kirby Kramer. 1999. “The New Traditional Economy. A New Perspective for Comparative Economics?” International Journal Social Economics 26/6: 763–778. Sahu, Sonal. 2010. “Institutions and Institutionalism”. In Howard Wiarda ed., Grand Theories and Ideologies in the Social Sciences. New York: Palgrave Macmillan, 113–126. Stanfield, Ronald J. 1999. “The Scope, Method, and Significance of Original Institutional Economics”. Journal of Economic Issues 33/2: 231–255. Streeck Wolfgang. 2011. “E Pluribus Unum? Varieties and Commonalities of Capitalism”. In Mark Granovetter and Richard Swedberg eds., The Sociology of Economic Life, 3rd ed. Boulder, CO: Westview, 419–455. Thomasberger, Claus. 1997. “Mercati, Costi di Transazione e la ‘Fallacia Economicistica’: Karl Polanyi versus Douglas C. North”. Inchiesta 27: 57–66. Williamson, Oliver E. 1992. Le Istituzioni Economiche del Capitalismo. Imprese, Mercati, Rapporti Contrattuali. Milano: Franco Angeli. ——— 2005. “Transaction Cost Economics”. In Claude Ménard and Mary M. Shirley eds., Handbook of New Institutional Economics. Berlin, Heidelberg: Springer, 41–65.

289

24 HOW THEORIES SHAPE, AND ARE SHAPED BY HISTORY Chaitawat Boonjubun and Asad Zaman

Introduction Manicas (1987) has described how the modern social sciences emerged in the early 20th century on the basis of a double misunderstanding. The nature and methodology of the physical sciences were deeply misunderstood by logical positivists. Then this misunderstanding was applied to rebuild the humanities using “scientific methodology”. If we accept this radical thesis, which has been supported and amplified by Zaman (2009, 2015a, 2021b), we are faced with a huge problem: we need to rebuild the entire edifice of the social sciences on new foundations. The disastrous wrong turn in the social sciences took place with the Methodenstreit in the late 19th century, where a mathematical and quantitative approach replaced the historical and qualitative approach dominant until then (see Hodgson 2001). Polanyi was one of the masters of this former methodology for the humanities, and his book ranks among the most influential in the 20th century. Zaman (2016) has sketched some of the central elements of Polanyi’s methodology. The goal of this paper is to provide some clarity and details of one aspect of this methodology, which would provide some guidance on how we can rebuild the historical and qualitative approach which was abandoned in the 20th century. The goal of Polanyi is to study the process of social change. His approach is similar to that of Ibn-e-Khaldun, who made a systematic study along these lines as early as in the 1377 (see Zaman 2021a). In Ibn-e-Khaldun vision, the drivers of social change are communities with collective identities which enable them to act together, and institutions which embody their collective purposes. The process of social change is shaped by the theories developed by different communities to analyze and manage changes to their own advantage. The ensuing power struggles play out in the social, economic, political, and environmental spheres. These dimensions interact in complex ways, and cannot be analyzed in isolation. As Zaman (2016) points out, these principles stand in diametric opposition to the methodological assumptions of modern economics and much of the social sciences. Polanyi’s analysis, discussed below, also explains why this erroneous methodology became widely accepted. Polanyi’s analysis of the emergence of modern economic theory will be examined below at two levels. The first level is the historical sequence of events which shaped theories of change

DOI: 10.4324/9781003336747-30

290

How theories shape, and are shaped by history

developed to analyze and manage the change by the different social classes. The second level is a meta-analysis of Polanyi’s approach, to understand how we can take a historical and qualitative approach to understand the process of social change. It is useful to put down a template, extracted from Polanyi, for this meta-analysis: 1 The process of social change is initiated by an exogenous event, or a collection of such events, which disturb existing social equilibrium. 2 These changes impact different classes in different ways. Those who are adversely affected develop theories about the causes of the change, in order to mitigate or minimize these adverse effects, and possibly turn them into an advantage. 3 Importantly, theories implemented in response to the change are often wrong. That is, these theories do not correctly identify the causal factors creating social change, and, accordingly, do not provide the right remedies. The reason for this is simple. Social change is of recent occurrence, and unfolds in many dimensions, leading to confusion about causal connections among contemporary observers. 4 Theories become widely accepted not because they are ‘true’; here ‘true’ means that they correctly identify the causal factors responsible for the social changes. Rather, the theories which are accepted as guides to policy depend on the relative power of the different classes, and also on the ability of the theories to appeal to a broad constituency, going beyond class boundaries. This last point is of course of great importance. It means that dominant theories, shaping both our understanding of the real world and the policy responses to change, may be dramatically wrong. We will focus on Polanyi’s analysis of the Speenhamland Laws, as an illustration of these methodological ideas. Polanyi considers the almost forgotten episode of Speenhamland to be as powerful as the French Revolution in shaping the minds of influential thinkers, and thereby in the creation of modern economic theory: If we suggest that the study of Speenhamland is the study of the birth of nineteenth century civilization, it is not its economic and social effect that we have exclusively in mind, nor even the determining influence of these effects upon modern political history, but the fact that, mostly unknown to the present generation, our social consciousness was cast in its mold. The figure of the pauper, almost forgotten since, dominated a discussion the imprint of which was as powerful as that of the most spectacular events in history. If the French Revolution was indebted to the thought of Voltaire and Diderot, Quesnay and Rousseau, the Poor Law discussion formed the minds of Bentham and Burke, Godwin and Malthus, Ricardo and Marx, Robert Owen and John Stuart Mill, Darwin and Spencer, who shared with the French Revolution the spiritual parentage of nineteenth century civilization. (Polanyi 2001 [1944]: 87–88) Obstacles to understanding the powerful insights of Polanyi arise from our own training in the modern social sciences, which do not allow for this kind of reflexive thinking. Social science is mostly considered an attempt to learn the universal laws which drive societies. Instead, Polanyi asks us to think about how our own thoughts have been shaped by Speenhamland, like they have been shaped by the French Revolution. His goal is to explain how the central outcome of the Industrial Revolution was a revolution in ways of thinking, the birth of a creed, to which we all now subscribe.

291

Chaitawat Boonjubun and Asad Zaman

The Industrial Revolution was merely the beginning of a revolution as extreme and radical as ever inflamed the minds of sectarians, but the new creed was utterly materialistic and believed that all human problems could be resolved given an unlimited amount of material commodities. (Ibid.: 42) A functioning market requires the commodification of our lives, turning human beings into human resources, Polanyi explains, thereby providing us with the means to liberate our minds from this toxic creed. To unpack the depth and sophistication of Polanyi’s analysis, we shall operate at two levels. At the lower level, in the next Section, we go through the historical events. Later, we shall undertake a meta-analysis of the lessons about the interactions of theories, policies, historical experience, and social classes, in shaping the theories we use to understand our own historical experience.

Emergence of the poor “Where do the poor come from? was the question raised by a bevy of pamphlets which grew thicker with the advancing century” (Polanyi 2001 [1944]: 94). It seems strange to our modern minds that the problem of poverty would first become of concern and interest in 16th-century England. After all, the Biblical “the poor you shall always have with you” remains a truism. The point is that the process of enclosures, whereby the landholding elites converted common lands to private property, caused a large-scale dislocation of the poor. Enclosures, Polanyi points out (ibid.: 37), have appropriately been called a revolution of the rich is against the poor. The lords and nobles were upsetting the social order, breaking down ancient law and custom, sometimes by means of violence, often by pressure and intimidation. They were literally robbing the poor of their share in the common, tearing down the houses which, by the hitherto unbreakable force of custom, the poor had long regarded as theirs and their heirs’. The fabric of society was being disrupted; desolate villages and the ruins of human dwellings testified to the fierceness with which the revolution raged, endangering the defenses of the country, wasting its towns, decimating its population, turning its overburdened soil into dust, harassing its people and turning them from decent husbandmen into a mob of beggars and thieves. Deprived of access to the land which allowed them to eke out a meager living for themselves, and dislocated from the social networks which accepted and supported them, the poor intruded upon the public consciousness as a social problem. The solution attempted by the Speenhamland Law failed dramatically. This failure of an approach to poverty previously considered natural shaped social consciousness; it led to the market solution, still in effect today. This solution has also shaped our thoughts and feelings about poverty. Our goal is now to provide more details of this story, so that we can learn to imagine alternatives to capitalism, desperately needed today. Traditional societies were based on the premise that human lives are infinitely precious – more valuable than any material possessions. Capitalist society is based on the opposite premise that human lives are commodities for sale and purchase on the labor market. Once this premise is accepted, earning money becomes the natural goal of life – after all, money can be used to purchase lives. Max Weber (2001: 18) characterizes the “spirit of capitalism” as follows: 292

How theories shape, and are shaped by history

The earning of more and more money, combined with the strict avoidance of all spontaneous enjoyment of life […] [earning money] as an end in itself, appears […] absolutely irrational. Man is dominated by the making of money, by acquisition as the ultimate purpose of his life. This […] is evidently as definitely a leading principle of capitalism as it is foreign to all peoples not under capitalistic influence. Our goal in this paper is to show how this radical creed – the idea that money is the solution to all problems – became embedded in our minds, even though it is alien to traditional society. The Speenhamland episode and its aftermath played a critical role in this dramatic transition in ways of thinking. This is why Polanyi places this incident up there with the French Revolution as a critical element in shaping the social consciousness of modern society.

The Speenhamland episode To contemporaries, the Speenhamland laws seemed to provide a natural and effective solution to poverty, consistent with the resistance of traditional society against the creation of the labor market, which, in fact, would involve its destruction. No market economy was conceivable that did not include a market for labor; but to establish such a market, especially in England’s rural civilization, implied no less than the wholesale destruction of the traditional fabric of society. During the most active period of the Industrial Revolution, from 1795 to 1834, the creating of a labor market in England was prevented through the Speenhamland Law. (Polanyi 2001 [1944]: 81) The justices of Berkshire meeting in Speenhamland on May 6, 1795 announced that all laborers would be entitled to sufficient money to cover the purchase of three loaves of bread (of standard quality and size) per week. The social responsibility of traditional society to take care of all members was translated into a law guaranteeing their right to live. The law was universally popular. The landed classes felt that they had honorably discharged their responsibility towards the poor. The laborers were overjoyed at the security of guaranteed bread, regardless of work. The law provided for supplementation of inadequate wages, so that employers felt that they would be able to hire cheap labor, because some part of the wages would be paid by the county. The results of the Speenhamland laws – Polanyi points out (ibid.: 139) – were dramatically contrary to these expectations of all three social classes: the landed elites, the emerging capitalists, and the laborers. The key problem was the motivation for labor: “no laborer had any financial interest in satisfying his employer, his income being the same whatever wages he earned” (ibid.: 83). Employers could hire large amounts of labor, offering very low wages, but the productivity of the labor declined dramatically, because the laborers had no incentive to work. As Polanyi writes (ibid.: 83, 84): Within a few years the productivity of labor began to sink to that of pauper labor, thus providing an added reason for employers not to raise wages above the scale. For, once the intensity of labor, the care and efficiency with which it was performed, dropped below a definite level, it became indistinguishable from “boondoggling” or the semblance of work maintained for the sake of appearances. […] In the long run the result was ghastly. 293

Chaitawat Boonjubun and Asad Zaman

As the productivity of the laborers declined due to a lack of motivation to work, employers lowered their wages. The productive output of labor also declined. While the output was declining, the need to provide more support to the ever-increasing population of the poor was rising. This situation was not sustainable in the long run. As counties cut back on poor relief due to lack of income, the poor could neither find work, nor adequate support, resulting in a catastrophe: Only when a grave deterioration of the productive capacity of the masses resulted – a veritable national calamity which was obstructing the progress of machine civilization – did the necessity of abolishing the unconditional right of the poor to relief impose itself upon the consciousness of the community. (Ibid.: 85–86).

The outcome: the abolishment of Speenhamland Polanyi describes the repeal of Speenhamland as an act of vivisection on the body public; nonetheless, this was a necessary step to the creation of the labor market required by capitalism. Speenhamland was designed to prevent the proletarianization of the common people, or at least to slow it down. The outcome was merely the pauperization of the masses, who almost lost their human shape in the process. The Poor Law Reform of 1834 did away with this obstruction to the labor market: the “right to live” was abolished. The scientific cruelty of that Act was so shocking to public sentiment in the 1830s and 1840s that the vehement contemporary protests blurred the picture in the eyes of posterity. Many of the most needy poor, it was true, were left to their fate as outdoor relief was withdrawn, and among those who suffered most bitterly were the “deserving poor” who were too proud to enter the workhouse which had become an abode of shame. Never perhaps in all modern history has a more ruthless act of social reform been perpetrated; it crushed multitudes of lives while merely pretending to provide a criterion of genuine destitution in the workhouse test. Psychological torture was coolly advocated and smoothly put into practice by mild philanthropists as a means of oiling the wheels of the labor mill. (Polanyi, ibid.: 86) Speenhamland precipitated a social catastrophe. We have become accustomed to discount the lurid presentations of early capitalism as “sob-stuff.” For this there is no justification. The picture drawn by Harriet Martineau, the perfervid apostle of Poor Law Reform, coincides with that of the Chartist propagandists who were leading the outcry against the Poor Law Reform. The facts set out in the famous Report of the Commission on the Poor Law (1834) advocating the immediate repeal of the Speenhamland Law, could have served as the material for Dickens’s campaign against the Commission’s policy. Neither Charles Kingsley nor Friedrich Engels, neither Blake nor Carlyle, was mistaken in believing that the very image of man had been defiled by some terrible catastrophe. And more impressive even than the outbursts of pain and anger that came from poets and philanthropists was the icy silence with which Malthus and Ricardo passed over the scenes out of which their philosophy of secular perdition was born. (Ibid.: 102–103) A historical experience is just a collection of events. Theories breathe meaning into these experiences by extracting lessons which abstract from the particulars to more comprehensive 294

How theories shape, and are shaped by history

generalizations. The lessons extracted from the Speenhamland episode by contemporary intellectuals were dramatically wrong. One of these lessons was the iron law of wages: wages will decline to the subsistence level. But perhaps the most important was the idea that the “right to live” was not compatible with the requirements of the labor market, essential to industrial production. ­Despite the fact that these were the wrong lessons, they were built into the foundations of economic theories created at the time. Economists see nothing wrong with a world where less than ten people have more than half the planetary wealth, and more than a billion people are living below the poverty line. Even though the planet grows more than needed to produce enough food for all, economic theories do not mention hunger, and policies which could eliminate it. These theories do mention that providing basic necessities for all would reduce the motivation to work, and thereby lower output. The trauma of Speenhamland explains why modern economics does not make the provision of basic needs to all human beings on the planet its central goal (see Zaman 2015b). Clara Mattei (2015) has studied the historical roots of modern austerity policies of economics, brilliantly exposing the underlying political will to strengthen and enrich the capitalists at the expense of labor. She traces austerity back to the World Wars, whereas these historical roots lie deeper, in the Malthusian analysis of Speenhamland.

The meta-analysis Polanyi (2001 [1944]: 90) writes that “The Speenhamland system was originally no more than a makeshift. Yet few institutions have shaped the fate of a whole civilization more decisively than this”. To understand this, we must look at the impact of the rise and fall of Speenhamland on the public consciousness. “Speenhamland led to the ironic result that the financially implemented ‘right to live’ eventually ruined the people whom it was ostensibly designed to succor” (ibid.: 85). The lesson seemed to be that there was a fundamental contradiction between guaranteeing laborers the right to live, and the creation of a labor market, essential to the functioning of an industrial capitalist society. Edmund Burke expressed this poetically as follows: “When we affect to pity as poor those who must labor or the world cannot exist, we are trifling with the condition of mankind” (cited by Polanyi, ibid.: 123). Pity for the poor was not compatible with the needs of capitalism. Creating a labor market implied that the threat of hunger was necessary to induce workers to sell their labor power for money. Polanyi describes the many attempts to resist this conclusion, and organize labor for production on socialist or governmental platforms. None of these efforts could successfully compete against the emerging labor market based on commodification of labor. The path chosen was suited to the interests of the emerging capitalist classes, and justified by a compliant theoretical analysis of the problem. Indeed, a right theoretical analysis was not possible for the contemporaries, because the historical experience did not equip them to understand the workings of the capitalist economy. Yet the path chosen fixed the trajectory of Western civilization for centuries, and laid down the foundations for dramatically deficient theories of society – economics and politics – which continue to be taught to this day. Polanyi (2001 [1944]: 107) writes: The mechanism of the market was asserting itself and clamoring for its completion: human labor had to be made a commodity. Reactionary paternalism had in vain tried to resist this necessity. Out of the horrors of Speenhamland men rushed blindly for the shelter of a utopian market economy. Since paternalistic attempts to provide for the poor had failed, the idea was born that there was a natural market mechanism. Attempts to interfere with this mechanism were disastrous. This 295

Chaitawat Boonjubun and Asad Zaman

led to the birth of the discipline of ‘economics’ – as the study of the supposedly ‘natural’ market mechanism, which operates on its own, separately from human social concerns. The underlying laws of these mechanisms were horrifying, and inhuman, but had to be accepted, to avoid even worse outcomes. Malthus (1998 [1798]: 114) was the first to spell out those laws, and their horrifying consequences: “The constancy of the laws of nature, or the certainty with which we may expect the same effects from the same causes, is the foundation of the faculty of reason”. According to his imagination (and contrary to facts) food supplies grow linearly, and population grows geometrically, necessarily outstripping available food. The source of poverty was the high growth rate of the poor, and the only solution was to sterilize them, encourage late marriages, and fewer children. Malthus strongly disapproved of government aid to the poor, as this would only increase birth rates, and exacerbate poverty. Scarcity is clearly a hangover from Malthusian ideas, that there is not enough food to feed the poor. In fact, the data show that world food supplies have been increasing slightly over the recorded past: from 1961 to 2019, the average per capita kilocalorie supply per day augmented approximately from 2,200 to 2,900 in the world – obviously with notable differences between and within countries (see Roser et al. 2013). Importantly, Amartya Sen’s Poverty and Famines (1982) shows that famines are not caused by lack of food, contrary to Malthus. Rather, they are caused by a lack of entitlement to food created by an economic theory which considers only those with money to be eligible to buy food. Such a cruel principle was also a reflection of the trauma of Speenhamland. The Poor Laws, including Speenhamland, were based on humanitarian conceptions: they were replaced by harsh measures, based on Malthusian theories, designed to punish the poor for the poverty they were held responsible for, due to their excessive prolificacy. The foundations for economic theory were laid by authors attempting to explain the outcome of Speenhamland, in a situation where a capitalist economy at its beginnings was embedded in traditional society, without a labor market. Opposed moral, political, and theoretical attitudes depended on a social reality that was, according to Polanyi (2001 [1944]: 130), the result of the simultaneous action on the body social of two mutually exclusive systems, namely, a nascent market economy and paternalistic regulationism in the sphere of the most important factor of production, labor. There was a clash between two different social systems. The worsening of the situation – e­ specially of the poor, but not only – was interpreted as a paradoxical effect of the Speenhamland Law. This thesis – even if some historians consider it exaggerated – succeeded as a demonstration of the need for systemic change. If pre-modern welfarism didn’t work, it was better to adopt market laissezfaire. If the old social system suggested counterproductive measures, it was better to switch to the new system, based on the market and capital. The economic science initially grew up on criticism of the Poor Laws, then developed as a market mythology. Polanyi writes in this sense (ibid.): The wage-fund theory […] was a rich source of misunderstandings […] [It] consisted of the hopeless attempt to arrive at categorical conclusions about loosely defined terms purporting to explain the behavior of prices, the formation of incomes, the process of production, the influence of costs on prices, the level of profits, wages, and interest, most of which remained as obscure as before. 296

How theories shape, and are shaped by history

Conclusions Based on the lessons of Speenhamland, the “dismal science” projected ever-increasing misery of the masses as a necessary requirement for the prosperity of the landed elites. Modern labor economics conceives labor as an onerous chore, a disutility, which must be compensated for by wages. But research shows that labor gives meaning and a sense of service to our lives. Utility theory takes into account the necessary misery of the poor by considering the collective happiness, summed over the entire population. The modern measure of GNP per capita does the same – it allows the wealth of the billionaires to compensate for the misery of the bottom billion. Capitalism destroys social relationships and the character traits of generosity, compassion, and gratitude, which are essential for human welfare. Polanyi (2001 [1944]: 48) writes that the human being 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. By making wealth the solitary indicator of social standing, capitalism destroys the fabric of society. Moving up from the morass of specific details, the central lesson of Polanyi is that social theory was born out of the attempt to understand the process of social change. Thus, theories cannot be understood outside of the historical context in which they are born. This historical context can shape theories far beyond the actual range of application of the historical lessons which they enshrine. For example, modern economics continues to reflect the lessons of the Speenhamland episode. As the analysis of Mattei (2022) shows, these theories remain in place because they support the capitalist order. As another illustration of the same phenomenon, while modern financial systems have changed dramatically, the debates between monetarists and Keynesian continue to use frameworks designed to explain the Great Depression and its aftermath. The triumph of the monetarist perspective is a reflection of the power of the financial classes, and not of the validity of monetary theories. (See Romer (2016) for a discussion of how dramatically wrong theories dominate the academia. This brilliant critique was never published, an illustration of the power of the academia to suppress dissent). The battle of methodologies (Methodenstreit) in the late 19th century replaced the historical and qualitative approach, also utilized by Polanyi, by the mathematical and quantitative approach of modern economics (see Hodgson 2001, 2007). The idea that we can search for universal laws which govern societies, invariant across time, space, culture, and geography, is patently absurd. Polanyi provides a sharp analysis showing how modern theories are influenced by now-forgotten history. He also provides us with templates on how to do incisive qualitative and historical analysis, in dramatic contrast to the sterile mathematics of modern economics. The Methodenstreit, followed by logical positivism, led to the replacement of the historical and qualitative approach by a mathematical and quantitative approach universally adopted by modern textbooks of economics. Polanyi shows us how this transition has blinded us to essential aspects of social theories. As one example, economics textbooks teach Keynesian theory as an abstraction, whereas the historical context of the Great Depression is essential to understanding this theory. A similar process has occurred more recently in political science, where the mathematical and quantitative approach is replacing the historical and qualitative approach – see Monroe (2005). The Global Financial Crisis, eerily similar to the Great Depression, is a reminder of the perils of forgetting history. Polanyi provides us with a sophisticated methodology which intertwines the analysis of history with that of the theories developed to understand and shape that history. These ideas remain as important today as they were when Polanyi first introduced them. 297

Chaitawat Boonjubun and Asad Zaman

References Hodgson, Geoffrey M. 2001. How Economics Forgot History: The Problem of Historical Specificity in Social Science. London: Routledge. ——— 2007. “Evolutionary and Institutional Economics as the New Mainstream?” Evolutionary and Institutional Economics Review 4(1): 7–25. Malthus, Thomas. 1998 [1798]. An Essay on the Principle of Population. London: Electronic Scholarly Publishing. Manicas, Peter T. 1987. A History and Philosophy of the Social Sciences. Oxford: Blackwell. Mattei, Clara Elisabetta, 2015. “The Guardians of Capitalism: International Consensus and Fascist Technocratic Implementation of Austerity,” LEM Papers Series 2015/23, Laboratory of Economics and Management (LEM). Pisa: Sant’Anna School of Advanced Studies. ———. 2022. The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Chicago: University of Chicago Press. Monroe, Kristen Renwick. 2005. Perestroika!: The Raucous Rebellion in Political Science. New Haven and London: Yale University Press. Polanyi, Karl. 2001 [1944]. The Great Transformation. Boston: Beacon Press. Romer, Paul. 2016. “The Trouble with Macroeconomics.” http://bit.ly/RSRA05Romer Roser, Max, Hannah Ritchie and Pablo Rosado. 2013. “Food Supply”. Published online at OurWorldInData. org. Retrieved from: https://ourworldindata.org/food-supply’ Weber, Max. 2001. The Protestant Ethic and the Spirit of Capitalism. London and New York: Routledge. Zaman, Asad. 2009. “The Origins of Western Social Sciences.” Journal of Islamic Economics Banking and Finance 5/2: 9–22. ——— 2015a. “Deification of Science and Its Disastrous Consequences.” International Journal of Pluralism in Economics Education 6/2: 181–197. ——— 2015b. “Hunger as the Primary Economic Problem.” WEA Commentaries 5(2): 10. https://www. worldeconomicsassociation.org/files/Issue5-2.pdf ——— 2016. “The Methodology of Polanyi’s Great Transformation.” Economic Thought 5(1): 44–63. ——— 2021a. “Ibn Khaldun: Muqaddimah.” An Islamic WorldView, July 22, 2021. https://azprojects.­ wordpress.com/2021/07/22/ibn-khaldun-muqaddimah/ ——— 2021b. “The Puzzle of Western Social Science.” Academia Letters: Article 459. https://doi. org/10.20935/AL459.1

298

25 MAKING INTERDEPENDENCE ÜBERSICHTLICH Reading Polanyi through a (neo)republican lens Louis Mosar

Introduction: a republican Polanyi The concept of freedom is a central theme of Karl Polanyi’s work. While writing his most famous work, The Great Transformation (TGT) (2001 [1944]), he wrote in a letter to his daughter that he intended to end the book with “a new concept of freedom” (cited in Polanyi-Levitt 2006: 388). Polanyi tried to realize this intent in the final chapter – “Freedom in a Complex Society” – of the TGT. Polanyi’s reflections about freedom neither began nor ended with TGT. In his contributions to the socialist calculation debate (cf. Bockman et al. 2016 [1922]; Polanyi 2018 [1924]: Chapter 3) and other texts from the nineteen-twenties and thirties, such as “New Reflections Concerning our Theory and Practice” (Polanyi 2018 [1925]: Chapter 2), “On Freedom” (Polanyi 2018 [1927]: Chapter 1) and “Community and Society” (Polanyi 2018 [1937]: Chapter 10), freedom was ­already central-stage. Later texts like “Jean-Jacques Rousseau, or Is a Free Society ­Possible?” (Polanyi 2018 [1953]: Chapter 12) and his introduction to the posthumously published The ­Livelihood of Men (1977) proof that freedom remained a central concern of his. The question that arises is: what remains of Polanyi’s attempt at a “new concept of freedom”? To answer this question, I bring Polanyi into dialogue with neo-republican political philosophy. As Bru Lain (2018) has observed, there seem to be some interesting convergencies between Polanyi and (neo-)republicanism. Neo-republicanism is a normative political philosophical framework that claims to revive an older and different conceptualization of freedom than the liberal conception of freedom as non-interference. Neo-republicans argue that before the rise of liberalism, the idea of freedom as non-domination, rather than freedom as non-interference was the dominant way of thinking about freedom in European culture. Moreover, they claim that the socialist movement can be seen as employing and radicalizing a republican framework (Pettit 1997: 140–143; Skinner1998: x n3). Recently some authors have built on this line of thought and have argued that the early American labour movement (Gourevitch 2015) and Karl Marx (Leipold 2017; Roberts 2017) appropriated and transformed the republican way of thinking about freedom. These authors claim that the republican conception of freedom can help to make sense of the ideas of these actors within the socialist movement. Similarly, I will argue that reading Polanyi through a (neo-) republican lens can enlighten certain aspects of Polanyi’s thought.



299

DOI: 10.4324/9781003336747-31

Louis Mosar

Neo-republicans define freedom as non-domination. Contrary to liberalism, Philip Pettit (2002) – neo-republicanism’s foremost theoretician – argues that only domination, and not interference, can be conceived as the antithesis of freedom. According to Pettit, “[w]hat constitutes domination is the fact that in some respect the power-bearer has the capacity to interfere arbitrarily, even if they are never going to do so” (1997: 63, emphasis added). Hence, neo-republicans argue that one can be free even if there is interference and that one can be unfree even if there is no interference. In the next section I argue that the former claim (freedom with interference) can help make sense of Polanyi’s claim that socialism upholds freedom despite the “reality of society”. In the final part of the essay, I will argue that Polanyi’s critique of the market can be formulated as a version of the second claim (unfreedom without interference), and as a contribution to neo-republicanism.

The free person and the free self The Rousseauean dilemma In the last chapter of TGT Polanyi poses the question what freedom can mean in a complex modern society. Since, “[i]nstitutions are embodiments of human meaning and purpose” (Polanyi 2001: 266), the downfall of 19th-century economic order based on the institutional ideal of the self-­ regulating market also implied a crisis for the concept and ideal of freedom that this order embodied. Polanyi argues that if we accept the liberal idea of freedom as non-interference, we are stuck in a dilemma. On the one hand the 19th-century market economy was predicated on the idea of freedom as non-interference. However, history had shown that the ideal of the self-regulating market leaves many people vulnerable to the subjection to others. This is for example the case during crises of unemployment: since jobs become scarce, employees become increasingly-vulnerable to the interferences of their employers. On the other hand, the only way to remedy these problems is through regulation of the economy and hence by coercively interfering in the lives of others. Thus, Polanyi explains that [i]f regulation is the only means of spreading and strengthening freedom in a complex society, and yet to make use of this means is contrary to freedom per se, then such a society cannot be free. (Ibid.) Polanyi poses this same question regarding the relation between freedom, interdependence and coercion in a later, unpublished essay entitled “Jean-Jacques Rousseau, or Is a Free Society ­Possible?” (Polanyi 2018: Chapter 12). In that text, he identifies a central dilemma in Rousseau’s Du contrat social (1782), which he calls the “Rousseauean dilemma” (2018: 167). This is a dilemma between “the principle of survival and the principle of freedom” (ibid.: 169). The principle of survival refers to the fact that humans are dependent on each other for their survival. Because of this interdependence, Polanyi argues that humans must submit to the collective needs of societal reproduction. In TGT he refers to the principle of survival as the “reality of society”, that is, as “the truth that because society is real, man must ultimately submit to it” (2001: 257). This implies that “[n]o society is possible in which power and compulsion are absent, nor a world in which force has no function” (2001: 266). According to Polanyi, “[t]he function of power is to ensure that measure of conformity which is needed for the survival of the group” (ibid.: 267). The principle of freedom denotes the idea that “[e]very free or legitimate society bases its behaviour on 300

Making interdependence übersichtlich: Polanyi and (neo)republicanism

the wills of the persons constituting it” (Polanyi 2018: 169). However, since societal needs sometimes have to overrule individual wishes, the question arises if a free society is possible. Polanyi argues that “at the root of the dilemma there is the meaning of freedom itself” and that “[l]iberal economy gave a false direction to our ideals” (2001: 266). He claims that “power and compulsion are part of that reality; an ideal that would ban them form society must be invalid” (ibid.: 267). This is precisely the case of liberal philosophy: it “claims that power and compulsion are evil, that freedom demands their absence from a human community” (ibid.: 265–266). Then, according to Polanyi, the problem with the liberal conception of freedom is that it denies the “reality of society”. Instead, Polanyi argues that a valid ideal of freedom should acknowledge the reality of society: “the socialist resigns himself to that reality and upholds the claim to freedom, in spite of it” (ibid.: 268). I argue that we can make sense of this claim if we interpret Polanyi through a (neo) republican lens.

The social freedom of the person Neo-republicans can help us to formulate an answer to the Rousseauean dilemma, which is in line with Polanyi’s remarks on freedom. Like Polanyi, (neo)republicans argue against the liberal idea that coercion and freedom are necessarily antithetical to each other. To explain why, I need to show first why neo-republicans claim that one can be unfree even if there is no interference. Although neo-republicans define freedom ‘negatively’ as non-domination, they argue that freedom presupposes the presence of a certain kind of relation. Neo-republicans conceptualize domination as a social relation in which one agent (the dominated) is subjected to the arbitrary power of another agent (the dominator) (Lovett and Pettit 2009; Pettit 1997: Chapter 2, 2002, 2012: Chapter 1). Pettit stresses that non-domination must be secured “robustly” or “resiliently”. By which he means that freedom may not be dependent on precarious contingency: say, because it happens that certain powerful individuals have a liking for you or it happens that you are able to keep out of the way of such individuals or ingratiate yourself with them. (Pettit 1997: 24) While non-interference can manifest itself as a precarious contingency, non-domination cannot. This point is illustrated through the (neo-)republican trope of the ‘benevolent master’. (Neo-) republicans argue that a slave with a benevolent master who never interferes would remain unfree. According to neo-republicans the problem with slavery is not interference as such. Instead, Pettit argues that the “terrible evil” of domination “is that it deprives a person of the ability to command attention and respect and so of his or her standing among persons” (2002: 351). In a free, nondominated, relation a person is recognized as a “discursive authority” with “a voice that has some claim to be given a hearing, and an ear that can give an effective hearing to the voices of others” (Pettit 2001: 72). Pettit (2001) argues that being recognized as a discursive authority endows us with a “discursive power” which gives us a degree of control within a social relation; he calls this discursive power “discursive control”. According to him, it is discursive control which ultimately constitutes our status as non-dominated, free subjects. After all, discursive control implies a social relation in which my interests must be considered. Or, as Pettit puts it, it makes social power non-arbitrary because it is “forced to track what the interests of those others require according to their own judgements” (1997: 55). This is what the slave lacks in his relation with his master. It 301

Louis Mosar

is because domination undermines the slave’s discursive control, that the master is not forced to take the slave’s interest seriously and that he can arbitrarily interfere in the slave’s life. In this way, domination is constitutive of interference. Moreover, Pettit stresses that what is so problematic about interference, choice-restriction, can also occur without actual interference. He explains that a slave will be self-abasement and self-censor to keep himself on the good side of the master, gain favours and avoid his wraith (Pettit 2002: 350, cf. 1997: 60–61, 2001: 78). Freedom presupposes a relation which robustly secures one’s non-domination; as a consequence, for neo-republicanism, freedom is socially constituted and can only exist in and through society. Contrary to the liberal notion of freedom as non-interference, for (neo-)republicans others are not just a threat to one’s freedom, they are also the precondition for one’s freedom. Pettit states in his landmark work Republicanism, that freedom is “the condition under which you live in the presence of other people but at the mercy of none” (1997: 80 emphasis added). Similarly, Polanyi argues in “On Freedom” for “social freedom” which “is based on the real relation of men to men” (2018: 22). Contrary to what Polanyi identifies as the liberal or “bourgeois” concept of freedom, social freedom is “not a form of releasing oneself from society but the fundamental form of social connectedness” (2018: 22). Polanyi also employs republican language to describe un-freedom. In his essay on Rousseau he argues that “[t]he opposite of freedom is slavery, the condition of being forced or compelled by an alien will” (2018: 171). In “On Freedom” Polanyi also formulates his critique of capitalism – to which we will return in the next section – in a republican language. He argues that wage workers are unfree. Not because they work under the command of others since “any collective work requires its coordination through orders”. What is “degrading is the fact that under the given conditions the power to command, to which the workers are subjected, is an alien power” (Polanyi 2018: 17). Like (neo-)republicans, Polanyi argues that the problem is not that people are sometimes subjected to power, it is only problematic when people are subjected to an alien power. Following Pettit, we can define “alien” or “arbitrary” will as an “uncontrolled” will (2012: 58). It is “uncontrolled” in the sense defined above: a social relation in which an agent has no discursive control. Consequently, there is no guarantee that the interest of the dominated will be considered. Thus, the dominated are exposed to the whims of the dominator. We are now able to understand why we can be free even if there is interference, and why coercion and freedom are not necessarily antithetical. I will tackle the issue through a question that Polanyi raises in his text on Rousseau: “In what ways is an individual free in obeying a law he has not voted for?” (2018: 172). According to Polanyi (ibid.), Rousseau’s answer is the “social tie”, by which he means “the formula which describes the double role of each adult citizen, as pledging his everything to the support of all, and receiving the same pledge from all, in exchange”. This is in the end the “reality of society”, the fact that humans are fundamentally dependent on each other for their survival. However, Polanyi agrees that this is an inadequate answer, since it merely describes the mutual obligations that citizens have to each other. It does not tell us why this would imply that someone who did not vote for a certain law would remain free. Thus, “on the purely normative level the paradox of freedom in society remains unresolved” (Polanyi 2018: 174). However, the (neo-)republican conceptualization of freedom avoids the dilemma. If republican freedom denotes a certain relation which is characterized by not being submitted to an arbitrary power, then it can be argued that this kind of relation is not necessarily undermined whenever one is submitted to a law which one has not voted for. According to Pettit (1997: 185–186, 2012), we should understand democracy in a contestatory way, rather than in a consensual way. What makes power non-dominating is discursive control over that power so that it is forced to track one’s interest. 302

Making interdependence übersichtlich: Polanyi and (neo)republicanism

Pettit points out that control and consent do not coincide. You can have consent without control, and you can have control without consent. Pettit’s example (2012: 157–160) of the former is selling yourself into slavery. A democracy that has existed for a thousand years is an example of the latter. Given the age of such a society, nobody will have consented with every law since nobody was alive during its whole existence. If consent would be necessary for a democracy, a democracy should restart every time a new member joins its ranks. For governmental power to be non-dominating, one should have discursive control over it to force it to take one’s interest into account. However, having discursive control over governmental power and forcing it to track one’s interests is perfectly consistent with a governmental body taking a decision one disagrees with. As long one is in this process recognized as someone who’s interest should be considered and one has means at one’s disposal to ensure that one’s concerns cannot simply be ignored, one remains free. However, one should always remain in a position to contest the decision that governmental power has taken. This is also consistent with Polanyi’s remarks at the end of TGT that “[c]ompulsion should never be absolute” and that we should consider “the right to nonconformity as the hallmark of a free society” (2001: 264).

The responsible freedom of the self Another element that Polanyi’s reflections on freedom share with Pettit’s neo-republican conceptualization of freedom is a strong link between freedom and responsibility. In “On Freedom”, Polanyi (2018: 22) argues that: For the socialist ‘acting freely’ means acting while conscious of the responsibility we bear for our part in mutual human relationships – outside of which there is no social reality – and realizing that we have to bear this responsibility. Being free therefore no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility. It is not the freedom of those who are relieved of the necessity to choose but of those who choose, not freedom of relief from duty but the duty which one assigns oneself; it is thus not a form of releasing oneself from society but the fundamental form of social connectedness, not the point at which solidarity with others ceases but the point at which we take on the responsibility of social being, which cannot be shifted onto others. Pettit can again help us to make sense of Polanyi’s link between freedom and responsibility. In the citation above there is a link between the social character of freedom and its relation to responsibility. The same is true in the case of Pettit. Pettit argues that freedom should also be understood as a person’s “fitness to be held responsible” (2001: 12). The idea of being able to be held responsible is already inherently social. This notion, Pettit maintains, is grounded in the ordinary practice whereby we hold one another responsible for things we do, and proceed to impute blame for those actions we see as bad, praise for those we see as good. (2001: 12) Consequently, agents are free “to the extent that we [can] think of them as worthy of this sort of reaction, be it a negative or a positive response” (ibid.: 12–13). However, that does not mean that it is our concrete attribution of blame or praise that makes someone free. Pettit explains that freedom 303

Louis Mosar

is a “concept-bound” property, by which he means that freedom cannot exist independently of our social practice of attributing blame and praise. According to Pettit freedom is similar to money in that regard (ibid.: 29). Money only exists in the world because of certain practices. There would be no money independent of these practices, however this does not imply that everything we personally judge to be money will make it money. The fact that the existence of money is dependent on our practices does not make money a purely subjective matter. Similarly, the fact that freedom is dependent on our practice of attributing responsibility, does not imply that it is our concrete and personal judgement of blameworthiness or praiseworthiness that makes someone free. We find a similar philosophical anthropology in Polanyi, who claims in “On Freedom” that the practice of prescriptive and normative judgement is “the most inner disposition of human Being and only of human Being”. According to Polanyi (2018: 36) “[h]e who says Man, says Being and Ought in the same breath”. Consequently, the essence of humanity is “the embodiment of the Being that Ought”. Given that freedom is a socially constituted reality, it is unsurprising that freedom is primary a property of “persons” and only derivatively a property of “selfs” and actions. By a “person” Pettit designate an agent’s “standing relative to others” (2001: 65). According to him, persons are free to the degree that they enjoy “a social status that makes the action truly theirs, not an action produced under pressure from others” (2001: 4). Instead, a “self” refers to an agent’s relation to itself and their actions, rather than its relation to others: That an agent is a self means that he can think of himself, or she can think of herself, in the first person as the bearer of certain beliefs and desires and other attitudes and as the author of the actions, and perhaps other effects, to which they give rise. (Pettit 2001: 79) A self can be said to be free to degree that he can identify with his actions “rather than having to look on them as a bystander” (ibid.: 4). What makes persons free is being in a relation in which they have discursive control. According to Pettit (2001: Chapter 4), it is also discursive control that bestows a person with the fitness to be held responsible. The idea is that we can attribute (responsibility for) an action to a certain person whenever that person is in a kind of relation that does not undermine a person’s discursive control, i.e., that did not undermine his standing as someone who has a claim to be heard and to be co-reasoned with. Since, when I have discursive control, I am not dominated and it cannot be said that I acted under the pressure of others. In this way the freedom of the self is constituted by the freedom of the person. It is because of my standing among others that I can be held responsible for my actions; this, in turn, enables me to identify with my actions as my own. Pettit explains that free persons are intentional agents who can articulate beliefs and desires which they can mark off as their own and that “they can be held to those words; they can be expected, so far as they are sincere, to live up to the words in the things they believe and desire and do” (2001: 80). Moreover, the fact that they can be held to their own words, constitutes their identities as persons and selfs. According to Pettit, someone’s identity and self-identity are constituted by the fact of “intertemporal responsibility” (ibid.: 83). Pettit argues that it is an agent’s discursive control that enables (self-)identity, since discursive control creates an “intertemporal trajectory” in which “[o]ne’s current actions can be questioned for their consistency with earlier intentions on the trajectory, in a way that they cannot be questioned for any other intentions: that is with anyone else’s intentions” (ibid.: 82).

304

Making interdependence übersichtlich: Polanyi and (neo)republicanism

According to Pettit, to be a free self entails that I can endorse certain commitments I made in the past and I must be able to live up to those commitments. Dominated persons will not be free selves, because they cannot endorse large parts of their past actions as their own, and since they cannot endorse their actions as their own, they do not have anything to live up to. A dominated person will be an “elusive self” (ibid.: 85–90). Not because they do not want to commit themselves, but because they cannot commit themselves. Slaves are a mere instrument of the master, they are an extension of their masters will. It is because they have no discursive authority and are not recognized as such that they cannot claim anything as their own. This conceptualization of the free self and the free person resonates with Polanyi’s ideas about the free person and self. In his essay on Rousseau he explains that “in following the principles which we embodied in our personality we are free” (2018: 171). For Polanyi, the ability to identify with your own actions is also the hallmark of the free self. As he explains in “On Freedom”, we will only attain social freedom whenever we can “directly track the repercussions of our life impulses on the lives of all the others and, in this way, on our own”. Polanyi argues that only then we will “be able to assume responsibility for the social effects of our existence, this is the final meaning of social freedom” (2018: 25). However, an important contribution of Polanyi is his argument that market society undermines the free person and the free self. For Polanyi, one of the main problems of capitalism is the fact that it obscures human relations in such a way that it becomes impossible to be held responsible. That is why the young Polanyi argued to make human relations as transparent as possible. It is to this critique of market capitalism that we now turn: neo-republicanism could benefit from it.

The dominating opaqueness of the market Freedom and the market In “On Freedom”, Polanyi argues that both labourers and capitalists are dominated by an alien will: Not human will but prices decide how labour is deployed. Not human will but interest rates command capital. The capitalist is just as powerless in the face of the laws of competition as the workers are. Capitalists and workers alike, human beings in general, appear as mere players on the economic stage. Only competition, capital, interest, prices and so on are active and real here, objective facts of social being, while the free will of human beings is only a mirage, only a semblance. (Polanyi 2018: 17) Polanyi builds here upon Karl Marx’s concept of “commodity fetishism”. Commodity fetishism refers to the phenomenon that in a system of generalized commodity production and exchange, relations between people become mediated by the commodities they sell in such a way that “their own movement within society has for them the form of a movement made by things, and these things, far from being under their control, in fact control them” (Marx 1990: 167–168). The crucial idea behind commodity fetishism is that the market constitutes mediated and opaque relations between humans which manifest themselves as relations between things. However, Polanyi explains: “‘Capital’ and ‘prices’ only appear to dominate human beings; in reality, human beings are being dominated by human beings” (2018: 18). Recently William Clare Roberts has read Marx’s

305

Louis Mosar

commodity fetishism in a similar way; that is, as describing what Roberts calls “impersonal market domination” (2017: Chapter 3). I will argue below that it is precisely the mediated nature of these relations that constitute this domination. However, neo-republican authors have characterized competitive markets as spheres of freedom rather than spheres of domination. Pettit (2006), Lovett (2010) and Taylor (2017) see markets as inherently liberatory and argue that perfect competitive markets are characterized by a complete absence of domination. Taylor’s (2017) “commercial republicanism” even argues that we have to strengthen market competition in order to maximize republican liberty. The main argument is that well-functioning markets – and in particular labour markets – free people from dependence on a particular master. If one would fall victim to an abusive employer, one could just leave for another (Pettit 2006: 142; cf. Lovett 2010: 53, Taylor 2017: Chapter 3). According to Pettit, competitive markets can transform the “compromising” interferences of masters into the impersonal interferences of market forces that merely “condition” our freedom. Pettit (2006: 139) does not deny that competitive markets possibly negatively “affect the range or the ease with which people enjoy their status as undominated agents”; however, he claims that it will not undermine or compromise our status as non-dominated agents because “it is the cumulative, unintended effect of people’s mutual adjustments”. His argument is that the anonymous and impersonal sphere of the market makes it impossible for others to personally interfere in our lives. In short, it is as if markets “have the aspect of an environment akin to the natural environment”. Pettit argues that competitive markets are similar to the rule of “non-arbitrary law”, in the respect that the rule of non-arbitrary law also constitutes a form of interference that conditions freedom rather than comprising it (1997: 74–77). “Non-arbitrary law” is non-arbitrary in the sense explained above. It is law that is open to contestation of those subjected to it. Implicitly, Pettit argues that an economy based on competitive markets structures social relations in a fundamentally similar way as his idea of a ‘contestatory’ democracy: in which citizens are always in position to contest the power, laws and decisions imposed on them. However Polanyi can show neo-republicans that the kind of relations that constitute the market are fundamentally different from the kinds of relations that prevail in a democracy.

Opaqueness of unfreedom and transparency of freedom Polanyi maintains that the market embodies a problematic vision of freedom. A vision of freedom that disregards the reality of society and sees the reality of society and freedom as essentially antithetical. In the first section, I have argued that freedom and the reality of society are only contradictory under the liberal conception of freedom as non-interference, but not necessarily in the republican conception of freedom as non-domination. However, as shown above, neo-republicans argue that capitalist markets help to realize freedom as non-domination, in a similar way as a system of democratic law and government helps to achieve non-domination. In what follows, I will argue that Polanyi can contribute to neo-republicanism by showing that the kind of relations constituted in the capitalist market and those that are constituted by democracy are fundamentally different. The key difference Polanyi points to is that market relations try to shield individuals from the personal interferences of other agents through making social relations opaque. This kind of social relations are suitable to realize freedom as non-interference, but they are unable to achieve freedom as non-domination because they undermine an agent’s discursive control. Instead, democracy structures social relations in precisely the reverse way: democracy makes social relations more transparent instead of opaque, thereby enabling discursive control. 306

Making interdependence übersichtlich: Polanyi and (neo)republicanism

A degree of transparency, or what Polanyi calls “Übersicht” (Bockman et al. 2016; Polanyi 2018: Chapters 1 and 2), seems to be a precondition to establish social relations with discursive control. One of Polanyi’s fundamental critiques of capitalist markets – which he reiterates through his work starting from his contributions to the ‘socialist calculation debate’ – is the paradoxical fact that within capitalist markets people are highly interconnected with each other but in an opaque, isolating way. On one hand, the system of interlocking markets brings together myriads of people, which are connected through the price-mechanism. At the same time, Polanyi argues that the opaque nature of these relations isolates people. In “Community and Society” Polanyi argues that “[t]he cash nexus is a means of estrangement” (2018: 147). Similarly, in TGT he maintains that vision was limited by the market which ‘fragmentated’ life into the producers’ sector that ended when his product reached the market, and the sector of the consumer for whom all goods sprang from the market. The one derived his income ‘freely’ from the market, the other spent it ‘freely’ there. Society as a whole remained invisible. […] Neither voters, nor owners, neither producers, nor consumers could be held responsible for such brutal restrictions of freedom as were involved in the occurrence of unemployment and destitution. (Polanyi 2001: 266) Such a way of organizing society embodies freedom as non-interference rather than freedom as non-domination. Steve Klein has pointed out that, in their defence of markets, neo-­republicans make the same argumentative move as economic liberals. Like the economic liberals, neo-­ republicans hope to avoid the conundrums of social power by reifying social relations and making them impersonal. Klein explains that neo-republicans believe that market “promises to disperse power through a quasi-natural, anonymous order such that no individual or corporate agent will have the capacity to invade another’s freedom” (Klein 2017: 854). Non-interference only requires that no one can personally interfere in the life of an agent. Transforming personal power into the impersonal forces of the market can avoid personal interferences of other agents, since particular agents become invisible in the mediated relations of the market. It becomes harder to deliberately and personally interfere in the lives of other agents; the isolating interdependence of the market functions as a barrier to personal interference. Given Pettit’s advocacy of contestatory democracy, Klein has argued that neo-republicans are “ambiguous between a robustly political view of the interaction of organized power and the market and a depoliticized view of the superiority of the market to political contestation” (ibid.). He argues that Polanyi can show neo-republicans that they should embrace the former instead of the latter to secure freedom as non-domination. He argues that Polanyi shows us that the “fictitious” nature of money, land and labour as commodities inherently politicizes the economy; consequently, a depoliticized economic order is a misleading ideal. I want to add a more fundamental problem to Klein’s argument. Polanyi shows us that the problem is not merely that a perfect competitive market is a misleading idealization, but is that even if the idealization would work, the strategy of making social relations opaque is antithetical to securing freedom as non-domination. Freedom as non-domination requires the presence of social relations that grant an agent with discursive control. Polanyi shows us that making social relations opaque will undermine our discursive control and thus both the freedom of the person and the freedom of the self. The free person will be undermined, because the mediated relations under capitalism make it impossible to contest the demands that others make on us through the price-mechanism. This is true for both the capitalist and the labourer since capitalism is driven by profitability, which is 307

Louis Mosar

expressed and communicated through the price-mechanism. In “On Freedom” Polanyi explains that “[i]t is not that the capitalists have no inclination to allow more economic justice but that, even if they had, it would be impossible for them, the apparent lords of the economy, to do so” (2018: 37). The price mechanism will, under penalty of going out of business, force the capitalist to make certain investments instead of others. For example, when it is more profitable to invest in remedies for ailments in the West instead of medicines for deadly diseases that hit the global poor, capitalist will have to choose the former instead of the latter (cf. Meuller-Langer 2013). Since profitability determines investments, the price-mechanism will also determine the division of labour. Labourpower will be employed where investments flow. As Polanyi remarks regarding labour-power, it is not for the commodity to decide where it should be offered for sale, to what purpose it should be used, at what price it should be allowed to change hands, and in what manner it should be consumed or destroyed. (Polanyi 2001: 185) Since the non-dominated person is a pre-condition for the free self, the domination of the market will also undermine the responsible freedom of the self. The opacity of the markets contributes the undermining of the free self in two ways. First, the highly interconnected, but opaque nature of market relations makes it hard to see the effects of our actions on others and thus makes it impossible to identify with and appropriate our own actions and take responsibility for them. Polanyi stresses that the invisible boundary of the market creates an individual that is allowed “to disregard the social effects of his individual acts and omissions” (2018: 153). In “On Freedom”, he compares the position of the producer-consumer under capitalism with that of the man in Chateaubriand’s thought-experiment of “the murdered Chinese”. This thought-experiment asks us to imagine a situation in which all wishes would be granted by pushing a button: however, as a result, 400 million people would die in China. Polanyi argues that this thought-experiment “gives us a true allegory of the situation in which even the best person finds himself in relation to his co-citizens” (2018: 27). Second, and at the same time, market forces will pressurize us to make certain choices instead of others. It will force the capitalist to make certain investments instead of others. However, this seems to be a general problem for all market participants as Polanyi explains in “Community and Society” (2018: 147): Giving your goods away at less than the market price will benefit somebody for a short time, but it would also drive your neighbour out of business, and finally ruin your own, with consequent loss of employment for those dependent on your factory or enterprise. Doing more than your due as a working man will make the conditions of work for your comrades worse. By refusing to spend on luxuries you will be throwing some people out of work, by refusing to save you will be doing the same to others. As long as you follow the rules of the market, buying at the lowest and selling at the highest price whatever you happen to be dealing in, you are comparatively safe. The damage you are doing to your fellows in order to serve your own interest is, then, unavoidable. The opacity of social relations is thus antithetical to discursive control. Conversely, a degree of transparency is necessary to enable discursive control and secure the free person and self. To be a

308

Making interdependence übersichtlich: Polanyi and (neo)republicanism

free person I must be able to contest the demands that others place upon me. Being able to contest the demands that others place upon me, requires that our social relations have a degree of transparency. This is what democracy does: it creates “internal” overview, in which there are clearly identifiable actors that recognize its members as discursive authorities. Moreover, a democracy creates institutionalized ways that allow its citizens to contest the demands that others make on them. This is illustrated through Polanyi’s idea of “functional democracy” and a system of collective negotiated prices, in which people can come together to reflect on the social consequences of the demands they make on each other. Such a democracy is organized around the principle of “functional representation”. This entails that society is organized into institutions that represent the different societal functions that every human being fulfils: as consumer, producer, and law maker. The interests of humans as consumers are represented through the “consumer cooperative”, the interests of humans as producers as producers as a “producers guild” and the law makers as “the commune”. Polanyi gives us the example of a negotiation between the commune, which wants to secure the future of the community, and the producers guild: The commune representatives demand large investments in order to secure the healthcare interests of the community and the life interests of future generations. Thus in the name of ideals they demand sacrifices of the economy (because everything that costs human labour restricts human need). The producers defend their labour power and the satisfaction of their needs as such. In the end, they agree on a concrete tax figure that means a specific quantity of surplus labour, of restriction of needs. (Polanyi 2018: 35) This example shows the importance of overview or transparency to secure discursive control. Polanyi’s model of functional democracy creates social relations with discursive control by making relations transparent. The demands that the community places on its labouring population are made explicit. To secure surplus product, the working population will have to toil without gaining compensation for their work. However, because these demands are made explicit and because there is an institutionalized way to do so, the workers can contest to which degree they are willing to sacrifice their own immediate interests for the interests of future generations. The same is true in the relation between the consumer cooperative and production guild in which prices are set through an institutionalized contestation between the different interests. In a capitalist market people are also making these demands on each other, but in a way which makes it impossible to contest them, because they are made impersonal through the price-mechanism. In the same way that functional democracy can secure the free, non-dominated person, it can also achieve the free and responsible self. Polanyi points out that in a functional democracy, what I demand from others is made visible, and since it is determined in open contestation with these others, I cannot shift my responsibility for the demands I place upon others to reified structures: This decision in turn means a direct, internal choice, for here ideals within people are confronted with their costs; here everyone has to decide what his ideals are worth to him. No state and no market intervene between the two sides of our consciousness; here there can be no shifting of responsibility, and nothing outside of ourselves can be made responsible for our fate. The individual only confronts himself because his fate is in his own hands. (Polanyi 2018: 35)

309

Louis Mosar

References Bockman, Johanna, Ann Fischer and David Woodruff. 2016. “Socialist Accounting” by Karl Polanyi: With Preface “Socialism and the Embedded Economy”. Theory and Society 45/5: 385–427. Gourevitch, Alex. 2015. From Slavery to the Cooperative Commonwealth: Labor and Republican Liberty in the Nineteenth Century. Cambridge: Cambridge University Press. Klein, Steven. 2017. Fictitious Freedom: A Polanyian Critique of the Republican Revival. American Journal of Political Science 61/4: 852–863. Lain, Bru. 2018. Polanyi’s Economic Embeddedness, Countermovement, and Republican Political Economy. Ethics, Politics & Society 1/1: 369–402. Leipold, Bruno. 2017. Citizen Marx: The Relationship Between Karl Marx and Republicanism. Ph.D. thesis. University of Oxford. Lovett, Frank. 2010. A General Theory of Domination and Justice. Oxford: Oxford University Press. Lovett, Frank and Philip Pettit. 2009. Neorepublicanism: A Normative and Institutional Research Program. Annual Review of Political Science 12/1: 11–29. Marx, Karl. 1990. Capital Volume One: A Critique of Political Economy (transl. B. Fowkes). London: Penguin Books. Mueller-Langer, Frank., 2013. Neglected Infectious Diseases: Are Push and Pull Incentive Mechanisms Suitable for promoting Drug Development Research? Health Economics, Policy, and Law 8 (2), 185–208. Pettit, Philip. 1997. Republicanism: A Theory of Freedom and Government. Oxford: Oxford University Press. ——— 2001. A Theory of Freedom: From the Psychology to the Politics of Agency. Oxford: Oxford University Press. ——— 2002. Keeping Republican Freedom Simple: On a Difference with Quentin Skinner. Political Theory 30/3: 339–356. ——— 2006. Freedom in the Market. Politics, Philosophy & Economics 5/2: 131–149. ——— 2012. On the People’s Terms: A Republican Theory and Model of Democracy. Cambridge: Cambridge University Press. Polanyi, Karl. 1977. The Livelihood of Man. New York: Academic Press. ——— 2001. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press. ——— 2018. Economy and Society: Selected Writings, Michele Cangiani and Claus Thomasberger eds. Cambridge: Polity Press. Polanyi-Levitt, Kari. 2006. Tracing Polanyi’s Institutional Economy to its Central European Source. In Karl Polanyi in Vienna: The Contemporary Influence of ‘The Great Transformation’, Kenneth McRobbie and Kari Polany-Levitt eds. Montréal: Black Rose Books, 378–391. Roberts, William C. 2017. Marx’s Inferno: The Political Theory of Capital. Princeton: Princeton University Press. Skinner, Quentin. 1998. Liberty Before Liberalism. Cambridge: Cambridge University Press. Taylor, Robert S. 2017. Exit Left: Markets and Mobility in Republican Thought. Oxford: Oxford University Press.

310

PART 5

Current problems and debates

26 WHERE POLANYI IS MORE RELEVANT THAN EVER Social justice and technical productivity in scientific knowledge production Emrah Irzik and Gürol Irzik Introduction Karl Polanyi was a critic of the highest order of the ideal of a self-regulating market and the concomitant market society, which is characterized, in stark contrast to all historical precedent, by an economy disembedded from the society that harbors it. His studies and observations regarding how the gambit to realize such an ideal inevitably produced society-wide harm and eventual ruin is frequently referenced in contemporary works of political economy. In fact, owing to the preponderant focus on this aspect of Polanyi’s work in the social sciences, one could almost be forgiven for perceiving him as an early prophet of the post-World War II (WWII) social democratic welfare state consensus or a theoretical avatar of John Maynard Keynes. The foreword to the Beacon Press edition of Polanyi’s Great Transformation written by Nobel Prize winning Keynesian economist Joseph Stiglitz, for example, is certainly symbolic in this respect, predisposing the reader toward an interpretation of the text to support that particular perspective. In contrast, recent secondary literature such as the poignant preface to an English translation of Polanyi’s “Socialist Accounting” by Johanna Bockman et al. (2016a) as well as Gareth Dale’s critical commentaries (2010: 1–18, 207–234, 2016: 1–12) have made welcome contributions toward rectifying the inaccurate “soft Polanyi” that has emerged from the hegemonic hold of Keynesianism over the contemporary leftwing political imagination. Satisfying ourselves with a one-sided recasting of Polanyi’s lifework as a monument to Keynesian managed capitalism would do great injustice to the richness of Polanyi’s thought, and would, by omission, constitute a misrepresentation of his actual positive program. Scathing critic of the utopia of a self-regulating market and “the liberal creed” that Polanyi was, he was never satisfied with producing merely a negative critique. To the contrary, he left us with ample textual material that provides a coherent picture of his “liberal socialism”. This part of his theoretical oeuvre is just as deserving of our attention as his negative critique. As we attempt to rectify the rather lopsided, if not stunted popularization of Polanyi in order to recover the full vision of an economy that he presented as the alternative to capitalism, we will foreground how elements of his model continue to render Polanyi relevant to critiquing the predicaments and recognizing the possibilities in the field of knowledge production and distribution today.



313

DOI: 10.4324/9781003336747-33

Emrah Irzik and Gürol Irzik

Polanyi’s critique of the self-regulating market economy Polanyi observed that the autonomous, self-regulating market economy is of a “utopian character” that “never could be really put into practice” and is “always more of an ideology than of an actual fact” (Polanyi 2014: 218). Polanyi described the purposeful political moves toward implementing it in earnest as “highly artificial stimulants administered to the body social” (ibid.: 143). These cannot but lead to ruin as they force into being the three “fictitious commodities” privileged in his analysis: labor, land, and money. Once the intervention is accomplished, respectively, workers “perish from the effects of social exposure”, suffer acute social dislocation, vice, perversion, crime and starvation; neighborhoods and landscapes become defiled and rivers are polluted, causing “military safety to be jeopardized and the power to produce food and raw materials destroyed”; and “sabotages and surfeits” of commodity moneys (gold, silver etc.) produce periodical liquidations of market society’s “own children”, namely business enterprises (Polanyi 2001: 73, 201). Out of necessity of survival, this destructive drift is then answered by a countermovement that originates in society rather spontaneously and pragmatically (ibid.: 147); whether first in governmental bodies, voluntary associations, organs of moral life, or public opinion (Polanyi 2014: 207). This reflexive countermovement has historically taken the form of trade unions and labor laws for the protection of workers, environmental regulations, and autarkic food security policies (via tariffs) for the protection of the functions of the land, and the replacement of the gold standard with managed money in order to protect economic enterprises against budgetary stresses and deflationary dangers (ibid.: 136–137). Crucially for Polanyi, however, the outcome of this double movement is not a stable compromise, much less an end state that society permanently settles into. In contrast to a generic social democratic advocate of regulated markets and managed capitalism, Polanyi repeatedly stresses his dissatisfaction with what this countermovement, in turn, gives rise to.1 For, according to Polanyi, no sooner than the countermovement takes hold do contradictions of a new sort emerge that threaten a complete breakdown of the system, foreshadowed at the dawn of market society with the “moral debasement of the Speenhamland period” (Polanyi 2001: 178) reaching its conclusion either in socialism or in fascism. The contradictions of the countermovement play out with varied intensity: While “haphazard intervention into the working of the market mechanism” may cause economic damage by upsetting the automatic balancing function of supply and demand, leading to economic inefficiency, “comprehensive planned interventions” are met by panic in the financial markets that can paralyze the entire economy (Polanyi 2014: 205, 208). Despite their necessity, “the adherents of a market economy justly point out that tariff policies and monopolistic trade union practices were often directly responsible for the aggravation of slumps and the restriction of trade” (ibid.: 218). Driving the point home further, he said that if “the system ceases to be self-regulating even in principle […] the vast mechanism must fall, leaving mankind in immediate danger of mass unemployment, cessation of production, loss of incomes, and consequent social anarchy and chaos” (ibid.: 216). Hence, the countermovement poses “grave peril to economic life, and therefore to society as a whole” (ibid.: 217). From the socialist perspective espoused by Polanyi, this presented what he deemed a dilemma: “Either to continue on the path of a utopia bound for destruction, or to halt on this path and risk the throwing out of gear of this marvelous but extremely artificial system” (ibid.). Polanyi’s underappreciated contribution to social theory is precisely in his proposed solution to this dilemma.

Polanyi’s alternative vision There are two elements in Polanyi’s thought that need to be accounted for in his socialist solution to the dilemma. The first is that he adheres to marginalist value theory rather than the labor theory of value (Polanyi 2001: 124, 132). Marginalist value theory locates the source of value in the 314

Social justice and productivity in scientific production

utility that commodities provide to consumers. This implies a defense of markets over planning, for as the dominant argument within the tradition goes, markets are more responsive to consumer choices than any other alternative mode of distribution. The second is that he holds non-Marxian philosophical and moral convictions. He eschewed amoral economistic socialism (as he perceived it) in favor of one based on ethical ideals (Polanyi 2016b). He deemed the centrally planned, state-communist experiments of early Soviet Russia a failure and praised instead the “mighty colossus” composed of voluntary “cooperatives producing on their own land” (Polanyi 2014: 174). Indeed, Polanyi continued to believe in the market’s tremendous economic efficiency (in the narrow, instrumental sense) throughout his works. Accordingly, Polanyi refrains from advocating for dispensing with the commodity form altogether; rather, his damning condemnation is reserved to the fictitious commodities. In his proposal, the market institution is to continue to function in the domain of goods and services, which would amount to its being re-embedded in society. The market organization of the production of “genuine commodities” (Polanyi 2001: 79) can proceed provided that fictitious commodities are abolished. Polanyi’s model is thus based neither on central planning nor pure markets, but takes the form of what he has variously referred to as “functionally organized socialism” or “guild socialism” (see Polanyi 2016a and 2016b respectively). Inspired foremost by Robert Owen, whom Polanyi praises repeatedly (placing him next to Jesus, no less), the core economic institution in this model is the voluntary collective enterprise. He locates the democratic principle of “self-governing organizations of the workers” (ibid.) or “industrial autonomy” (Polanyi 2016b) that is to animate this enterprise variously in trade unions, in industrial and agricultural cooperatives, and in municipal and factory councils, drawing on the Owenite and Proudhonian traditions of syndicalism, villages of cooperation and labor exchanges (Polanyi 2001: 176–177). In this model of “functional socialism” or “functional economy”, which foregrounds the concern of maximizing voluntary collectivism, humanistic freedom and social harmony, the different functions (hence the terminology) of the same individuals are to be organized in different organizations (Polanyi 2016b). The role of the parliamentary state, which is the locus of political democracy, is redefined as a partner body that represents the people in their function as consumers, serving as the counterpart of the sectoral guilds which are the centers of economic democracy that represent people in their function as producers. Crucially, these bodies are to be constituted by the same mass of individuals, and therefore, in Polanyi’s synthesis of collectivist-communist and syndicalist traditions, they shall not degenerate into competing centers of power that can enter into conflict with each other (ibid.). Polanyi’s proposed model then is neither a self-regulating market economy nor a social democratic regulatory state, much less Soviet-style central planning, but a socialism of cooperative enterprises coupled with a partner state. In what follows, we spotlight certain alternative production models that have been maturing in the contemporary science-driven high-technology based economic sectors as representatives of a (post-)Polanyian affirmation of this vision.

Polanyi on science and technology Although Polanyi did not write much about science and technology, he was well aware of the role they played in the self-regulating market economy. Indeed, in several essays written between 1939 and 1958 and later collected in For a New West, Polanyi explicitly noted how this economic organization made use of the developments in science and technology to achieve unprecedented efficiency and expressed his deep concern about the power they exert on human lives. In a striking essay that carries the same title as the aforementioned collection, he wrote: 315

Emrah Irzik and Gürol Irzik

Technology and science formed a partnership, economic organization made use of its chance, forcing the efficiency principle in production (both by market and planning) to vertiginous heights. Western culture is what science, technology, and economic organization, mutually reinforcing one another, unbridled and unrestrained, are making of man’s life. Their subordination (science and technology, as well as economic organization) to our will to a progress that is human and to the fulfillment of a personality that is free has become a necessity of survival. It falls to the West to discipline its children. For the sociologist, nuclear fission, atom bomb, and the Asian revolutions may well seem to fall into unrelated fields: science, technology, and politics. Actually, they are proximate steps in the growth of an industrial civilization […] For the West, they represent one problem: How to find creative answers to responsibilities to which it is committed by its past. (Polanyi 2014: 31) This passage, written in 1958, was no doubt a reflection of the anxiety Polanyi felt about the use of the atomic bomb created by the application of basic science and the related threat of a nuclear war, which in his view made necessary the control not just of the economic organization but also of science and technology for the purposes of a free and a humane life. However, for him freedom did not mean “the right to sweat one’s fellows, to make inordinate gains without commensurate service to the community, or to keep technological inventions from being used for the public benefit […] If such freedoms disappear, it is all to the good” (Polanyi 2014: 40; our emphasis). He was adamant that “the broadcasting of instrumental knowledge should be fostered through all the means at the disposal of the community” (Polanyi 2014: 117).

Commodification of scientific research Unfortunately, however, just as industrial capitalism was made possible by a unique coalescence of economic organization, technology and science, so too was knowledge-based, post-industrial capitalism that emerged roughly two decades after Polanyi’s 1958 essay. Two factors were crucial for this new stage of capitalism: on the one hand, the development of technosciences such as genetics and genetic engineering, biomedicine, computer science and technology, in which pure knowledge and its implementation in products are increasingly blurred; and, on the other hand, the resurrection of the utopia of a self-regulating market economy. Just as the utopia of 19th-century self-regulating market economy was organized around the commodity fiction of labor, land, and money as main factors of production, the post-1980 economy in developed countries was organized around the commodification of scientific knowledge and expertise as a major factor of production. While there is a continuing debate as to whether the commodification in question is fictitious or not (see, for example, Azam 2007; Cangiani 2020; Jessop 2007; Reitz 2019), there is relatively little discussion in the literature on Polanyi about its impact on the culture of science, the role of science and technology in society, and what can be done about it. To address this, we briefly compare the post-1980 regime of commercialized science to the previous one that existed between 1945 and 1980 in the USA (see Berman 2012; Etzkowitz 2008; Mirowski and Sent 2008). The old regime was shaped above all by the role basic (pure) science played in WWII in producing the atomic bomb. Accordingly, the state became the major source of funding for especially basic research from which would spring material outputs through its application and development. As a result, federal Research and Development (R&D) expenditures steadily increased after the war, reaching a peak that constituted roughly two thirds of all R&D expenditures in the sixties (NSF 2023). Moreover, academic scientists had a high degree of autonomy in pursuing their 316

Social justice and productivity in scientific production

research agendas and the distribution of funds. This meant a relative isolation of academic science from politics as well as commerce. If a patent was obtained from federally funded research, it belonged not to the scientist or their institution, but to the government. A certain institutional ethos and culture of academic science buttressed this regime (Merton 1973). Two norms, communalism and disinterestedness, in this context are worth emphasizing for our purposes. The norm of disinterestedness functions to eliminate or minimize any bias due to scientists’ personal, economic, or ideological interests through institutional controls such as peer review and replication of research results. The norm of communalism, on the other hand, refers to the common ownership of scientific discovery or knowledge and opposes secrecy because new knowledge is always built upon old knowledge and owes much to open and free discussion and exchange of ideas, techniques, and even materials (such as proteins, which will come up below). As Merton put it: The substantive findings of science are a product of social collaboration and are assigned to the community […] Property rights in science are whittled down to a bare minimum by the rationale of scientific ethic. The scientist’s claim to ‘his’ intellectual ‘property’ is limited to that of recognition and esteem. (Ibid.: 273) A significant consequence of this was the tendency among scientists to shun intellectual property for their discoveries with potential economic gain. For example, neither the polio vaccine nor magnetic resonance imaging was patented. Similarly, computer programs were not copyrighted or patented until the seventies. As for research agendas, they were shaped and given priority through a very intricate system that bears the marks of intrinsic theoretical interest and intellectual challenge, past scientific achievements, and generally the concern for public benefit. The post-1980 social organization of science, on the other hand, was motivated by the idea that scientific innovation is the engine of the economy and thus needs to be incorporated into capital. This, in turn, led to the emergence of new forms of collaboration between university and industry, the increasing privatization of publicly funded research and the commodification of scientific knowledge and expertise through the mechanism of an aggressive regime of intellectual property rights. By 2019, the shares in R&D funding had flipped, with 72% being provided by businesses (NSF 2023). The new regime is made possible by a series of legal arrangements, decrees, and Supreme Court decisions. Just to mention a few of these, the Bayh-Dole act of 1980 gave the universities and business firms the right to patent the results of publicly funded research. In 1987 the act was extended, by executive order, to cover big firms as well. The Supreme Court’s decision regarding Diamond v. Chakrabarty in 1980 extended intellectual property rights to cover life forms, which was previously unimaginable, and blasted open the door to patenting both genetically engineered living organisms and genetic material itself. Just eight years later, the United States Patent and Trademark Office (USPTO) granted Harvard University the first patent for a genetically modified living animal called the ‘oncomouse’, which is used in labs for cancer research. At the turn of the new millennium “the USPTO had issued patents on about 6,000 genes, one sixth of which were human genes”. As Sheldon Krimsky points out, The upshot of this decision [of USPTO to patent genes] has made every gene sequencer an ‘inventor’ or ‘discoverer of patentable knowledge,’ which has inadvertently thrust normal genetic science into entrepreneurship and basic biological knowledge into a realm of intellectual property. (Krimsky 2004: 69–70) 317

Emrah Irzik and Gürol Irzik

The leading US universities responded positively to these developments. There was a ten-fold increase in university-held patents by the year 2000. While only 25 universities had technology transfer offices in 1980, virtually every university has one today. In exchange for substantial funds, they offered business firms not only expert labor power, labs, and equipment, but also prior or privileged access to the results of scientific research and shared or sole ownership of patents. While still holding their university positions, many scientists became CEOs or partners in these firms, and others started their own companies. As universities became entrepreneurial, the logic of the market (productivity, efficiency and the like) began to dominate the culture of academic science, with unwelcome consequences (Irzik G. 2007; Krimsky 2004; Radder 2010). First, research interests are increasingly being shaped by commercial value rather than epistemic value and social utility. Second, secrecy, which is the opposite of communalism, is becoming a serious problem as more and more universities receive industrial support for their research and sign protocols that often contain non-disclosure clauses that ban their researchers from publishing their findings without the written consent of the supporting company. This makes the independent confirmation of the accuracy of published results impossible. Third, the phenomenon of “funding bias” in some disciplines provides evidence that the norm of disinterestedness is being threatened. There is a strong association between drug industry funding and the research results that favor that industry’s interests (Sismondo 2008). This phenomenon naturally raises questions about the reliability of drug research based on those trials. Finally, the explosion in conflicts of interest in research exacerbates this problem by undermining the norm of disinterestedness.

Emerging alternatives to knowledge goods production and their limits Fortunately, in parallel to the post-1980 transformation described above, an alternative has also emerged in various domains of knowledge production. It is this alternative that we would like to foreground as a Polanyian response in line with his positive vision, rather than as a case of regulatory countermovement as he conceptualized. A regulatory countermovement seeking to reform the intellectual property regime, say by limiting patent terms to shorter durations or declaring temporary freezes on their enforcement to address crises, while having important potential merits, does not on its own escape the dilemmas that Polanyi described. To illustrate this point, one needs only to look at how the issue of vaccine patents played out in the face of the COVID-19 crisis. Already by January 2020, the genome of the SARS-CoV-2 virus was published online, as a result of “unprecedented data sharing” by scientists collaborating internationally and in real time, utilizing the online platform NextStrain (Le Guillou 2020). This allowed vaccine development to begin immediately. By 2021, with the highly effective COVID-19 shots already going into arms, promising calls for the vaccine patents to be suspended were being made by various actors, some quite high-profile (The New York Times 2021a). With a seemingly receptive Biden administration in the mix, for a while it looked as though such a policy could be forthcoming (The New York Times 2021b). But after an initial bad faith diversionary claim discounting the ability of the rest of the world to produce mRNA vaccines regardless of patent status (The New York Times 2021c), which had more than a whiff of colonial attitude about it,2 the patent holders then fell back on their much more entrenched thesis, arguing that such a move would stifle life-saving medical innovation, i.e. by undermining the profit motive – what commercial business could pursue expensive new medical innovations if a precedent is set that intellectual property can be abrogated at the very moment when the investment is poised to prove most lucrative? “Who will make the vaccine next time?” – Brent Saunders, the former chief executive of Allergan asked with concern. “The move would have the effect of ‘handing over American innovations to countries 318

Social justice and productivity in scientific production

looking to undermine our leadership in biomedical discovery’” – Stephen Ubl, the president and chief executive of the Pharmaceutical Research and Manufacturers of America remarked patriotically (The New York Times 2021b). Not to mention all but guaranteed crash of pharma stocks in financial markets that would ensue from such a move – indeed even the fleeting possibility of the same was enough to send the stock prices of vaccine companies tumbling (Financial Times 2021). The prospect of a “seizing up of the market system” and “financial panic” that haunted Polanyi thus loomed large over the issue, along with superpower nationalism, and in the end the push for an mRNA vaccine patent waiver for the duration of the pandemic fizzled. In his critique of capitalist productivity, Polanyi claimed that In the capitalist economy, technical productivity lags behind the theoretically achievable maximum […] all other natural or legal monopolies, as well as those created by transient economic circumstances, work towards the maintenance of relatively unproductive methods of production and, thus, to an indefinite mass of unutilized technical methods of production. (Polanyi 2016a: 404) This is clearly what happened with mRNA vaccines under the standard intellectual property paradigm, patents by definition granting legal monopoly status until expiry after 20 years. Refuting blatantly interested claims to the contrary, the New York Times (2021c) identified no less than 10 facilities in developing countries like Brazil, Argentina, South Africa, Indonesia and especially India with formidable manufacturing capacities that could have been put to the task of manufacturing Pfizer’s or Moderna’s state-of-the-art mRNA vaccines, if intellectual property were no barrier. A standard leftwing solution to this kind of impasse is to simply nationalize pharma development. Such an option cannot be dismissed outright since, historically, public funding has always been vital to the research and development of some of the most important drugs in use today, including many of the COVID-19 vaccines (Cross et al. 2021; Lalani et al. 2023). Furthermore, there is the demonstrably successful case of the Cuban biopharma industry which is entirely state-owned. Not only did Cuba’s “relatively sophisticated” health system weather the outflow of professionals after the 1959 revolution, the US embargo from 1962 onwards, and the collapse of its main trading partner, the USSR in 1991, its biopharma industry made the country into a net-exporter of drugs (Jimenez 2011; Tancer 1995). Out of this system have come two effective COVID-19 vaccines, Abdala (protein subunit type) and Soberana 2 (protein subunit conjugate type). Nationalization of industries, however, is hardly an element of Polanyian socialism. More importantly, it is by definition scale-limited to the nation-state whereas medical challenges are often global, as in the case of COVID-19. Nevertheless, what makes the Cuban case interesting for our purposes is its inception, and certain features of its industrial organization that are not typical of state ownership. Cuba’s entry into biopharma was synthetic production of interferon, a protein that plays a major role in the immune system’s response to infections (and to some extent to tumors). Crucially, this endeavor, eventually to be dubbed “Cuba’s Billion-Dollar Biotech Gamble” in Science (Kaiser 1998) was not embarked upon ex-nihilo. It was only made possible because the Finnish doctor Kari Cantell had refrained from patenting his own procedure for producing interferon and collaborated with the Cubans to share the procedural know-how (Jimenez 2011; Reid-Henry 2010: 16). This openness assured that interferon technology could be transferred to the aspiring Cuban biopharma initiative in the 1980s. While initial hopes for interferon as a cancer cure did not materialize, the investment in interferon technology did pay off wonderfully in the form of dengue fever and meningitis drugs. 319

Emrah Irzik and Gürol Irzik

Today’s mature Cuban biopharma sector is spearheaded by the West Havana Biocluster, which functions as a socialist Silicon Valley for biotech, with the government playing the role of venture capital. The Cuban government sets overarching goals for the sector and controls funding, but the industry is composed of multiple firms that integrate by means of horizontal communication between their specialist workers. The firms maintain considerable autonomy and operational freedom in their operations (Cardenas 2009). This model has been referred to as politically centralized yet administratively decentralized (Reid-Henry 2010: 31). The Cuban state, as the holder of all Cuban biopharma patents, acts as a national patent pool (Cardenas 2009). This enables full collaboration and knowledge sharing between the plethora of Cuban biopharma entities (hospitals, R&D centers, labs, manufacturing plants, universities, government agencies etc.) and Allows incremental innovation under profound integration with the state-funded health system […] This kind of cross-cooperation allows using the specific competences created by the vertical-like in-house integration in other projects and avoids costly duplication in research and development. (Ibid.) In other words, the Cuban model is effectively unhindered by intellectual property. This “closed cycle”, “full value chain” cooperative approach to high tech production which “resembles more an internal open source of innovation” is promoted by the government, spanning the sector and replicating the scale advantages afforded by vertical and horizontal integration in analogous large capitalist companies (ibid.). However, viewed from a broader perspective, the very same strengths of the Cuban system are also its shortcomings. While “state ownership of property in conjunction with decentralized management” has served Cuba well (Lage in Reid-Henry 2010: 144), “science always faces a trade-off between autonomy and support in its dealings with the state” (Mukerji in Reid-Henry 2010: 59). This observation speaks to Polanyi’s insistence that only voluntary enterprises can qualify as truly cooperative, while the Cuban compromise on this point sits uneasily with his strict position of “no middle ground between enforced cooperation and free cooperation” (Polanyi 2014: 171). When it comes to the issue of cooperation on the world scale, there is still much to be desired. Cuba has been a member of the WTO since 1995 and its precursor the GATT since 1948 and is signatory to the TRIPS Agreement. As soon as Cuban drugs venture abroad, they operate in the usual manner under the prevailing global intellectual property regime, with the Cuban government safeguarding its interests as patent holder vis-à-vis foreign companies. That Cuba is a net exporter of drugs is prima facie evidence suggesting it relates to the rest of the world through a commercial logic, its otherwise commendable medical internationalism (Cuban doctors abroad, solidaristic SouthSouth bilateral deals and cooperation etc.) notwithstanding. While “in Cuba, science and socialism is to serve the nation” (Reid-Henry 2010: 28), what today’s world needs more than ever is for science to serve humanity not only at the scale of the nation but at the scale of the globe.

A post-Polanyian alternative: open technoscience The full potential of the republic of science cannot be realized by any nation-state actor alone, no matter how revolutionary it aspires to be. Fortunately, it is not strictly necessary for any such actor to do so either. The “Open Science” movement which aims to make all scientific knowledge as congealed in the form of data, software and publications freely available to all is making progress

320

Social justice and productivity in scientific production

toward the same revolutionary goal in the here and now, and doing so without regard to national borders. UNESCO defines Open Science as follows: For the purpose of this Recommendation, open science is defined as an inclusive construct that combines various movements and practices aiming to make multilingual scientific knowledge openly available, accessible and reusable for everyone, to increase scientific collaborations and sharing of information for the benefits of science and society, and to open the processes of scientific knowledge creation, evaluation and communication to societal actors beyond the traditional scientific community. […] Open scientific knowledge refers to open access to scientific publications, research data, metadata, open educational resources, software, and source code and hardware that are available in the public domain or under copyright and licensed under an open license that allows access, re-use, repurpose, adaptation and distribution under specific conditions, provided to all actors immediately or as quickly as possible regardless of location, nationality, race, age, gender, income, socioeconomic circumstances, career stage, discipline, language, religion, disability, ethnicity or migratory status or any other grounds, and free of charge. (UNESCO 2021, Preamble, p. 7, 9) The decommodification of knowledge implied in this excerpt could become, with one further step, the antithesis of intellectual property: While the statement homes in on knowledge goods covered by copyrights (aside from the somewhat unclear inclusion of “hardware”), it is ambivalent on patents. This is a significant omission in today’s technosciences. Hence, Michele Boldrin and David Levine’s position of intellectual property abolitionism that encompasses patents as well as copyrights, is becoming increasingly attractive (Boldrin and Levine 2008). Such a position echoes not only Polanyi’s dictum that the dissemination of instrumental knowledge and access to it should be fostered by every means, but also his strong belief that technological inventions should be used for public benefit. It points toward creating boundless space for an evolved form of cooperation, with greater potential than what characterizes the territorially bounded cooperatives which had originally inspired Polanyi: networked cooperation built on a universally available commons of knowledge that enables, globally and universally, the kinds of cooperation previously limited to the single cooperative, the internal departments of the single large firm or the single socialist nation state. This constitutes a form of socialization native to the era of the knowledge economy that is an alternative to nationalization, a form of socialization with which Polanyi took issue. Open technoscience does not only support, without qualification, the values of voluntary enterprise and free cooperation that Polanyi championed; it also furthers his two economic concerns of social justice and technical productivity simultaneously (Polanyi 2016a). While he was willing to forego some productivity in favor of furthering higher purposes if necessary because modern society can afford to do so with its immense productive capacities (Polanyi 2014: 38), such a tradeoff does not apply to an open technoscience context. Production under a regime of open technoscience does not suffer from the contradictory imperatives of commodity production on the one hand and regulation on the other. “A world where all scientific knowledge has been made available online” (Nielsen 2020) would allow us to immediately dispense with inefficiencies such as duplication of R&D work by competing companies, available manufacturing capacity being employed in producing second-tier products instead of what is state of the art at any given moment, and the massive 20-year delay between when an innovation is made and when the benefits to humanity can be fully realized. Furthermore, it would significantly boost participatory citizen science (UNESCO

321

Emrah Irzik and Gürol Irzik

2021) by tapping into the “wisdom of crowds” to harness the “micro-expertise” of networked individuals. Whether professional or lay, otherwise spatially and temporally disconnected persons could collaborate toward solving scientific problems via processes of “designed serendipity” (Nielsen 2020). The voluntary quality of cooperation reaches an apotheosis in this vision, opening up an entirely new social field to the application of Polanyian ethics of individual responsibility and moral purpose (Dale 2010). In certain applications of scientific knowledge production, open (techno)science is already established and mature. The archetypical phenomenon of Free Open-Source Software (FOSS), for example, has proven its viability in the face of, and in many ways its superiority over proprietary software. FOSS began completely as a volunteer effort by a handful of idealist software programmers in the 1980s, who simply decided to write their own operating system and applications from scratch and share them under free licenses. This initially daunting task quickly became manageable when the Internet enabled first hundreds, then thousands of other programmers across the world to collaborate in real time in the 1990s. The massive collaboration model proved so successful that commercial companies began employing programmers to write FOSS for which they would sell value-adds like bespoke features, support services and custom hardware. The flagship FOSS operating system, Linux, is now dominant in supercomputers and servers, while the Linux kernel is dominant in mobile devices (as a component in Android). Academic and scientific institutions as well as governments also collaborate in FOSS. FOSS has demonstrated that selling knowledge goods as commodities is not the only way to produce quality software or the only way to secure funding. Other motivations have proven viable, both of monetary and non-monetary kinds: individual and community needs, intrinsic satisfaction, reciprocity in kind, social commitment, prestige and career building, employment by value-adding businesses, government funding, user donations and patronage via crowdfunding (Irzik E. 2019). There is much overlap between these, and the motivations cited by UNESCO (2021) for open science as well as the values and virtues cultivated in the Cuban biopharma sector (Cardenas 2009; Reid-Henry 2010). Likewise, the Open Access model in research article publishing has made terrific headway over the last couple of decades. Open Access does for academic articles what FOSS has done for software. The bulk of this transformation has been achieved simply by reallocating university funding from closed access serial subscriptions to funding author submissions to open access journals. The author motivations for doing so are transparent: easier access means wider readership, which translates into more citations, which is the currency of academia both in terms of prestige and ultimately employment (Suber 2012). Open access articles on average are cited at about twice the rate of their closed access counterparts (McKiernan et al. 2016). The model has allowed some form of open access to more than one third of all research articles published in 2018 (European Commission). Open access mandates3 that stipulate publicly funded research to be published as open access can provide further momentum to this ongoing transition. The White House Office of Science and Technology Policy has declared 2023 the “Year of Open Science” and UNESCO is trying to position open science as a way of mending much that is currently broken in our world: poverty, health issues, access to education, rising inequalities and disparities of opportunity, increasing science, technology and innovation gaps, natural resource depletion, loss of biodiversity, land degradation, climate change, natural and human-made disasters, spiraling conflicts and related humanitarian crises. (UNESCO 2021, Preamble, p. 2)

322

Social justice and productivity in scientific production

In short, in our information age, science as an institution is being called upon to help address the polycrisis.4 Will it deliver? Rejecting general economic determinism, Polanyi was adamant that both cooperation and competition could emerge under the same historical and material conditions (Polanyi 2014: 38, 41–42). Just as competition for profit can provide a powerful motive driving technological and scientific research and development, so can the efficiencies of open collaboration. Yet only the latter maximizes the benefits of such development to humanity universally. In order to answer the question above in the affirmative, we need the cooperative tendency in scientific knowledge production to prevail over the competitive.

Acknowledgment We thank Faik Kurtulmuş and the editors of this volume for a number of helpful comments.

Notes 1 In fact, on this point, it can be argued with benefit of hindsight that he was overly pessimistic regarding the viability of managed capitalism according to the Nordic model or Western Europe during the Trente glorieuses. 2 We thank Ali Bektaş for pointing out this angle to us in personal communication. 3 For an example, see https://www.whitehouse.gov/ostp/news-updates/2022/08/25/ostp-issues-guidance-tomake-federally-funded-research-freely-available-without-delay/ 4 For a primer on the term polycrisis, see https://www.weforum.org/agenda/2023/03/polycrisis-adam-toozehistorian-explains/

References Azam, Geneviève. 2007. “La Connaissance, une Marchandises Fictive”. Revue du Mauss 29: 110–126. Berman, Elizabeth P. 2012. Creating the Market University. Princeton: Princeton University Press. Bockman, Johanna, Ariane Fischer, and David Woodruff. 2016a. “‘Socialist Accounting’ by Karl Polanyi: With Preface ‘Socialism and the Embedded Economy’”. Theory and Society 45: 386–427. Boldrin, Michele, and David K. Levine. 2008. Against Intellectual Monopoly. Cambridge: Cambridge ­University Press. Cangiani, Michele. 2020. “Knowledge as Fictitious Commodity and the Knowledge Society”. In Brigitte Aulenbacher, Markus Marterbauer, Andreas Novy, Kari Polanyi Levitt and Armin Thurnher eds. Karl Polanyi. Wien: Falter Verlag: 177–180. Cardenas, Andres. 2009. “The Cuban Biotechnology Industry”. http://www.theairnet.org/files/research/cardenas/andres-cardenas_cubab_biotech_paper_2009.pdf Cross, Samuel, Yanuk Rho, and Henna Reddy, et al. 2021. “Who Funded the Research Behind the Oxford–­ AstraZeneca COVID-19 Vaccine?” BMJ Global Health 6/12: e007321. https://doi.org/ 10.1136/ bmjgh-2021-007321. Dale, Gareth. 2010. Karl Polanyi: The Limits of the Market. Cambridge: Polity Press. ——— 2016. Reconstructing Karl Polanyi. London: Pluto Press. Etzkowitz, Henry. 2008. The Triple Helix. New York: Routledge. European Commission. “Trends for Open Access to Publications”. https://research-and-innovation. ec.europa.eu/strategy/strategy-2020-2024/our-digital-future/open-science/open-science-monitor/ trends-open-access-publications_en Financial Times. 2021. “US Backs Plan to Suspend Covid Vaccine Patents”. https://www.ft.com/content/ eca86f43-7127-4213-948d-3cc8d652805e. Irzik, Emrah. 2019. “Forms of Remuneration for Free Software Production: A Reducible Complexity”. Studia UBB Sociologia LXIV/1: 109–126.

323

Emrah Irzik and Gürol Irzik Irzik, Gürol. 2007. “Commercialization of Science in a Neoliberal World”. In Ayse Buğra and Kaan Ağartan eds. Reading Karl Polanyi for the 21st Century. New York: Palgrave: 135–153. Lalani, Hussain S., Sarosh Nagar, and Ameet Sarpatwari et al. 2023. “US Public Investment in Development of mRNA Covid-19 Vaccines: Retrospective Cohort Study”. BMJ 380: e073747. Le Guillou, Ian. 2020. “Covid-19: How Unprecedented Data Sharing Has Led to Faster Than Ever Outbreak Research”. https://ec.europa.eu/research-and-innovation/en/horizon-magazine/covid-19-how-unprecedenteddata-sharing-has-led-faster-ever-outbreak-research. Jessop, Bob. 2007. “Knowledge as a Fictitious Commodity: Insights and Limits of a Polanyian Analysis”. In Ayse Buğra and Kaan Ağartan eds. Reading Karl Polanyi for the 21st Century. New York: Palgrave: 115–134. Jiménez, Marguerite Rose. 2011. “Cuba’s Pharmaceutical Advantage”. NACLA 44/4: 26–29. https://doi.org/ 10.1080/10714839.2011.11725548. Kaiser, Jocelyn. 1998. “Cuba’s Billion-Dollar Biotech Gamble”. Science 282/5394: 1626–1628. Krimsky, Sheldon. 2004. Science in the Private Interest. Lanham, MD: Rowman and Littlefield. McKiernan, Erin C., Philip E. Bourne, and C. Titus Brown, et al. 2016. “How Open Science Helps Researchers Succeed”. eLife July 7, 2016. https://doi.org/10.7554/eLife.16800 Merton, Robert. 1973. The Sociology of Science. Chicago, IL: The University of Chicago Press. Mirowski, Philip, and Esther Myriam Sent. 2008. “The Commercialization of Science and the Response of STS”. In Edward J. Hackett, Olga Amsterdamska, Michael Lynch and Judy Wajcman eds. The Handbook of Science and Technology Studies, 3rd ed. Cambridge: MIT Press: 635–689. Nielsen, Michael. 2020. Reinventing Discovery. Princeton, NJ: Princeton University Press. NSF (National Science Foundation). 2023. “U.S. R&D Increased by $51 Billion in 2020 to $717 Billion; Estimate for 2021 Indicates Further Increase to $792 Billion”. https://ncses.nsf.gov/pubs/nsf23320. Polanyi, Karl. 2001. The Great Transformation. Beacon Hill, MA: Beacon Press. ——— 2014. For a New West. Giorgio Resta and Mariavittoria Catanzariti eds. Cambridge: Polity Press. ——— 2016a. “Socialist Accounting”. Theory and Society 45: 386–427. ——— 2016b. “Guild Socialism”. In Karl Polanyi. The Hungarian Writings. Gareth Dale ed. Manchester: Manchester University Press. Radder, Hans, ed. 2010. The Commodification of Academic Research. Pittsburgh: The University of Pittsburgh Press. Reid-Henry, Simon M. 2010. The Cuban Cure. Chicago, IL: The University of Chicago Press. Reitz, Tilman. 2019. “Knowledge”. In Gareth Dale, Christopher Holmes and Maria Markantonatou eds. Karl Polanyi’s Political and Economic Thought. Newcastle: Agenda Publishing: 213–224. Sismondo, Sergio. 2008. “Pharmaceutical Company Funding and its Consequences: A Qualitative Systematic Review”. Contemporary Clinical Trials 29/2: 109–113. Suber, Peter. 2012. Open Access. Cambridge: The MIT Press. Tancer, Robert S. 1995. “The Pharmaceutical Industry in Cuba”. Clinical Therapeutics 17/4: 791–798. The New York Times. 2021a. https://www.nytimes.com/2021/05/03/us/politics/biden-coronavirus-vaccinepatents.html ——— 2021b. https://www.nytimes.com/2021/05/05/us/politics/biden-covid-vaccine-patents.html ——— 2021c. https://www.nytimes.com/interactive/2021/10/22/science/developing-country-covid-vaccines.html UNESCO. 2021. Open Science. https://unesdoc.unesco.org/ark:/48223/pf0000379949

324

27 CHRONICLER OF THE INTERREGNUM. KARL POLANYI AND THE WAR IN UKRAINE Florin Poenaru

Introduction In “Against Fear”, published in 1923, Karl Polanyi wrote We can scarcely remember the time when we were not afraid […] Our lives are pervaded by a monstrous uncertainty. The value of money changes from one hour to the next. In the future, misery lurks. We do not know when and against whom we will be herded on to the battlefield. Civil war has become familiar to us. Small states are afraid of large states, large states fear one another. Soldiers and military commanders are the most fearful of all. They are arming themselves feverishly, as if the enemy were already breathing down their necks. (Polanyi 2016: 141) A hundred years later these remarks remain prescient. Pandemic, inflation, climate catastrophe and the war in Ukraine offer the broad contours of a world mired in poly-crisis. Fear and uncertainty dominate everyday life. Perhaps our world is not as shattered as Polanyi’s was when he penned these thoughts (or at least not yet), but, mutatis mutandis, there are important similarities. Polanyi was trying to make sense of the world that emerged after World War I (WWI). The balance of power in Europe that ensured the long peace after the Napoleonian wars collapsed and this led to WWI and the subsequent turmoil. His early writings (Polanyi 2014, 2016) express the struggle to come to terms with not only the aftermath of the war, but with the very fact that it happened. A century of peace in Europe vanquished the thought of war. Peace was the de facto state of affairs and war an impossibility: …no one had any clear notion of how the war had even been possible. The feeling never quite passed that in our world the war was an impossibility. And because everybody was essentially thinking in such terms and no one understood – that is, the war was not credited with more reality than one would ascribe to some terrible, abiding delusion. (Polanyi 2016: 65)



325

DOI: 10.4324/9781003336747-34

Florin Poenaru

This led to what Polanyi called a “confused and unprecedented climate of opinion” (2016: 66). People, individually and collectively, had lost meaning. They could not comprehend anymore a world devoid of sense and direction. Instead, people, “dumbfounded”, could only passively contemplate the “colossal catastrophe”. Arguably, a similar feeling is present today in relation to the war in Ukraine, albeit the scale is, of course, different. In 2015 I met in Kiev an Internally Displaced Person from Donetsk, who fled the city after the beginning of the civil war. He, and other people in this situation, were dumbfounded by the very possibility of war. No one expected or foresaw it, let alone prepare for it. Donetsk was a modern prosperous city where the local football team recently won the Europa League. Everyday life pointed in any other direction, except war. Something similar I encountered in February 2022, when the Russian invasion of Ukraine began. Friends and comrades in Kiev expressed shock that the war was now real. Equally, many people in post-socialist Eastern Europe experienced a profound sense of disorientation, an existential angst, when the war broke out simply because it was unfathomable. After 70 years of peace, an armed confrontation was inconceivable. Collectively, in Eastern Europe at least, we used to think of war as something very far away: either in the past, pertaining to the generation of our grandparents; or geographically, affecting other countries or continents. Naturally, there is always a danger to overstate the absence of war and the predominance of peace. The century of peace that followed the Congress of Vienna was punctuated by a series of conflicts, most notably by the Crimean War and the Franco-Prussian War, though the balance between the powers remained basically stable. Likewise, one cannot discount the number of wars that accompanied the dissolution of the USSR, let alone the huge conflagration at the heart of Europe when the Yugoslav state disintegrated. War and peace are a matter of perspective and the Eurocentric vision inevitably obscures the reality of war in other spaces. Nonetheless, the outbreak of the war in Ukraine simultaneously generated a lot of passion and outcry, but also the need for theoretical and systemic understanding of its causes. On February 24, 2022, Russia announced the beginning of a “special military operation” in Ukraine. The immediate reason invoked by the Russians was to defend the interests and security of the Russian-speaking population in Donbas, facing mortal danger from the “neo-Nazi” regime in Kiev. The wider rationale had to do with the perceived “existential threat” for the integrity of the Russian state following the Eastern expansion of NATO after the collapse of the Soviet Union in 1991. Ukraine was hoping to become formally part of the alliance too, while its military already developed interoperability with NATO forces (Streeck 2022). Many Western and Russian top officials and analysts warned that Ukraine membership of NATO represented a “red line” for Russia and would lead to armed confrontation (for a summary of these positions, see Maté 2022). It materialized in February 2022. What initially appeared to be a swift military operation grew into full-blown war. A year after the beginning of hostilities the war was escalating and a peaceful resolution was far from reach. What is more, due to this confrontation, the specter of potential nuclear annihilation was again considered a very real possibility – a threat that was absent from the mind of the last generation and which contributes to the overall feeling of declinism and impending civilizational collapse. The war in Ukraine generated a series of theoretical questions in a climate fraught with partisanship, not least in the academia. Political entrenchment guided the answer to questions pertaining to the origins of the war. What led to this conflict? What were the immediate and long-durée causes? Did the war start on the day of the special military operation, or a case can be made that the beginning of the confrontation can be traced further back in 2014 (after EuroMaidan), or perhaps in 2008 (after the NATO summit in Bucharest, when Ukraine and Georgia were invited to join), 326

Chronicler of the interregnum. Polanyi and the war

or even in 1991 (with the Independence of Ukraine)? Or, maybe, as Vladimir Putin claimed, the trouble started with Lenin and the Bolsheviks? Apportioning blame has been also politically and ideologically divisive. There seems to be a large consensus around the idea that the Russian invasion of Ukraine is an example of revived Russian imperialism, bent on reconquering lost territories in a quest for restoring previous glory. Imperialism, colonialism and de-colonization emerged in this time as important concepts of contention. At the opposite end, realist-conservative thinkers like John Mearsheimer believed that the Russian invasion of Ukraine was ultimately a sign of weakness of the Russians, not of imperial might. Calculating that a militarized Ukraine and affiliated with NATO (either as a formal member or in any other way) poses an existential threat to the vital interests of the Russian state, its leadership decided to go on the offensive in order to protect its interests. If by this they needed to sacrifice Ukrainian independence and attract the ire of the Western countries, it was a price worth paying. In any case, for people in the Mearsheimer paradigm the real conflict is between the USA and Russia that just happen to take place on the Ukrainian territory. The notion of a proxy war emerged as an important analytical category in making sense of this war. How to achieve peace and what exactly does it mean in this context? Advocates of peace were derided as peaceniks (Balibar 2022; Zizek 2022) and considered to be siding with the aggressor. At the same time, leftist voices that supported Ukraine inadvertently supported NATO as the only organization able to offer support (military, foremost) to the Ukrainians. The splits within the global left and within the anti-war groups were a telling outcome of the consequences of this war and deepened the confusion surrounding it. This chapter argues that the perplexities caused by the war in Ukraine warrant a return to Karl Polanyi’s writings. These writings offer important insights in order to help structure the “confused […] climate of opinion”, if not to dispel it altogether. The reason this is so, I suggest, is not because Polanyi offers a ready-made toolkit of concepts. The opposite is the case. What is valuable in Polanyi is how he shaped his thinking in media res. What distinguishes his writings, the earlier ones, but also his masterpiece The Great Transformation, is his attempt to make sense of epochal changes as they were unfolding in real time. His method was to place everyday life events and transformations in historical perspective. He did so by looking back into the past, but also into the future, trying to figure out best ways ahead, best models to follow without having an actual blueprint because the reality itself was amorphic. His contemporary Antonio Gramsci expressed a similar sensibility when he wrote about the interregnum. Polanyi is the chronicler of the “interregnum” – both actor and informed observer of that peculiar hiatus when the old has died and the new is struggling to be born. For this reason, perhaps, Michael Burawoy argued that Gramsci and Polanyi should constitute the pillars of a reloaded version of Marxist thinking in post-communism (Burawoy 2003). As Gareth Dale observed, Polanyi always carried the melancholy that the world he grew up in, prior to WWI, has irremediably and tragically collapsed (Dale 2016a, 2016b). This does not mean that Polanyi was nostalgic or seeking to revive the old world. But trying to make sense of this collapse and what came after it informed his thinking and major writings. No wonder they are full of ruptures, contradictions and unclarities. This is perhaps the price of thinking in and through the present. More specifically, in this text I discuss Polanyi’s ideas about international understanding (and competition), peace, pacifism and war. The basic point I want to convey is that Polanyi developed a critique of both the cynical reason of realism and the inherent idealism of liberalism. Or, as Claus Thomasberger has put it, Polanyi wrote “a defense of common people’s realism against the utopian vision of the liberal economic elite” (Thomasberger 2018: 54). This expresses Polanyi’s attempt 327

Florin Poenaru

always to match realist thinking with a normative perspective. He understands that power is crucial, especially in international relations, and to deny this would mean to be oblivious to reality (Cangiani 2022). At the same time, devising collective ways to tame this power for the benefit of collective understanding is paramount for political activity.

States For Polanyi, states are quintessentially defined by their frontiers. One reason is that state-making claims cannot be sustained without the possibility of affirming and defending borders. Historically, once a state was unable to protect its borders, it was doomed. Secondly, frontiers define membership. Belonging to a community or a state entails being within certain boundaries. A state cannot develop without knowing for sure – at least for a generation in Polanyi’s view – what its boundaries are. Without loyalty to the state, communities cannot progress and this loyalty cannot be exercised in relation to a state that lacks precise boundaries. In addition, borders allow to decide who belongs to the community and who doesn’t, thus increasing the solidity of the community. Only such a community and its state can develop law and order, safety and security, education and morality, culture and civilization. The risk of having the borders contested – even from afar, as Polanyi put it, meaning that this threat should not come necessarily from neighbors – precludes the normal functioning of the state and hinders the development of “higher forms of life” in the community (Polanyi 2014: 72). In such a situation, if the conflict cannot be overcome by political means, the war is inevitable and, adds Polanyi, even reasonable because it is the precondition to preserve the very possibility of the life of the community. One can rephrase and say that war becomes inevitable once a state perceives an existential threat to its integrity, if there are no other means to assuage this fear. On these grounds he criticizes naïve and abstract pacifism that sees war as some atavistic, irrational remnant that humanity needs to do away with. Instead, for Polanyi, war is nothing but the institutionalized manifestation of competing state interests that necessarily emerge from the international state system. War begins when these competing interests cannot be kept in check and the balance of power is offset. It is no coincidence that this is the starting point of his magnus opus. What Polanyi envisages instead is an embedded international moralism – that is, a form of international cooperation that is mindful of national self-determination and diverging national interests that, precisely on these grounds, pushes countries to pursue their interests in a spirit that is respectful of others and their security concerns. Moralism, for Polanyi, is not an idealist category: it does not mean that countries should abide by some sort of transcendental set of norms that guide the conduct of states. States should follow instead an enlightened form of self-interest which means adhering to international institutions able to mitigate various and sometimes competing national interests. Here one can point out the difference between Polanyi’s views and the type of realism proposed by Mearsheimer (2001). For the latter, the international system is anarchic. No underlining laws or institutions exist that can be called upon to intervene between states. What sets the relation between states is simply actual and perceived power. Stronger countries will dominate weaker ones while big powers will inevitably enter in competition with each other to achieve hegemony – the only true source of security and peace in the Mearsheimer model. For Polanyi, by contrast, peace is an outcome of policy that results in an international peace order. This is why he initially cherished the balance established by the ensuing of the Cold War, before starting to fear that the USA might in fact be more powerful than its competitor and active in imposing its own universal vision of global capitalism. 328

Chronicler of the interregnum. Polanyi and the war

Polanyi insists that the greatest task of politics is the right appreciation of the interests a country has together with the right appreciation of the forces at work in the world. Failure to properly grasp this situation and the international system is shaken and it crumbles. But what are the criteria based on which to judge one country’s interests? For Polanyi the answer is a realism that takes “moral and spiritual facts as realities” (Polanyi 2014: 76). Put differently, the moral imperative in this situation is to unite the community at home around its common interests and to secure allies abroad. Since no state will support the selfish interest of another state, the very quest for allies to support national interest shows that that interest is properly formulated as to allow space for other national interests as well. In this way the moral stance in international politics for Polanyi is to be able to formulate and pursue enlightened self-interests.

War and peace This focus on structural factors that shape the international arena is what offers the peculiarities of Polanyi’s view on peace. For him, the opposite of war, or its negation, is not peace, but international order. For this order to be achieved, an international economic order must be firmly in place. In Polanyi’s view the collapse of the gold standard that underpinned the post-Napoleonian world order was among the economic factors that led to the catastrophe of WWI. Attempts by major world powers to impose a new order according to their interests in the 1920s and 1930s failed and this led to the tragedy of WWII. The presence of war is an outcome of international disorder. This is why for Polanyi naïve pacifism is dead-end. Abhorring war as a matter of principle – as pacifists do – is precisely a way to prolong the very possibility of war because it does not solve the structural issues that lead to war in the first place. Even more, Polanyi believes that in a situation in which fascism is on the rise, pacifism accommodates it. The true moral decision in this circumstance is precisely to embrace the duty to fight against the enemy of democracy and international cooperation. Polanyi complicates things further by distinguishing between a victorious, or militaristic, peace and a pacifist peace (2016: 129). The militaristic peace is a peace imposed by the victor of a military confrontation by virtue of its power alone. Militarism is the doctrine that knows no boundaries except its possibility of deploying power. Militarism can impose swift peace, but this peace will be durable just as long as the state that imposed it maintains its power. Once this power is weakened or lost, the peace disappears. By contrast, pacifistic peace is a peace to which states subscribe by virtue of respecting an international order guaranteed by international organizations. This is peace premised upon law and justice that trump any immediate concerns with raison d’état narrowly understood. It is peace derived from the understanding that states belong to a totality and that totality takes precedence. International order must be constructed to replace the institution of war. Hence, for Polanyi peace is a matter of long-lasting institutional design. This means that peace is an outcome not of conciliation, but of policy. Foreign policy for Polanyi is nothing else than defending wisely the national interests of a state. But a good foreign policy means taking into account other countries’ interests and, what is more, devise a policy that manages to overlap one’s state interests with others (Dale 2016a: 406). This means that external relations and internal political conditions cannot be separated. Lasting peace can be ensured only by the development of democracy within each country.1 However, it must be noted here that Polanyi’s thinking on these issues is not uniform and it evolves just as the realities of the interwar period did. In the early 1920s Polanyi emphasized that a pacific world order can be achieved through the design of international organizations. These institutions gained their legitimacy by being steeped into ideas of justice and equality and by 329

Florin Poenaru

embodying the rule of law. Hence, Polanyi was a supporter of the idea of the League of Nations which, he believed, or at least hoped at the time, was able to embody his notion of peace: namely, a stable inter-national institutional assemblage able to replace the institution of war. The League of Nations would enable states (especially great powers) to peacefully negotiate their interests (Polanyi 2016: 143). By 1930s, as the League of Nations collapsed, Polanyi’s was less optimistic. He pinned the cause of the collapse by the unilateral disarmament of the states defeated in the WWI. This disempowering prepared the stage for a militaristic peace instead of truly offering the preconditions for a realistic peace embodied by a functional and credible League of Nations. In its actual incarnation in the 1930s, the League of Nation was an empty shell: even worse, an instrument of power of the victors of WWI disguised as a universal framework. Initially, after WWI, Polanyi envisaged international free trade, the League of Nations and a biding arbitration system as foundational to the new organization of international affairs (2016: 194). By the 1930s his analysis on the topic took a different turn and is best articulated in the first chapter of The Great Transformation. Against the free-marketers idea that wars are caused by countries that are too protective of their own interests and insulate themselves from the rest of the world through tariffs, Polanyi pointed out that in the period of the late 1890s European peace prevailed despite Germany’s turn toward protectionism and imperialism. This was possible because the balance of power was still in place. Therefore, it is not a matter of free market vs. protectionism that define the presence or the absence of peace, but rather the dissolution of the balance of power into power blocks that are irreconcilable. In the 1930, Polanyi furthered the argument by pointing out that the turn toward autarky and nationalism is caused precisely by the disbalances inherent in the free trade (see also Desai 2020). Limiting membership to the League of Nations – or any other similar institution – solely on the basis of a country’s adherence to the principles of free trade would be a measure that only exacerbates what it seeks to cure. Also, in the 1930s Polanyi’s view of war and peace was changed by the ascendancy of fascism and Nazism, as mentioned previously. Choosing not to fight against Nazism represented a dereliction of duty. Principled pacifism in this context represented an abdication in the face of evil driven by a poor analysis of the phenomena of fascism. Moreover, somehow counterintuitively, Polanyi believed that any gesturing toward peace in the face of the Nazi threat will only lead to a deepening of war. Appeasing the fascists and the Nazis will offer them time to strengthen even further which, in turn, will lead to a prolonged war against them, which Polanyi rightly perceived to be inevitable. The understanding of war and peace in Polanyian thinking revolves in fact around the tension between politics and economics. At the political level, states have their own interests, the most important of which is their capacity to maintain and defend borders, as a prerequisite for their existence. To be successful in this regard, states must be able to formulate their interests and pursue them in such a way as to be able to build alliances, thus being able to consider the self-interest of other states. This pursuit will eventually lead to the development of certain inter-statal forms of international arrangement that will mediate between states. But this is only one side of the coin. Economic interests form the other. One of the major strengths of Polanyi’s analysis, most clearly developed in TGT, is the recognition of the weight global economic interdependence plays in international affairs.2 Even those states bent on completely sealing off their borders from the outside world will not, in fact, be able to achieve this. This does not mean, however, that free trade should be the de facto option. What it means is that a world in which states are economically interdependent unquestionably needs a global political order. What shape this global political order should take was an open question in Polanyi’s work. 330

Chronicler of the interregnum. Polanyi and the war

What remains a source of contention in discussing Polanyi’s work is establishing the proper relationship between these two sides of the coin, the political and the economic. Right at the beginning of TGT, Polanyi lists the four institutions that made the 19th-century civilization possible: (1) the balance of power, (2) the gold standard, (3) self-regulating market, (4) the liberal state. He then continues: “Of these institutions the gold standard proved crucial; its fall was the proximate cause of the catastrophe. By the time it failed, most of the other institutions had been sacrificed in a vain effort to save it” (Polanyi 2001: 3). But, Polanyi writes, the gold standard was nothing else than the attempt to generalize at the level of international economic relations the principles of free market that characterized the domestic economies at the time. Hence, from these opening lines of TGT, it seems that the economic factor is crucial. What brought down the 19th-century civilization and gave rise to two devastating world wars was the self-regulating market (or, to be precise, its failure to do so). Further down, Polanyi notes that simultaneously with the affirmation of the self-regulating market, something really unique happened at the beginning of the 19th century: the emergence, perhaps for the first time in history, of a genuine interest for peace. This constitutes a profound rupture with previous epochs in which peace was secondary or completely negligible to states’ interests. If a state wanted to achieve something, it would wage war, provided it was capable of doing so. Perhaps following the scare of the French Revolution, or maybe because of the increased affirmation of capitalistic interests that did not want to see their profits jeopardized – or both – there was a dramatic shift at the beginning of the 19th century toward a conception of solving issues between states in a peaceful manner. After the Napoleonian War, keeping peace becomes a virtue in itself. Polanyi suggests that, initially at least, the main drivers toward this newfound ideal of peace were those best placed to profit for it: “namely, that cartel of dynasts and feudalists whose patrimonial positions were threatened by the revolutionary wave of patriotism that was sweeping the Continent” (ibid.: 7). Their political reaction at the beginning of the 19th century set the stage for the Concert of Europe. In the first phase, the royalty of Europe formed “an international of kinship” and this strong bond helped grease the wheels of the emerging system of balances. In the second stage, after the German unification, the social group that made peace effective, according to Polanyi, was haute finance. As a sui generis institution, it connected the political and the economic spheres and offered the instruments to maintain the international peace system. The great powers established the international peace system and wanted it to work, though they could not have achieved this goal without the actions of the haute finance. But what ensured this unique position of the high finance, connected with all states, banks and diplomacies, though independent of all, was the private sphere of commercial interests – that is, its economic interests. Thus, while the Concert of Europe seems to emerge as a political construction in the early 19th century to protect the interests of the old royalty, by the end of the century the economic interests of the haute finance seem to be the prime source of stability, the main driver that keeps the system in place. Haute finance was not morally predisposed to peace, far from it. If opportunity arose, it would have no qualms to finance localized wars for the purpose of profits. What it feared, however, was a generalized war between the great powers and the dismantling of the balance of power if that would affect the monetary foundations of the system. Again, in this view, the imperative for peace appears strongly linked with the economic interests of the haute finance, not with raison d’état. However, Polanyi is rather keen to ignore altogether “at this stage” the distinction between political and economic power even though he later affirms that “ultimately it was war that laid down the law to business” (ibid.: 12). Thus, in Polanyian analysis, the haute finance became an instrument for peace in the second half of the 19th century because no other social group was better placed to play this role, but even so, the haute finance was not powerful enough to fully determine 331

Florin Poenaru

the actions of political power. Ultimately, state politics ran “supreme”, says Polanyi, only for the economics to make a comeback. Polanyi writes (ibid.: 18–19): in every case peace was maintained not simply through the chancelleries of the Great Powers but with the help of concrete organized agencies acting in the service of general interests. In other words, only on the background of the new economy could the balance-of-power system make general conflagrations avoidable. Further down, he also notes: Only a madman would have doubted that the international economic system was the axis of the material existence of the race. Because this 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. Apart from it, there was neither sufficient cause for such an interest, nor a possibility of safeguarding it, insofar as it existed. The success of the Concert of Europe sprang from the needs of the new international organization of economy, and would inevitably end with its dissolution. What I think Polanyi actually has in mind here is the impossibility to separate economics and politics altogether. Let’s imagine a state decides it needs to ramp up its production of arms. For that perhaps it needs to import certain raw materials whose price fluctuate because of dynamics of the world market. Or rather this raw material is located in a country that needs to be persuaded diplomatically to export it. By the end of the 19th century states functioned simultaneously in a global political world (intra-state relations) and a global economy (business interests that could be connected, but in practice not necessarily so, to state interests). This complex system was kept in motion successfully as long as there was a balance of power between “that loose federation of independent powers”. With the emergence of two power blocs centered around the British Empire and Germany, respectively, the Concert of Europe was effectively over, and with it, the peace in Europe. The global market expansion and the gold standard produced in the long run “disruptive strains” within the European society of the 19th century, especially protectionism, nationalism, revolution, imperialism and colonialism. These, in turn, led to turbulence in the global market sphere which reverberated in the relationships between states.

The “Anarchism of small states” After the dissolution of the Austro-Hungarian Empire in 1918, historian and politician Oscar Jászi proposed a Danubian Confederation to replace it. The plan was to offer autonomy for the multicultural constituencies of the former Empire in a political construction that recognized all ethnic claims. The plan failed and the former Empire was chopped to pieces among various neighboring countries, leading to a situation in which large ethnic minorities were trapped within nationbuilding projects (as was the case with the Hungarians in Romania after the 1918 annexation of Transylvania). A collaborator of Jászi and a first-first hand observer of the dissolution of the Austro-Hungarian Empire, Polanyi privileged in his subsequent thinking the quest for regional geopolitical constructions, as the Danubian Confederation was meant to become (Polanyi 2016: 194). He introduced the notion of “tame empires” which were big geopolitical actors dominated by states and confederations that were able to maintain the world peace through their cooperation

332

Chronicler of the interregnum. Polanyi and the war

(Dale 2016b). This was Polanyi’s version of the Concert of Europe for the 20th century. In this construction there was no place for what he called the “anarchism of small states”. Polanyi believed that small states should renounce the type of sovereignty enjoyed by the great powers because their nation-making claims would ultimately lead to disruptions of the international system. He praised the USSR for being a political power committed to regionalism which, by its very nature, was able to keep in check the historical troublemakers: the small nations of Central Europe. Following WWII, Polanyi also fully accepted that big states also have the privilege of enjoying spheres of influence, therefore the claims made by the small states could only upset the balance established by these geopolitical hard facts (Dale 2022). Regions and tame empires would make free markets and nation states obsolete. Competition on the market and between states would be replaced by a way of living specific to each bloc. The narrowness of national interest would be superseded by a higher goal and tighter forms of integration that the nation-state could offer. However, the realities of the late 1940s dispelled this vision and canceled any hope that it could ever be realized. Instead, Polanyi noted, the USA was emerging as a regressive hegemon, trying to remake the world of the 19th century to its own benefit. At this point, Polanyi redefined the global cleavage as that between the liberal capitalism espoused by the USA and various forms of (regional) planning (Dale 2016b; Thomasberger 2022). The hegemony of the former will make impossible to attain any forms of the latter. All the perils that brought crashing down the world of the 19th century were now be revived by the US economic and political outlook. The consequences would be ever more damaging. For Polanyi, the USA was not only reactionary, but also anachronistic. The economic realities of the post-war world demanded the cooperation of great regional blocks, not intra-state competition. To rephrase it, Polanyi was demanding multipolarity to ensure world peace and prosperity, whereas the USA wanted to impose its version of capitalism globally. By the beginning of the 1950s, the universalism of the USA came to a head with the regionalism of the USSR and the previous allies were now locked in a different type of confrontation: the Cold War. It helped to keep peace for half a century – at least by Polanyi’s definition as the absence of direct confrontation between great powers. The collapse of this arrangement in 1991 has reverberations up until today. The current war in Ukraine is one such echo. Therefore, Polanyi’s reflections on war and peace and his inchoate theory of international ­relations – developed in media res, in the context of major historical transformations – help us reframe the way we think about the war in Ukraine, and perhaps of any conflict. Instead of trying to apportion blame for the conflict, a proper Polanyian question would be: why is peace absent? Why war – as an institutional formation – was needed in order to address diverging interests between nations? In this framework the war in Ukraine is a symptom that the post-Cold War international order came crashing down and that no alternative peace order has been created. Thus, as conflicts of interest increased, war became inevitable. To what extent the war in Ukraine is just the overture to a wider confrontation between great powers with a view to carve out a new international order remains to be seen. Based on the Polanyian thought sketched above, there are few reasons to be optimistic.

Notes 1 Hence his agreement with the statement: “Capitalist states are unable to organize peace” (Polanyi 1937: 38) 2 This line of thinking inspired the proponents of the world-system theory, especially Wallerstein, for whom Polanyi was a seminal thinker (Dale 2016b; Melegh, Szeleny 2016; Nakayama 2020).

333

Florin Poenaru

References Balibar, Étienne. 2022. “Ukraine’s Sovereignty Depends on NATO”. Iai News, 3 November. https://iai.tv/ articles/etienne-balibar-ukraines-sovereignty-depends-on-nato-auid-2294?_auid=2020&fbclid=IwAR1H 151g9CgLWDsrfkZLfHs3_ZYrAeqZY3oBLuQae5dRD7Zti6n5Wa3IOsw. Accessed 14 March 2023. Burawoy, Michael. 2003. “For a Sociological Marxism: The Complementary Convergence of Antonio Gramsci and Karl Polanyi.” Politics and Society 31/2: 193–261. https://doi.org/10.1177/0032329203252270 Cangiani, Michele. 2022. “Does Peace Have a Chance?” Karl Polanyi Society, 25 April. https://www.­ karlpolanyisociety.com/2022/04/25/does-peace-have-a-chance-michele-cangiani/. Accessed 14 March 2023. Dale, Gareth. 2016a. Reconstructing Karl Polanyi. Excavation and Critique. London: Pluto Press. ——— 2016b. “In Search of Karl Polanyi’s International Relations Theory.” Review of International Studies 42: 401–424. https://doi.org/10.1017/S0260210515000273 ——— 2022. “Karl Polanyi and Russia’s War on Ukraine.” Karl Polanyi Society, 25 April. https://www. karlpolanyisociety.com/2022/04/25/karl-polanyi-and-russias-war-on-ukraine-gareth-dale/. Accessed 14 March 2023. Desai, Radika and Kari Polanyi Levitt, eds. 2020. Karl Polanyi and Twenty-First-Century Capitalism. ­Manchester: Manchester University Press. Maté, Aaron. 2022. “NATO Prolongs the Ukraine Proxy War, and Global Havoc.” Substack, 19 September. https://mate.substack.com/p/nato-prolongs-the-ukraine-proxy-war?utm_source=substack&utm_ medium=email. Accessed 14 March 2023. Mearsheimer, John. 2001. The Tragedy of Great Power Politics. New York: W. W. Norton & Company. Melegh, Attila and Iván Szelényi. 2016. “Polanyi Revisited. Introduction.” Intersections. East European Journal of Society and Politics 2/2: 4–10. https://doi.org/10.17356/ieejsp.v2i2.246. Nakayama, Chikako. 2020. “Karl Polanyi as a precursor of world-systems theorists: an investigation of the theoretical lineage to Giovanni Arrighi.” In Radhika Desai, Kari Levitt eds. Karl Polanyi and twenty-first century capitalism. Manchester: Manchester University Press. Polanyi, Karl. 1937. Europe To-Day. London: W.E.T.U.C. ——— 2001. The Great Transformation. The Political and Economic Origins of Our Time. Boston: Beacon Press. ——— 2014. For a New West. Giorgio Resta and Mariavittoria Catanzariti eds. Cambridge: Polity Press. ——— 2016. Karl Polanyi. The Hungarian Writings. Gareth Dale ed. (Translated by Adam Fabry). Manchester: Manchester University Press. Streeck, Wolfgang. 2022. “Fog of War”. Sidecar, 1 March. https://newleftreview.org/sidecar/posts/fog-ofwar. Accessed 14 March 2023. Thomasberger, Claus. 2018. “Freedom, Responsibility and the Recognition of the Reality of Complex Society”. In Michael Brie and Claus Thomasberger eds. Karl Polanyi’s Vision of a Socialist Transformation. Montreal: Black Rose Books. Thomasberger, Claus. 2022. “Once Again: Universalism or Regional Planning?” Karl Polanyi Society, 25 April. https://www.karlpolanyisociety.com/2022/04/25/once-again-universal-capitalism-or-regionalplanning-claus-thomasberger/ Accessed 14 March 2023. Zizek, Slavoj. 2022. “The Ukraine Safari.” Project Syndicate, 13 October. https://www.project-syndicate. org/commentary/ukraine-war-shameful-stance-of-western-left-by-slavoj-zizek-2022-10. Accessed 14 March 2023.

334

28 THE DOUBLE MOVEMENT IN THE GLOBAL SOUTH Critiques, extensions, and new horizons Geoff Goodwin

Introduction1 Karl Polanyi devoted the last decade of his academic career to directing a comparative research project that located and explored economic life in settings as diverse as Mesoamerica, South Asia, and West Africa. The main volumes that emerged out of this pioneering project – Trade and Market in the Early Empires and Dahomey and the Slave Trade – built on Polanyi’s earlier engagement with history, sociology, and anthropology, which laid the foundations for his novel critique of liberal capitalism in The Great Transformation. To challenge the simplistic narrative of homo economicus that underpins (neo) classical economics and reveal the historical uniqueness and destructive tendencies of liberal capitalism, Polanyi drew heavily on ethnographic research conducted in the early 20th century, including Bronislaw Malinowski’s classic text Argonauts of the Western Pacific. Thus, while Polanyi’s analysis in The Great Transformation centres on Europe, especially England, it is also rooted in the experiences of non-European cultures and societies. This makes the concepts that Polanyi elaborated in the book and his later research a particularly good starting point to explore social and political change in the Global South, especially as capitalist markets have spread more widely and penetrated more deeply since the mid-20th century, generating similar tensions to the ones Polanyi depicts during the earlier development of capitalism in Europe.2 Yet capitalist development in the Global South has been a highly uneven process, both across space and time. This complexity presents certain challenges to Polanyian concepts; however, it also provides fertile terrain to critique, revise, and extend them. In this chapter, I will seek to demonstrate this by tracing the footsteps of the “double movement” in the Global South and drawing out conceptual insights from scholars who have applied, evoked, and critiqued the concept in this context. The original formulation of the double movement, which is central to Polanyi’s analysis in The Great Transformation, sees two competing forces – or “organising principles” – driving social and political change in Europe between the early 19th and early 20th centuries: the movement to commodify “fictitious commodities” – land, labour, money – and expand market relations and mentalities, on the one hand, and the “countermovement” against fictitious commodification and market domination, on the other. Although the countermovement – a broad cross-class societal response that took diverse political forms – ­partially decommodified fictitious commodities and generally improved socioeconomic conditions,

335

DOI: 10.4324/9781003336747-35

Geoff Goodwin

it was ultimately incompatible with classical liberal institutions, like the gold standard and free trade.3 The clash between the movement and countermovement led to the collapse of classical liberal capitalism in the early 1930s and the spread of alternative political economic regimes, including fascism and socialism. Hence, the double movement was a contradiction that generated profound crises and transformations and created the conditions for progressive as well as regressive social and political change. Polanyi formulated the double movement to analyse this social and historical context and made no claims about its wider validity. Yet numerous scholars have detected similar dynamics in the Global South in the late 20th and early 21st centuries, suggesting the contradiction of the double movement is a more enduring and widespread feature of capitalism. I will seek to show that the complexities of social and political change in the Global South and the colonial character of capitalism are best captured by reading the double movement as a continuous historical process, which takes distinct forms in different social and historical contexts and comprises a plurality of movements and countermovements (Goodwin 2018, 2022). This formulation builds on the work of scholars who take a more radical reading of Polanyi (for example, Lacher 1999; Cangiani 2011) as well as research that I have undertaken on land and water in Ecuador (for example, Goodwin 2017, 2021). Conceptualising the double movement as a continuous historical process captures long run processes of commodification and contention and reveals fundamental tensions and contradictions in capitalism. Only by taking such a view is it possible to comprehend the impact of capitalist-colonial expansion on the Global South and the enduring influence of unequal global structures and relations. The rest of this chapter is organised as follows. I will start by discussing Polanyi’s excursions to the Global South in The Great Transformation and decolonial and postcolonial critiques of his analysis. I will also indicate how insights from structuralist and dependency thinkers from the Global South shine new light on the double movement. The work of authors who have applied or evoked the double movement in the Global South will then be discussed. Here, I will show the general, if not universal, tendency to focus on neoliberal capitalism and overlook longer term processes and struggles. I will then propose a reading of the double movement that captures these long-run dynamics, arguing that the double movement is best understood as a continuous historical process that takes distinct forms in different social and historical settings and comprises a plurality of movements and countermovements. I will conclude by signposting future avenues of research and analysis.

Polanyi in the Global South With his analytical lens fixed on Europe, especially England, Polanyi only offers a glimpse of the double movement in the Global South in The Great Transformation. He suggests countries that were under Western colonial rule in the 19th and 20th centuries “lacked the prerequisite, political government” to contain or resist commodification through the state (see, for example, p. 192). The liquidation or weakening of non-market institutions through various forms of colonial intervention compounded the lack of state protection (see, for example, pp. 171–172; see also Burawoy 2003). Thus, Western colonialism restricted or destroyed state and non-state forms of decommodification while simultaneously expanding market institutions and relations, leaving colonised peoples highly exposed to capitalist market forces. The constant threat of military intervention helped impose capitalist markets, especially “if the region in question happened to be rich in raw materials required for European manufactures” (2001 [1944]: 217). Polanyi’s fleeting analysis in the Global South simplifies a highly uneven process and understates the capacity of colonised peoples to innovate and resist in the face of capitalist-colonial expansion. Yet it still provides important insights into the double movement. 336

The double movement in the Global South

First, the comparison Polanyi makes between socioeconomic change in Europe and colonised countries in the Global South indicates the importance of the pace of change to his analysis. Illustrating the centrality of the enclosure movement to Western colonialism, he notes: Thus, the colonists may decide to cut the breadfruit trees down in order to create an artificial food scarcity or may impose a hut tax on the native to force him to barter away his labor. In either case the effect is similar to that of Tudor enclosures with their wake of vagrant hordes. (2001 [1944]: 172) Polanyi therefore suggests that the commodification of land and labour generated similar effects in the Global South: scarcity, dislocation, hunger, homelessness, and poverty. A key difference, however, was the speed of this transformation, with colonised peoples often subjected to a rapid and violent process of socioeconomic change. Polanyi claimed that the enclosure and commodification of land in the Global South was often “compressed into a few years or decades”, whereas similar processes took several centuries to unfold in Europe (ibid.: 188; see also Undurraga et al. 2021). This suggests that the rate as well as the direction of socioeconomic change should be incorporated into double movement research and analysis (see, for example, Liu 2022). Second, Polanyi stressed that the introduction and spread of capitalist markets was not a mere economic transformation; it was also a cultural and psychological phenomenon. He thus hints at the enduring cultural and cognitive legacies of colonialism. This, in turn, helps explains why the market mentalities that so troubled Polanyi (1968 [1947]) have become entrenched rather than obsolete since the collapse of classical liberal capitalism in the 1930s. To understand the complexity and unevenness of double movements in the Global South, it is crucial these issues are factored into the analysis (see, for example, Zayed 2022).

Decolonial and postcolonial critiques of Polanyi Decolonial and postcolonial scholars, who also stress the cognitive and epistemic legacies of colonialism, have provided further insights into the double movement through their critical engagement with Polanyi, particularly his analysis in The Great Transformation. Bhambra (2021) takes aim at Polanyi for seeing capitalism emerge autonomously in Europe and viewing colonialism as a mere extension rather than integral element of this historical process (see also Bhambra and Holmwood 2018). Conceptualising capitalism as intrinsically colonial, as Bhambra suggests, encourages situating the double movement in a global process of capitalist-colonial development that started to gather pace in the 15th and 16th centuries (Goodwin 2022). Several conceptual and methodological points follow on from this. Here, I will highlight two. First, it suggests greater critical attention should be paid to how historical processes of slavery, colonialism, and imperialism have shaped double movement dynamics over the long run. Bhambra notes, for example, that the creation of European social democracies and welfare states in the 20th century was heavily reliant on the income and resources colonising nations extracted from colonised peoples. Thus, she posits: The welfare state was not an historic achievement of the working class. It was an amelioration of national conditions of deprivation funded by the labour and resources of racialized others and colonial subjects (2021: 319). 337

Geoff Goodwin

Whether one is willing to relegate the European working class to a minor role in the creation of welfare states (I, for one, am not), the more important point that Bhambra highlights is that European countermovements were directly or indirectly supported by slavery, colonialism, and imperialism (this could also be extended to East Asian colonial powers, like Japan). For example, the capacity of the British state to institutionalise the countermovement that Polanyi described was significantly enhanced by the income and resources that the British state, firms, and investors extracted from colonised peoples (Goodwin, forthcoming; see also Fraser 2022). In addition to revealing the colonial character of the countermovement that emerged in Britain during classical liberal capitalism, this reveals a wider point: what is possible for countermovements in one historical setting might be impossible in another due to changing colonial structures and relations (and vice versa…). A global and historical perspective is thus required to fully grasp the dynamics of the double movement. Second, the colonial character of capitalism draws attention to how the unequal global economic structures and relations that have emerged through centuries of capitalist-colonial development shape double movements. The centre-periphery concept, first elucidated by Prebisch (1986 [1949]), provides one framework to explore this (Goodwin, forthcoming). In broad terms, the concept suggests the capitalist world economy split into two blocks during capitalist-colonial expansion, with the core (Global North) the main hub of industrial production and technological progress and the periphery (Global South) the principal site of agricultural, mineral, and oil production. Exports from the periphery supported industrialisation in the centre, enabling core countries to reap the benefits of mass industrial production and maintain their privileged position at the centre of the capitalist world economy. Dependency scholars from Latin America, like Dos Santos (1970), drew on the centre-periphery concept to show how countries in the core dominated nations in the periphery through production, trade, finance, and technology, trapping them in a perpetual state of underdevelopment (see also Amin 1974; Polanyi-Levitt 2002 [1970]; Rodney 2018 [1972]). The transformations that the capitalist world economy has experienced since the late 20th century show that centre-periphery structures and relations are not immutable. A handful of ­countries – for example, Taiwan, South Korea, Singapore – have moved from the periphery to the core through state managed capitalism, while China has emerged as a global economic powerhouse. Yet periphery structures and relations remain important features of the capitalist world economy and countries in the Global North continue to benefit enormously from being at the centre (see Hickel et al. 2022). Taken together, these points suggest that double movements are likely to take different forms, follow alternative rhythms, and generate diverse effects in the core and periphery. The literature dealing with these dynamics provides further conceptual and methodological insights, which help push double movement analysis further.

Double movements in the Global South during neoliberal capitalism Most scholars have used the double movement to analyse social and political change in the Global South during neoliberal capitalism, which began to emerge in the late 1970s, before spreading, evolving, and becoming hegemonic, if highly variegated, by the turn of the century (Harvey 2005; Peck 2010a). The majority view this as a definitive break in the history of capitalism and see contemporary double movements start at this stage. Silva (2009), who analyses political change in Latin America during the neoliberal era, exemplifies this view, claiming structural adjustment programmes constituted the “first step toward the recommodification of labor and land” (2009: 24) in the 1980s. Latin American states then 338

The double movement in the Global South

“subordinated politics and social welfare to the needs of an economy built on the logic of free-­ market economics” (2009: 3) through more comprehensive neoliberal restructuring in the 1990s and 2000s. Thus, as was the case in England in the 19th century (Polanyi [1944] 2001), (neo) liberalisation in Latin America was a consciously planned political process instituted through the state. It was, however, actively supported by international organisations, especially the International Monetary Fund and the World Bank, indicating the centrality of Bretton Woods institutions to contemporary double movements in the Global South (Stewart 2006). The literature shows other similarities and differences with the double movement that Polanyi described. First, some scholars frame the countermovements that have emerged to contest neoliberal capitalism in the Global South as “defensive” reactions against the removal or dilution of the protection – or decommodification – provided by pre-existing social and political institutions (for example, Almeida 2007; Silva 2009; Udayagiri and Walton 2003). This was certainly a feature of the countermovement that Polanyi described in Europe. Nonetheless, it also had important “offensive” qualities; that is, it was instrumental in crafting new social and political institutions that expanded decommodification through and outside the state. Thus, it was not so much a reactionary, backward-looking response to fictitious commodification and market domination, even if some actors in the countermovement certainly fell into this category, but a forward-looking movement that sought to make societies and polities anew. Recognising both the defensive and offensive characteristics of countermovements is essential for understanding double movements in the Global South (Goodwin 2018, 2022 – see next section). The countermovement that Polanyi (2001 [1944]) documented in Europe took regressive as well as progressive forms. However, double movement research in the Global South has given much more attention to the latter than the former. Indeed, countermovements are generally assumed to be a progressive force and the regressive and destabilising features of the countermovement that Polanyi described are largely overlooked. Nonetheless, the double movement literature provides useful insights into the actors involved in contesting neoliberal capitalism. There are parallels and divergences with countermovements during classical liberal capitalism. On the one hand, we see familiar faces, like trade unions and peasant communities. There is also evidence to suggest that capitalists have been involved. Langan (2023), for example, argues that owners of small and medium size businesses in Ghana have mobilised against the dislocation caused by economic liberalisation, echoing the participation of elements of the capitalist class in the countermovement in Europe in the late 19th and early 20th centuries (Polanyi 2001 [1944]: 139–140, 201–209; see also Salverda 2019). On the other hand, we see the emergence of new actors, including informal workers, environmental activists, and indigenous movements. The participation of indigenous peoples in countermovements has been particularly important in some countries in the Global South (see, for example, Undurraga and Márquez 2021). Yet they have also been actively involved in challenging fictitious commodification and market domination in settler colonial settings in the Global North (see, for example, Horowitz, 2023), indicating another crucial link between colonialism and countermovements. Class structures and relations, which intersect with ethnicity and race, also differ to the context Polanyi analysed, with most Global South countries having vast informal sectors and highly fragmented class structures, making it harder to articulate class-based demands that can lead to broader societal improvements (Sandbrook 2011). Evidence to support a defining feature of Polanyi’s class analysis – that is, the capacity of classes to drive changes that benefit society at large (2001 [1944]: 161–163) – is thus even more difficult to find in the Global South. Nonetheless, extending Polanyi’s insight to include other social groups – for example, race, gender, age – and intersecting them with class might prove valuable (Goodwin 2022; see also McMichael 2023; 339

Geoff Goodwin

Rayner and Morales Rivera, 2020). By, for example, limiting the destruction of the Amazonian rainforest, indigenous peoples who mobilise to resist land commodification not only defend their own habitats and cultures but protect global climatic conditions and distant ecosystems and water sources. Thus, we see glimpses of what Polanyi captured with his class analysis, suggesting his important conceptual insight can be extended to include other social groups, while recognising that they operate according to different logics and at alternative scales. Coming back to the Amazonian region, the effects of indigenous resistance to land commodification, are not neatly bound by human borders and also extend into non-human worlds (animals, plants, rivers…). This suggests that we need to think beyond “society” – Polanyi’s anthropocentric frame of reference in The Great Transformation – especially in the context of climate change and environmental crisis. Regardless of their location, form, and orientation, contemporary countermovements must overcome significant obstacles to challenge fictitious commodification and market domination in the Global South. Sandbrook (2014: 12) hints at this, noting that the “countermovement has the numbers, but it is stymied by a cacophony of voices and divergent interests” (see also Sandbrook 2011, 2022). Levien (2007) provides empirical support for this claim in his analysis of India’s National Alliance of People’s Movements (NAPM). He argues that the problems that the NAPM experienced reflect the wider challenge of establishing what he calls a “Polanyian constituency” (2007: 144); that is, individuals, groups, and classes experience market dislocation in diverse ways, which opens the door to the “proliferation of single-issue movements whose commonality is hard to perceive and unity difficult to build” (2007: 119; see also Levien 2021). The influence and power of international development actors can bring further complications. In Haiti, for example, Steckley at al. (2022) argue that non-governmental organisation (NGO) funding has created a market for social movements and community organisations, which has compelled countermovements to adopt the form of a commodity and succumb to capitalist market logics. There is also evidence to suggest that countermovements simply fail to materialise. Li (2014: 181–182) claims that the lack of resistance to land commodification, the conversion of landowners into wage labourers, and the emergence of competitive capitalist relations in rural Sulawesi, Indonesia suggests “followers of Polanyi who might have expected to find a locally generated countermovement that put social protection ahead of profit, have to confront the processes identified by Marx”. The suggestion that Polanyian theory can be fruitfully extended by connecting it to Marxism is an important point that has been made by several other scholars (for example, Burawoy 2019; Cangiani 2011; Goodwin 2022; Polanyi-Levitt 1990). The more precise analytical insight that emerges from Li’s analysis, however, is that it is crucial not to assume that countermovements will automatically appear to challenge fictitious commodification and market domination. Yet the literature also shows that countermovements have been able to generate sufficient political power to challenge and reconfigure capitalism at various scales. The clearest evidence of this has come from Latin America where waves of protests in the 1980s and 1990s created the conditions for the proliferation of left-leaning governments in the early 21st century– the so-called “pink tide” (Almeida 2007; Fernandez Garcia 2021; Munck 2013; Sandbrook 2014; Silva 2009). Pink tide governments were not always socially progressive, and some, like the Correa government in Ecuador and the Morales administration in Bolivia, were centralised and authoritarian. Nonetheless, as Munck (2013: 157) notes, “they undermined the notion the market can simply impose its logic on society”. Broadly speaking, this was achieved by giving the state a more central role in regulating capitalist markets, (re) building infrastructure, improving public services, and expanding social protection. The outcomes of these policies were diverse – and, sometimes, perverse – but poverty and, to a lesser extent, inequality declined, and the lives 340

The double movement in the Global South

of millions of Latin Americans improved following decades of crisis and decline during earlier waves of neoliberal restructuring. Countermovements have had important political effects elsewhere in the Global South during the neoliberal era. Gemici and Nair (2016) document a wide range of activity, with resistance to extractive industries, land grabs, and environmental degradation particularly prevalent and “covering almost every part of the Global South” (2016: 684; see also Diepart et al. 2023; McMichael 2023; Paredes 2022). These cases, they note, cover an “astonishing geographical distribution, covering almost every part of the Global South” (2016: 584). Their analysis centres on social and communal mobilisation outside and, at times, against, the state; however, as the recent Latin American experience illustrates, state institutions have also been mobilised to limit fictitious commodification and market domination. Stokes-Ramos (2023) indicates this in her double movement analysis of land politics and planning in Puerto Rico, a Caribbean country that remains under the colonial control of the United States but has some legislative autonomy. Her investigation focuses on a land law that was introduced in 2015 to classify and regulate agricultural land, following decades of escalating land commodification and socioenvironmental dislocation. One important feature of the political process behind the introduction of the law was the space that it created for public discussion and engagement. In addition to enabling members of various social groups and classes to influence the design of the legislation, this participatory process also created a constituency of supporters who challenged efforts to dilute and marginalise the legislation after it was introduced. The participatory process was far from perfect, as Stokes-Ramos (2023) acknowledges, and the degree of land decommodification it achieved was relatively limited. Nonetheless, the case hints at the potential of participatory and direct forms of democracy to chart a progressive course through the contradiction of the double movement (see also, Córdoba et al. 2021; Diepart et al. 2023; Goodwin 2017, 2021; Sankar and Suresh 2023). Countermovements have also been evident in authoritarian contexts, not least in China where the state has played a central role in containing as well as expanding capitalist markets in recent decades. Several studies have explored these dynamics. Liu (2022), for example, characterises recent efforts to regulate the use and distribution of land as a form of state-directed countermovement. Whereas state agencies actively encouraged the distribution of land to capitalist firms in the opening decades of the early 21st century, they have recently started to slowdown this process to control “the pace, form, and extent of land and labor commodification” (2022: 2). This, he contends, is the latest attempt of the Chinese state to balance capital accumulation and social stability, seeking to contain social unrest, on the one hand, while protecting and advancing capitalist interests, on the other. Countermovements of extremely diverse forms have therefore been evident in multiple settings during neoliberal capitalism. Progressive changes have proved difficult to sustain, however, indicating the inherently unstable and contradictory nature of the double movement (Dale 2016; Goodwin 2022). Latin America, once again, provides ample evidence of this. The pink tide started to ebb in the mid-2010s as global economic conditions worsened, corruption scandals multiplied and left-leaning governments struggled to maintain the sense of progress and hope that had characterised their opening years in office. One by one, pink tide governments started to fall, including in Argentina, Ecuador, Brazil, and, momentarily, Bolivia. Meanwhile, a deep macroeconomic crisis in Venezuela triggered a massive wave of outward migration as millions of Venezuelans sought refuge from rampant inflation and economic collapse. Right-wing Latin American politicians and parties started to regroup, seizing on the crisis in Venezuela to discredit leftist governments and policies.This resulted in the weakening or dismantling of pink tide government reforms and programmes; fictitious commodification deepened, and socioeconomic conditions worsened. 341

Geoff Goodwin

Drawing on Polanyi to understand this “roller coaster’” of political change, Garcia Fernandez (2021) argues that it has followed a double movement logic. One factor that prevented left governments from building sustainable political projects, he argues, was their reluctance or inability to transform macroeconomic structures. The centre-periphery concept, discussed above, enables us to push this point further. While Latin American economies have undergone important changes in recent decades, most remain directly or indirectly reliant on primary exports, which generates significant inequality and volatility, especially in South America, where countries tend to depend more heavily on the export of agriculture, oil, and minerals (Goodwin 2023; see also Paredes 2022). This came sharply into focus in the 2010s when the collapse of oil prices caused significant political-economic dislocation and, in the case of Venezuela, a full-blown economic crisis. The failure of pink tide governments to implement more radical macroeconomic reforms came home to roost, leaving them exposed to sustained attacks from the right. Institutionalising the countermovement through the state in Latin America is thus significantly constrained by the peripheral position that the region occupies in the capitalist world economy. Making reference to a framework that I have elaborated to analyse decommodification (Goodwin 2018, 2022, forthcoming – see next section), Garcia Fernandez (2021: 316) also claims that pink tide governments failed to take sufficient steps to decommodify fictitious commodities, generally opting for “intervening” and “limiting” forms of decommodification rather than the more radical “preventing-reversing” varieties. He notes, for example, that leftist governments could have provided much more support for worker cooperatives and landless and homeless movements (see also Goodwin 2017; Itzigsohn and Rebón 2015). The lack of radicalism on the part of left governments cannot, of course, be understood outside of economic and social structures, and countermovements and decommodification are thus closely connected to the position Latin American countries occupy in the capitalist world economy. This underlines the centrality of centre-periphery structures and relations to double movement dynamics (Goodwin, forthcoming). The failure of pink tide governments to radicalise decommodification brings another factor into focus that is crucial for double movement analysis: class power (Burawoy 2019). Pink tide governments faced opposition from domestic elites, segments of the middle class, multinational corporations, international investors, and multilateral organisations, and this limited the degree of social and political change. Evans (2020) demonstrates this in his Polanyian analysis of Brazilian politics during and after the pink tide, arguing that the capitalist class, particularly Brazilian financial elites, played a lead role in bringing down the centre-left project led by Luiz Inácio Lula da Silva and Dilma Rousseff and supporting the rise of the far-right president, Jair Bolsonaro. Evans (2020: 685) identities another crucial factor that contributed to Bolsonaro’s ascent to the presidency: the gradual demobilisation of the social bases that supported the Lula and Rousseff governments. This highlights the challenge of institutionalising progressive countermovements through the state. Social organisation and mobilisation are crucial at every stage of the political and bureaucratic process, not merely to support the promulgation of laws and policies and creation of new state institutions (Goodwin 2018, 2022; see also Stokes-Ramos 2023). However, as Evans suggests, it is extremely difficult to sustain this level of organisation, commitment, and pressure over the long run, not least because of the tactics that governments use to control and deradicalise social movements and community organisations. Dinerstein (2020) captures this dilemma with her concept of “translation”, which refers to the political tensions and frustrations that emerge when the ideas, proposals, and practices of progressive social collectives are converted into the institutional language of law and policy. The problem, Dinerstein explains, is rooted in the intrinsic need for capitalist states to support capitalist relations, practices, and processes, on the one hand, and ensure laws and policies fulfil these basic objectives, on the other (see also, Wright 2019). 342

The double movement in the Global South

Demands and proposals that are not legible from this epistemological and ontological perspective are excluded from the translation process or deradicalised and reformulated to support capitalist relations and processes. Translation was a major issue during the pink tide (Dinerstein 2020; Goodwin et al. 2022) and adds another layer of complexity to institutionalising countermovements through the state in the Global South. The political roller coaster in Latin America has not stopped with the ebbing of the pink tide, however. Mass mobilisations in Chile and Colombia provided a platform for left governments to be elected in the early 2020s, and social movements and left-leaning political parties have challenged the right-wing Lasso government in Ecuador. Meanwhile, governments with strong links to pink tide administrations have returned to power in Argentina, Bolivia, and Brazil, and remained in office in Venezuela. The right remains powerful, however, including leaders and constituencies that are more inclined to dictatorship than democracy. Latin America thus remains at the frontline of resistance to neoliberal capitalism as well as reactionary efforts to retain it, albeit in its “zombie” form (Peck 2010b). How should this be interpreted? Is it the latest phase of a wave of double movements that started with the rise of neoliberal capitalism? Or is it part of a much longer cycle of contestation linked to capitalist-colonial expansion in Latin America?

The double movement as continuous historical process To explore questions such as these the historical range of double movement analysis must be extended. The formulation of the double movement that I have proposed (Goodwin 2018, 2022), which builds on scholars who take a radical reading of Polanyi (for example, Cangiani 2011; Lacher 1999) as well as my own research in Ecuador (for example, Goodwin 2017, 2021), supports this type of analysis.4 Extending the contradiction that Polanyi saw in classical liberal capitalism (Polanyi-Levitt 2013), this reading sees the double movement as a continuous historical process that takes distinct forms in different social and historical contexts. From this perspective, capitalism is seen to comprise two dialectically related forces: the movement towards incorporating labour, land, and money into capitalist markets and expanding the range of capitalist market relations (commodification) and the countermovement towards limiting, stopping, or reversing fictitious commodification and challenging capitalist market domination (decommodification). These two forces are located on a spectrum with the self-regulation of capitalist markets at one end and the absence of capitalist markets at the other. Hence, (de) commodification is understood as a gradational, dialectic process. Capitalism evolves through a simultaneous process of commodification and decommodification without resolving the underlying contradiction between these two forces. Capitalist states perform a dual role in this process, creating, maintaining, and expanding capitalist markets on the one hand, and regulating, limiting, and, at times, eliminating them, on the other. Fictitious commodification is at the heart of the contradiction of the double movement. The fundamental aim of countermovements is to decommodify fictitious commodities and challenge capitalist market domination through the regulation of markets and the protection, expansion, and creation of noncapitalist market relations, practices, and institutions. Within this reading, countermovements take two analytically distinct forms: defensive and offensive. The former involves protecting existing types of decommodification while the latter entails creating new forms. Countermovements follow multiple paths to secure decommodification through and outside the state. The state–countermovement relationship is multidirectional with democratic and authoritarian states capable of embracing, weakening, or crushing countermovements. No ideological or normative characteristics are a priori attached to countermovements and 343

Geoff Goodwin

confronting fictitious commodification and market domination can take various political forms. The double movement is understood to comprise multiple processes that occur at different scales and involve different social groups and classes. Hence, the double movement is conceptualised as a plurality of movements and countermovements rather than a singular process that moves uniformly towards or against capitalist markets. This formulation has several advantages. First, reading the double movement as a continuous historical process encourages more critical analysis of the capitalist processes and regimes that emerged in the Global South in the decades (and centuries) before neoliberal capitalism and the dislocation and contention that accompanied earlier waves of fictitious commodification and capitalist market expansion. The point is not to ignore the enormous social, political, and economic changes that have taken place over the last five decades, but to ensure underlying continuities and contradictions are not overlooked. Undurraga and Márquez (2021) indicate the importance of a historical approach in their double movement analysis of Mapuche resistance to capitalist development in Chile, explaining how earlier waves of fictitious commodification triggered indigenous countermovements, especially at the start of the 20th century when the forestry industry expanded. I have also shown how indigenous peoples navigated and challenged land commodification in Ecuador in the decades before neoliberal capitalism took hold (Goodwin 2017, 2021; see also Rayner 2017). In both cases, these struggles were linked to longer run processes of capitalist-colonial development, reinforcing the importance of integrating colonialism into double movement analysis. Taking a longer-term view of the double movement, also allows for a fuller analysis of the global interconnectedness of capitalism. Fictitious commodification and market domination in the Global South have long underpinned incomes, consumption and accumulation in the Global North, as the centre-periphery concept suggests, and viewing the double movement as a continuous historical process enables the deeper analysis of these long-run structures and processes (Goodwin 2022, forthcoming; see also Bhambra, 2021; Fraser 2022). It is important, however, to recognise the geographical and historical unevenness of capitalist-colonial development and avoid applying the double movement to settings it is not well equipped to explain. Alcock (2023) demonstrates this in his historical analysis in China, claiming that it was not until state socialism gave way to state capitalism in the early 1980s that the double movement became a useful concept to understand social and political change in the country. Reading the double movement as a continuous historical process thus requires sensitivity to history, context, and different temporalities of capitalist development in the Global South. Second, distinguishing between defensive and offensive countermovements supports this more historical and contextual analysis. This categorisation widens the range of countermovement activity to capture struggles related to long-term processes of fictitious commodification and incorporate countermovements that seek to create and transform as well as protect and reform. Hence, countermovements are not reduced to defensive reactions against the dilution or removal of decommodification or the “recommodification” of fictitious commodities (cf. Silva 2009). It is important to note that this classification is not binary or static. Countermovements can exhibit defensive and offensive characteristics synchronically or sequentially. Indigenous struggles in Ecuador, for example, have simultaneously sought to protect long-standing customs, practices, and institutions and create new forms of social and political organisation, such as the plurinational state (Goodwin 2017, 2021; Rayner 2017; Rayner and Mérida 2019; see also Itzigsohn and Rebón 2015). Third, conceptualising the double movement as a plurality of movements and countermovements encourages more fine-grained, situated analysis of (de) commodification processes that occur at different scales and involve distinct social groups and classes (see Goodwin 2017, 2021; Levien 2007; McMichael 2023; Zayed 2022). The point is not to discourage macro-level analysis but to ensure important smaller-scale processes and struggles are not overlooked in the search for 344

The double movement in the Global South

changes of the magnitude that Polanyi describes in The Great Transformation. Together, what we might call the “plural” and “singular” readings of the double movement create a richer tapestry of Polanyian research and analysis and establish a stronger foundation for understanding contestation, crisis, and change in capitalist societies. Fourth, embedded in this reading of the double movement is a new conceptualisation of decommodification, which allows for more precise analysis of capitalist dynamics (Goodwin 2018, 2022, forthcoming). From this perspective, decommodification is understood as a gradational, dialectic process that takes three distinct analytical forms: (i) intervening (ii) limiting (iii) preventing-­reversing. Each involves a material element but also includes social, cultural and ecological dimensions, making them distinctly Polanyian. The first – intervening – involves directly intervening in capitalist markets to regulate fictitious commodification; examples include minimum wages, capital controls, agriculture tariffs, and rent controls. The second – limiting – relates to supplementary mechanisms that reduce exposure to fictitious commodification and potentially create space for alternatives; examples include unemployment benefits, pensions, food banks, and basic income schemes. The third – preventing-reversing – involves defending, maintaining or creating mechanisms that avert, subvert or reverse fictitious commodification; examples include public parks, collective labour practices, squatting, community water systems, communal land, worker cooperatives, and peasant farming. Although most of these forms require some degree of state intervention, decommodification is also realised outside the state. Recognising this is especially important in the Global South as non-state actors play a crucial role in tackling fictitious commodification and defending or creating alternatives to capitalist markets and relations. It is also important to recognise that decommodification realised through the state can be a source of tension and violence in the Global South. A national park, for instance, might remove land from the market and create new decommodified spaces for some social groups and classes, but it might also displace indigenous peoples from their land and destroy their cultures and livelihoods. Paraphrasing Harvey (2003), such cases amount to “decommodification by dispossession”, indicating the added challenges of institutionalising countermovements through the state in (post) colonial settings (Goodwin, forthcoming).

Conclusion In this chapter, I have traced the footsteps of the double movement in the Global South, starting with Polanyi’s brief excursions in The Great Transformation, before going on to discuss the work of decolonial and postcolonial scholars who have critiqued Polanyi’s analysis and authors who have applied or evoked the double movement across the Global South. Decolonial and postcolonial critiques of Polanyi suggest shifting colonial and imperial relations weigh heavily on double movement dynamics. Scholars who have used the double movement to analyse social and political change in the Global South provide further insights, indicating the diverse ways fictitious commodification and market domination have been contested and navigated, especially during neoliberal capitalism. I have suggested the most fruitful way to analyse these processes is to read the double movement as a continuous historical process that takes different forms in distinct historical and social settings. I have also proposed conceptualising the double movement as a plurality of movements and countermovements that take place at alternative scales and involve different social groups and classes. Following this reading of the double movement allows greater scope to incorporate decolonial and postcolonial insights and undertake more fine-grained, place-based analysis that captures the diversity and unevenness of capitalist-colonial development in the Global South. New research that moves in this direction could breathe new life into Polanyian theory and analysis and generate penetrating insights into the past, present, and future (s) of capitalism. 345

Geoff Goodwin

Notes 1 I am grateful to Michele Cangiani and Claus Thomasberger for inviting me to write this chapter and for helping me improve it with their insights and guidance. I would like to dedicate it to Kari Polanyi-Levitt, whose intelligence, kindness, and generosity inspired me to engage more deeply with her father’s work. I remain solely responsible for any errors or omissions. 2 Space prevents a discussion of debates about the use of binary categories, like Global South/Global North and centre/periphery. See Sud and Sánchez-Ancochea (2022) for a timely and important contribution. 3 I use the concept of ‘decommodification’ to capture what Polanyi (2001 [1944]) generally refers to as ‘social protection’. I explain my reading of decommodification in the final section of this chapter. For a fuller discussion, see Goodwin (2018, 2022, forthcoming). 4 See Goodwin (2018, 2022, forthcoming) for a fuller discussion of this framework. See also Sandbrook (2022).

References Alcock, Rowan. 2023. “Polanyi in Rural China: Beyond the Double Movement”. New Political Economy 28/6: 986–1000. Almeida, Paul D. 2007. “Defensive Mobilization: Popular Movements against Economic Adjustment Policies in Latin America”. Latin American Perspectives 34/3: 123–39. Amin, Samir. 1974. “Accumulation and Development: A Theoretical Model”. Review of African Political Economy 1/1: 9–26. Bhambra, Gurminder K. 2021. “Colonial global economy: Towards a theoretical reorientation of political economy.” Review of International Political Economy 28/2: 307–322. Bhambra, Gurminder K. and Holmwood, John. 2018. “Colonialism, Postcolonialism and the Liberal Welfare State”. New Political Economy 23/5: 574–587. Burawoy, Michael. 2003. “For a Sociological Marxism: The Complementary Convergence of Antonio Gramsci and Karl Polanyi”. Politics & Society 31/2: 193–261. ——— 2019. “Afterword: Resolving Polanyi’s Paradox”. In Gareth Dale, Chris Holmes and Maria Markantonatou eds. Karl Polanyi’s Political and Economic Thought: A Critical Guide, 213–224. Newcastle: Agenda Publishing. Cangiani, Michele. 2011 “Karl Polanyi’s Institutional Theory: Market Society and its ‘Disembedded’ Economy”. Journal of Economic Issues 45/1: 177–198. Córdoba, Diana, Peredo, Ana María and Chaves, Paola. 2021. “Shaping Alternatives to Development: Solidarity and Reciprocity in the Andes during COVID-19”. World Development 139: 2–10. Dale, Gareth. 2016. Reconstructing Karl Polanyi. London: Pluto Press. Diepart, Jean-Christophe, et al. 2023. “The Recognition and Formalization of Customary Tenure in the Forest Landscapes of the Mekong Region: a Polanyian Perspective”. Journal of Land Use Science 18/1: 211–226. Dinerstein, Ana Cecilia 2020. “Why Does the Political Left Fail Grassroots Movements?” Open Democracy 20 May. Dos Santos, Theotonio. 1970. “The Structure of Dependence”. American Economic Review 60/2: 231–236. Evans, Peter. 2020. “Polanyi Meets Bolsonaro: Reactionary Politics and the Double Movement in Twentyfirst Century Brazil”. International Sociology 35/6: 674–690. Fraser, Nancy. 2022. Cannibal Capitalism. London and New York: Verso Books. Garcia Fernández, Ramon. 2021. “South America in the Twenty-First Century: Twenty Years on a Roller Coaster”. Journal of Economic Issues 55/2: 306–317. Gemici, Kurtulus and Nair, Manjusha. 2016. “Globalization and Its Countermovement: Marxian Contention or Polanyian Resistance?” Sociology Compass 10/7: 580–591. Goodwin, Geoff. 2017. “The Quest to Bring Land Under Social and Political Control: Land Reform Struggles of the Past and Present in Ecuador”. Journal of Agrarian Change 17/3: 571–593. ——— 2018. “Rethinking the Double Movement: Expanding the Frontiers of Polanyian Analysis in the Global South”. Development and Change 49/5: 1268–1290. ——— 2021. “Fictitious Commodification and Agrarian Change: Indigenous Peoples and Land Markets in Highland Ecuador”. Journal of Agrarian Change 21/1: 3–24. ——— 2022. “Double Movements and Disembedded Economies: A Response to Richard Sandbrook”. ­Development and Change 53/3: 676–702.

346

The double movement in the Global South ——— forthcoming. “Uneven Decommodification Geographies: Exploring Variation Across the Centre and Periphery”. EPA: Economy and Space, early view Goodwin, Geoff, O’Hare, Patrick, Alderman, Jonathan and Sheild Johansson, Miranda. 2022. “The Politics of Coproduction During Latin America’s ‘Pink Tide’: Water, Housing, and Waste in Comparative Perspective”. World Development 157: 1–14. Harris, Kevan and Scully, Ben. 2015. “A Hidden Counter-Movement? Precarity, Politics, and Social Protection Before and Beyond the Neoliberal Era”. Theory and Society 44/5: 415–444. Harvey, David. 2003. The New Imperialism. Oxford and New York: Oxford University Press. ——— 2005. A Brief History of Neoliberalism. Oxford and New York: Oxford University Press. Hickel, Jason, Dorninger, Christian, Wieland, Hanspeter and Suwandi, Intan. 2022. “Imperialist Appropriation in the World Economy: Drain from the Global South through Unequal Exchange, 1990–2015”. Global Environmental Change 73: 1–13. Horowitz, Leah. S. 2023. “The Double Movement and the Triple-Helix: Divestment, Decommodification, and the Dakota Access Pipeline”. EPA: Economy and Space 55/6: 1137–1354Itzigsohn, José and Rebón, Julián. 2015. “The Recuperation of Enterprises: Defending Workers’ Life-world, Creating New Tools of Contention”. Latin American Research Review 50/4: 178–196. Lacher, Hannes. 1999. “The Politics of the Market: Re-Reading Karl Polanyi”. Global Society 13/33: 313–326. Langan, Michael. 2023. “The Double Movement in Africa: a Nkrumah-Polanyi Analysis of Free Market Fatigue in Ghana’s Private Sector”. Review of International Political Economy 30/2: 463–486. Levien, Michael. 2007. “India’s Double-Movement: Polanyi and the National Alliance of People’s Movements”. Berkeley Journal of Sociology 51: 119–149. ——— 2021. “Fictitious but Not Utopian: Land Commodification and Dispossession in Rural India”. In D. A. Ghertner and R. W. Lake eds, Land Fictions: The Commodification of Land in City and Country, 26–43. Ithaca, NY: Cornell University Press. Li, Tania. 2014. Land’s End: Capitalist Relations on an Indigenous Frontier. Durham, NC: Duke University Press. Liu, Tiantian. 2022. “Enclosure with Chinese Characteristics: A Polanyian Approach to the Origins and Limits of Land Commodification in China”. Journal of Peasant Studies 50/4: 1347–1375. McMichael, Philip. 2023. “Updating Karl Polanyi’s Double Movement for Critical Agrarian Studies”. Journal of Peasant Studies 50/6: 2123–2144. Munck, Ronaldo. 2013. Rethinking Latin America: Development, Hegemony and Social Transformation. Basingstoke: Palgrave Macmillan. Paredes, Maritza. 2022. “One Industry, Different Conflicts: A Typology of Mining Conflicts”. The Extractive Industries and Society 9: 1–9 Peck, Jamie. 2010a. Constructions of Neoliberal Reason. Oxford and New York: Oxford University Press. ——— 2010b. “Zombie Neoliberalism and the Ambidextrous State”. Theoretical Criminology 14/1: 104–110. Polanyi, Karl. 1935. “The Essence of Fascism”. In J. Lewis et al. eds. Christianity and the Social Revolution, 359–394. London: Victor Gollancz. ——— 1968 [1947]. “Our Obsolete Market Mentality”. In G. Dalton ed. Primitive, Archaic and Modern Economies: Essays of Karl Polanyi, 59–77. New York: Anchor Books. ——— 2001 [1944]) The Great Transformation: The Political and Economic Origins of our Time. Boston, MA: Beacon Press. Polanyi-Levitt, Kari, ed. 1990. The Life and Work of Karl Polanyi. Montreal: Black Rose Books. Polanyi-Levitt, Kari. 2002 [1970]. Silent Surrender: The Multinational Corporation in Canada. Montreal: McGill-Queens University Press. ——— 2013. From the Great Transformation to the Great Financialization. London and New York: Zed Books. Prebisch, R. (1949/1986) El desarollo economico de la America Latina y algunos de sus principales problemas. Desarrollo Económico 26/103: 479–502. Rayner, Jeremy. 2017. “The Struggle for Quito’s Communes: Negotiating Property and Citizenship in Plurinational, Post-Neoliberal Ecuador”. Urban Anthropology 46/1, 2: 95–134. Rayner, Jeremy and Mérida Conde, Juan eds. 2019. Las Comunas del Ecuador: Autonomía, Territorio y la Construcción del Estado Plurinacional. Quito: IEAN. Rayner, Jeremy and Morales Rivera, Valeria. 2020. “The Counter-Movement through the Lens of Generation: Emancipation, Protection, and Neoliberalization in Costa Rica, 2000–2018”. Journal of Latin American and Caribbean Anthropology 25/4: 569–589.

347

Geoff Goodwin Rodney, Walter. 2018 [1972]. How Europe Underdeveloped Africa. London: Verso Books. Salverda, Tijo. 2019. “Facing Criticism: An Analysis of (Land-Based) Corporate Responses to the LargeScale Land Acquisition Countermovement”. Journal of Peasant Studies 46/5: 1003–1020. Sandbrook, Richard. 2011. “Polanyi and Post-Neoliberalism in the Global South: Dilemmas of Re-­embedding the Economy”. New Political Economy 16/4: 415–443. ——— 2014. Reinventing the Left in the Global South: The Politics of the Possible. Cambridge, UK: Cambridge University Press. ——— 2022. “Polanyi’s Double Movement and Capitalism Today”. Development and Change 53/3: 647–675. Sankar, Vinay and Suresh, Lavanya. 2023. “The Political Ecology of Small Freshwater Bodies in Kerala, India”. World Water Policy 9/1: 45–46 Silva, Eduardo. 2009. Challenging Neoliberalism in Latin America. Cambridge, MA: Cambridge University Press. Steckley, Joshua, Boumba, Nixon, and Marylynn Steckley. 2022. “Commodifying the Countermovement: How Foreign Funding Turns Haitian Social Movements into Commodities”. In Paul Stacey ed. Global Power and Local Struggles in Developing Countries, 36–58. Brill: Leiden. Stewart, Frances. 2006. “Do We Need a New ‘Great Transformation’? Is One Likely?” Research Paper 2006/36. Helsinki: UNU-WIDER. Stokes-Ramos, Hannah. 2023. “Rethinking Polanyi’s Double Movement through Participatory Justice: Land Use Planning in Puerto Rico”. EPA: Economy and Space, 55/8: 19701988. Sud, Nikita and Sánchez-Ancochea, Diego. 2022. “Southern Discomfort: Interrogating the Category of the Global South”. Development and Change 53/6: 1123–1150. Udayagiri, Mridula and Walton, John. 2003. “Global Transformation and Local Countermovements: The Prospects for Democracy under Neoliberalism”. International Journal of Comparative Sociology 44/4: 309–343. Undurraga, Tomás and Márquez, Felipe. 2021. “The Unfinished Development of the Frontier: A Karl Polanyi Reading of the Conflict between the Forestry Industry, Mapuche Communities and the Chilean State”. Sociología & Anthropología 11/1: 69–94. Valderrama, Paula. 2019. “Democracy”. In G. Dale, C. Holmes and M. Markantonatou eds, Karl Polanyi’s Political and Economic Thought: A Critical Guide, 171–189. Newcastle: Agenda Publishing. Wright, Erik Olin. 2019. How to Be an Anti-Capitalist in the 21st Century. London and New York: Verso. Zayed, Hany. 2022. “The Political Economy of Revolution: Karl Polanyi in Tahrir Square”. Theory, Culture and Society 39/3: 75–97.

348

29 THE ECOLOGICAL THOUGHT OF KARL POLANYI AND HIS CONTRIBUTION TO ECOLOGICAL ECONOMICS1 Federico Zuberman Introduction The analysis of the society-economy-nature link has been the subject of discussion for a long time (Marx 2004; Odum 1971; Podolinsky 2004). This debate, approached by different schools of economic and environmental thought, is characterized not only by the techniques, possibilities, and ways of assessing environmental impacts in the economy, but also by a deep discussion on the concept of development (Escobar 2014; Martínez Alier 2021). Currently, it is possible to establish two predominant approaches to this issue. First, that of Environmental Economics, which has neoclassical roots and is willing to value natural resources and externalities through market mechanisms, and second, that of Ecological Economics, which understands the economy as an open system within a larger system, the natural or biophysical world, and therefore considers that other valuation mechanisms should be used apart from the chrematistic ones. In the latter converge a large number of heterogeneous researchers and thinkers who understand the economy-societynature relationship in a critical way, recognizing that in that linking there are different relations of power, inequality, and domination, which are always characterized by conflict (Barkin et al. 2012; Zuberman 2020). In addition to developing lines of research with these critical perspectives, one of the great contributions made by Ecological Economics was to trace the historical path of environmental economic thought. The aim of this paper is to highlight the important and inspirational contributions of Polanyi’s work and thought in this path. Despite he is rarely cited among authors of Ecological Economics, his notion of the economy as an institutionalized process, his unappealable argument against the possibility of an economy self-regulated by the market, the idea of “fictitious commodities” and the stress about dangers of an unembedded economy can be very useful in the analysis of the current ecological crisis.

A possible path in the history of environmental economic thought Around the 1970s, the environmental issue began to take center stage at the global level. Economics, meanwhile, found different ways of dealing with the problem from its point of view. Using as a background of the works of Arthur Pigou and Ronald Coase and following the tradition of

349

DOI: 10.4324/9781003336747-36

Federico Zuberman

analysis through market failures, externalities, and property rights, different instruments of monetary valuation were developed to incorporate these problems. These types of valuations were nothing more than a new appendix of Neoclassical Economics, called Environmental Economics and Natural Resources Economics (Pearce 2002). Since then, criticism has emerged of this view of the economy and its proposal regarding the management of natural resources. There is enough consensus to note the contributions of Nicholas Georgescu-Roegen as a cornerstone of Ecological Economics. In his most important work, The Entropy Law and the Economic Process (1971), he postulated that the economic system was actually embedded in a biophysical environment and was therefore subject to the laws of physics and thermodynamics. This challenged the economic thought showing that material and energy resources are finite, and that the generation of waste is a problem. While he used the term Bioeconomics in his writings, Georgescu-Roegen’s critique was the starting point for what years later will be the line of thought and research called Ecological Economics. Since its inception, Ecological Economics has established itself as a space for discussion, research, and action, mostly in the academic field, but with intervention and territorial commitment (Røpke 2004). In this sense, it has been dedicated to designing instruments for valuation and management of natural resources that incorporate other dimensions and take other valuation languages into account (Martínez Alier 2021). However, the activity of Ecological Economics was not limited solely to developing interesting indicators or new valuation methods. One of the most valuable contributions it has made has been to help review and rethink the origins and evolution of economic thought in its environmental aspect. Some of the most important works in this sense are those of José Manuel Naredo (1996) and those of Joan Martínez Alier (1995a). Above all, from these very influential works it has been possible to trace a route that is now widespread among authors specialized in the economy-nature link (Ramos Gorostiza 2005; Román 2013). There are several authors who propose the French Physiocrats of the 17th century as a starting point in this path. This school, led by Francis Quesnay, understood that the central activity of the economy was agriculture, since it was the only activity that in effect yielded a net product, relegating manufacturing and commerce to the simple fact of transforming and distributing what already had been generated. It is inferred from this vision that economic activity was fundamentally based on the creative power of Nature. Authors like Naredo take the Physiocrats’ idea that the economic circuit is a carousel of production, consumption, and growth, and they vindicate the organicist vision of the physical world, associating, at the very least, the idea of economic growth with physical growth. Naredo (1996) states that from then on, economic science continued to uncritically assume the ideas of production and growth as indisputable premises in the march toward progress, forgetting the context and the original nuances they proposed. With the development of economic thought during the period of the classical economists, the concern for Nature and the physical environment began to be relegated. Discussion focused only on the physical limits of economic growth and failed to reflect on the place of nature in the economy, which was very rarely considered explicitly. For example, although David Ricardo’s thought has allowed for many contemporary methodological developments in environmental economics, he built a theoretical framework based on the assumption that land is just a factor of production, also defined as indestructible, inexhaustible, and fixed in quantity. The question of the limit to growth can also be seen in the formulation of the law of diminishing returns, but it was nothing more than a nod to the role played by the natural substratum in the economy. Economics began to deal only with appropriable, assessable, and exchangeable goods and services ignoring the

350

The ecological thought of Karl Polanyi and ecological economics

particularity of ecosystem services and the neoclassicals definitively hollowed out the idea of natural sustenance of the economy that the Physiocrats had started. Karl Marx’s vision of nature and the economic system is still debated. Although his ideas were not discordant with the thinking in which progress meant unlimited growth, economic development, and emancipation from the limits imposed by nature, his criticism of the capitalist system laid the theoretical foundations for what would later be the analysis of social metabolism (FischerKowalski and Haberl 1998; Toledo 2013). His concept of metabolism (Stoffweschel) taken up by Schmidt (1976), is an example of this. Though these arguments show an interesting ecological view in Marx, the questioning of his negative response to Sergei Podolinsky’s thesis is well known (Burket and Foster 2006; Martínez Alier 1988). It is important to note that, while both Marx or subsequent Marxists focused their analyses on capital/labor relations, relegating the study of the capital/nature link, in recent years there has been a notable proliferation of works that recover the ecological perspective that can be taken from Marx’s texts and that could have been the basis for an “eco-socialist” line of thought. But in this historical line they emphasize that in parallel to those thinkers of the late 19th and early 20th centuries, there were those who questioned the idea of thinking of the economy as a closed circuit without considering the physical environment in which it develops. Important examples of such thinkers include Sergei Podolinsky and, after him, Vernadsky who associated the economic circuit with a model of energy flows, and Frederick Soddy and Patrick Geddes who questioned the separation of the financial cycle from its real material and energetic sustenance. These thinkers, most of whom were not economists, are today considered the forerunners of Ecological Economics (Martínez Alier 1995b).

Karl Polanyi’s contribution It is striking that in this path of economic thought, where numerous precursors of an ecological vision of the economy are mentioned, the work of Karl Polanyi is not always seen as relevant. Despite the fact that there are some notable mentions – such as those of Daly and Farley (2004), Martínez Alier (2013), Aguilera Klink (2015) or Azamar Alonso et al. (2021) – it remains necessary to emphasize its importance. In this sense, the objective of this chapter is to highlight Polanyi’s role in the history of economic thought and regarding the link between society, the economy and nature. In addition, the usefulness of his critical vision for the analysis of contemporary environmental issues will be emphasized. Polanyi’s work was not just another criticism of the market economy. His theoretical and empirical criticism of the idea of a social organization based on self-regulated market economy implies a deep and consistent criticism of modernity, industrial society, the fallacious idea of growth as progress and development, and of unreflective and atomized knowledge as it is sometimes still proposed even today (Lisboa 2008). It is worth noting that just as Polanyi maintained the impossibility of separating work from the other activities of life, the ideas manifested by his work were not separated from a deep sensitivity for nature. Polanyi did not need to be a naturalist, biologist or chemist, like so-called precursors of Ecological Economics, to realize and affirm that “the problem of man’s material livelihood should be subjected to total reconsideration” in order to “enlarge our freedom of creative adjustment and thereby improve our chances of survival” (Polanyi 1977: xliii). This statement, which seems to have been made in the midst of the ecological crisis of the 21st century, belongs to the heading of his posthumous work The Livelihood of Man. This implies, as will be seen, that in his vision of the

351

Federico Zuberman

economy, even with the prominence that he assigned to anthropology and the cultural institutions that create societies, there is a clear idea of materiality and of the physical-natural support in which the economy develops.

The material and biophysical support of the economy Let us begin with Polanyi’s substantive conception of the economy. He defines it as An instituted process of interaction between man and his environment, which results in a continuous supply of want satisfying material means. Want satisfaction is ‘material,’ if it involves the use of material means to satisfy ends; in the case of a definite type of physiological wants, such as food or shelter, this also includes the use of so-called services. The economy is then an instituted process. (Polanyi 1957: 248) By defining the economic system in this way, he is recognizing that, as a process, meaning a movement of circulating elements, the system is charged of materiality. Nevertheless, he clarifies that Reduced to a mechanical, biological, and psychological interaction of elements that economic process would possess no all-round reality. […] Hence the transcending importance of the institutional aspect of the economy. (Ibid.: 249) This “substantive” concept of economics differs from the “formal” one that comes from the classical and neoclassical tradition. Formal economics refers to the well-known and widely used definition in which a situation of choice arises in the face of insufficient means, also called the scarcity postulate. In reality, however, according to Polanyi, such ‘rational’ choice mechanism, and in general formal economics, focuses on a specific economic system, the market system, of which it is an expression. Therefore, “outside of a system of price-making markets economic analysis loses most of its relevance as a method of inquiry into the working of the economy” (ibid.: 248). Here one of the great differences of Polanyi’s is noticed, not only with the followers of the classical and neoclassical tradition but also with many critics of it. If Naredo (2004: 87), for instance, attributes to the Physiocrats the virtue of “trying to reconcile their reflections on venal or pecuniary values, with that economy of nature that extended its object of study to the entire biosphere and its resources”, Polanyi, on the other hand, blames them for having built the notion of formal economy. As noted above, Naredo regrets that after that “audacious synthesis between chrematistic and the economy of nature” proposed by the French physiocratic school, economic science has detached itself from a strong idea of materiality, of valuing nature, and then of an association between economic growth and physical growth, thereby continuing to uncritically further the idea of production and growth as indisputable premises in the march toward progress. On this point there is a remarkable coincidence. Naredo and Polanyi agree that as economics became consolidated as a scientific discipline, it suffered a double dislocation (Lisboa 2008). On the one hand, it was detached from ethical or, more strictly speaking, moral considerations. On the other hand, the disregard of the biophysical background led economics to deal only with exchange values, through an accounting system. Polanyi, in turn, goes further by raising the question that “neither Quesnay nor Smith aimed at the establishment of the economy as a

352

The ecological thought of Karl Polanyi and ecological economics

sphere of social existence that transcends the market, money or price – and insofar as they did, they failed in their aim” (Polanyi 1977: 8). The central issue is, then, the fallacious identification of “economic phenomena” as “market phenomena”. For Polanyi, Quesnay’s produit net economy was A mere phantom in the process between man and nature of which the economy is an aspect. The alleged ‘surplus’ whose creation he attributed to the soil and to the forces of nature was no more than a transference to the ‘Order of Nature’ of the disparity selling price is expected to show against cost. (Ibid.) In short: “The construct of a surplus was merely the projection of the market pattern on a broad aspect of that [human beings’] existence – the economy” (ibid.: 9). Furthermore, reinforcing his questioning of classical economic thought, Polanyi adds that this produit net of the Physiocrats was also the father of Marx’s concept of surplus value and its derivatives: Thus was the economy impregnated with a notion foreign to the total process of which it forms part, a process that knows neither cost nor profit and is not a series of surplus-­ producing actions. Nor are physiological and psychological forces directed by the urge to secure a surplus over themselves. (Ibid.: 8) With this paragraph, it is clear that Polanyi already fully understood the divorce of (market and capitalist) economy from nature, that Ecological Economics would talk about decades later. But it is worth using his own words to revive the sensitivity with which he carried out his analysis: Neither the lilies of the field, nor the birds in the air, nor men in pastures, fields, or factories – tending cattle, raising crops, or releasing planes from a conveyor belt – produce surpluses from of their own existence. Labor, like leisure and repose, is a phase in the self-sufficient course of man through life. (Ibid.: 8–9) Therefore, for Polanyi’s substantive approach to the economy, it is not enough to introduce the idea that the economic circuit is in an open system with flow of materials and energy as some Ecological Economics handbooks or articles repeat, if that circuit, which represents the economic system in general, is fallaciously defined according to the particular form it assumes in the market and capitalist economy. For Polanyi, the “substantive meaning” of the economy “as instituted process” Derives from man’s dependence, for his living upon nature and his fellows. It refers to the interchange with his natural and social environment, insofar as this results in supplying him with the means of material want satisfaction. (Polanyi 1957: 243) This means that, in addition to considering the economic circuit as an open system with a flow of materials and energy that functions within the broader system of nature, it must be considered as “instituted”, that is, immersed in and organized by a social system.

353

Federico Zuberman

The key point of the fictitious commodities The critique of the notion of the formal economy and the fallacious identification of economy and market was already underway in Polanyi’s most important work, The Great Transformation, published in 1944. There, he explains in detail, through theoretical and empirical foundations, his criticism of the utopian idea of conceiving an economy self-regulated by the market. The issue is not only the fact of not recognizing other economies beyond the market economy. In Chapter 6 of this work he introduces a key element that has much to do with his clear ecological vision of the economy: the fictitious commodities. “A market economy – he explains – is an economic system governed, regulated and oriented by market prices; order in the production and distribution of goods is entrusted to this self-regulating mechanism” (Polanyi 2001: 71). This self-regulation implies that all production would be destined for sale in the market and, analogously, all income would come from the market as well. In this system, the production and distribution of goods and services would be regulated by the mechanisms of supply and demand for those goods. The concept of commodities then implies the market mechanism that, through prices, allows articulating the processes of industrial production. By definition, a commodity is an object produced for sale on the market. But, if each element necessary for production must necessarily be regulated by a market that assigns prices, the basic elements of production – labor, land, and money – should be organized in markets too. Thus, as Polanyi narrates in this work, the development of capitalism since the 15th century attempted at generating markets for those elements. But, in his own words, Labor and land are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists. To include them in the market mechanism means to subordinate the substance of society itself to the laws of the market. (Polanyi 2001:75) And if, in fact, we stick to the definition of commodities given above, neither work, nor land, nor money could be considered commodities since they have not been produced for sale on the market. Hence, Polanyi has defined them as fictitious commodities. If William Petty, in the 17th century, already considered labor as the father of wealth and the earth as its mother, it is evident that among economists – including Marxist critics – analyses focused on the father and not on the mother. Polanyi, on the other hand, considers both: Labor is only another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man. (Polanyi 2001: 76) The manifest sensitivity demonstrated by Polanyi for the problems that the advance of the market economy and the modern industrial society generated for humanity and the planet is reflected in the fact that he clearly identified and detailed the threats represented by treating both as merchandise. It is worth drawing one more quote from the already mentioned chapter (Polanyi 2001: 76): For the alleged commodity ‘labor power’ cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the 354

The ecological thought of Karl Polanyi and ecological economics

bearer of this peculiar commodity. In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to that tag. Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Among other virtues, the merit of Polanyi’s work was knowing how to build his theoretical framework with the empirical contributions provided by the studies of history and anthropology without ceasing to reflect on the events of his time (Coraggio 2012; Rendueles 2004). This is perhaps what allows us to find in his writings a constant sense of anticipation. In this sense, the profound description made in The Great Transformation of the process of commodification of work and land between the 16th and 19th centuries is not reduced to a simple chronological account of enclosures and conversions, or the abolition of Speenhamland laws. On the contrary, it refers more broadly to the constant need of the “liberal creed” to incorporate into the self-regulating market mechanism everything in its power. If we refer to our times, the neoliberal project – which since the last decades of the 20th century has done nothing but try to continually expand the free-market system and with it the commodification of human beings and nature – confirms that the satanic mill to which Polanyi alluded is fully valid and topical. To illustrate the satanic mill of the 21st century, it is not necessary to strictly adhere to the old enclosures and the classical parceling of communal lands. Throughout Latin America, from the Mexican Ejido, to the Central Andes, to the Amazon Jungle, there are numerous communities of peasants, indigenous people, and descendants of African slaves pressured by agribusiness or by ‘extractivist’ projects that force them permanently to new subdivisions that the advance of capitalism demands, denying the possibility of the existence of other non-market economies. Furthermore, if the 21st century brings something new, it is that of generating commodities from any service that nature can offer. Let us remember that Polanyi clarifies that “what we call land is an element of nature inextricably interwoven with man’s institutions” and that “the economic function is but one of many vital functions of land” (Polanyi 2001: 187). In that sense, we find ourselves in a process in which it is not only the land but those vital functions of the land that are in the crosshairs of being commodified. Current climate change and gas emission reduction policies propose nothing more than the creation of a global carbon market. It seems there is a parceling out of the atmosphere instead of the land, establishing emission rights that can be tradable between different countries and even different companies. Fresh water seems to be following the same path. Instead of guaranteeing its access, as should be the case for an essential element for everyone’s life, a fallacious democratization is chosen through market pricing. It is emblematic of how deeply this “liberal creed” of which Polanyi spoke of has taken hold: even some ecologists have come to justify the possibility of listing environmental services on formal markets. The North American Society of Ecology published in one of its Issues in Ecology that this would not only increase care and protection, but also the price system would alert society to changes in supply or condition of the ecological systems that generate them (Daily et al. 1997). Biopiracy and the application of patents to new varieties of seeds deserve a separate chapter for themselves. They aim to establish property rights not only at the expense of the work of selecting genotypes carried out by different indigenous communities for several centuries, but also by appropriating the very life of new species created in laboratories. The same happens in the pharmaceutical industry when laboratories try to patent species that were recently found in the most unexplored corners of the planet. 355

Federico Zuberman

The countermovements: a contribution to political ecology The expansion of the market system, incorporating man and nature as commodities, could not be without resistance. In analyzing this point, Polanyi confronts some Marxists, distancing himself from the analysis of “class interest” defined in economic terms. While acknowledging that classes play an unavoidable role in social transformations, they provide only a limited explanation of long-term movements in society. However, this does not imply a disengagement from the issue of conflict. On the contrary, Polanyi’s analysis focuses on what he has called a double movement. In his view, the dynamics of modern society are governed by a double movement: that of the market, expanding continuously, but accompanied and coexisting with a countermovement that controls said expansion. In the author’s own words: Let us return to what we have called the double movement. It can be personified as the action of two organizing principles in society, each of them setting itself specific institutional aims, having the support of definite social forces and using its own distinctive methods. The one was the principle of economic liberalism, aiming at the establishment of a self-regulating market, relying on the support of the trading classes, and using largely laissez-faire and free trade as its methods; the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization, relying on the varying support of those most immediately affected by the deleterious action of the market – primarily, but not exclusively, the working and the landed classes – and using protective legislation, restrictive associations, and other instruments of intervention as its methods. (Polanyi 2001: 138) It is worth reviewing the quote verbatim to emphasize that when the author refers to the principle of social protection, he explicitly incorporates the need to protect nature from the devastating effects of the market system. As pointed out in the previous section, the movement of the market has been expanding strongly to every corner of the planet since the last decades of the 20th century. And at the same time there are more and more social movements that act in its defense against the fictitious commodification. However, they are not only the traditional unions of workers or rural laborers demanding just better pays. They are a heterogeneous but numerous groups of social movements fighting for a counterhegemonic globalization, as defined by Boaventura de Sousa Santos (Santos 2002), or for the consolidation of alternative modernities and alternatives to modernity, as defined by Arturo Escobar (Escobar 2002). Anti-globalization activists, indigenous communities, peasant movements or local community organizations that are the ones who closely perceive and sense The dangers involved in the exploitation of the physical strength of the worker, the destruction of family life, the devastation of neighborhoods, the denudation of forests, the pollution of rivers, the deterioration of craft standards, the disruption of folkways, and the general degradation of existence including housing and arts, as well as the innumerable forms of private and public life that do not affect profits. (Polanyi 2001: 139) In Polanyi’s own terms (ibid.), “the trading classes had no organ to sense the danger involved” in all this. Although his analysis of the “double movement” is explicitly addressed to the 19thcentury liberal laissez-faire capitalism, we can adopt it as a model for the following stages of “transformed” capitalism, up to the current one of triumphant neoliberalism. 356

The ecological thought of Karl Polanyi and ecological economics

Among these current counterhegemonic movements some identify Other Economies (Cattani 2004). That is, other economic practices in addition to those that occur in the market, based in other principles, and besides to being really existing, prove to be entirely viable (Coraggio 2011). In other analyses, authors such as Martínez Alier (1995a, 2021) have coined the term Popular Ecologism or Environmentalism of the Poor, to refer to this type of resistance, which has nothing to do with a certain postmaterialist environmentalism or Ecologism of the Rich that is not opposed to the fictitious commodification of nature, but, on the contrary, frequently defends vested interests. These actors not always define themselves as environmentalists or ecologists. However, they are constantly immersed in environmental or ecological distributive conflicts, defending land, forests, water, or any kind of common goods. Fighting for climate and environmental justice and food sovereignty, against biopiracy, the deposition of hazardous waste, or the expansion of neoextractivism. As we can see, an antecedent of this possible articulation between Political Ecology and Ecological Economics can also be found in Polanyi’s texts.

The challenge of re-embedding the economy Polanyi’s analysis, written in the 1940s but looking back several centuries, seems nonetheless very timely. In one of his articles (1947: 109), he predicted: Our condition can be described in these terms: industrial civilization may yet undo man. But since the venture of a progressively artificial environment cannot, will not, and indeed, should not, be voluntarily discarded, the task of adapting life in such a surrounding to the requirements of human existence must be resolved if man is to continue on earth. No one can foretell whether such an adjustment is possible, or whether man must perish in the attempt. This sentiment, which seems to be tailored to the challenges of the century we live in, compels us to place the critical situation facing the planet today under Karl Polanyi’s lens. The global nature of the socio-ecological crisis makes it necessary to solve these problems urgently and with decisions made for that level of scale. Since the Stockholm Summit in 1972, the United Nations has held a series of Summits on Environment and Development, with the aim of establishing treaties and agreeing on different goals among countries in pursuit of sustainable development. However, these meetings have only been relatively successful. Although there has been an improvement in the degree of representativeness of the different countries involved and more and more resources and greater efforts are being allocated to resolve environmental issues, environmental problems are not only not resolved but, on the contrary, are aggravated. Emissions continue to rise, deforestation increases, the availability of water is increasingly restricted, fossil fuels continue to be used more and more, and biodiversity is increasingly threatened. The Polanyi’s view is also useful in this point. Although, as mentioned at the beginning, the close link between environmental, social and economic issues today is unquestionable, it may be argued that there are economic decisions that end up having a strong influence on environmental issues. The notion of the economy as an institutionalized process that has been described above assumes that “the human economy [...] is embedded and enmeshed in institutions economic and noneconomic. The inclusion of the noneconomic is vital” (Polanyi 1957: 250). If the economy is thought of as a sphere separate from society, this is nothing more than the result of a centurieslong historical process that Polanyi describes and characterizes as “the genealogy of an economic society” (Polanyi 1947: 113). No wonder, then, that the environmental conferences and summits are not the only ones that draw guidelines on environmental issues. Economic growth and the 357

Federico Zuberman

expansion of markets are usually the objectives of international summits of different types of organizations, which usually have even a lower level of representativeness, and therefore of legitimacy, than the aforementioned summits. Summits such as those of the World Trade Organization (WTO), the highly publicized meetings of the G20 and the Financial Stability Board (FSB); the World Economic Forum and its annual meeting in Davos or the secret meetings of the Bildelberg group; the recommendations (and impositions) of the World Bank and the International Monetary Fund (IMF) are the ones that truly install the public agenda of the world economy and govern, to a large extent, what happens behind the scenes of national economies. Contradictorily, these economic prescriptions generate as many or more environmental problems than the environmental summits attempt to solve (Zuberman 2010). It would seem that the objective of collaborating with the economic growth of the countries as argued by these organizations should be something unquestionable. But proposing greater economic growth will inevitably bring with it higher levels of consumption and higher emissions, greater use of renewable and non-renewable resources, greater pressure on ecosystems, greater generation of waste, etc. It is not by chance that the market society is the only one in the entire history of humanity that has generated a global ecological crisis, putting the survival of the entire civilization at risk. As Polanyi says (1947: 114), “The Market mechanism moreover created the delusion of economic determinism as a general law for all human society”. Polanyi’s work shows us that this type of society was the only one that has tried to impose an economic sphere “sharply delimited from the other institutions in society” (ibid.: 111) where “instead of the economic system being embedded in social relationships, these relationships were now embedded into the economic system” (ibid.: 114). Respecting the terms of the author, we speak then of a market society with an unembedded economy. In this sense, even though these international summits and meetings have recently tried to show a “green” image and allocate some lines of their communiqués to “sustainable development” and to future generations, it is clear that their goal is none other than to increase the level of consumption, which is not only unfair and unequal, but also impossible to generalize and sustain over time. Recovering Polanyi’s terms, this doesn’t just mean ignoring the risks of a disembedded economy, it is to ignore the history of the last centuries. The period that he lived through clearly showed the consequences of long years of liberal self-regulating market project that imploded in world wars and totalitarian governments. In this sense, the current challenge of the socio-ecological question seems similar: to find the way to re-embed the economy in society, on the basis of the awareness that society has one planet to inhabit.

Conclusion A review of Karl Polanyi’s work offers us convincing proof that his thought and his theoretical formulations had a clear notion of the importance of the natural support on which the economy is based, as proposed by Ecological Economics. From here, two important conclusions emerge. First, his reading should not be ignored when reviewing the thinkers who have dedicated themselves to thinking about and questioning the society-economy-nature relationship. In this sense, his critical vision of capitalism was able to warn clearly and in anticipation about the environmental problems that could arise in a market economy, and the necessary society’s response to such conflicts. Second, his work is a great contribution to thinking about the ways to face the challenges posed by the 21st century. Polanyi’s ideas show us two important paths: first, recognizing that the market is only one of the possible organizing and regulating principles of material production and reproduction,

358

The ecological thought of Karl Polanyi and ecological economics

but not the only one, and, second, that in these other principles there are some of the necessary keys to re-embed the economy as a delimited sphere, as a part of and governed by society – in view a fairer and more sustainable future.

Note 1 Thanks to Samuel Brooks of Williams College, USA for his contribution in the translation of this paper.

References Aguilera Klink, Federico. 2015. Economía y naturaleza humana, volviendo a Smith y Marx. Polis Revista Latinoamericana 41. https://journals.openedition.org/polis/10909 Azamar Alonso, Aleida, Jose Carlos Silva Macher and Federico Zuberman. 2021. Economía ecológica latinoamericana. Buenos Aires: CLACSO. Siglo XXI. Barkin, David, Fuente Carrasco and Mario y Tagle Zamora, Daniel. 2012. La significación de una Economía Ecológica radical. Revista Iberoamericana de Economía Ecológica 19: 1–14. Burket, Paul and John Bellamy Foster. 2006. Metabolism, energy, and entropy in Marx’s critique of political economy: Beyond the Podolinsky myth. Theory and Society 35: 109–156. Cattani, Antonio David. (ed.). 2004. La Otra economía. Buenos Aires: Editorial Altamira-UNGS-OSDE. Coraggio, José Luis. 2011. Principios, instituciones y prácticas de la economía social y solidaria. In Coraggio, J. L. ed., Economía social y solidaria. El trabajo antes que el capital. Quito: Abya Yala Ediciones. ——— 2012. Karl Polanyi y la otra economía en America Latina. In: Karl Polanyi. Textos escogidos, pp. 47–78. Buenos Aires. CLACSO-UNGS. Daily, G. C., S. Alexander, P. R. Ehrlich, L. Goulder, J. Lubchenco, P. A. Matson, H. A. Mooney, S. Postel, S. H. Schneider, D. Tilman y and G. M. Woodwell. 1997. Ecosystem services: Benefits supplied to human societies by natural ecosystems. Issues in Ecology 2, 1–17. Spring 1997. Daly, Herman and Joshua Farley. 2004. Ecological economics: Principles and application. Washington, DC: Island Press. Escobar, Arturo. 2002. Globalización, desarrollo y modernidad planeación, participación y desarrollo, pp. 9–32. Medellín: Corporación Región Ed. ——— 2014. La invención del desarrollo. Colombia: Ed. Universidad del Cauca. Fischer-Kowalski, Marina and Helmut Haberl. 1998. Sustainable development: Socio-economic metabolism and colonization of nature. International Social Science Journal 50: 573–587. Georgescu-Roegen, Nicholas. 1971. The entropy law and the economic process. Cambridge, MA: Harvard University Press. Lisboa de Melo, Armando. 2008. A atualidade de Karl Polanyi para a reconstrução do pensamento econômico. Revista Otra Economia II/3: 7–26. Martínez Alier, Joan. 1988. El marxismo y la economía ecológica. Revista Mientras Tanto 35/October: 127–147. ——— 1995a. De la economía ecológica al ecologismo popular. Montevideo: Icaria/Nordan. ——— 1995b. Los principios de la economía ecológica. España: Fundación Argentaria. ——— 2013. Karl Polanyi: Historia social y antropología económica. Ecología Política 45 : 122–124. ——— 2021. El ecologismo de los pobres. Conflictos ambientales y lenguajes de valoración. 6a ed. Icaria. Marx, Karl. 2004. Manuscritos económicos-filosóficos de 1844. Buenos Aires: Colihue. Naredo, José Manuel. 1987/1996. La economía en evolución. Historia y perspectivas de las categorías básicas de la ciencia económica. Madrid: Siglo XXI. Naredo, J. M. 2004. La economía en evolución: invento y configuración de la economía en los siglos XVIII y XIX y sus consecuencias actuales. Manuscrits: Revista D’història Moderna 22: 83–120. Odum, Howard. 1971. Environment, power and society. New York: Wiley Interscience. Pearce, David. 2002. An intellectual history of environmental economics. Annual Review Energy Environ 27: 57–81. Podolinsky, Sergei. 2004. Socialism and the unity of physical forces. Organization&Environment 17/1: 61–75. Polanyi, Karl. 1947. Our obsolete market mentality. Commentary 3: 109–117.

359

Federico Zuberman ——— 1957. The economy as instituted process. In Polanyi, K., Arensberg, C. M. and Pearson, H. W. eds., Trade and market in the early empires. Chicago: Gateway Edition. ——— 1977. The livelihood of man. Ed. H. Pearson. New York. Academic Press. —— 2001. The great transformation: The political and economic origins of our time. Beacon Press. Boston. Ramos Gorostiza, José Luis. 2005. Medio natural y pensamiento económico: Historia de un reencuentro. Principios. Estudios de Economía Política 2: 47–70. Rendueles, César 2004. Karl Polanyi o la humildad de las ciencias sociales. Nexo. Revista de Filosofía 2: 155–166. Román, Marcela. 2013. Teoría económica y Ciencias ambientales. Un recorrido histórico: de los fisiócratas a los institucionalistas. Agronomía & Ambiente 33/1–2: 57–70. FAUBA, Buenos Aires. Røpke, Inge. 2004. The early history of modern ecological economics. Ecological Economics 50/3–4: 293–314. Santos, Boaventura De Sousa (coord.). 2002. Produzir para viver. Os Caminhos da produção não capitalista. Civilização Brasileira. Rio de Janeiro. Schmidt, Alfred. 1976. El concepto de naturaleza en Marx. Madrid: Siglo XXI. Toledo, Víctor Manuel. 2013. El metabolismo social: Una nueva teoría socioecológica. Relaciones. Estudios de historia y sociedad 34/136: 41–71. Zuberman, Federico. 2010. La obsoleta mentalidad de crecimiento del G20. Otra Economía 4/6: 167–180. ———. 2020. Heterogeneidades y vínculos en la Economía Social y la Economía Ecológica. Cuadernos de Economía Crítica 6/12: 115–136.

360

30 KARL POLANYI IN THE TRANSITION TO A LOW-CARBON AND BIODIVERSE SOCIETY Peadar Kirby

Introduction The emergence of the climate and biodiversity crises over recent decades and their growing importance in global and national political agendas point to the need for radical social transformations if humanity is to stabilise the conditions for organised social and economic life to continue. The reports of the Intergovernmental Panel on Climate Change (IPCC) and of its less well-known cousin, the Intergovernmental Panel on Biodiversity and Ecosystem Services (IPBES), which are the leading global sources of information and policy advice on climate change and biodiversity loss, place growing emphasis on the need for ‘profound transformations … to integrate sustainable development and 1.5°C-compatible pathways’ including ‘the values, ethics, attitudes and behaviours that underpin societies’ (IPCC 2018: 475). In its 2019 report, the IPBES (2019: 14) stated: Goals for conserving and sustainably using nature and achieving sustainability cannot be met by current trajectories, and goals for 2030 and beyond may only be achieved through transformative changes across economic, social, political and technological factors. This context is the starting point for this chapter’s examination of the possible contributions Karl Polanyi’s oeuvre can make to offer a badly needed theoretical framework that helps inform the scale and nature of the transformations required. It also helps to understand the impediments that have blocked for decades effective and adequate action to achieve the necessary transformations. The chapter begins by highlighting some of the theoretical deficiencies, limitations and inconsistencies that characterise how transformation is considered in these reports. The following section argues that Polanyi offers a uniquely relevant theoretical framework through which to understand the nature of the transformations required, and identifies some important contributions that can be drawn from Polanyi’s work. The chapter goes on to critique some dominant social democratic interpretations of Polanyi, arguing that he offers a fuller and more demanding critique of the current technoeconomic paradigm and gives clarity to what might constitute the transformations called for both by the IPCC and the IPBES if we are to transition to a low-carbon and biodiverse society.

361

DOI: 10.4324/9781003336747-37

Peadar Kirby

Transformations: what transformations? While the IPCC reports are very influential in setting the frameworks and the goals of policy (the dominant global policy goal now is to keep global warming to within 2°C or 1.5°C above preindustrial levels), they are far less useful in giving clarity about the means to achieve the goals. The scientific evidence laid out is increasingly stark even when presented in the very careful and parsed way in which the reports are written, including stating the levels of certainty about each assertion made. In contrast to this, much of the future projections about what is likely to happen and which therefore inform policy options (and in particular the role that technologies, some of them not yet developed to the scale necessary, might play in reducing emissions) rest on Integrated Modelling Assessments (IAM), which has the consequence that the claim for “reducing demand, sufficiency, or even degrowth […] is not reflected at all in the modelling part” (Schumacher 2022). The 2019 IPBES report is characterised less by internal inconsistency and more by the limited range of interventions recommended to achieve transformative change. The report identifies five main interventions or levers as it calls them that can generate transformative change. These are incentives and capacity-building; cross-sectoral cooperation; pre-emptive action; decision-making in the context of resilience and uncertainty, and environmental law and implementation. While each of these are worthwhile interventions, they are unlikely to result in ‘the evolution of global financial and economic systems to build a global sustainable economy, steering away from the current limited paradigm of economic growth’ as the report calls for (IPBES: 18–19). Similarly, the 2022 IPCC1 report is high on ambition but lacking in the means sufficient to meet it. Its agenda is ‘shifting development pathways towards sustainability’ (ibid.: 3). This would involve eradicating extreme poverty and providing decent living standards to all, addressing inequality and many forms of status consumption, shifting to balanced, healthy diets while reducing food loss and waste, policies to induce lifestyle or behaviour changes, and sufficiency policies to avoid demand for energy, materials, land and water while delivering human wellbeing for all within planetary boundaries. These transformative changes are to be carried out by a combination of individual agency through social change agents so that ‘these bottom-up socio-cultural forces catalyse a supportive policy environment which enables changes’ (TS-106). Finally, the IPCC admits that decoupling economic growth from emissions growth isn’t happening at the scale required thus raising major questions about the current dominant model being used to transition to a low-carbon society, namely a climate capitalism. This is indeed a radically transformative agenda but it fails completely to acknowledge the reality of a market society and the social and political obstacles that must be overcome in order to carry out a fundamental transformation. What is missing is an appreciation of power and politics, power not only in the sense of the elites who dominate but also of the ways in which it is structured in our neoliberal capitalist societies where the balance between public and private power, state and market, has tipped very much in the direction of the latter (though, of course, the state has often been actively promoting this). Politics is the means to change this and necessarily involves contestation by civil society actors. These are the big questions that lead us to turn to the work of Polanyi.

Polanyian contributions In introducing Polanyi to the discussion, we are simply acknowledging that social change cannot be separated from theoretical reflections that accompany and give direction to the transformation. What is striking about the politics of transitioning to a low-carbon and biodiverse society is the absence of any clear theoretical script. While the limits of a predominantly technological approach 362

Polanyi in the transition to a low-carbon and biodiverse society

to curbing emissions at the speed and to the scale needed are pushing the IPCC to focus more on social transformation, the implications of this for the relationship of state and market power, for social agency and for the politics necessary to bring about such a transformation are being little acknowledged, much less explored. A number of core themes in Polanyi’s work make him a very relevant theoretical guide. In the 1990s, critics of globalisation turned to key insights of Polanyi. As Joseph Stiglitz wrote in his foreword to the 2001 edition of The Great Transformation, It often seems as if Polanyi is speaking directly to present-day issues. His arguments – and his concerns – are consonant with the issues raised by the rioters and marchers who took to the streets in Seattle and Prague in 1999 and 2000 to oppose the international financial institutions. (Stiglitz 2001: vii) These concerns related to the destructive impacts on society of self-regulating markets. While this core insight of Polanyi remains as relevant as ever, the greater awareness today of the ways in which humanity is surpassing planetary boundaries and destroying the fragile ecosystems on which its livelihood depends, introduces a broader range of issues that reflect more fully the principal concerns of Polanyi. As Kari Polanyi Levitt wrote (2013: 99–100): His central thesis was that the nineteenth-century liberal economic order was ‘economic’ in a different sense from that in which all societies have been limited by the material conditions of existence. It was ‘economic’ in the distinctive sense that it chose to base itself on a motive never before raised to the level of justification of action and behaviour in everyday life, namely individual gain. Prior to the rise of industrial capitalism, markets were never more than accessories of economic life. In that regard, the generalized market economy of modern capitalism stands as an exception. As ‘improvement’ (read ‘efficiency’) conquered ‘habitat’ (read ‘security’) and labour, land, money and the essentials of life became commodified, the economy acquired an existence of its own driven by ‘economic’ laws of its own, whether conceived in neoclassical or Marxist terms. Echoed in this lengthy quote are key themes of contemporary ecological thought: the need to refashion an economy so that it can function with the limitations of what nature and the planet can support (“the material conditions of existence”), learning from indigenous peoples (“prior to the rise of industrial capitalism”) about how to achieve a balance between the functioning of society and the flourishing of nature, a focus on the values that underlie the relationship between society and nature expressed in such terms as ‘sufficiency policies’, changing current unsustainable systems of production and consumption, moving beyond the limited paradigm of economic growth, and liberating human agency for social transformation. To all of these Polanyi’s work has a major contribution to make. The discussion here identifies eight core themes of his oeuvre that address these contemporary concerns. Market society: Perhaps Polanyi’s best known concept is that of the market society, namely the society created by the British Industrial Revolution and which was subservient to the self-governing market system. Since this market must be allowed to run society without outside interference, such a system “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”, wrote Polanyi (2001: 3). To avoid this destruction, society spontaneously 363

Peadar Kirby

reacted to protect itself through, for example, the growth of the trade union movement and through legislation on factory conditions, public health, social insurance, municipal services and union rights. These countervailing measures were designed to check the destructive forces of the market and this pendulum was seen by Polanyi as a ‘double movement’ – the first movement was the imposition of the market mechanism on society and the second movement was the reaction by society against its destructive impact. While the notion of the double movement was widely applied to the anti-globalisation movement in the late 1990s and early 2000s, as it was seen as a self-correcting mechanism to counter market inroads, it is more accurately seen, as Polanyi Levitt (2013: 100) puts it, as “an existential contradiction between the requirements of a capitalist market economy for unlimited expansion and the requirements of people to live in mutually supportive relations in society”. This existential contradiction is well expressed in Polanyi’s distinction between Improvement and Habitation. Improvement can be summarised as economic progress, fuelled by “the rich man’s desire for a public improvement which profits him privately” at the price of Habitation or social dislocation, the destruction of the fabric of society, tearing down the houses “which the poor had long regarded as theirs and their heirs” (Polanyi 2001: 37), namely the destruction of a secure sense of belonging to society and its natural environment. Polanyi was here writing about the effects of the enclosures in Tudor England “to clarify the alternatives facing a community which is in the throes of unregulated economic improvement” (ibid.: 36). It is the fundamental tension that lies at the heart of so much political contestation, particularly over the last century, and which takes on added significance in the face of climate change and biodiversity loss. Polanyi touches on one of the central challenges now facing society if it is to avoid destroying the conditions for organised life on this planet: “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” (ibid.: 35). It is such a slowing down that lies at the heart of the degrowth concept, namely “a planned downscaling of energy and resource use to bring the economy back into balance with the living world in a safe, just and equitable way” (Hickel 2020: 29). Polanyi’s contribution to the contemporary politics of climate change and biodiversity loss, therefore, is to make visible the structured nature of power which is proving so destructive of society and the natural world on which society’s wellbeing depends. In identifying the imposition of the self-governing market mechanism as a key source and driver of society’s overshooting planetary limits, he is also focusing attention on a major factor constraining the many actions being taken to reverse this situation. While the reports of the IPCC and IPBES mention decades of unsustainable production and consumption patterns and the need to shift development pathways towards sustainability and to transform unsustainable systems (including governance arrangements and political economic institutions) beyond the limited paradigm of economic growth, these reports lack a theoretical coherence which a Polanyian framework offers. Commodification and decommodification: If much attention was paid to the double movement in the period when Polanyi was seen as a guide for the alter-globalisation movement, the demands of climate change and biodiversity loss today bring Polanyian themes of commodification and decommodification to the fore. For Polanyi, the extension of price-making markets changing land, labour and money into commodities to be bought and sold in the marketplace was the central innovation of the Industrial Revolution. Prior to this, markets had never been anything other than “accessories of economic life … absorbed in the social system” (Polanyi 2001: 71). Yet, treating nature (land), the human person (labour) and the means of exchange (money) as commodities “is

364

Polanyi in the transition to a low-carbon and biodiverse society

entirely fictitious” and “would result in the demolition of society”, affecting the institutions and practices of society as a whole: The commodity fiction, therefore, supplies a vital organizing principle in regard to the whole of society affecting almost all its institutions in the most varied way, namely, the principle according to which no arrangement or behaviour should be allowed to exist that might prevent the actual functioning of the market mechanism on the lines of the commodity fiction. (ibid.: 76) Polanyi’s identification of commodification as a process that ends up consuming and degrading the very natural and social conditions required for the economy and society to function, makes two substantial contributions to today’s debates. On the one hand, it serves to draw attention to a fundamental reason why so many of the efforts to reverse climate change and biodiversity loss are simply not adequate to the task since they do not address the issue of commodification. Secondly, Polanyi maps out what needs to be done to address and reverse our current unsustainable and destructive development trajectory, namely the decommodification of land, labour and money, returning the economy again to be an accessory of social life. Yet, as Sandel states (2012: 13, 14), writing of the United States, “serious debate about the role and reach of markets remains largely absent from our political life”; this, he goes on, “has exacted a heavy price: it has drained public discourse of moral and civic energy, and contributed to the technocratic, managerial politics that afflicts many societies today”. This serves to underline both the significance of Polanyi’s point about commodification being a central organising principle of our social life and also just how neglected it is in practice. Where Polanyi offers some hints of the radical import of decommodification is in his treatment of land (nature). His descriptions of the destructive impacts of commodification on nature in The Great Transformation, read in the light of today’s understanding of soil erosion, ocean acidification, property price inflation and bubbles, exhaustion of raw materials, and volatility of fossil fuel supplies and prices, are remarkably prescient. He was extremely rare among social scientists in acknowledging the central importance of nature to human and social flourishing, and in places he elaborates on the implications of this: The economic function is but one of the many vital functions of land. It invests man’s life with stability; it is the site of his habitation; it is a condition of his physical safety; it is the landscape and the seasons. We might as well imagine his being born without hands and feet as carrying on his life without land. And yet to separate land from man and to organise a society in such a way as to satisfy the requirements of a real-estate market was a vital part of the utopian concept of a market economy. (Polanyi 2001: 187) An example of what this might mean in practice can be found in the 2019 IPCC special report on land which recommends such land policies as “recognition of customary tenure, community mapping, redistribution, decentralisation, co-management and regulation of rental markets” to provide security and flexibility in responding to climate change. It also recommends local stakeholders in selecting and monitoring land policies, “particularly those most vulnerable to climate change including indigenous peoples and local communities, women, and the poor and marginalised”

365

Peadar Kirby

(IPCC 2019: 31, 34). Implementing these in a robust and effective way would require extensive decommodification. Before market society: As it is well-known, Polanyi spent the 1950s working with a team of economic anthropologists at Columbia University examining the role of markets, trade and money in a wide range of societies prior to the Industrial Revolution. I expect he would have been delighted to see the interest now being shown by both the IPCC and the IPBES in indigenous knowledge systems. As the 2014 IPCC report (2014: 19) put it: Indigenous, local and traditional knowledge systems and practices, including indigenous people’s holistic view of community and environment, are a major resource for adapting to climate change, but these have not been used consistently in existing adaptation efforts. Integrating such forms of knowledge with existing practices increases the effectiveness of adaptation. Similarly, the IPBES report (2019: 18) states that recognizing the knowledge, innovations, practices, institutions and values of indigenous peoples and local communities […] often enhances their quality of life and the conservation, restoration and sustainable use of nature. The economic anthropological work of Polanyi’s final years takes on major significance in this context, a significance underlined by the immensely positive reception given to Graeber and Wengrow’s (2021) anthropological tour de force. While the focus of their book is far broader than the quite precise economic interests of Polanyi and his team, Graeber and Wengrow’s synthesis of three decades of anthropological research confirms that the economy was always embedded in the social systems they report on. Furthermore, their book reinforces the intent behind Polanyi’s anthropological work, namely to rediscover “the freedom to create new and different forms of social reality” (ibid.: 525). I imagine that Polanyi would have agreed wholeheartedly with their claim: Nowadays, most of us find it increasingly difficult even to picture what an alternative economic or social order would be like. Our distant ancestors seem, by contrast, to have moved regularly back and forth between them. (Ibid.: 502) Or, to put it more succinctly, “how do we find ourselves stuck in just one form of social reality?” (ibid.: 519). Graeber and Wengrow don’t reference Polanyi in their book but his presence lurks in the background and he is cited in Graeber’s even more famous book on debt (Graeber 2011). Graeber recounted in a foreword to a recent edition of Marshall Sahlins’ Stone Age Economics (Sahlins, 2017) that Sahlins, as a graduate student in Columbia University in the 1950s, attended seminars held by Polanyi in his New York home. Graeber’s PhD was supervised by Sahlins. At the time, Polanyi was “leading a direct challenge to the economic orthodoxy of the day […] mapping out historical alternatives, understanding how sharing, gift and redistributive economies had operated in the past”, an effort to which Sahlins contributed. Graeber (2017: xii, xiii) adds that “at the time, such ideas, and the people who espoused them, were considered genuinely dangerous”. Ideas considered dangerous in the 1950s have now become necessary as humanity is at last waking up

366

Polanyi in the transition to a low-carbon and biodiverse society

to the destructive and unsustainable development trajectories that we urgently need to find ways of superseding, learning from the ways our ancestors lived in community and in balance with their natural surroundings. Forms of integration: Polanyi’s main contribution to discovering a new path forward lies in his identification of three forms of integrating, or embedding to use his term, the market to serve the good of society which he found existed in all societies prior to the Industrial Revolution, though in different mixes and forms. These are reciprocity, redistribution and exchange, each being different ways in which the exchange of goods and services took place and each requiring different cultural networks and institutional forms. Reciprocity expresses a culture of sharing and requires strong community relationships to exist within and between groups among which there is a certain symmetry. He wrote (1968: 152): “This was true both of the more permanent communities such as families, tribes, or city states as of those less permanent ones that may be comprised in, and subordinate to, the former” and can exist at least in transitory form, in voluntary or semi-voluntary groups such as the military, vocational, religious or social groups. The nearest equivalent today is the gift economy (Cheal 2017). Though Polanyi emphasised the institutional community-setting in which reciprocity flourished, he also recognised that it rested on values of equity and consideration: Adequate behaviour is often that of equity and consideration, or at least a show of it – and not the stricti juris attitude of ancient law, as in Shylock’s insistence on his pound of flesh. Hardly anywhere do we find the habit of reciprocal gifts accompanied by hard bargaining practices. Whatever the reason for the elasticity which gives preference to equity rather than stringency, it clearly tends to discourage the manifestations of economic self-interest in the give-and-take relations of reciprocity. (Polanyi 1977: 39) In the case of redistribution, Polanyi emphasised that it requires an established centre from which the distribution takes place. Goods, which include land and natural resources, are allocated through being collected and then distributed by virtue of custom, law or ad hoc central decision: Sometimes the system amounts simply to storage-cum-redistribution, at other times the ‘collecting’ is merely dispositional, i.e., there is a change in the rights of appropriation without any change in the actual location of the goods. Redistribution occurs for many reasons and on several levels, from the primitive hunting tribe to the vast storage systems of ancient Egypt, Sumeria, Babylon, or Peru. (Ibid.: 40) The final form of integration is exchange and requires a system of price-making markets through which the exchange takes place, though Polanyi emphasises that the exchange may be by means of barter as well as by means of money. He writes (1968: 155): In order for exchange to be integrative the behaviour of the partners must be oriented on producing a price that is as favourable to each partner as he can make it. Such a behaviour contrasts sharply with that of exchange at a set price. He therefore distinguishes this form of integration through exchange from the operation of the market mechanism today.

367

Peadar Kirby

Though Polanyi distinguishes these three means of integrating the economy in society, he is clear that they existed side by side in different economic sectors: Several subordinate forms may be present alongside the dominant one, which may itself reoccur after a temporary eclipse. Tribal societies practice reciprocity and redistribution, while archaic societies are predominantly redistributive, though to some extent they also allow room for exchange. Reciprocity, which plays a dominant part in most tribal communities, survives as an important, although subordinate, trait in the redistributive archaic empires where foreign trade was still largely organized on the principle of reciprocity. (Polanyi 1977: 42) While Polanyi has at times been criticised for lacking detail in what he prescribes to reembed the market in society and thus overcome market society, his three forms of integration greatly enrich our understanding of different ways to provision society beyond the market mechanism which dominates today and limits the room for the other forms of integration to play a more central role. Reciprocity is again coming to the fore in many grassroots projects that seek to model the transition to a low-carbon and biodiverse society (Litfin 2014). While the redistributive mechanisms of the welfare state have been eroded over recent times, the Covid pandemic brought the need for a more redistributive state back into political focus. And the emergence of farmers’ and craft markets directly linking producer and consumer gives expression to elements of what Polanyi meant by market exchange. Understanding economics: Discussion of the three forms of integration points to the fact that Polanyi understood economics in a way different to today’s dominant understanding. He was keen to clarify that a formal meaning “springing from the logical character of the means-ends relationship, as in economizing or economical” has today become dominant eclipsing the substantive meaning, namely a person’s patent dependence for his livelihood upon nature and his fellows […] He survives by virtue of an institutionalized interaction between himself and his natural surroundings. That process is the economy, which supplies him with the means of satisfying his material wants. (Polanyi 1977: 19, 20) For Polanyi, the two meanings ‘have nothing in common’. The substantive meaning, which was dominant in history prior to the Industrial Revolution, came to be “disdainfully relegated to oblivion” while neoclassical economics was founded on the formal meaning. His question about which of the two meanings the adjective ‘economic’ is meant to convey expresses well the implications of the distinction: those of an entity of nature, dependent for its existence on the favour of environmental conditions as are plant and beast, or those of an entity of the mind, subject to the norm of maximum results at minimum expense. (Ibid.: 20, 21) Furthermore, the formal meaning equates the human economy with its market form and recognises only individual wants, not those of groups or communities: Once a human being was circumscribed as an ‘individual in the market,’ the proposition as we hinted, was easy to substantiate. Of his wants and needs, only those mattered that money 368

Polanyi in the transition to a low-carbon and biodiverse society

could satisfy through the purchase of things offered in markets; the wants and needs themselves were restricted to those of isolated individuals. Therefore, by definition, no wants and needs other than those supplied in the market were to be recognized, and no person other than the individual in isolation was to be accepted as a human being. (Ibid.: 29) The distinction made by Polanyi has major implications for addressing climate change and biodiversity loss. The intellectual apparatus of neoclassical economics, applied to the climate crisis through mechanisms such as emissions trading schemes and green taxes, seems far too narrow and limited to address the challenges of ensuring the economy operates within planetary boundaries and to guide communities as to how best to provision themselves within these limits, raising questions about the adequacy of the market system to achieve these ends. It is an issue that deserves far greater attention. Freedom and agency: Beyond the different meanings of economics, it has already been mentioned that Polanyi saw a “contradiction between the requirements of the market economy for limitless expansion and the social requirements of people to live in mutually supportive social relations”. His daughter Kari added that, for her father, the outcome of this existential contradiction “is not determinate”: “There is no grand design of progress. There are no impersonal historical forces which inevitably move humanity forward” (Polanyi Levitt 2013: 103). Polanyi rejected Marx’s claim to have discovered the laws of history and the belief that socialism was bound to supersede capitalism. Instead he believed that it is human beings themselves who create the future: Never has there been such an absurd superstition as the belief that the history of man is governed by laws which are independent of his will and action. The concept of a future which awaits us somewhere is senseless because the future does not exist, not now or later. This future is constantly being remade by those who live in the present. The present only is reality. There is no future that gives validity to our actions in the present. (Quoted in Polanyi Levitt and Mendell 1987: 22) This conviction about people’s freedom to create their own future was a deep-rooted belief for ­Polanyi. An essay entitled “On Freedom” written in 1927 and only recently available in English was later described by his wife Ilona Ducyznska Polanyi (1977: xv) as containing “the cornerstones of Polanyi’s future life-work and of his philosophy of life”. Here he makes a distinction between being free in the typical ideology of the bourgeois, to be free of duty and responsibility […] [and] to be free through duty and responsibility […] It is thus not a form of releasing oneself from society but the fundamental form of social connectedness, not the point at which solidarity with others ceases but the point at which we take on the responsibility of social being, which cannot be shifted onto others. (Polanyi 2018a: 304; emphases in original) This turns on its head the notion of freedom which informs so much contemporary economics and politics and which reduces freedom to being simply a matter of individual choice. Instead, Polanyi offers a much more demanding understanding of freedom as being to assume responsibility for our society and environment. It is an understanding which finds rich expression in today’s school strikes for climate change and among the activists of Extinction Rebellion. 369

Peadar Kirby

Rediscovery of society: Polanyi is to be distinguished from most socialist thinkers in that he devotes little attention to the state but instead places the emphasis on society. His focus was on restoring the fullness of society, its institutions, culture and values to guide the economy. In the work of the progressive mill owner, Robert Owen (1771–1858) who transformed the cotton mills of New Lanark in Scotland into a co-operative enterprise, Polanyi saw the rediscovery of society. As he wrote about Owen: “His socialism one might say, was based on a reform of human consciousness to be reached through the recognition of the reality of society” (Polanyi 2001: 133). “There is no contracting out of society”, Polanyi wrote in 1937. “But where the limits of the socially possible are reached, community unfolds to us its transcending reality. It is to this realm of community beyond society that man yearns to travel” (quoted in Brie 2017: 23). Yet, he is clear that true community is impeded by the market system which “acts like an invisible boundary isolating all individuals in their day to day activities”. Because of this denial of community “our society is in process of being destroyed”. So, transforming society requires abolishing the private ownership of the means of production; instead “the means of production must be owned by the community” giving the people as a whole responsibility for the productive system (Polanyi 2018b: 149). Polanyi’s emphasis on society, and particularly his focus on community as the locus for social transformation, echoes the many community-based projects that have emerged in recent decades to model alternative ways of sustainable and low-carbon living while his emphasis on the means of production being in community hands has for long been a familiar feature of the cooperative movement.2 Machine age: A final contribution that Polanyi can make is to challenge the techno-optimism that has characterised much of the discourse on climate change, endowing technology “with a thing-like autonomy and a seemingly magical power of historical agency” (Marx 2010: 577). There are echoes here of Polanyi’s fears that “industrial technology is showing itself wholly capable of generating suicidal tendencies that strike at the roots of liberty and life itself” (Polanyi 1977: li). Since Polanyi’s time, technology has become more ubiquitous and has come to dominate even intimate spaces of our lives and of our relationships to one another. Yet his warnings about “the menace of a cultural development” resulting in “the fragmentation of man, the standardization of effort, the supremacy of mechanism over organism and of organization over spontaneity” remain perhaps more true than ever (ibid.: xlix). While there is pushback against some of the technological fixes being proposed to address climate change (Hulme 2014), Polanyi’s emphasis (1977: li) on “the safety of society above the requirements of maximum technological efficiency” remains powerfully pertinent.

Polanyi is a more demanding guide “In retrospect”, writes Timothée Parrique (2019: 294) in his doctoral thesis on the political economy of degrowth, “Polanyi was ahead of his time”. In many ways, Polanyi has always been ahead of his time since, as he wrote in his final letter before his death: “The heart of the socialist nation is the people, where collective existence is the enjoyment of a community culture. I myself have never lived in such a society” (quoted in Polanyi Levitt 1990: 262). Since such a society has yet to be achieved, there has been a tendency to interpret Polanyi through the lens of dominant ideological frameworks which had the consequence of taming the radically transformative import of his life’s work. He has, for example, been claimed as a champion of the US New Deal and of European social democracy and his vision seen as The possibility of a political-economic compromise by which businesses would continue to earn profits, but they would accept regulatory restraints, taxation, and the steady expansion of social welfare institutions. (Block and Somers 2014: 221) 370

Polanyi in the transition to a low-carbon and biodiverse society

However, as his wife wrote following his death: “Although not a Marxist, he was much less a Social Democrat” (Ducyznska Polanyi 1977: xi). As is clear from the previous section, ­Polanyi’s analysis and prescriptions were far more innovative, broader and more radically transformative than the social democratic compromise between capital and labour mediated by the state (Bockman 2018). Polanyi therefore emerges as a much more demanding guide, but one uniquely suited to the contemporary requirements of radical transformation in all aspects of society and economy if humanity is to relearn the art of living within the carrying capacity of the planet and re-establish relations of mutual flourishing with the eco-systems on which all life depends. As he put it in ­describing the society to which he aspired, which to him was socialism: Freedom through social knowledge can never mean a specific state of affairs; rather it is a programme, a goal which is constantly re-establishing itself. The history of humanity will not have reached its final point with socialism; humanity’s history will, in its true sense, only begin with it. (Polanyi 2018a: 316) This captures well key elements of the transition now facing us: as our growing knowledge of the damage we are causing to the carrying capacity of the planet helps to free us from the constrains of our present development trajectory, we gain the freedom to set out on a radically new trajectory. We will adapt and revise this as we go, and as hopefully we move back into living within the limits of the eco-systems on which our lives, as individuals and as society, depend we will know that we are just getting to the beginning of a history that can be sustainable.

Conclusions While the importance of Polanyi’s work for the low-carbon transition has been referred to by the German Advisory Council on Global Change (WBGU 2011: 5) and by the New Economics Foundation (NEF 2009), there have been few attempts to map out what his contribution actually is (Kirby 2021). This chapter has deliberately started with some of the recommendations of the IPCC and the IPBES as a way of identifying an emerging agenda. The chapter than went on to examine a range of elements of Polanyi’s oeuvre that speak directly to the concerns of this agenda. The claim here is that Polanyi offers a unique theoretical framework to guide the further elaboration and implementation of this emerging agenda. It therefore opens the way for more detailed study to mine Polanyi’s work further and link it to the many themes being identified by the IPCC and IPBES. In this way, the challenges of the current crisis-filled conjuncture of human history can be grasped as opportunities to move towards Polanyi’s vision of humanity attaining “the highest stage of social freedom […] to be able to assume responsibility for the social effects of our existence” (Polanyi 2018a: 306).

Notes 1 The report being referenced here is the third volume of the Sixth Assessment Report of the IPCC (IPCC AR6 WG III) entitled Mitigation of Climate Change. 2 As his daughter Kari put it: ”His model was essentially one of cooperative associations of producers, consumers and communities (municipalities etc.) jointly determining the allocation and distribution of resources in a process of negotiation whereby economic efficiency criteria would be consciously moderated by social policy as determined by the members of these associations. This was not a market-less economy, nor an economy without money” (Polanyi Levitt 2013: 47).

371

Peadar Kirby

References Block, Fred and Margaret R. Somers. 2014. The Power of Market Fundamentalism: Karl Polanyi’s Critique. Harvard: Harvard University Press. Bockman, Johanna. 2018. Not the New Deal and Not the Welfare State: Karl Polanyi’s Vision of Socialism. In Michael Brie and Claus Thomasberger eds., Karl Polanyi: Vision of a Socialist Transformation. Montreal: Black Rose Books: 200–208. Brie, Michael. 2017. For an Alliance of Liberal Socialists and Libertarian Commonists: Nancy Fraser and Karl Polanyi – A Possible Dialogue. In Michael Brie ed., Karl Polanyi in Dialogue: A Socialist Thinker for Our Times. Montreal: Black Rose Books: 7–64. Cheal, David. 2017. The Gift Economy. London: Routledge. Ducyznska Polanyi, Ilona. 1977. Karl Polanyi: Notes on His Life. In Harry W. Pearson ed., The Livelihood of Man. New York: Academic Press: xi–xx. Graeber, David. 2011. Debt: The First 5,000 Years. New York: Melville House. ——— 2017. Foreword in Marshall Sahlins: Stone Age Economics. London: Routledge: ix–xviii. Graeber, David and David Wengrow. 2021. The Dawn of Everything: A New History of Humanity. London: Penguin. Hickel, Jason. 2020. Less Is More: How Degrowth Will Save the World. London: William Heinemann. Hulme, Mike. 2014. Can Science Fix Climate Change?.Cambridge: Polity. IPBES. 2019. Summary for Policymakers of the Global Assessment Report on Biodiversity and Ecosystem Services. Bonn: IPBES Secretariat. IPCC. 2014. Climate Change 2014 Synthesis Report. Geneva: IPCC. ——— 2018. Global Warming of 1.5°C: Special Report. Cambridge: Cambridge University Press. ——— 2019. Climate Change and Land. Geneva: IPCC. ——— 2022. Climate Change 2022. Cambridge: Cambridge University Press. Kirby, Peadar. 2021. Karl Polanyi and the Contemporary Political Crisis: Transforming Market Society in the Era of Climate Change. London: Bloomsbury. Litfin, Karen T. 2014. Ecovillages: Lessons for Sustainable Community. Cambridge: Polity. Marx, Leo. 2010. Technology: The Emergence of a Hazardous Concept. Technology and Culture 51/3: 561–577. NEF. 2009. The Great Transition. London: New Economics Foundation. Parrique, Timothée. 2019. The Political Economy of Degrowth. Stockholm: Stockholms universitet. Polanyi, Karl. 1968. The Economy as Instituted Process. In George Dalton ed., Primitive, Archaic and Modern Economies: Essays of Karl Polanyi. New York: Anchor Books: 139–174. ———1977. The Livelihood of Man. New York: Academic Press. ——— 2001. The Great Transformation. Boston: Beacon Press. ———. 2018a. On Freedom. In Michael Brie and Claus Thomasberger eds., Karl Polanyi: Vision of a Socialist Transformation. Montreal: Black Rose Books [original 1927]: 298–319. ——— 2018b. Community and Society: The Christian Criticism of our Social Order. In Michele Cangiani and Claus Thomasberger eds., Karl Polanyi: Economy and Society: Selected Writings. Cambridge: Polity [original 1937]: 144–153. Polanyi Levitt, Kari.1990. Karl Polanyi and Co-Existence. In Kari Polanyi Levitt ed., The Life and Work of Karl Polanyi. Montreal: Black Rose Books: 253–263. ——— 2013. From the Great Transformation to the Great Financialization: On Karl Polanyi and Other ­Essays. London: Zed Books. Polanyi Levitt, Kari and Marguerite Mendell. 1987. Karl Polanyi: His Life and Times. Studies in Political Economy 22: 7–39. Sahlins, Marshall. 2017. Stone Age Economics. London: Routledge. Sandel, Michael J. 2012. What Money Can’t Buy: The Moral Limits of Markets. London: Penguin Books. Schumacher, Juliane. 2022. It’s a Very Western Vision of the World. Rosa Luxemburg Stiftung, downloaded from https://www.rosalux.de/en/news/id/46631/its-a-very-western-vision-of-the-world [27th September 2002]. Stiglitz, Joseph. 2001. Foreword to the Great Transformation. Boston: Beacon Press: vii–xvii. WBGU. 2011. World in Transition: A Social Contract for Sustainability. Berlin: German Advisory Council on Global Change.

372

31 ECOSOCIALIST FREEDOM THROUGH PARTICIPATORY DEMOCRATIC PLANNING Pat Devine

Introduction This chapter will address the relationship between participatory democratic planning, Polanyi’s advocacy of ‘associational socialism,’ building on the work of GDH Cole, my own model of social ownership and negotiated coordination, the reality of society and planetary boundaries, and substantive as well as formal freedom. Negotiated coordination by the social owners based on subsidiarity enables all affected people to be involved through their associations in making and implementing the decisions that shape society and its mediation with non-human nature. A multilevel structure combining centralisation and decentralisation, it is an individual and social learning process through which people enjoy substantive freedom at all interdependent levels and through which they change themselves. As an ecosocialist, my understanding of freedom is the ability to influence individually and collectively decisions, policies, and their implementation that affect me, others, and non-human nature – Polanyi’s ‘reality of society’ given the planetary boundaries. This I think covers the conventional distinction between freedom from and freedom to. We must reject the false binary between the autonomous individual and social and ecological constraints, which is not to deny the importance of autonomous individual agency. We are all shaped by the social and ecological context within which we have developed and exist and within which we exercise our individual autonomous agency. The question is to what extent we are able to influence the social and ecological context at the different levels of our existence. Freedom is not an abstract concept, but a lived reality shaped by the institutional framework, the social processes, and the values of the society in which we live. We can be more free or less free. In his magnum opus, The Great Transformation, Polanyi argues that the adverse consequences of capitalism on human and non-human nature give rise to counter movements seeking to exercise social control over its modus vivendi, the profit motive, exchange value, and market forces. This, in turn, causes the system to seize up, which leads to moves to limit or reverse the social control. The only way to break through this repeated cycle, Polanyi argued, is for society to exercise full control over economic activity by abolishing the markets for his fictitious commodities, labour, land and money (capital), i.e. capitalism. He envisaged this happening through the development of guild or associational socialism along the lines of GDH Cole, but he did not concern himself with

373

DOI: 10.4324/9781003336747-38

Pat Devine

how this might work in practice or how we might get there. This is what my model of participatory planning through social ownership based on negotiated coordination attempts to do. Polanyi’s essential argument in The Great Transformation is summarised as follows: “For a century the dynamics of a modern society was governed by a double movement: the market expanded continuously but this movement was met by a countermovement checking the expansion in different directions. Vital though such a countermovement was for the protection of society, in the last analysis it was incompatible with the self-regulation of the market, and thus with the market system itself.” (1944/2001, 136; my italics) It is important to distinguish between institutedness and embeddedness (see Devine 2003). The institution of markets for labour, land and money (capital) for Polanyi (and Marx before him) was what constituted capitalism, the first moment of the double movement. Although these markets are always embedded in society (and non-human nature) they can be more or less embedded, more or less regulated, the second moment of the double movement. The weak interpretation of the ‘always embedded’ thesis is that this creates the possibility of a relatively stable regulated capitalist system; the strong interpretation, supported I believe by the passage in italics above, is that the second moment of the double movement by interfering with the operation of market forces causes capitalism to seize up, which leads to what Antonio Gramsci called an ‘organic crisis’ and a ‘war of manoeuvre.’ This involves a struggle between capital and is allies for deregulation to restore the power of market forces, and a historic bloc of progressive forces seeking to fully extend social control by abolishing the markets for Polanyi’s fictitious commodities, labour, land, and capital. (More on this later) Polanyi’s discussion of what a socialist society might look like took place primarily in Vienna in the 1920s, well before The Great Transformation (1944). The context was the discussion of socialist accounting initiated by Ludwig von Mises’ Economic Calculation in the Socialist Commonwealth (1975 [1920]) in which Polanyi was influenced by GDH Cole’s Guild Socialism Restated (also 1920) and the experience of ‘Red Vienna.’ For a detailed discussion of Polanyi’s contribution to the discussion see the chapters by Peter Rosner, Marguerite Mendell, and Lee Congdon in Kari Polanyi-Levitt (ed.) (1990). The essence of the Guild Socialist approach lies in the belief that society ought to be so organised as to afford the greatest possible opportunity for individual and collective self-expression to all its members, and that this involves and implies the extension of positive self-government through all aspects of social life. Polanyi’s early approach to this was to adopt a functionalist theory of society. He rejected both the state socialist version of socialism, in which the state represented the interests of consumers, and the syndicalist version, in which syndicates represented the interests of workers. Instead he argues: “Society is essentially an organism whose individual organs carry out their functions in unity with each other. This is the starting point of the new functional social theory. … The different functions of individuals are: production, consumption, neighbourly relations, intellectual life and their flourishing. These are the functions that encourage people to form associations: collective production, collective consumption, common neighbourhoods and intellectual associations. … One and the same individual can belong to more than one group. … In a functional democracy, therefore, there is no need for state power as a unifying factor

374

Ecosocialist freedom through participatory democratic planning

… However this does not mean that state power becomes redundant. … It still remains an important bearer of functions located on the municipal, regional [national and international PD] scales.” (Polanyi 2016b, 122) In a way Polanyi was in the tradition of Robert Owen, William Morris, and GDH Cole. Owen advocated small, largely self-contained, associational communities based on mutual respect, love and moral values. Morris (1890) in his News from Nowhere envisaged a society based on the abolition of private property, abolition of the divisions between art, life, and work, and pleasurable as opposed to burdensome work. And Cole, as outlined above, argued for guild socialism based on associations of workers in the same industry. The conclusion we can draw from all this is summed up by Cole himself (1920, 95): “a person requires as many forms of representation as he has distinct organizable interests or points of view.” This brings me to my own model of participatory democratic socialism, first outlined in my Democracy and Economic Planning: The Political Economy of a Self-governing Society (Devine 1988/2010) and subsequently developed and elaborated in many articles with Fikret Adaman and in the ten-yearly special issues of Science and Society devoted to envisaging a socialist future. First, however, a word on Polanyi’s lifelong interest in moral education, associated with his periodic interest in Christianity. In his early years he was a central figure in the Galileo Circle and the bourgeois radical Society of Social Science, for which ‘the precondition for socialism was the existence of an educated working class’ (Tokes 1967, quoted in Dale 2016a, 34). During his period in the UK Polanyi worked for the WEA (Workers’ Education Association) and it was the preparation of his economic history lectures for this that became the basis for The Great Transformation, which he began to draft in the late 1930s (Dale ibid., 167). Polanyi’s interest in worker’s education as a precondition for socialism in a way echoes Marx’s distinction between the lower and higher stages of communism in his Critique of the Gotha Programme: “What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society, which is thus in every respect, economically, morally, and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges.” (Marx 1891) My model of participatory democratic (eco)socialism starts from and institutionalises Cole’s quote above, “a person requires as many forms of representation as he has distinct organizable interests or points of view.” It consists of the following elements: abolition of the social but not functional division of labour; social ownership; subsidiarity; negotiated coordination; deliberative discussion; and participatory planning. It is a transformatory learning process which enables people to freely participate in creating the reality of society within which they freely act as autonomous agents.

Abolition of the social division of labour So far all attempts to build a socialist, let alone an ecosocialist, society have failed or run into severe difficulties. It has proved easier to carry through a revolution than create a new society. I think this is because they were all in less developed countries (or imposed from outside) rather

375

Pat Devine

than generated internally in the most developed capitalist countries. There was no educated working class or peasantry. To achieve this the social division of labour, in which people spend most of their working lives doing the same quality of work needs to be abolished. This is not the same as the functional division of labour. People who run organisations whether large companies, education, health, and social service departments, trade unions, cultural and sporting institutions, or any other large organisation, are performing different functional activities but share a common largely transferable experience. They can easily talk to and understand each other. The same is true of professional activities such as doctors and nurses, lecturers and teachers, barristers and solicitors, architects and surveyors, engineers, and so on. Similarly with skilled crafts people such as roofers, carpenters, electricians, plumbers, bricklayers, decorators, arboriculturalists, gardeners, and so on. That leaves the vast variety of unskilled activities like bin emptying, ditch digging, office cleaning, etc., which have little to recommend them apart from temporary work in gap years or their equivalent. A caveat here. In our societies, as well as an implicit hierarchical social division of labour there is also a sexual or gendered division of labour in which women do most of the caring and nurturing work which frequently cuts across the social divisions discussed above. Polanyi’s insistence on education as a necessary condition for socialism corresponds with his advocacy of a form of guild socialism, discussed above. Movement towards the abolition of the social, as well as the gendered, division of labour would give people not only more time to participate in the running of society but would also give people the opportunity to develop what he called a general overview of the context, of the whole economic totality. This was particularly important for him in relation to the overcoming of alienation.

Social ownership and subsidiarity The concept of social ownership, like Polanyi’s guild socialism, is distinct from those of state or worker ownership. It is common or cooperative ownership by those groups of people who are affected by the decisions made and their implementation. It thus includes all those who have Cole’s “distinct organizable interests or points of view.” Given that we are talking about a society in which private ownership by capitalists and landowners no longer exists, there is no reason for people as workers to have a special status. The social owners are people who work in an enterprise or other forms of organisation, consumers or users of what they produce or do, the localities in which they are based, advocacy groups concerned with ecological, environmental, and equal opportunities issues, and other groups that may be affected by the activities of the organisation involved. In addition to these specific groups the social owners would also include organisations concerned with wider, more general issues, such as government bodies, planning boards and trade unions. Social ownership is a generalisation of Polanyi’s commune. The commune is considered to be the owner of the means of production. A direct right of disposition over the means of production, however, is not tied to this ownership. This right rests with the production associations, to be understood as associations of a particular industrial branch, based on a system of councils, which administer this branch of industry on behalf of society. (Polanyi 2016a, 414) Social ownership internalises as joint owners all those interests included in Polanyi’s production associations plus other significantly affected groups: other enterprises in the industry and their 376

Ecosocialist freedom through participatory democratic planning

localities, other industries and affected localities, local, regional, and national planning boards, and any other significantly affected interests. This is where the concept of subsidiarity comes in. The social owners will differ according to the scale or reach of the decisions made: local regional, national, international. Like Polanyi, my model deconstructs the concept of ‘the market’ into market exchange and market forces. As Gareth Dale puts it (2010, 211), “The specific sense in which Devine’s system resembles Polanyi’s is that it accords an integral place to market exchange while ruling out the operation of market forces.” Market exchange involves the exchange, the buying and selling, of what is produced or supplied using existing capacity. Market forces are the process through which changes in the capacity of autonomous producers are coordinated through investment or disinvestment. Polanyi’s recurring lifelong interest was in the distinction between societies in which market forces were the dominant form of coordination and those pre-capitalist societies in which they were not. This is what underlay his concept of the ‘economistic fallacy,’ the mainstream neoclassical attempt to apply the subjective marginalist theory to pre-capitalist formations. Although a valid criticism of much mainstream economic history’s approach to pre-capitalist societies, this leaves us with an apparent conundrum. When it came to capitalism Polanyi rejected the classical labour theory of value, which Marx had used to explain how exploitation occurs in capitalism when exchange takes place at value and adopted elements of the very subjective marginalist theory he had criticised in relation to pre-capitalist societies. Dale has argued that Polanyi’s preoccupation with the coordinating process rather than with exploitation led him to display “a particularly blind spot towards the brutal, exploitative and acquisitive character of Dahomey’s ruling class” (Dale 2010, 177), since market forces were not the main coordinating process in Dahomey. It may also have misled Polanyi in his critique of Dobb’s Studies in the Development of Capitalism (Polanyi 1948) in which he criticised Dobb for relying on the development of labour shortages and the beginnings of labour markets in his analysis of the transition from feudalism to capitalism. It will be clear from the definition of social ownership that the social owners at the level of the use of an enterprise’s existing capacity consist of a different set of groups from those at the level of investment and disinvestment involving changes in productive capacity. This is an example of the principle of subsidiarity: decisions and their implementation should occur at the most local level consistent with all interested groups being able to be involved. Decisions over the establishment, closure or changes in the size of firms through investment or disinvestment affect not only the firm in question, but also many other interests, the social owners at this level: other firms in the same industry or sector; the localities in which they or proposed new firms are/might be based; users of what they produce; trade unions; interest and advocacy groups; local, regional and national planning boards; and any other groups claiming a significant interest which is recognised and agreed by the other social owners.

Negotiated coordination through deliberative discussion The social owners then negotiate a pattern of major investment and disinvestment (minor investment is decided on by the social owners at the firm level). They use a combination of explicit and tacit knowledge in the course of their deliberations. The explicit knowledge consists of published, or at least publishable, knowledge. It will include data on whether the existing industry is producing more or less than users need, and therefore whether it needs to contract or expand. This will be generated by aggregating the spare capacity or the order books of the individual firms in the industry. Such data will also indicate how well the existing firms and doing in relation to others in 377

Pat Devine

meeting the needs of users. The explicit data will include details of the circumstances of the actual or potential localities of the firms involved – over or under employment, the balance of skills, transport networks, availability of housing, social and cultural facilities, etc. It will also reveal any reasons that might explain any differential performance of the different firms constituting the industry. Tacit knowledge, a term coined by Karl’s brother Michael, Polanyi (1983), is knowledge that is acquired, and can only be acquired, by experience. It is supplied by the representatives of the groups constituting the social owners. Such knowledge can be either individual, acquired by doing things, or social, acquired by working together as a group. The importance of tacit knowledge reinforces the argument for negotiated coordination among the social owners. Negotiated coordination is not a process of aggregating existing preferences, it is a learning process through which the social owners get to know the interests and preoccupations of each other through deliberative discussion in the course of which they change their preferences (if one chooses to use this terminology). It enables people to develop Polanyi’s general and inner overview of the context in question (Cangiani and Thomasberger 2018, 43). The need for such an overview, as we have seen, is a central reason why Polanyi placed so much importance on the education of workers. Negotiated coordination is a transformatory learning process, for individuals and social groups, as through discussion they discover what matters to others and to themselves. Underlying explicit knowledge is the lived reality and experience of people which is drawn upon by individuals and groups in the course of their participation in the negotiations. This is one reason why models of socialism based on a process of arriving at a Walrasian general equilibrium through repeated iterations of responses to revised announced prices (such as Albert and Hahnel 1991; Cottrell and Cockshott 1993) are unsatisfactory. Such electronic models of socialism imply participation by the individuals or groups involved in responding to changes announced from above but deliberately eschew discussion and negotiation among them, thus missing the human dimension that negotiation drawing on tacit knowledge enables. Participatory planning through negotiated coordination is also the process through which the alienation associated with capitalism, and also market socialism, can be overcome.

Participatory planning Participatory planning is a layered structure of decision making and implementation, from local to global, through which the social owners at each level, those affected by and interested in the decision at issue, participate directly, or indirectly through representatives, in making and implementing the decision. Its importance lies both in the tacit knowledge drawn upon and in the likelihood that having participated in making the decision people will be more committed to it and its implementation, they will ‘own it.’ They will have Polanyi’s overview of the options available, the implications of these options for different groups and interests, and the need for a ‘just transition’ given the immense changes in our way of life that ecological sustainability and the associated redistribution will inevitably involve (see Devine 2022). Again, this may be seen as a generalisation of Polanyi’s view that: The democratic system of representation among the workers in the workshops, offices, and administrative agencies thus becomes a production association as soon as it takes on direction and management of a particular branch of industry or services on behalf of society. Individual production associations combine to form a regional association, and the regional

378

Ecosocialist freedom through participatory democratic planning

associations combine to form a congress of production associations, which represents production as a whole. (Polanyi 2016a, 414) At the global level the social owners, equivalents of the United Nations and the COPs, would negotiate over targets for necessary measures to check climate change and biodiversity loss, promote rewilding where appropriate, and correcting the combined and uneven development and trade flows between the developed and less developed countries that capitalism has created. They would also agree on frameworks for human rights and the protection of legitimate minority groups from illiberal discrimination. These targets and frameworks would then be disaggregated to lower levels for their detailed development and implementation, bearing in mind that in an ecosocialist society there would be no corporate capitalist or bourgeois state interests in the negotiations and also the need to take account of the historically unequal capitalist contributions to ecological damage and socio-economic and cultural inequality. A similar process would occur at the regional and national levels. Within the frameworks set at the global level the social owners at these levels would negotiate on how to apply the global targets and policies at their level. People through their voluntary associations would participate in decisions concerning the nature, size and location of major investments and disinvestments that change the structure and location of their productive capacity and the associated employment opportunities and ecological impacts. The same process would then apply at the local level. This layered and interdependent structure of decision-making and implementation would enable people to participate at all levels in the decisions that create the social and ecological context in which they live and are free to exercise their individual agency. It is the way in which people make their own history, a development perhaps of Marx’s famous statement in the 18th Brumaire of Louis Bonaparte (1852): “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.” In an ecosocialist society people collectively would have participated in creating the circumstances given and transmitted from the past. This brings us to:

Freedom in a complex society with planetary boundaries The final chapter of the Great Transformation, “Freedom in a Complex Society,” ends with the stirring declaration: “Uncomplaining acceptance of the reality of society gives man indomitable courage and strength to remove all removable injustice and unfreedom. As long as he is true to his task of creating more abundant freedom for all, he need not fear that either power or planning will turn against him and destroy the freedom he is building by their instrumentality. This is the meaning of freedom in a complex society; it gives us all the certainty that we need.” (Polanyi 2001, 268) Inspiring as this “optimism of the will” (Gramsci, see Simon 1982/1990) is, today it needs to be set in the context of a complex society subject to the ecological constraints of planetary boundaries (Steffen et al. 2015). These boundaries have been combined with the satisfaction of basic human needs by Kate Raworth in her construct of the ‘doughnut economy’ (Raworth 2017, 44). The outer edge of the

379

Pat Devine

doughnut is the ecological ceiling which consists of nine planetary boundaries, as set out by Rockstrom et al, beyond which lie unacceptable environmental degradation and potential tipping points in Earth systems. The inner edge is the social foundation which consists of the 12 internationally agreed minimum social standards agreed by the world’s governments in the 2015 Sustainable Development Goals. Between the social and planetary boundaries lies an environmentally safe and socially just space for humanity (Raworth 2017, Appendix). Polanyi’s double movement captures the tension between the move to create and strengthen market forces and the reaction from the adversely affected parts of society to exercise social control over the operation of market forces. Only when the markets for the fictitious commodities are abolished will socialism have been achieved and it will be possible to ‘remove all removable injustice and unfreedom.’ Raworth’s doughnut complements this analysis by providing a structure for thinking quantitatively about this subject to the reality of both society and planetary boundaries. Ecosocialist freedom, then, is the ability of people collectively to participate on equal terms in influencing the context at the different subsidiary levels within which they freely exercise their individual autonomous agency. Participatory planning through deliberative negotiation combines the institutional and the moral dimensions of freedom, it is premised on the abolition of inequality and subordination, freedom from, and the substantive ability to collectively shape the context, freedom to. It involves overcoming the institutional separation of politics from economics, the abolition of markets for the fictitious commodities (i.e. capitalism), and the establishment of full social control over economic activity. This might be achieved in the form of working-class organisation, landed interests, and capital’s need for large aggregations of stable money. However, what is largely missing is an anti-capitalist political strategy for uniting these forces into a movement to transcend capitalism. Enter the Italian communist Antonio Gramsci. Gramsci, while languishing in Mussolini’s prison, reflected on many things, including why the revolutions that swept Europe during and after the First World War succeeded only in Russia. He concluded that this was because Russia was relatively backward with an undeveloped civil society and little organisation between the mass of the people and the authoritarian Tzarist state. In the more developed countries of Europe civil society was more elaborated with a myriad of local grass roots organisations hegemonised by the ruling class ideology. Seizing state power was relatively easy in Russia after which the task was to develop a counter hegemonic revolutionary consciousness, whereas in the more developed countries bourgeois hegemony prevailed in civil society which supported successful counter revolutionary movements. Polanyi experienced this in Austria when Red Vienna was defeated by forces supported in the rural rest of the country, but he was unaware of Gramsci’s theoretical framework which had not yet seen the light of day and been published. Gramsci’s theoretical framework consists of three interrelated aspects: a war of position; an organic crisis; and a war of manoeuvre. The ruling class rules not just by coercion but also by hegemony, the domination of society by its ideas. Hegemony has two parts: the building of institutions and organisations in civil society; and the ideological struggle between ruling class ideology and post-capitalist ideas on how to relate to one another, to organise society and economic activity, and to relate to non-human nature. Examples of the former include prefigurative developments within the existing society, and of the latter the role of public intellectuals, think tanks, and political parties. A war of position is the often quite prolonged struggle for hegemony between the ruling class and the opposing anti-capitalist forces. If successful, the anti-capitalist forces create a new historic bloc challenging the existing order. An organic crisis develops when the ruling class can no longer rule in the same way, but a new socialist society cannot yet be created, the old is dying and the new cannot be born. In this 380

Ecosocialist freedom through participatory democratic planning

interregnum a great variety of morbid symptoms appear. The organic crisis leads to a war of manoeuvre in which the contending forces seek to resolve the crisis in their favour, the old through a passive revolution, the new through a revolution replacing capitalism. The outcome of this largely depends on the preceding war of position. Gramsci thought that historical experience suggests that the result is usually a turn to the right, not the left: pessimism of the intellect, optimism of the will; be realistic but keep trying. A final advantage of a participatorily planned society is that it would contribute to the overcoming of alienation, in line with Polanyi’s concept of freedom in a complex society. People would have overview, be more in touch with themselves, other people, their work, their product, their neighbourhood, and non-human nature. They would be living in a new civilisation, an ecosocialist society.

References Albert, Michael and Robin Hahnel. 1991. The Political Economy of Participatory Economics. Princeton, NJ: Princeton University Press. Brie, M. and C. Thomasberger (eds.). 2018. Karl Polanyi’s Vision of a Socialist Transformation. Montreal: Black Rose Books. Cole, George D. H. 1980 [1920]. Guild Socialism Restated. New Brunswick: Transaction Books (Leonard Parsons). Cottrell, Allin and W. Paul Cockshott. 1993. “Calculation, Complexity and Planning: The Socialist Calculation Debate Once Again.” Review of Political Economy 5/1, 73–112. Dale, Gareth. 2010. Karl Polanyi: The Limits of the Market. Cambridge, MA: Polity Press. ——— 2016a. Karl Polanyi: A Life on the Left. New York: Columbia University Press. ——— 2016b. Karl Polanyi: The Hungarian Writings, edited by Gareth Dale. Manchester: Manchester ­University Press. Devine, Pat. 1988/2010. Democracy and Economic Planning: The Political Economy of a Self-Governing Society. Cambridge, MA: Polity Press. ——— (with Fikret Adaman and Begüm Özkaynak). 2003. “Reinstituting the Economic Process: (Re)embedding the Economy in Society and Nature.” International Review of Sociology 13/2, 357–374. ——— 2022. “Ecosocialist Economics.” The Routledge Handbook on Ecosocialism, Chapter 26. Marx, Karl. 1852. 18th Brumaire of Louis Bonaparte. multiple publishers. Marx, Karl. 1891. Critique of the Gotha Programme. multiple publishers. Mises, Ludwig von. 1975 [1920]. “Economic Calculation in the Socialist Commonwealth.” In Collectivist Economic Planning, Friedrich A. Hayek ed. New York: Kelley Publishing. Morris, William. 1890. News from Nowhere. multiple publishers. Polanyi, Karl. 1948. “Marxist Economic Thought.” Journal of Economic History VIII, 2, 206–207. ——— 2001 [1944]. The Great Transformation. Boston: Beacon Press. ——— 2016a [1922]. Socialist Accounting. Translated by Johanna Bockman, Ariane Fischer and David Woodruff. Theory and Society. New York: Springer. ——— 2016b [1923]. “Guild and State”. In Dale 2016b, Karl Polanyi: The Hungarian Writings, edited by Gareth Dale. Manchester: Manchester University Press, 121–122. Polanyi, Michael. 1983. The Tacit Dimension. Gloucester: Peter Smith. Polanyi-Levitt, Kari, ed. 1990. The Life and Work of Karl Polanyi. Montréal: Black Rose Books. Raworth, Kate. 2017. Doughnut Economics. London: Random House. Simon, Roger. Gramsci’s Political Thought: An Introduction. London: Lawrence and Wishart, 1982/1990. Steffen, Will, Katherine Richardson, Johan Rockström, Sarah E. Cornell, Ingo Fetzer, Elena M. Bennett, Reinette Biggs, Stephen R. Carpenter, Wim de Vries, Cynthia A. de Wit, Carl Folke, Dieter Gerten, Jens Heinke, Georgina M. Mace, Linn M. Persson, Veerabhadran Ramanathan, Belinda Reyers and Sverker Sörlin. 2015. “Planetary Boundaries: Guiding Human Development on a Changing Planet,” Science 347/6223: 1259855. DOI: 10.1126/science.1259855 Tokes, Rudolf L. 1967. Bella Kun and the Hungarian Soviet Republic: The Origins and Role of the Communist Party of Hungary in the Revolutions of 1918–1919. New York: Praeger.

381

INDEX

Note: Page numbers followed by “n” denote endnotes. Abdala 319 abstract neoclassical models 67 accumulation of capital 27, 56, 237, 253, 258, 341 Adler, Max 10, 23, 24, 27–29, 253; Marx‑Studien 23 administrative‑economy models 39 adult education 105 Ady, Endre 5, 10, 12, 14, 18 “Against Fear” (Polanyi) 325 agrarian tariffs 74 agreed prices 36 Alcock, Rowan 344 alienation 244, 247–251 Alier, Joan Martínez 350, 351, 357 Allergan 318 Al Mina 200, 202n10 Alonso, Azamar 351 Althusser, Louis 250 Alvarez, Anthony S. 62 always disembedded approach 64, 67–68 always‑embedded markets 66, 77, 78, 80 always‑instituted economy 80 Amazonian region 340 American Economic Review 272 Amin, Samir 123 amoral economistic socialism 315 amoral economy 53 Analysis of Sensations (Mach) 268 The Ancient Economy: Methods and Models (Manning and Morris) 201 Ancient Law (Maine) 268 ancient Mediterranean and Western Asian study and Polányi 196–201; economic behaviors and choices in early Greece 198; forms

of economic integration 197–199; New Institutionalist Economics (NIE) 201; port of trade 199–201 Angell, Norman 164, 215 anthropological economy 261 anticapitalist policies 89 Anti‑Comintern Pact (1936) 154 anti‑democracy 155 anti‑fascism 157 anti‑individualism 106, 140–142, 144 anti‑individualist philosophy 40, 143–145 anti‑liberal countermovement 95 antisemitism 145 anti‑socialist politics 106 apoikiai/apoikia 200 Arbeiter Zeitung 28 Archimedes Lodge 10 Archiv für Sozialwissenschaft und Sozialpolitik 33, 107 Argonauts of the Western Pacific (Malinowski) 188 Aristotle 198, 202n3, 211 Ármin Brüll scholarship 8 Armistice of 1918 102, 161 Arrighi, Giovanni 122 Asian Infrastructure Investment Bank 123, 179 asset distribution 119 Assyria 199, 200 Aster Revolution 11, 13 Atlantic democracies 17 Austria(n) 108; corporative constitution (1934) 135; crisis 101–103; Germany’s annexation of (Anschluss) 103, 105, 106, 126; government 102, 103, 106

383

Index Austrian Civil War (1934) 105 Austrian National Bank 102 Austrian Revolution 26 Austrian Schilling 102 Austrian School of Economics 23, 25, 27, 35, 37, 40, 41, 42–43n2, 43n3, 232 The Austrian Schutzbund and the Civil War of 1934 (Duczvnska) 110n5 Austrofascism 28, 105–107 Austro‑Hungarian Compromise (1867) 3, 11 Austro‑Hungarian Empire 22, 175, 332 Austro‑Marxism in Vienna 22–30, 43n15, 232; socialist democracy and economic efficiency 25–28; transformation of capitalist society 28–29 Austrosocialism 106 authoritarian interventionism 106, 107 authoritarianism 28, 42 automatism 107, 212 balance‑of‑budget orthodoxy 131 balance‑of‑power system 55, 57, 114, 142, 151, 170, 270 Balázs, Béla 5 Balzac, Honoré de 223 Bandung spirit 123 banking system 102 Bank of England 104, 117 Barone, Enrico 33; “The Ministry of Production in the collectivist state” 33 Baross, Gábor 6 Bauer, Otto 15, 22–24, 26–28, 33, 108, 127, 157, 253; “Der Weg zum Sozialismus” 33; Zwischen zwei Weltkriegen? (Between two world wars?) 29 Bayh‑Dole act (1980) 317 Bécsi Magyar Ujság (Magyar News in Vienna) 15, 24 Belle Époque 114 Belt and Road Initiative 123 Bennington College 3, 40, 174, 229 Berény, Róbert 5 Bernstein, Eduard 10, 23 Beyersdorf, Frank 108 Bhambra, Gurminder K. 337, 338 Biden, Joe 179, 318 Bildelberg group 358 Bloch, Ernst 8 Block, Fred 66–68, 69n3, 70n11–15, 76–78, 80, 84, 232, 244, 250, 284 Blum experiment 213 Blyth, Mark 65, 66; Great transformations 65 Bockman, Johanna 313 Böhm‑Bawerk, Eugen von 37, 40, 43n3, 232 Boldrin, Michele 321 Bolshevik party 13

Bolshevism 11, 13, 14, 16, 19, 23, 29, 34, 150, 157, 221, 234 Bolsonaro, Jair 342 Bourdieu, Pierre 65 bourgeois radicalism 12, 13 Bresson, Alain 200, 201; La Cité Marchande 200; L’Emporion 200 Bretton Woods Conference (1944) 170 Bretton Woods institutions 176, 177 BRICS Development Bank 123, 179 Britain’s Industrial Future 130 British Trade Unions 151 brown shirt movement 153 Brüning (Chancellor) 113 Brussels Conference 109, 110n3 Bücher, Karl 196 Budapest 3–4, 220; in Austro‑Hungarian Monarchy 3–4 Budapest Metropolitan Library 4 Budapest University 13 Bulletin of Atomic Scientists 122 Burawoy, Michael 30, 327, 336, 342 Caldwell, Bruce 235 Callon, Michel 67, 69 Cambridge Encyclopedia of the Greco‑Roman World (Scheidel) 201 Cangiani, Michele 26, 27, 67, 70n14, 79, 80, 155, 157, 167n13, 168n15, 219, 237, 269, 271, 272, 273, 282, 283, 285, 328 Cannan, Edwin 40 Cantell, Kari 319 Capital (Marx) 244, 250, 253–255, 260 capitalism 19, 23, 27, 29, 36, 41, 42, 51, 54, 62–69, 73, 76, 78, 82, 84, 88, 90, 94, 106, 109, 131, 143, 145, 157, 166; always disembedded approach 64, 67–68; comparative 65; contemporary 64, 68, 69; debauched system of 14; embeddedness, disembeddedness and re‑embeddedness 63, 65–68, 70n10; embeddedness as social construction of economy 62, 64–65; ethical critique of 87; historical bloc in 57; laissez‑faire 114; organized 87, 88, 90; post‑1870 corruptions of 91; redistributive 77; welfare 77, 82, 84 capitalist commodity 51, 52, 58 capitalist development 51, 122; double movement of 54–56 capitalist market: economy 27, 41, 51, 54, 59, 64, 68, 70n15, 87, 233, 238, 239; prices 233, 234, 236–239; society 106, 171; system 36, 39, 41, 42, 236–237, 239 capitalist property system 143 capitalist society 28–29, 36, 70n15, 78, 89, 146 Carr, Edward Hallett 160, 162 Carthaginian peace 151, 167n10

384

Index catallactic triad 208, 261 Catanzariti, Mariavittoria 164, 167n12, 168n17 Catholic Church 14 Catholicism 105 Catholic Saint Emeric Student Association 8 central banks/banking 212–214 Central Economic Council 132 Central Europe 113, 114, 116–118 centre‑periphery concept 338, 342, 344 Chamber of the Commons 152 Chang, Ha‑Joon 278 Chapman, Anne 215 Chartist propagandists 294 Chateaubriand, François‑René de 223 cheap credit policy 117, 118 China 122–123, 178, 179 Christianity 14, 375 Christian Left 128, 138, 162, 225, 254 Christian Social Party (Christlichsozial Partei) 11, 13, 25, 28, 105 Churchill, Winston 128, 171, 172, 176, 179; Iron Curtain Speech 171 civil rights 127, 134 civil society 57, 60, 67, 68 class: antagonism 26; reductionism 245; struggle 27, 29 classical capitalism 20 clericalism 12 clericofascism 106 climate change 361, 364–366, 369, 370 Club of Hungarian communists 16 Clyde workers’ revolt (1915) 130 coal mine issues 129 Coase, Ronald 201, 279, 349 Co‑Existence (journal) 160, 229 co‑existence and Polányi 160–167; concept of 166; idea of 162–163; international frame of liberal institutions 163–164; pacifism 164–165; socialism and democracy 165–166; tolerance 160–162; writings in interwar period (1930s) 161–162 cognitive embeddedness 65 Cole, G.D.H. 24–26, 30, 126, 151, 221, 227, 373–375; Guild Socialism Restated 374 collective security 151–154, 157 collectivism 88; vs. syndicalism 39 collectivist conspiracy theory 69n4, 91 collectivist counter‑revolution 88 colonialism 161, 164 Columbia University 161 commercial republicanism 306 Committee on Finance and Industry 128 commodification 52, 55, 56, 58, 59, 64, 74, 84, 87, 93, 142, 244, 247, 250–251, 336, 337, 343, 345, 364–366; of scientific research 316–318

commodity fetishism 51, 243, 244, 249, 305, 306 commodity money 212 Commons, John R. 272 communalism 317, 318 “commune” (Kommune) 39 communism 14, 89, 176 Communist Party 15 Communist Party of Austria (KPÖ) 22 competitive markets 27, 58, 174, 236, 240, 263, 306 complementary goods 37 complexity argument 236 Comte, Auguste 268 The Concept of Political (Schmitt) 156 Concert of Europe 331–333 Condliffe, J.B. 118; Economic Yearbook of the League of Nations 118 Conference on Disarmament 126, 153 Congdon, Lee 15, 244, 374 Congress of Vienna 326 Conservative Party 128, 129, 132 consumer cooperative 309 consumer goods 37, 38, 210 contemporary capitalism 60 contemporary Marxism 29 contestatory democracy 306 Coolidge (President) 108 cooperative socialism 35 corporate liberalism 56 corporatism 29, 106 corporatist capitalism 142, 144 corporatist model 40, 143 corporatist state 137, 141 corporative state (Ständestaat) 106 corporativism 247 cost calculation 87 countermovement 55, 63, 67, 69, 73, 74, 80, 90, 91, 92, 241, 335, 336, 338, 339–341, 343, 344 counter‑revolution 28, 127, 155 COVID‑19: crisis 318; vaccines 319 Creditanstalt 28, 102, 103, 162 Crimean War 326 crisis: of civilization 33–35; ecological 349, 351, 358; financial (2007–2008) 120, 122; of humanity 94; of liberalism 57; of market society 73; monetary theory of 213–214; political 113, 128, 239 critical institutionalism 275 critique of political economy 254, 258, 263 Critique of the Gotha Programme (Marx) 258, 375 Crouch, Colin 68, 279 crypto‑inflation 117 Cuba(n): biopharma 319–320; government 320 Cuban Missile Crisis (1960s) 122 cultural embeddedness 65 currency stabilization 107–108, 116 customs tariffs 74

385

Index Czigány, Dezső 5 Dahomey 210–211, 377 Dahomey and the Slave Trade (Polanyi) 335 Dale, Gareth 66–68, 80–82, 84, 96n5, 160, 243, 244, 268, 271, 313, 327, 377 Dalton, George 191, 197, 243; “Economic Theory and Primitive Society” 191 Danubian Confederation 332 Dardot, Pierre 67 Dawes Plan loans 116, 117 decolonization movements 34 decommodification 79, 336, 339, 342–345, 364–366 deflation 109, 214 degenerated markets 88 dehumanization 251 Dekker, Erwin 34, 35 Demetriou, Denise 201 democracy 13, 14, 16, 24, 29, 42, 73, 127, 140, 143, 144, 157; British 166; radicalization of 68; Spann’s attacks on 106 democratic rule of law 27 democratic socialism 20, 135 democratization 24, 87, 114 Der Kampf 23, 26 Der Österreichische Volkswirt (The Austrian Economist) 16, 24, 28, 101, 125–126, 128, 131, 149, 162, 170, 172 despotism 16 Deutsch, Julius 22 Diamond v. Chakrabarty (1980) 317 Dickinson, H.D. 33 dictatorship 13, 14, 18, 22, 23, 30, 59 Die Analyze der Empfindungen (The Analysis of Emotions, Mach) 9 Dietler, Michael 201 digitalization 60 DiMaggio, Paul 65 Dinerstein, Ana Cecilia 342 discovery of society 254, 370 disembeddedness 63, 65–68, 70n10, 73, 76, 78, 79, 80, 84; economy 262; liberalism 233; markets 77–78 disinterestedness 317, 318 Dobbin, Frank 65 Dollfuss, Engelbert 28, 110n4, 126, 138 domestic bourgeois middle‑class radicalists 10 domestic incomes: of rentiers, workers and peasants 114–115, 119 Donlan, Walter 197 Doomsday Clock 122 double movement 51, 52, 54–57, 59, 60, 73–84, 86, 88, 186–187, 206, 246, 250, 285, 356, 364, 374, 380; anatomy of Polanyi debate 76–84; neoliberal origins of 87–89; overview 73–76

double movement in Global South 335–345; as continuous historical process 343–345; decolonial and postcolonial critiques of Polanyi 337–338; during neoliberal capitalism 338–343; in Polanyi’s The Great Transformation 336–337 Dual Monarchy 175 Ducszynska, Ilona 10, 11, 15, 16–18, 22, 28, 110n5, 369; The Austrian Schutzbund and the Civil War of 1934 110n5; The Plough and the Pen. Writings from Hungary, 1930–1956 18 Durbin, Evan 92, 93; The Politics of Democratic Socialism: An Essay on Social Policy 92 Durkheim, Émile 266, 274 Durkheimian institution 274, 275 Eastern Democratic Union (EDU) 175 ecological crisis 349, 351, 358 ecological economics 349–359; challenge of re‑embedding 357–358; contribution to political ecology 356–357; fictitious commodities 354–355; history of environmental economic thought 349–351; material and biophysical support 352–353; Polanyi’s contribution 351–352 economic anthropology and Polanyi 54, 185–193, 261; comparative‑holistic approach 189–191; double movement 186–187; eclecticism and legacy 185, 192–193; formalist–substantivist debate 191–192; Malinowski as anthropological antecedent 187–189; political economy 185–187, 193 Economic Calculation in the Socialist Commonwealth (Mises) 33, 235, 374 economic liberalism 35, 52, 54, 56, 60, 74, 75, 102, 171, 173, 177, 178, 235, 239, 240; restoring 107–109 Economic Yearbook of the League of Nations (Condliffe) 118 economistic fallacy 53, 54, 58, 64, 69n6, 73, 78, 190, 243, 283, 377 economistic prejudice 282, 284 economy/economic: determinism 51, 55, 57, 245, 251; efficiency 25–28; globalization 121; history 64, 185, 187, 191, 196, 198, 201, 208, 270, 278, 279, 285, 377; imperialism 286; integration 82, 116, 121, 122, 177, 179, 367–369; laws 58, 60; multi‑polarity 122–123; planning 107; retrogression 105; sociology 62, 64–69, 70n15; solipsism 196 ecosocialist freedom 373–381; abolition of social division of labour 375–376; freedom in complex society 379–381; negotiated coordination 377–378; participatory planning 378–379; social ownership and

386

Index subsidiarity 376–377; using explicit and tacit knowledge 377–378 Eidgenössische Technische Hochschule 5 1844 Manuscripts (Marx) 244, 249, 250 Eldersch, Matthias 22 electoral reforms 127 Elliot, Walter 129 embedded economy 262 embedded liberalism 66, 68, 82, 176, 177, 233 embeddedness 63, 65–68, 70n10, 73, 76, 78, 80, 84; concept of 269; vs. institutedness 374; as social construction of economy 62, 64–65 emergency law (1917) 28 Emeric Circle 9 emporia/emporion 200, 201 Engels, Frederick 35, 41, 220, 270 England 105, 114, 117, 119, 129, 171 The Entropy Law and the Economic Process (Georgescu‑Roegen) 350 environmental economics 349, 350 environmentalism of the poor see popular ecologism Eötvös Loránd University (ELTE) see Faculty of Law, at Royal University of Budapest ‘The Epoch of Socialism’ (Mises) 34 Ervin Szabó Library see Budapest Metropolitan Library Escobar, Arturo 356 Ethiopia 153, 154 European civilization: 19th‑century 34, 41, 91, 175, 235, 240, 331 European civil war 157 Europe To‑Day (Polanyi) 148, 151, 153, 156, 157, 161, 162, 173 Eurozone crisis 110 Evans, Peter 66, 342 exchange values 51–53, 58 Extinction Rebellion 369 Fabian socialism 35 factory laws 74 Faculty of Law, at Royal University of Budapest 8 farms collectivization 114, 162 fascism 28, 40, 56, 60n3, 73, 74, 83, 89, 90, 106, 107, 127, 128, 150, 157, 163, 165, 166, 235, 330 fascism and Polanyi 137–146; Christianity and the Social Revolution 138; “The Essence of Fascism” 138; “Fascism and Socialism” 145; The Fascist Transformation 138, 145; The Fascist Virus 138; as philosophy of anti‑individualism 140–142; as restructuring of society for capitalism 142–144; “Spann’s Fascist Utopia” 141; “The State and the Individual in Fascism” 140; theory 138–139; “Wirtschaft und Demokratie” 138

fascist Italy 149–150, 152, 153, 157 The Fascist Transformation (Polanyi) 88, 138, 145 fatalism 244 Faundez, Julio 282 Federal Government 133 Federal Union 175 Federation of British Industry 132 Ferenczi, Sándor 5 fetishism 244, 247–251 fetishization 258 feudalism 12, 377 fictitious commodification 52, 335, 339–341, 344, 345, 356 fictitious commodities 39–41, 43n16, 73, 87, 243, 244, 258, 261–263, 286n5, 315, 349, 354–355; labor, land and money as 39–41, 51, 52, 57, 58, 60, 63, 76–79, 81, 335 financial capital 59 financial crisis (2007–2008) 120, 122 financialization 59, 60, 119–120, 122 “Financial Reconstruction of Austria” (1922) 101 Financial Stability Board (FSB) 358 finlandisation 17 Finley, Moses 196, 198, 201, 202n3; The World of Odysseus 198 First Hungarian People’s Republic (1918–1919) 11, 16 fiscal adjustment programmes 110 Fischer, Josef L. 30 Five‑Year Plans 114, 162 fixed prices 36, 40 Fligstein, Neil 65 Ford Foundation 197 foreign capital 102, 122 foreign credits 115–116 foreign policy 128, 155 Forel, Auguste‑Henri 10 formal choice‑theoretic model 189–190, 192 formal economics 189 Fourcade, Marion 67 framework costs 227–228 France 114, 117, 118, 121, 152, 153 Franco‑British hegemony 152 Franco‑Prussian War 326 Franz Joseph University 8 free community 225 freedom, concept of 299 freedom and socialism 219–230; for communities of peoples 229–230; community and society 224–226; framework of socialist economy 227–228; historical materialism 220; ideal of moral freedom 220; military machineries in World War I 220; Misesʼs challenge and Polanyi’s complex societies 221–223; philosopheme of murdered Chinese and Polanyi’s socialist alternative 223–224;

387

Index socialist and capitalist accounting systems 226–227 freedom of speech 42 Free Hungarians 16 free labour market 240 free‑market 25, 38, 66; economics 40, 143, 187; system 238 Free Open‑Source Software (FOSS) 322 free responsible individuality 225 free trade 54, 56, 108, 131, 179, 212, 330; agreement 121 Free Trade Union of Old Galileists 15 French Marxist school 192 French Revolution 293 Friedman, Milton 38 Führerprinzip 156 functional democracy 26, 309 functionalism 188 functionalist political model 141 functionally organized socialism see guild socialism functionally organized socialist economy 26, 39, 87 functional market economies 108 functional representation 222, 227, 309 functional socialism 26, 35, 36, 38–41, 87 funding bias 318 G20 358 Gábor Bethlen Circle 9 Gailledrat, Éric 201 Galbraith, James 121 Galbraith, John Kenneth 113, 256 Galileo Circle 9–12, 220, 267, 268, 375 Garcia Fernández, Ramon 342 Geddes, Patrick 350 Gemici, Kurtulus 62, 65, 67, 68, 69n2, 70n2, 70n9–10, 271, 341 General Agreement on Tariff and Trade 177 general strike in Great Britain (1926) 28, 127 Geneva Protocol: 1922 103; 1925 152 Genfer Sanierung 102 Gentile, Giovanni 140, 142 George, Henry 13 Georgescu‑Roegen, Nicholas 350; The Entropy Law and the Economic Process 350 German Advisory Council on Global Change (WBGU) 371 German‑Austrian customs union project 103 German Social Democratic Party (SPD) 23, 29, 30, 105, 106, 108 gift exchange 197 Giustizia e Libertà 153 global economy 42, 67, 73, 107, 110, 115, 119 globalization 65, 120–122, 176, 179, 215; neoliberal 123 Global Standard Institutions 279 Goldscheid, Rudolf 13

gold standard 55–57, 102, 107–110, 129, 131, 142, 171, 173, 212, 213, 270 Good Society (Lippmann) 88 Goody, Jack 196 gradational vs. methodological approach 65–68 Graeber, David 366 Gramsci, Antonio 30, 57, 58, 327, 374, 379, 380, 381 Granovetter, Mark 62, 64, 65, 68, 69n2, 70n7–10, 70n15 Grant, Donald 222 Great Britain 114, 116, 121, 125, 128, 152, 157, 171, 173, 213; Polanyi’s articles about 125, 126, 129, 131 Great Depression 57, 74, 88, 89, 108–109, 120, 131, 142, 153, 157, 162, 163, 297 The Great Transformation (Polanyi) 41, 57, 62–64, 73, 77, 78, 80, 83, 84, 86–88, 90–93, 95, 119, 128, 129, 131, 134, 137–139, 142, 143, 148, 149, 156, 161, 162, 166, 170, 172, 186–188, 197, 207, 213, 216, 223, 226, 233, 239, 244–246, 251, 253, 255, 257, 259, 270, 284, 327, 335, 336, 345, 363, 373–374; “Conservative 1920s, revolutionary 1930s” 107; “Freedom in a Complex Society” 271, 379; inner logic and coherence 92–94; “The International System” 170; “Speenhamland and Vienna” 25, 40, 103–105 Great transformations (Blyth) 65–66 Greenspan, Alan 120 Gruchy, Allan G. 272 Grünberg, Carl 8 Grünberger, Alfred 101 Gründerzeit 4 guild socialism 16, 24, 26, 30, 36, 39, 55, 126, 315, 376 Guild Socialism Restated (Cole) 374 Habsburg Empire 102, 113, 154, 175 Halperin, Rhoda 185, 244 Harper’s Magazine 170 Harrod, Roy 40 Harvard University 317 Hasebroek, Johannes 196 haute finance 54, 55, 165, 166, 331 Havas, Endre 17 Hayek, Friedrich 33, 35, 37, 87, 89, 96n12, 113, 175, 284; “The Nature and History of the Problem” 232; “The Present State of the Debate” 232; The Road to Serfdom 88, 233 Hayek vs. Polanyi 232–241; freedom without social awareness 237–239; market prices as limit to moral progress 237–239; political consequences of market system 239–240; problem in complex society 235–237;

388

Index relationship between political beliefs and social reality 234–235 Hazánk kötelessége (Obligation of Our Homeland, Polányi) 18 Healey, Kieran 67 hedge funds 59 Hegel 141, 246, 247, 249, 255; Philosophy of Law 255 Heimwehr 105, 106 heterodox economic tradition 192 Hilferding, Rudolf 23, 27, 253; Marx‑ Studien 23 historical materialism 220, 243, 244 historiographic revisionism 157 History and Class Consciousness (Lukács) 244 Hitler, Adolf 113, 140, 143, 148, 153, 154, 161, 173 “Hívő és hitetlen politika” (Believing and Unbelieving Politics, Polányi) 16 Hobson, John 30 homo œconomicus 122, 189, 263, 283, 285 Horthy, Miklós 22 householding 54, 270, 271, 274 House of Commons elections (1945) 171, 176 housing policies 104 Human Action (Mises) 261 human economic existence 188 humanity, crisis of 94 Hungarian Association of Freethought 9 Hungarian Communist Party 4 Hungarian Council, Britain 17 Hungarian Councils Republic 14, 22 Hungarian Revolution (1956) 10, 18 Hungarian Sociological Association 267 Hungarian Writers’ Association Abroad 18 Hungary 3, 4, 108 Huszadik Század (Twentieth Century) 267, 269 hyperinflation 92, 101, 119 Ibn‑e‑Khaldun 290 idealist socialism 87 Illyés, Gyula 5 impaired market self‑regulation 88, 90, 92–95 imperialism 161 impersonal market domination 306 “imputation problem” (Zurechnungsproblem) 37–40, 43n6 Independent Labour Party 126, 129 indigenous peoples and land commodification 339–340, 355 individualism 106, 140, 143, 145, 237 individual liberty 127 individual‑universal principles 145 industrialization 162 Industrial Revolution 211, 280, 291–293, 363, 366, 368

Industry and Politics (Mond) 130 industry/industrial: capitalism 60, 193, 214, 316; civilization 56, 58; cooperation 130; democracy 30 inflationist policies 118 institutedness 92–94 institutional dysfunction 89 institutional economics 266 institutional embeddedness 269, 271 institutional freedom 161 institutionalism and Polányi 266–275; early influences 267–269; historical‑comparative perspective 269–271; institutional economics and original institutionalism 266; in late career 272–274; variant of institutional economics 274–275; voluntaristic dimension of institutions 271–272 institutionalist approach of Polanyi 278–286; criticism of ‘economistic’ intellectual frameworks 278–279; economistic prejudice 282; framework for social sciences 284–286; institutional set‑up of market economy 283–284; market economy as contingent historical form 282–283; neo‑institutionalist framework 279–280; North’s neo‑institutionalism 281–282; perspective 280–281 institutional separation 131, 134, 135 Integrated Modelling Assessments (IAM) 362 intellectual property 321 interdisciplinarity 185–187, 279 Intergovernmental Panel on Biodiversity and Ecosystem Services (IPBES) 361, 362, 364, 366, 371 Intergovernmental Panel on Climate Change (IPCC) 361, 362, 364, 366, 371 international capital 122, 179 international civil war and Polanyi 148–157; epochal change and connection between “internal” and “external” 148–150; Europe To‑Day 148, 151, 153, 156, 157, 161, 162, 173; fascism/democracy 154–156; market society and democracy 156–157; “Markstein 1935” 149, 172; “Milestone 1935” 148; nationalist revisionism 152–153; Versailles system and caesura (1930s) 150–152 International Court of Law 164 international credit system 214 international division of labor 174, 176 International Gold Standard 57, 113, 114, 116–118, 121, 170, 174, 177, 180n4 internationalism 13, 121, 145, 225 internationalization 114 international markets 177, 178

389

Index International Monetary Fund (IMF) 109–110, 113, 278, 339, 358 international monetary system 212 international peace 108 international trade 122, 174, 176, 177 intervention costs 228 interventions/interventionism 86, 88–90, 92, 93, 106, 115 Issues in Ecology 355 Italian Labour Charter (1927) 140 Italo‑German dispute (1934) 154 Jászi, Oszkár 5, 9–13, 15, 17–19, 24, 269, 332; A kommunizmus kilátástalansága és a szocializmus reformációja (The Hopelessness of Communism and the Reform of Socialism) 15 Jessop, Bob 58 Joseph, Franz 34 Joynson‑Hicks, William 128 József, Attila 5 Kádár regime 18 Kanesh 199, 200 Kar‑Esarhaddon (Esarhaddon) 200 Karinthy, Frigyes 5 Karl (Emperor) 34 Károlyi, Mihály 11, 16–18 Kar‑Shalmaneser (Shalmaneser III) 200 karu’s 200 Kautsky, Karl 23, 24, 221 Kehoe, Dennis P. 201 Kellermann, Zoltán 17 Kelsen, Hans 23, 27, 29, 164 Kende, Zsigmond 19 Keynes, John Maynard 113, 114, 122, 128, 130, 166, 173, 177, 313; “The end of laissez‑faire” 130; Keynesian economics 82; Keynesian fiscal policy 131 Keynesianism 66, 206, 313 Khrushchev administration 160 Kindleberger, Charles P. 109, 113 Klages, Ludwig 140 Klatschko, Anna 5 Klatschko, Samuel 5, 19 Klein, Steven 307 Klink, Aguilera 351 knowledge: goods production and their limits 318–320; problem 234 A kommunizmus kilátástalansága és a szocializmus reformációja (The Hopelessness of Communism and the Reform of Socialism, Jászi) 15 Koschaker, Paul 199 Kosztolányi, Dezső 5 Kozuh, Michael 200

Kreditanstalt 113, 117 Krimsky, Sheldon 317 Krippner, Greta R. 62, 65, 69n2, 70n10, 269 Kula trade 188 Kun, Béla 11, 15 Labour Government 129; crisis (1931) 132 labor market 93, 293, 295 labor movement 107, 127, 157 Labour Party 91, 126, 127, 132, 133, 171, 176 labor power 43n15, 52, 54, 58 labor theory of value 40 Lacher, Hannes 80, 81, 84, 96n2, 139, 275 La Cité Marchande (Bresson) 200 laissez‑faire principles 54–56, 58, 87, 92, 143, 240 land reform 12 Landshut, S. 244 Langan, Michael 339 Lange, Oskar 33 Laski, Harold 127, 133, 162 Latin America 338–340, 342 Lausanne School 34, 35, 43n3 Laval, Christian 67 laws of nature 58 League of Nations (LoN) 101–110, 103, 110n3, 113, 116, 125, 126, 149–153, 157, 164, 330; Covenant of (articles 16 and 19) 163, 164, 167n12; Financial Committee 102; Pact of 164 The Leeds Weekly Citizen 171 L’Emporion (Bresson & Rouillard) 200 Lerner, Abba P. 33 Levien, Michael 340 Levine, David 321 Lewis, J. 104 Li, Tania 340 liberal capitalism 17, 57, 58, 87, 88, 126, 127, 134, 135, 144, 150, 171 liberal democracy 143, 145 liberal economy 16, 40, 55, 107, 150 Liberal Industrial Inquiry 130 liberalism 36, 51, 55, 56, 88, 106, 140, 220, 300; crisis of 57; Geneva’s 108; international 109; market 56 liberalization 101 liberal movement 90 liberal nationalism 149 liberal revival (1980s) 215 liberal socialism 15, 16 liberal state 55, 57, 106, 134, 142, 170, 270 liberal system 127, 130, 131 liberal utopia 86 Linz Congress, of Austrian Social Democratic Party 127 Lippmann, Walter 17, 88–90, 96n12; Good Society 88

390

Index Litvinov, Maksim 154 Liu, Tiantian 341 The Livelihood of Man (Polanyi) 57, 351 living democracy 26 living standards 104, 105, 114, 118 Lloyd George, David 110n2, 130, 132 loans 102–104, 109; foreign 109, 110n2, 117 Locarno Treaty (1925) 153 London Non‑Intervention Committee 157 The London Quarterly of World Affairs 17, 170 Lösch, August 40 Lovett, Frank 306 low‑carbon and biodiverse society, Polanyi in 361–371; contributions 362–370; as demanding guide 370–371; transformations 362 Lukács, György (Georg) 4, 8, 13, 246, 244, 247, 249; “A bolsevizmus, mint erkölcsi probléma” (Bolshevism as a Moral Problem) 13; “Changing Function of Historical Materialism” 246; History and Class Consciousness 244 Lula da Silva, Luiz Inácio 342 Luxemburg, Rosa 221 MacDonald, Ramsay 129, 152 Mach, Ernst 9, 23, 24, 29, 268–269, 271, 273; Analysis of Sensations 268; Die Analyse der Empfindungen 9 Machado, Nuno Miguel 67, 70n15 machine age 370 Macmillan, Harold 128, 132 Maine, Henry Sumner 90, 268; Ancient Law 268 Main Secondary School, of Royal Hungarian Teacher Training Institute 7, 8 Malaparte, Curzio 140 Mali Empire 210 Malinowski, Bronisław 187–189, 281, 224, 335; Argonauts of the Western Pacific 188, 335 Malthus, Thomas 104, 294, 296 Manchuria 153 Manicas, Peter T. 290 Manning, J. G. 201; Ancient Economy: The Methods and Models 201 March on Rome 154 marginalist value theory 314–315 marginal utility theory 40 market economy 52–54, 58, 60, 65, 75, 79, 88, 89, 92–95, 105, 143, 144, 175, 189; impaired 82, 83 market‑immanent mechanism 94 marketization 56, 73 marketless economy 36 marketless trading 200 markets: capitalism 145, 186, 187, 193, 211; capitalist economies 190, 193;

competition 41, 56, 90, 235, 240, 306; domination 335, 339–341, 344, 345; exchange 36, 187, 206, 211, 367–368, 377; fundamentalism 66; globalization 42; logic 63, 65–68, 69; mechanism 74, 76, 89, 91, 93, 175, 256, 260, 314, 349, 354, 358, 364, 365, 367, 368; mentality 214, 271; revolution 88 market society 36, 41, 53, 60, 63, 67, 80, 142, 206, 363–364; crisis of 73; critique of 78; establishment of 75; history of 77, 84; ideology of 64; regulating 77; rise of 74, 76, 80 market utopia 41, 60, 77, 79, 240 Márquez, Felipe 344 Martineau, Harriet 294 Martinovics Lodge 10 Marx, Karl 5, 19, 23, 35, 41, 51, 52, 55, 58, 60, 193, 196, 220, 270, 299, 305, 306, 350, 369, 375, 377; Capital 244, 250, 253–255, 260; Critique of the Gotha Programme 258, 375; 1844 Manuscripts 244, 249, 250; “On the Jewish Question” 247; Theses on Feuerbach 254, 255 Marx, Karl vs. Polanyi 243–251; alienation and fetishism 247–251; connections and overlaps 243–245; economic determinism and class reductionism 245–247 Marxian socialism 12, 16, 221, 222 Marxism 7, 23, 24, 29, 192–193, 244 Marxist determinism 245, 286n4 Marx‑Studien (Adler & Hilferding) 23 Mattei, Clara 295, 297 Maucourant, Jérôme 60n3, 198, 209, 216n4 Max Adler 253 maximization theory 192 May, Christian 275 Mayer, Hans 37 Mayhew, Anne 191, 192, 194n5 McCarthyism 134 Mearsheimer, John 328 Mendell, Marguerite 30n4, 244, 284, 374 Menger, Carl 27, 37, 40, 43n3, 232, 263–264, 273; Grundsätze der Volkswirtschaftslehre 263; Principles 37 Merton, Robert 317 metabolism (Stoffweschel) 350 metadosis 211 metagovernance 54 Methodenstreit 290, 297 Meyer, Edouard 196 Meyer, J. R. 244 Michels, Robert 10 Miklós, Gimes 18 militaristic peace 329 Ministry of Munitions 130

391

Index Mises, Ludwig von 25, 26, 33–38, 40–42, 42n2, 43n3, 87, 89–92, 96n12, 104, 106–108, 110n2, 113, 175, 215, 226, 232, 235, 236, 261; attack on concept of socialism 219; challenge to socialism 221–223; Economic Calculation in the Socialist Commonwealth 33, 235, 374; ‘The Epoch of Socialism’ 34; Human Action 261; line of reasoning 37, 39; “The Myth of the Failure of Capitalism” 88; Socialism: An Economic and Sociological Analysis 33, 222 Mitchell, Wesley Clair 210, 273 Mitläufers 14 mixed economy 84 Model Secondary School see Main Secondary School, of Royal Hungarian Teacher Training Institute modern capitalism 196, 280 modern civilization 35, 38, 42 modern economic theory 290–291, 297 modern freedom 27, 128 modernity/modernisation 3, 4, 224 Möller, Astrid 201 Mond, Alfred 130; Industry and Politics 130 “Mond‑Turner talks” 132 monetary payments 208 monetary protectionism 212 monetary theory of crisis 213–214 money, Polanyi on 206–215; 1930s crisis 213–214; exchange and power 209–211; institutional analysis 214–215; origins and functions 207–209; pragmatics 206; at time of market capitalist system 211–213 moral economy 53–54 moral‑normative approach 68, 69 moral/religious freedom 161 Morris, Ian 201; The Ancient Economy: Methods and Models 201 Morris, William 375; News from Nowhere 375 mRNA vaccine 318, 319 Munck, Ronaldo 340 municipal socialism 87, 89 Mussolini, Benito 140, 152, 153, 380 Mycenae in Greece 198 Nair, Manjusha 341 Napoleonian War 331 Naredo, José Manuel 350, 352 National Alliance of People’s Movements (NAPM) 340 National Government 129 national imperialism 153 National Industrial Council 132 nationalism 13, 144, 145, 155 nationalist revisionism 152–153, 155 National Recovery Administration (NRA) 133

National Socialism 106, 141, 166 National Socialist Revolution 114 national sovereignty 122 nation state 120–122 native fascism 106 NATO 326, 327 natural costs 226, 227 natural economic laws 59 naturalism 58, 234 natural laws 11, 16, 19, 60, 234 natural resources economics 350 Naukratis 201 Nazi Germany 128, 153, 154, 157, 209 Nazism 150, 151, 153, 165, 330 neo‑authoritarian movements 139 neoclassical economics 40, 62, 68, 192, 193, 197, 273, 280, 282, 350, 368, 369 neo‑colonialism 123 neo‑institutionalism 279–280, 281–282 neoliberal capitalism 145, 254 neoliberal counterrevolution 35, 178 neoliberal globalization 120 neoliberalism 35, 36, 42, 51–60, 64–69, 87, 90, 91, 94; authoritarian 60; commodities and fictitious commodities 51–53; critique of interventionism 92; double movement 54–56; Geneva 109; Polanyi and 57–60; Polanyi as moral economist 53–54 neoliberalization 59, 110 neoliberal policy 42, 58, 122 neo‑republicanism and Polányi 299–309; freedom and market 305–306; opaqueness of unfreedom and transparency of freedom 306–309; responsible freedom of self 303–305; Rousseauean dilemma 300–301; social freedom of person 301–303 Neurath, Otto 33; “Durch die Kriegswirtschaft zur Naturalwirtschaft” 33 New Britain 135, 138 New Deal 56, 73, 77, 81, 114, 121, 133, 134, 161, 166, 173, 176, 177, 213 New Democratic Hungary Movement 16, 17 New Economics Foundation (NEF) 371 New Institutionalist Economics (NIE) 201 News from Nowhere (Morris) 375 New York Federal Reserve Bank 118 New York Times 105, 319 NextStrain 318 Nietzsche, Friedrich 5, 140 Nölke, Andreas 275 Nolte, Ernst 157 non‑arbitrary law 306 non‑capitalist economies 187, 190 non‑capitalist societies 78, 189 non‑financial firms 59 non‑functioning markets 75

392

Index non‑market economies 53–54 Norman, Montague 117 North, Douglass 201, 279–283; “Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi” 280 The North American Society of Ecology 355 North Atlantic Treaty 176 October Revolution (1917) 11, 157 oncomouse 317 Open Access model 322 open market imperialism 177 “Open Science” movement 320–323 open scientific knowledge 321 open technoscience 320–323 Oppenheim, Leo 198 ordoglobalism 109 ordoliberal principles 109 orthodox economics 187–190 orthodox Marxism 220 Ortutay, Gyula 17 Ostwald, Wilhelm 10 Ottakring Clinic 15 Owen, Robert 315, 370, 375 pacifism 155, 163, 329 pacifist peace 329 Pareto school 33 Paris Peace Treaties 149, 151, 152, 172 parliamentary democracy 26, 166 parliamentary reformism 82 Parrique, Timothée 370; “In retrospect” 370 participatory planning 378–379 Party of Communists 11 Patriotic Front (Vaterländische Front) 28 Pax Americana 165 Pax Britannica 165, 212 payment 209–210, 212 peaceniks 327 Peace Treaties 161, 163 Pearson, Harry 264 peoples’ right of self‑determination 13 personal freedom 39, 41, 42, 59 Peter the Great 16 Petőfi, Sándor 8, 10 Pettit, Philip 300–307; Republicanism 302 Petty, William 354 Pharmaceutical Research and Manufacturers of America 319 Philosophy of Law (Hegel) 255 Pigou, Arthur 349 Pikler, Gyula 8, 9, 268, 269, 271 Plana‑Mallart, Rosa 201 The Plough and the Pen. Writings from Hungary, 1930–1956 (Polanyi and Duczynska) 18 pluralistic corporatism 132

Podolinsky, Sergei 350 Polányi, Adolf 5 Polanyi, Karl – Polányi, Károly 3; “Against Fear” 325; on agricultural policy and industry 132; “Amerika in Schmelztiegel” 134; articles in New Britain 135, 138; Austria and Germany 106; Austrofascism 105–107; Central European perspective 113; on commodities and fictitious commodities 39–41, 51–53; “Community and Society” 307, 308; conception of socialism 219, 225; “The Contribution of Institutional Analysis to the Social Sciences” 273; contribution to Der Österreichische Volkswirt 125–126, 131; “Corporative Austria – A Functional Society?” 135; “Covert External Rule and Socialist Economy” 18; Dahomey and the Slave Trade 335; “Demokratie und Währung in England” 128; “Der Mechanismus der Weltwirtschaftskrise” 126; on double movement 52, 54–56, 76–84; “The Economy as an Instituted Process” 191, 273, 284; “Englisches Stahlstatut” 132; “The Essence of Fascism” 106, 139–141, 143; family 4–7; ‘The Fascist Transformation’ 88; “The Fascist Virus” 40, 139, 142, 143; “The Functionalist Theory of Society and the Problem of Socialist Economic Accounting” 232; The Great Transformation 25, 41, 57, 62–64, 73, 77, 78, 80, 83, 84, 86–88, 90–93, 95, 103–105, 107, 119, 128, 129, 131, 134, 137–139, 142, 143, 148, 149, 156, 161, 162, 166, 170, 172, 186–188, 197, 207, 213, 219, 223, 226, 233, 239, 244–246, 251, 253, 255, 257, 259, 270, 271, 284, 327, 335, 336, 345, 363, 373–374, 379; Hazánk kötelessége (Obligation of Our Homeland) 18; “Hívő és hitetlen politika” (Believing and Unbelieving Politics) 16; “Hungarian Lesson” 18; and Hungarian politics 16–20; “Ideologies in Crisis” 34; illness 15; interest on New Deal 133–134; interpretation of World Economic Crisis (1929–1933) 118–119; “Is America an Exception?” 134; “Jean‑Jacques Rousseau, or Is a Free Society Possible?” 300; “Labour in Southport” 132; “Labour und Eisenindustrie” 132; as leader in Galileo Circle 9–12; “Liberale Sozialreformer in England” 130; “Liberale Wirtschaftsreformen in England” 130; The Livelihood of Man 57, 351; “Marx on Corporativism” 247; “Marx on Self‑Estrangement” 257; “The Mechanisms of the World Economic Crisis” 114; as moral economist 53–54;

393

Index neoliberal‑corporatist transformation 128–131; neoliberalism and 57–59; “New Nations of Asia and Africa” 122; For a New West 315; “Nézeteink válsága” (“The crisis of our ideologies”) 20; “Notes” 40; “On Belief in Economic Determinism” 233; “On Freedom” 223; “On the Question of Socialization” 228; “Our Obsolete Market Mentality” 233; The Plough and the Pen. Writings from Hungary, 1930–1956 18; “Polgárháború” (Civil War) 14; positive economic theory 39–41; premises and features of new institutional set‑up 131–133; The Present Age of Transformation 40; recognition of complex societies 221–223; Red Vienna and 103–105; relationships with Cole and Tawney 30; restoring economic liberalism 107–109; “Roosevelt im Verfassungskampf” 133; “Schmalenbach und Liberalismus” 131; schools and schooling 7–8; on science and technology 315–316; as secretary of bourgeois radical party 12–14; “Socialist Accounting” 231; “Socialist Calculation Debate” 307; socialist calculation debate with Mises 33–37, 39, 41, 42; socialist transformation 126–128; “Sozialistische Rechnungslegung” 25; Speenhamland system 103–105; “The Test of Socialism” 221; “Tory Planwirtschafter” 132; Trade and Market in the Early Empires 197–199, 280, 284, 335; “T.V.A. Ein amerikanisches Wirtschaftsexperiment” 133–134; “Über die Freiheit” (“On Freedom”) 27, 253, 302–305, 308, 369; on United States 133–134; “Universal Capitalism or Regional Planning?” 170, 176, 229; in Vienna 14–16, 22–25, 29; “Wirtschaft und Demokratie” 128, 139; see also individual entries Polanyi, Karl, interpretation of Marx 253–264; economic society 260–261; fascism and capitalism 254–257; fictitious commodities 261–263; market and capital 259–260; power and value 257–259 Polányi, Laura 5, 7 Polányi, Mihály Lázár 5–8, 18, 19 Polányi, Pál 5 Polányi, Zsófia (Sophie) 5 Polanyi‑Levitt, Kari 104, 160, 244, 245, 363, 369, 374 “Polgárháború” (Civil War, Polányi) 14 politics/political: activism 23; capitalism 59; crisis 113, 128, 239; democracy 27, 29, 83, 88; economy 55, 67, 69, 79, 105, 114, 185–187, 193, 254, 258, 263; embeddedness 65 political Left 105, 106, 110

Pollacsek, Adolf 4, 5 Pollacsek, Károly 4, 8 Pollacsek, Lujza 4 Pollacsek, Mihály 3–7; in Budapest 3–4 Pollacsek, Vilma 4 Poor Law Amendment Act (1834) 284, 294 Popper, Leo 8 Popper‑Lynkaus, Josef 13 popular democracy 42 popular ecologism 357 Pór, Ödön 5 port of trade 199–201, 208 positive theory of socialist economics (sozialistische Wirtschaftslehre) 39 post‑industrial capitalism 60 post‑war treaty system 149 poverty and emergence of poor 292–293 Poverty and Famines (Sen) 296 Prebisch, R. 338 pre‑capitalist societies 196, 197 price theory 280 primitive money 207, 210 Prinzhorn, Hans 141 private: enterprise system 134; equity 59; ownership 35–36, 258; property 26, 37, 41, 143 privatization 110 “production associations” (Produktionsverband) 39 produit net economy 353 Pronunciamento 106 protectionism 86, 87, 90–95, 121 protectionist counter‑movement 89, 95 pseudo‑philosophies of money 206 psychological pragmatism 130 public administration reforms 102 public education 139 public funds 104 Pulszky, Ágost 268 Putin, Vladimir 327 Quesnay, François 350, 353 racial‑national principle 145 racism 145 radical democracy 84 Radical Party 10–14, 15 radical reforms 13 Radner, Karen 199, 200 Rákosi, Mátyás 11 rational choice theory 280 Raworth, Kate 379, 380 reactionary subversivism 154, 155 realism 165, 214, 328 reciprocity and redistribution 187–188, 190–191, 197, 208–209, 270, 367–368 Redfield, James 197 Red Guard 4

394

Index Red Vienna 20, 22, 25, 29, 34, 87, 103–105, 233, 253, 254, 374, 380; as socialist municipality 104 re‑embeddedness 63, 65–68, 70n10, 79, 109 re‑embedding 92–94 Re‑forming Capitalism (Streeck) 274 reform socialism 82, 84 regionalism 175 regulated market‑system 80–81 Reichsmark 117 reification 247 religious tolerance 161 Renger, Johannes 198 Renner, Karl 23, 24, 27 rent taxes 104 reparations 114–116 Report of the Commission on the Poor Law (1834) 294 Report of the Gold Delegation (1932) 106 representative democracy 150 Republikanischer Schutzbund 28 Research and Development (R&D) expenditures 316 revolutionary philosophy 145 revolutionary triennium (1917–1919) 149 Revolution of 1848 11 Ricardo, David 40, 104, 246, 294, 350 right‑wing populist movements 139 The Road to Serfdom (Hayek) 88, 233 Robbins, Lionel 113, 175, 189; definition of economics 189 Roberts, William Clare 305, 306 Rodotà, Stefano 286 Rodrik, Dani 121, 177 Roosevelt administration 121, 126, 134, 176 Rosenberg, Alfred 140 Rosner, Peter 374 Rosselli, Carlo 153 Rothschilds 113 Rouillard, Pierre: L’Emporion 200 Rousseau, Jean Jacques 229 Rousseauean dilemma 300–301 Rousseff, Dilma 342 Ruggie, John G. 176 rule by race 17 Russell, Bertrand 30 Russia 14, 17, 114, 122, 149, 163, 166; economy 18 Russian Revolution (1917) 5, 14, 16, 20, 155, 165–166, 234 Russian War 116 Rutherford, Malcolm 272 Sahlins, Marshall 197, 261, 366; Stone Age Economics 366 Sandbrook, Richard 340 Santos, Boaventura de Sousa 356 Santos, Dos 338

Sargon II 199, 200 SARS‑CoV‑2 virus 318 Saunders, Brent 318 scarcity postulate 189 Schafer, Felix 26, 37, 40; Memoirs 40 Schaff, Adam 250 Scheidel, Walter 201; Cambridge Encyclopedia of the Greco‑Roman World 201 Schiff, Walter 40 Schlesinger, Zsófia 4 Schmitt, Carl 153, 156, 164; The Concept of Political 156 Schumpeter, Josef 37, 40, 43n4–6, 134, 167n7 Schuschnigg, Kurt 110n4 Schutzbund (League for the Defense of the Republic) 28 science 219, 221, 316 scientific knowledge 316, 317, 320–323 scientific methodology 290 scientific worldview (wissenschaftliche Anschauung) 234 Second International 23, 24, 29, 220 Seidler, Ernő 4, 5 Seipel, Ignaz 28, 101–102, 104 Seitz, Karl 25 self‑censorship 126, 149 self‑regulating capitalist market system 36–38, 41, 52, 54–58, 63, 67, 70n10, 73, 75–79, 83, 90–95, 139, 146, 170, 175, 176, 229, 235, 239, 240, 259, 270, 300 self‑regulating market economy 55, 106, 225, 235; Polanyi’s critique of 314 Sen, Amartya 296; Poverty and Famines 296 shadow banking 59 Shalmaneser V 199 Silk Road Initiative 179 Silva, Eduardo 338 Silver, Morris 196 Simmel, Georg 8 Slobodian, Quinn 34, 35, 109, 175 Smith, Adam 69n6, 187, 215, 223 Snowden, Philip 108, 129 Soberana 2 319 social awareness see social knowledge social change 290, 291 social costs 226, 227 social democracy 27, 56, 77, 81, 82, 84, 157 Social Democratic Party (Sozialdemokratische Arbeiterpartei Österreichs, SDAPÖ) 22–25, 28, 104 Social Democrats 105 social freedom 27, 237–238 social hegemony 23 socialism 12–14, 16, 19, 20, 23, 24, 27, 29, 34, 36, 39, 42, 73, 78, 82, 87, 88, 94, 104, 106, 126, 140, 143, 155, 157, 166, 180n4, 235; decentralized 56; revolutionary 77

395

Index Socialism: An Economic and Sociological Analysis (Mises) 33, 222 socialist accounting 107, 234 socialist democracy 24–28 socialist economy 26, 35, 36, 38, 39 socialist freedom 27, 253, 254 Socialist League 133 Socialist Students 5 socialization 24, 27, 39, 43n15, 87, 132–133 social justice 39, 321 social knowledge 237 social objectification 249 social ownership 376–377 social protection 52, 54–56, 59, 73, 74, 78, 79, 105, 212, 239–240 social responsibility 238 social science 9, 24, 220, 291 social transactions 210 Society of Social Sciences 9, 10, 11 Soddy, Frederick 350 Sombart, Werner 10 Somers, Margaret R. 66, 68, 76–78, 80, 82, 84, 244, 250 Somló, Bódog 8 Sós, Aladár 6 sovereign wealth funds 59 Soviet Revolution 157 Spanish Civil War 157, 173 Spann, Othmar 106, 138, 141 special purpose money 209 species‑being 248, 250 Speenhamland Law 103–105, 284, 291–297, 355; abolishment 294–295; meta‑analysis 295–296; solution to poverty 293–294 Spencer, Herbert 90, 268 Stalinism 162 Stalin, Joseph 13, 162 Stanfield, Ron 258, 268, 271, 282, 194n8 ‘state‑free’ market economy 79 state planning 166, 240 Steckley, Joshua 340 Steuersadismus 104 Stiglitz, Joseph 66, 313, 363 Stockholm Summit (1972) 357 Stokes‑Ramos, Hannah 341 Stone Age Economics (Sahlins) 366 Streeck, Wolfgang 121, 174, 274, 275, 284, 285, 326; Re‑forming Capitalism 274 Strong, Benjamin, Jr. 117 structural adjustment programmes 109–110, 113 structural embeddedness 65 subsidized‑monopolized‑ protectionist‑capitalist economy 88 substantive vs. formal economics 53, 57, 58, 64, 189–191, 352 substantivist approach 122 Sugár, Tivadar 10

Summits on Environment and Development 357 Szabadfalvi, József 268 Szabadgondolat (Freethought) 9, 10, 13 Szabó, Ervin 4, 19 tame empires 229, 332 tamkaru’s 199, 200, 202n7 tariff protection 89 Társadalomtudományi Társaság (Society of the Social Sciences) 267 Tawney, Richard H. 30, 128, 256 taxation 102, 104; tax revenues 211; tax sadism 104 Taylor, Robert S. 306 technical productivity 39, 226, 319, 321 technosciences 316 Tennessee Valley Authority plan 133 Theory of the Social Economy (Wieser) 41 Theses on Feuerbach (Marx) 254, 255 Third World 109 Thomasberger, Claus 55, 57, 58, 59, 96n11, 162, 167n13, 168n15, 178, 219, 230, 234, 281, 282, 283, 327, 333, 378 Thurnwald, Richard 187, 224 Tiglath‑pileser III 199 Tisza, István 10–12 Tönnies, Ferdinand 224, 245, 246, 268 Topoi 198 totalitarianism 141, 156, 158n5, 163, 166, 240 Toynbee, A. J. 215 Trade and Market in the Early Empires (Polanyi) 197–199, 280, 284, 335 Trades Union Congress (TUC) 132; General Council of 130 trade‑unionism 127 trade union(s) 14, 88, 91, 94, 108, 127, 130, 132; movement 25, 364 transaction costs 201, 207, 279 transnational corporations 121 Trefort see Main Secondary School, of Royal Hungarian Teacher Training Institute Trobriand tribal system 188 Troika‑loans 110 Trotskyism 162 true democracy 127 Truman, Harry S. 176, 177; Address before a Joint Session of Congress 176; administration 171; Doctrine 176; Inaugural Address 176 Tsar Nicholas II 34 Tyler, Royall 110n2 Übersicht 307 Übersichtsproblem 232 Ubl, Stephen 319 Új Magyarország (New Hungary) 17 Ukraine war (2022) 122, 148, 179, 325–333; anarchism of small states 332–333;

396

Index state‑making claims 328–329; views on peace 329–332 Undurraga, Tomás 344 unemployment compensation 88 UNESCO 321, 322 United Nations 357, 379 United States 42, 116–119, 122, 125, 171, 213; pragmatism and institutionalism 271–273; supremacy 178–180; Supreme Court 134; universalism of 333; utopia of universal capitalism restoration 176–178 United States Patent and Trademark Office (USPTO) 317 universal capitalism 160, 176–178 universal community 225 universal economy 176, 177 universal suffrage 12, 131, 143 University Circle 9 University of Kolozsvár 8 University of Vienna 8 unregulated international economic system 177 unregulated markets 55, 56, 120 utilitarianism 40 utopian socialism 107 utopian thinking 235 Valensi, Lucette 244 Vámos, Henrik 5–6 Vandervelde, Émile 10 Varga, Jenő 13 Veblen, Thorstein 192, 260, 271 Versailles system 150–154, 164, 173 Versailles Treaty 164 Vienna Chamber of Commerce 35 Vienna Ringstrasse 34 vitalism 140–141 Vorgartenstrasse 26, 40 Vorwärts 5 vulture capital 59 wage‑fund theory 296 Wallace, Henry 134 Wall Street crash (1929) 117, 121, 142, 171, 213 Wank, Richárd 15, 24 war communism 13 war debts 115 War of Independence (1848‒1849) 10 Washington Consensus 65, 121 wealth 4, 5, 9, 13, 52, 59, 89, 116, 207, 234, 237, 238, 240, 295, 297 weapons of mass destruction 122 Webb, Beatrice 221 Webb, Sidney 221 Weber, Max 33, 41, 43n13, 196, 200, 219, 244, 245, 256, 260, 261, 262, 263, 267, 292

Wells, H.G. 13 Wengrow, David 366 Western civilization 42 Western colonialism 336, 337 Western Marxism 244 Western mercantilism 211 West Havana Biocluster 320 White House 121 The White House Office of Science and Technology Policy 322 Whitley Committee 130 Wiederaufbaugesetz 108 Wieser, Friedrich 27, 35, 37, 40, 41, 42n2, 43n3, 232; Theory of the Social Economy 41 Williamson, Oliver 274, 279 Williamsonian institution 274, 275 Wilson, Woodrow 164; Fourteen Points 164 Wohl, Alex 5 Wohl, Cecile (Cecilia) 5; Kunst und Psychoanalyse 5 Women’s Lyceum 5 Workers’ Education Association (WEA) 162, 375 Workers in an Integrating World (1995) 120 working class 12–14, 22, 23, 25, 30, 105, 127, 139; dictatorship 11, 15; housing conditions 104; movements 74; practice 23; revolution 24 Works Councils 130 World Bank 119, 278–280, 282, 339, 358 World Economic Crisis (1929–1933) 113–119, 131; 1918–1924 116–117; 1925–1928 117; 1929–1933 117–118; lessons of 114–116; Polanyi’s interpretation 118–119 World Economic Forum 358 The World of Odysseus (Finley) 198 World Trade Organization (WTO) 358 World War I 10–14, 22, 23, 29, 34, 35, 74, 90, 103, 104, 107, 114, 119, 122, 126, 128, 142, 151, 162, 267, 325, 380 World War II 42, 86, 109, 122, 131, 166, 171, 173, 174, 270, 316 World War II, Polanyi’s vision after: collapse of liberal world order and transformation (1930s) 172–175; international system in 1945 170–172; rise of Asia 178–180; utopia of universal capitalism restoration under American lead 176–178 Yamada, Shigeo 200 Zelizer, Viviana 65 Zimmerman, Alfred 102 Zimmerwald anti‑war appeal 10 Zionist Makkabea Circle 9 Zukin, Sharon 65 Zukunft 23

397