Talk:Karl Polanyi (1886-1964)

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Contents 1 Study 1.1 Generative questions originating the article 1.2 Key points to make 1.3 Key resources to draw on 1.4 Scope and tone of coverage 2 Talk 2.1 Introduction and Biography 2.2 The Great Transformation (1944) 2.3 The Remedy and Proposed New World Order

Study

Generative questions originating the article

Key points to make

Key resources to draw on

Scope and tone of coverage

Talk

Lead off: Brian Gregory

Introduction and Biography

Karl Polanyi was born in Vienna in 1886, in a well to do, highly- educated family. His father was a part of the bourgeois class, making his fortune in the railroad industry. His brother, Michael, was a famous philosopher and chemist, who wrote extensively about objectivism and the scientific method. Growing up in Budapest, Karl Polanyi was active in the intellectual and artistic scene. He received his doctorate in philosophy and law from the University of Budapest in the mid 1900s and took job as a journalist, writing economic and political commentary for “the prestigious Der Oesterreichische Volkswirt” [1](6).

In the early 1930s, Polanyi moved to London after North America and Europe began to emerge from the devastation caused by the Great Depression. It was here that he did most of his research for The Great Transformation. The book was not in fact published until Polanyi moved to the United States, having taken up a position in Vermont at Bennington College. After WWII, Polanyi received a teaching position at Columbia University, where he worked with students on “anthropological research on money, trade, and markets in precapitalist societies,” and co-authored and published Trade and Market in the Early Empires with Conrad M. Arensberg and Harry W. Pearson [2](4).

The Great Transformation (1944)

Karl Polanyi’s seminal work, The Great Transformation, was published in 1944, when the world was in the midst of the 2nd World War. Viewed by some as a treatise about economics and the faults of free-market ideology, The Great Transformation, is really a detailed examination of “the political and economic origins of the nineteenth-century civilization” [3](1). Not only does Polanyi look at the structure and history of the economic system that founded modern day capitalism, he also looks at the political climate of the world, its influence on the economy, politics, and society, and gives a concrete recommendation for creating a just, egalitarian world – seemingly achievable ideals which are still very alive today.

The opening paragraph of Part II of the work sets up Polanyi’s argument and illustrates a very important concept, “the double movement,” which is central to his argument.

"For a century the dynamics of modern society was governed by a double movement: the market expanded continuously but this movement was met by a countermovement checking the expansion in definite directions. Vital though such a countermovement was for the protection of society, in the last analysis it was incomparable with the self-regulation of the market, and thus with the market system itself" [4](2).

For Polanyi, the “double movement” was a paradox, and one of the fundamental ills of the capitalist system. On one side, according to Polanyi, there was “economic liberalism” also called laissez-faire capitalism, which was founded upon the concept of the self-regulating market (SRM). The laissez-faire school of thought was part and parcel of the Reaganomics era that became a staple of the former president’s fiscal policies and is still taught in economics courses today. The gist of economic liberalism, which was argued by Adam Smith in Wealth of Nations (1776), is that the best way to deal with markets was to just leave them alone, as the economy would naturally fix itself because the value of currency would fluctuate as a result of Supply and Demand (S & D) when nations raised and lowered exchange rates which would, in turn affect investment, trade, and the unemployment rate.

Markets in the economic liberalist system, as held by Polanyi, exploited labor, land, and capital as “fictitious commodities” [5](1). This was done so that:

“Labor should find its price on the market; that the creation of money should be subject to an automatic mechanism; that goods should be free to flow from country to country without hindrance or preference; in short, for a labor market, the gold standard, and free trade” [6](2).

To Polanyi, this was wrong on many levels. First and foremost, people were exploited because they were treated as commodities to be bought and sold on the market. Polanyi’s in-depth historical investigation disputed an argument, which has been purported by many SRM proponents. People in England in the 18th century were “substantially better off than before the factory system” and the industrial revolution [7](2).

However, as has been shown in research in concrete societies, the working class were the gainers while the lower classes suffered. Polanyi disputed the Poor Law Amendment Act of 1834, which was passed by parliament to reform England’s extreme poverty, giving help to the poor so that they could alleviate their circumstances and pick themselves up again. According to Polanyi, this was also a form of regulation, which went against the fundamental tenet of the SRM ideal. Not only was the U.K. helping the poor, they were also trying to fix their economy by lowering the unemployment rate, which would cause more money to be pumped into the economy, encouraging trade and foreign direct investment.

It has been argued by many economic liberalists that exploitation of land and labor are associated with the notions that “you cannot change human nature”; that people are inherently greedy and self-interested and have their own motives and agendas [8](1). Many criticisms of The Great Transformation have focused on this notion of human self-interestedness that is just part of the human condition – that humans always want and desire more. However, Mayhew [9](1) asserts that these arguments do not take in to account Polanyi’s argument for redistribution of resources, today most closely aligned to the universalist protectionist movement (Steger, 2003).

“The Owenite Movement originally was neither political nor working class. It represented the cravings of the common people, smitten by the coming of the factory, to discover a form of existence, which would make man master of the machine… Yet it expresses perhaps the best spirit of Owen, who emphatically was not an enemy of the machine. In spite of the machine, he believed, man should remain his own employer; the principle of cooperation or ‘union’ would solve the problem of the machine without sacrificing either individual freedom or social solidarity, either man’s dignity or his sympathy with his fellows” [10](2).

This quote strikes me as a good example of how to use view new technologies from a postive light rather than negatively and nihilisticly. Because the Owenites were not concerned with machines as capital that could help them to produce more and be more efficient workers. They viewed technology as something to master and integrate into their lives.

For Polanyi, though, laissez-faire economics was always an ideal but was never actually practiced in any society at any time. It was something that was pushed as policy by specific political groups, and consequently gained acceptance in western economic theory and mass culture.

Another problem of SRMs was the gold standard that tied international currencies to one another. It would seem that tying currencies to each other would help the case for the self-regulating market. However, protectionism was the name of the game and, according to Polanyi, it existed on three levels: money, labor, and land. First, money was fixed to the gold standard at the Bank of England, the centralized monetary institution at the time. In 1915 the Federal Reserve was created to protect the balance of payments of the U.S. The two other forms of protectionism, land and labor, are exemplified in the Corn Laws and labor laws of the 1800s in which “import tariffs were created to protect British Farmers and landowners against competition from cheap foreign grain import” [11](5).

To correct the ails caused by the Stock Market Crash of 1929 and the Great Depression which ensued, Roosevelt implemented the New Deal. One result: gold was devalued and gold obligations were refused, even to other countries. To Polanyi, this was Protectionism at it’s finest. It was also imperialism.

“Only in the United States, with its independence from world trade and its excessively strong currency position, was the gold standard chiefly a matter of domestic politics. In other countries, going off gold involved no less than dropping out of world economy” [12](2).

The discussion on the rise of fascism was quite interesting. It applies most readily to Polanyi’s opposition to the SRM ideology and economic liberalism in the statement “in reality, the part played by fascism was determined by one factor: the condition of the market system” (Polanyi, p. 250). As Polanyi saw it, “fascism, socialism, and the New Deal were similar only in discarding laissez-faire principles… Yet from the point of view of market economy these often radically different solutions merely represented given alternatives” [13](2).

The Remedy and Proposed New World Order

“The true criticism of market society is not that it was based on economics… but that it was based on self-interest” [14](2).

In chapter 21 of the reading, Polanyi outlines a remedy, ‘A Newer Deal,’ if you will, for the devastation that has been caused by the utopian ideal of the free-market economy. The plan is one in which “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” [15](2).

Polanyi asserts that freedom must be one of the highest ideals and must be guarded and watched by an international eye. This freedom is the freedom of individual peoples. Not the detached freedom created by “fictitious commodities” [16](1).

In addition, Polanyi says that international institutions should uphold human freedom, not freedom tied to the markets. This includes free enterprise, private ownership, and the freedom for people to be happy and content with their standard of living without being forced by foreign powers to change their desires to desires that they don’t want or think that they need. All of these freedoms should be continually upheld by international organizations. In the book Globalization: A Very Short Introduction (2003), Manfred Steger adds to the list begun 60 years earlier by Polanyi. Among them, he says that debt owed by Third World Nations to the First World should be forgiven and governments and international institutions should be transparent (p. 135)(3).

At the end of The Great Transformation (1944), Polanyi questions this notion of freedom, asking whether it is too utopian. He says “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” [17](2).

Possible questions for discussion:

1. Is this type of freedom possible or is it utopian?

2. What was the turning point in history where the idea of the self-regulating market could have been completely abolished? Way back in when Adam Smith wrote Wealth of Nations in 1776 could the policy, political climate have been steered in a different direction? Or was it an inevitability that human history took the path that it did, in terms of this discussion?

3. Have things changed since this book was published? Do we still fervently hold on to the ideal of the SRM?

Interesting Resources

• 5-Part Radio Documentary Podcast that talks about the life and legacy of Karl Polanyi (Produced by the Canadian Broadcasting Corporation) - [18]

Works Cited

• 1. Mayhew, Anne. Review: The Great Transformation: The Political and Economic Origins of Our Time. http://eh.net/bookreviews/library/polanyi.shtml
• 2. Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. 1944, 1957. (2nd paperback edition with a Foreword by Joseph E. Stiglitz and an Introduction by Fred Block). Boston: Beacon Press, 2001. Chapters 11-21, pp. 136-268. http://studyplace.ccnmtl.columbia.edu:80/files/courses/reserve/polanyi01.pdf.
• 3. Steger, M.B. (2003). Globalization: A Very Short Introduction (1st ed.) Oxford: Oxford University Press.
• 4. Stiglitz, Polanyi Foreward. http://studyplace.ccnmtl.columbia.edu:80/files/courses/reserve/stiglitz_on_polanyi.pdf.
• 5. Wikipedia: Corn Laws: http://en.wikipedia.org/wiki/Corn_Laws.
• 6. Wikipedia: Karl Polanyi: http://en.wikipedia.org/wiki/Karl_Polanyi.

Brian Gregory 08:28, 30 January 2007 (EST)

Updated: Brian Gregory 23:40, 30 January 2007 (EST)

After class we somewhat tentatively agreed on Tuesday, 1/30 5-7 pm for a pre-class discussion. Does this still work for everyone? Josh, is the Lewisohn room available? If not, it is very easy to reserve space in the TC library - whether this is a central enough location may be another matter. Eric Strome 21:42, 24 January 2007 (EST)

Yes, Tuesday it is, and it works for me. So, Josh, location? (Rasmus)

I'm also in for Tuesday 5-7. Will have my article posted by the time we meet. Brian Gregory 10:26, 29 January 2007 (EST)

Hi, I can be there Tuesday as well, I may be about 20mins late however. Kristin 10:54, 29 January 2007 (EST)

I may be late as well - but where are we going? Eric Strome 09:48, 30 January 2007 (EST)

OK, let's meet 5:00 in the Dodge Hall lounge, where the Blue Java coffeeshop is. It is the building just south of Lewisohn. Next time, we find a better place, but this will work for now.

Rasmus