Wednesday, February 25, 2009

Thinking Polanyi “The Great Transformation” (136-170)

Try to put this all together in brief and maybe with less cleverness than I’d like, perhaps I can revisit this again and revise.

A Double Movement

On 136 Polanyi identifies a double movement of modern society: “the market expanded continuously but this movement was met by a countermovement checking the expansion in definite directions.” And it’s this struggle of opposites that he addresses throughout – the juggernaut of the market sprawling across the globe and the resistance “countermovement.” He quotes Robert Owen who said: “market economy if left to evolve according to its own laws would create great and permanent evils.” These will be identified as being evils to humans and society, as well as eventually to the market itself.

The first evil of the market is the reduction of humans to commodities, to parts. He defines production as the “interaction of man and nature; if this process is to be organized through a self-regulating 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.” Essentially under this system, the human could be less than human. On 137, Polanyi suggests that this is a “fiction” disregarding the health of the “soil and the people” and leaving their fate in the hands of the market “would be tantamount to annihilating them.” Hence, he says, “the countermove consisted in checking the action of the market in respect to the factors of production, labor, and land. This was the main function of interventionism.”

The Paradox

Ok, it’s a long quote, but this is the main key on 147:

“And yet all these strongholds of governmental interference were erected with a view to the organizing of some simple freedom – such as that of land, labor, or municipal administration. Just as, contrary to expectation, the invention of laborsaving machinery had not diminished but actually increased the uses of human labor, the introduction of free markets, far from doing away with the need for control, regulation, and intervention, enormously increased their range. Administrators had to be constantly on the watch to ensure the free working of the system. Thus even those who wished ardently to free the state from all unnecessary duties, and whose whole philosophy demanded the restriction of state activities, could not but entrust the self-same state with the new powers, organs and instruments required for the establishment of laissez-faire.”

Continuing, Polanyi writes: “This paradox was topped by another. While laissez-faire economy was the product of deliberate State action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not.”

That’s a pretty cool thought, while economic liberals complain about a collectivist conspiracy, it seems that “The great variety of forms in which the ‘collectivist’ countermovement appeared was not due to any preference for socialism or nationalism on the part of concerted interests, but exclusively to the broad range of the vital social interests affected by the expanding market mechanism.” Intervention wasn’t planned, it emerged out of necessity and emerged all over nearly simultaneously. (154) Polanyi states that this is not the work of socialists at all, rather, (153) “On the contrary, the sponsors of these legislative acts were as a rule uncompromising opponents of socialism, or any other form of collectivism.”

One more key thought in this section, on 138, “Paradoxically enough, not human beings and natural resources only but also the organization of capitalistic production itself had to be sheltered from the devastating effects of a self-regulating market.” That is, it’s not just about protecting people, but the system if left alone will tear itself apart. We’re seeing this now and it’s long been coming. Let’s think about it like a sensible renewable energy policy. If we lived on an island and used all our trees for firewood, quickly we’d be out. (This may have happened on Easter Island.) But something more sensible, regulated, and all can survive to thrive longer.


So why isn’t this seen by economic liberals? Polanyi writes on 166: “Nothing obscures our social vision as effectively as the economistic prejudice.” Shortsightedness and faith, he repeats how the mantra of the free market is essentially a religion “a crusading passion” (143), sacred and holy (139). On 141he writes, “Economic liberalism was the organizing principle of society engaged in creating a market system. Born as a mere penchant for nonbureaucratic methods, it evolved into a veritable faith in man’s secular salvation through a self-regulating market. Such fanaticism was the result of the sudden aggravation of the task it found itself committed to …. The liberal creed assumed its evangelical fervor only in response to the needs of a fully deployed market economy.”

But it didn’t start out that way, for (on 142) “In England, too, laissez-faire was interpreted narrowly; it meant freedom from regulation in production; trade was not comprised.” Thus, “Protectionism was so ingrained that Manchester cotton manufacturers demanded, in 1800, the prohibition of the export of yarn, though they were conscious the fact that this meant loss of business to them.” This is KEY: “Freedom from regulation in the sphere of production was all the industry wanted; freedom in the sphere of exchange was still deemed danger.”


Keeping on this religious mantra, Polanyi writes, (150) “The root of all evil, the liberal insists, was precisely this interference with the freedom of employment, trade and currencies practiced by the various schools of social, national, and monopolistic protectionism since the third quarter of the nineteenth century; …” Also on 150 he writes, “Its apologists are repeating in endless variations that but for the policies advocated by its critics, liberalism would have delivered the goods; that not the competitive system and the self-regulating market, but interference with that system and interventions with that market are responsible for our ills.” We’re hearing exactly these words today, even in the face of deregulation that’s crippled us.

However, proponents of a self-regulating market are all for regulation when it suits the market. On 155 he writes, “In other words, if the needs of a self-regulating market proved incompatible with the demands of laissez-faire, the economic liberal turned against laissez-faire and preferred – as any antiliberal would have done – the so-called collectivist methods of regulation and restriction.” It’s hypocrisy at its worst. Furthermore “For as long as that systems is established, economic liberals must and will unhesitatingly call for the intervention of the state in order to establish it, and once established, in order to maintain it.” And he writes on (156) “The accusation of interventionism on the part of liberal writers is thus an empty slogan, implying the denunciation of one and the same set of actions according to whether they happen to approve of them or not.” Rampant hypocrisy, blinders on by the religion of the free market.

All of this brings me back to John Dewey and previous weeks’ readings. The idea that in fact the collective can bring about the personal liberty we seek, rather than constraining it. “They may think they are clamoring for a purely personal liberty, but what they are doing is to bring into being a greater liberty to share in other associations, so that more of their individual potentialities will be released and their personal experience enriched.” (193-4) On 216, Dewey further states, “Organization as a means to an end would reinforce individuality and enable it to be securely itself by enduring it with resources beyond its unaided reach.”

Not a Class War

Polanyi dismisses class as contributing to the problems. On 159 he writes, “The fate of classes is more frequently determined by the needs of society than the fate of society is determined by the needs of the classes.” In fact, classes are brought together by failures of the market. “Precisely because not the economic but the social interests of different cross sections of the population were threatened by the market, persons belonging to various economic strata unconsciously joined forces to meet the danger.” (162)


The concluding parts of the essay deal with annihilation of people under the gears of the market system. Lots of discussion on this on 148, how people are made unemployed and destitute and constitutional liberties lost all “judged a fair price to pay for the fulfillment of the requirement of sound budgets and sound currencies, these a priori of economic liberalism.” He calls this a “destructive landscape (164) and a destruction of people’s cultures. And perhaps most scarily, as opposed to systems before, now, “under the rule of the market the people could not be prevented from starving according to the rules of the game.” “… under free and equal exchange Indians perished by the million.” (168)

We feel these effects today all too painfully. – Nick

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