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Karl PolanyiThe Great Transformation
Nonfiction | Book | Adult | Published in 1944A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Themes
The Social Ramifications of Economic Policy
Throughout the book, Polanyi discusses the liberal belief that the market should take precedence over the needs of society. Polanyi consistently refutes this belief, arguing that economy exists as a mere aspect of society. Despite this subjugation of the economy to society, the nature of the economy still affects various aspects of society, as it is part of the social fabric. In terms of market liberalism and the practices during the Industrial Revolution, Polanyi argues that liberals attempted to transform the very nature of society in order to fit the market: “Such an institutional pattern could not have functioned unless society was somehow subordinated to its requirements. A market economy can only exist in a market society” (74).
Even though this intent to subjugate society proved ultimately fruitless, as the market economy exists not as the ends itself but as the means to an end, Polanyi repeatedly demonstrates the negative effects of this implementation of the market system:“Machine production in a commercial society involves, in effect, no less a transformation than that of the natural and human substance of society into commodities […] the dislocation caused by such devices may disjoint man’s relationships and threaten his natural habitat with annihilation” (44). This commodification of natural social elements has deleterious effects upon the nature of social organization, in that it dislocates the individual and removes them from their relationships within society, solidifying the individual’s monetary status as the most important aspect of their identity.
Polanyi constructs the economy as a tool by which one can alter the fabric of society: “Human beings should use the instruments of democratic governance to control and direct the economy to meet our individual and collective needs” (xxxviii). He offers the example of Speenhamland Law in order to prove that the economy represents a means to an end, although he acknowledges that even the best intentions can have negative consequences, as far as society is concerned. As a result of Speenhamland:
the workhouse was invested with a stigma; to stay in it was made into psychological and moral torture [….] The traditional unity of Christian society was giving place to a denial of responsibility on the part of the well-to-do for the condition of their fellows (106).
This is where the idea that immorality is associated with poverty stems from; after Speenhamland, we see the beginning of capitalism’s attempt to redefine social norms through an economic lens. Polanyi presents Speenhamland and, primarily, the reaction against Speenhamland, as the birthplace of the market economy. The negative effects of Speenhamland upon the psyche of England were so profound that economic liberalism was employed in an attempt to free laborers from the stigma associated with the workhouse. Although Polanyi argues that this was unsuccessful and ultimately led to even more dire psychological and physical consequences, he appears to understand the liberal impetus to do away with protectionism in order to free society. However, he argues that this attempt to free society is misplaced, as one cannot extricate the economy from society at-large. Due to this embeddedness, “the economic advantages of free labor market could not make up for the social destruction wrought by it” (81).
Ultimately, the greatest social consequence that Polanyi demonstrates as a result of economic policy is the rise of fascism. Polanyi argues that the attempted construction of the self-regulating market directly resulted in the spread of fascism, the effects of which were felt throughout societies worldwide. Specifically, Polanyi argues that the gold standard disabled England’s military and thereby allowed for the destruction of World War I. In this way, England’s adherence to economic policies prevented England from building a military capable of halting the conflict that snowballed into World War I. Polanyi blames the market system for the atrocities of World War I, demonstrating the dire social consequences that can occur as a result of economic policy.
The Unifying Potential of the Market Economy
Although the market economy displays many problems and has deleterious effects on societies, Polanyi repeatedly demonstrates the market’s ability to unify nations into a singular economy. Instead of the divisive forces of many smaller economies, Polanyi argues that the market system is unique in its ability to unify all involved nations under the auspices of peaceful trade:
The essentiality of the gold standard to the functioning of the international economic system of the time was the one and only tenet common to men of all nations and all classes, religious dominations, and social philosophies (26).
The market system was able to span continents, religions, and cultures in a way that no other ideology—except perhaps Islam, the spread of which was also influenced by trade—had ever done before. Polanyi gives many examples to prove his point, including England’s dependence upon overseas food imports, which led its navy to be mobilized in order to ensure the peaceful unification of international trade. Polanyi repeatedly asserts that the market economy required international peace in order for international trade to exist; as a result, tensions were sublimated in order to provide for the market economy, though they did still exist.
The market economy became a kind of global religion of sorts, as it spread or was forced upon various countries:“A new way of life spread over the planet with a claim to universality unparalleled since the age when Christianity started out its career, only this time the movement was on a purely material level” (136). Polanyi repeatedly associates the universality of the market system as something that is akin to religion. Despite liberal claims of the market system as a natural progression, Polanyi argues that the market was wholly artificial both in its implementation and in its continued existence. One could argue that this makes the very nature of the market system inherently Christian, as both represent manmade constructions bent on salvation: whereas Christianity seeks to save the individual soul, economic liberalism seeks to save the national psyche, both often using violence as a means by which to achieve this end.
As previously mentioned, the universality of this new economic religion had many social consequences, including the rise of fascism. In this way, the unifying potential of the market system was not always a positive endeavor but rather deleteriously affected many countries, especially those considered colonies. Polanyi argues that these negative effects of the unified market system were not limited to exploitation; rather, the unification of the internal market economy also necessitated the exclusion of various countries’ economies from this system. Polanyi gives Russia as an example: “The absence of the nineteenth-century balance of power system, as well as the inability of the world market to absorb Russia’s agricultural produce, forced her reluctantly into the paths of self-sufficiency” (256).
Essentially, the unified nature of the market system also excluded those countries, like Russia, whose exports were not in demand. Russia then had two options: be annihilated by the inflexibility of the market system, or extricate itself from the system’s rigidity by becoming self-sufficient. Unsurprisingly, Russia chose the latter, and socialism was born. Ironically enough, the very nature of socialism exists as a threat to the market economy, as socialist countries no longer play by capitalist rules. Polanyi then implies that the market economy created its own downfall as a result of its single-minded attempt to be established as the universal economic system.
Man as a Social Being
Although the vast majority of the book concerns economics and, specifically, the role that economics played in the great transformation, Polanyi also theorizes at various points about the nature of man; that is, Polanyi uses his criticism of the economy in order to discuss various philosophic issues concerning man, delineating that which is natural from that which is artificial.
For example, Polanyi argues that the commodification of man is an entirely artificial construct springing from the liberal desire to rationalize the fictional naturalization of the market system. In contrast, Polanyi argues that society itself represents a natural evolution of sorts, as human beings are naturally social creatures:
For if one conclusion stands out more clearly than another from the recent study of early societies, it is the changelessness of man as a social being. His natural endowments reappear with a remarkable constancy in societies of all times and placed; and the necessary preconditions of the survival of human society appear to be immutably the same (48).
In this way, Polanyi draws similarities between all societies he believes represent the natural progression of life. As a part of this natural socialization of man, Polanyi also engages with the economic theories associated with reciprocity, arguing that reciprocity, not profit, represents the natural economy. As society represents a natural aspect of man, so, too, does the idea of reciprocity, which allows man to coexist in relative harmony. Polanyi then draws a distinction between this social organization and that which the market system is based on, in order to demonstrate the inherent instability and ultimately destructive impetus behind the market system.
