Thoughts on Readings 2/25/09

The Great Transformation: The Political and Economic Origins by Karl Polanyi.

This week we read Chapters 11, 12 and 13 from Karl Polanyi's "The Great Transformation". Polanyi was a Hungarian political economist and economic historian. I decided to look into his background a bit after finishing the reading to see where he was coming from and the historical context from which he comes. I read that he was a World War I officer of the Austro-Hungarian army and a member of the editorial staff of Vienna's leading financial newspaper. He was forced into exile first from Hungary and then from Vienna, and he wrote "The Great Transformation" while in exile in London at the end of the 30's.

I don't have much of an academic background in economic history or even economic theory for that matter, so I did find it difficult to get to some of the core ideas of Polanyi at first. But once I reread the text and isolated some key quotes, his basic theory came through.

The work is basically a history of the self-regulating economic market and how the market sets up a system that is inconsistent with a sustainable society. According to Polanyi, the ongoing tension between the efforts to create and maintain the self-regulating market and the efforts to protect society from the negative consequences of the self-regulating market the "double movement". It is the classic struggle between liberal capitalism and social protectionism, here taking place as a result of the consequences of the Industrial Revolution.

He basically says that the commodification of both people (under the name of labor) and nature (under the name of land) under a self-regulating market is problematic and always leads to a self-corrective action. If the SRM is left "to evolve according to its own laws (it) would create great and permanent evils" (p. 136).

Polanyi encapsulates the issue in this way:

"The commodity fiction disregarded the fact that leaving the fate of soil and people to the market would be tantamount to annihilating them. Accordingly, 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". (p. 137)

Polanyi points out that the response to the negative effects of the self-regulatory market (interventionism) depended on the class of those that were impacted, and "the outcome was decisively influenced by the character of the class interests involved" (p. 161).

When reading it my thoughts kept turning back to Dewey's concepts of the "ripple effect" of behavior and how individual behavior (commerce, acquisition of wealth) can effect collective behavior (the self-regulating market). The are definitely some Dewey ideas that can be applied in the Polanyi context, even though Polyani is basing his theories more in terms of international economic structural patterns.

I also am left wondering what Polanyi would think of the current economic crisis, and ironically I am sitting blogging with President Obama's first speech to a joint session of Congress on the television in the background. Facing the current recession, I would love to know what Polanyi thought of the state of the global economy. Now we are faced with a global economic recession of enormous scale, and the facts are coming out that this was directly caused by the lack of governmental restriction on bank lending. Now, the "social liberals" of the media are bringing the story to a mortified and shocked public. Free trade without governmental oversight is what the capitalist giants wanted, and now that they have made monumental errors, they ironically want the government to step in and bail them out with billions of dollars of taxpayer monies.

It would seem that Polanyi's ideas were prophetic and the "countermovement" Polanyi discusses is upon us. And so it goes.