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Part I
Modernity: continuity and change
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1 Social theory as critique of political economy
The Polanyian synthesis and its influence
1.1 Introduction
The framework and arguments that we shall develop in this volume draw, selectively, on classical – modernist – social theory, and in particular on the work of one of its last representatives: the Hungarian economic historian Karl Polanyi. In this chapter, via a close reading of Polanyi’s arguments, particularly as set out in The Great Transformation, first published in 1944, we outline the broad perspective to be developed and filled out in subsequent chapters.
In the wake of the 100th anniversary of the outbreak of the First World War, the West is facing three major crises – economic, political, and ecological – uncannily similar to those responsible for that catastrophic conflict and the subsequent dissolution of the nineteenth century world order. In this context it is not at all surprising to witness a rekindled interest in Karl Polanyi, the thinker who, more than anyone else, attempted to chronicle, rationalize, and evaluate the changes that eventually led to the collapse of that order. This time around, the attention is, however, largely restricted to Polanyi’s critique of political economy contained in his masterpiece The Great Transformation, rather than the economic anthropology he contributed to later in the 1950s, and for which he is still remembered.1 In a kind of cultural countermovement against the hegemony of current neoliberal thought, a new Polanyian moment is gathering pace and we wish to contribute to it by presenting his analysis of market society and the theory of social change he developed out of it.
Although post-Second-World-War social theorists have always maintained an ambivalent attitude towards Polanyi, and in particular towards The Great Transformation, he is currently inspiring a widespread interdisciplinary debate concerning his legacy and his ability to supply a heuristic framework for understanding the present, prolonged post-GFC crises.2 In this chapter we propose a reading of Polanyi’s work that views it as a remarkable effort to arrive at a synthesis of classical social theory the aim of which was to develop an alternative to political economy and to counter its vision of market society. The critique of classical political economy proposed by Polanyi harks back to the radical socialist tradition, but departs in crucially important ways from Marxist perspectives, above all in its anti-materialistic stance. While stressing these differences and their heuristic value for assessing the neoliberal reforms of the last three decades, we also point out that Polanyi’s notion of crisis remains unfortunately bound to a Marxist reading of market society as riddled with internal contradictions that will inevitably bring about its dissolution, rather than viewing crisis as part of cyclical dynamics allowing for both consolidation and renewal.
1.2 The Whig interpretation of social progress: political economy as heuristics and as ideology
Polanyi advances a reading of classical political economy as composed of two main strands: a heuristic framework concerned with understanding the basis of social change, and a prescriptive theory (the liberal creed) interested in influencing both the direction and pace of change. Building on the utilitarian philosophies of the eighteenth-century Scottish School, classical political economy supports a naturalistic account of the development of market society as the outcome of the individual’s propensity to produce and barter commodities. It is upon this propensity that the division of labour unfolds within given social groups, and trade relations are established between them. Moreover, it is claimed that left to itself this propensity would promote a continuously expanding dynamic able to progressively encompass any social group and field of activity, leading eventually to the expansion of the market pattern onto a global scale. Underpinning this natural propensity is the expectation of the potential material gains that could accrue to the individuals and groups actively engaged in the production and distribution of commodities. According to this account, a market society is not only humanity’s natural condition, but also one that can satisfy the sentiment of social justice in the most effective way. Hence, since Mandeville, a long line of political economists has attempted to show that the ‘unintended consequences’ of self-seeking and maximizing behaviour would indeed be the promotion of public benefits.3
Upon these two beliefs – in the naturalness of market exchanges and the unintended positive consequences of the profit motive – political economy has erected a liberal creed committed to showing the derivative nature of moral virtues and social norms, while denouncing any attempt to enforce them directly through exhortation, cultivation, or statecraft. While virtuous behaviour and selfless cooperation have come to be described by liberal theorists as ineffectual or unsustainable, political action and statecraft are systematically depicted as interferences that reduce individual freedom and undermine the self-regulating power of market society. Political economists are thus led to view politics not only as superfluous in fostering collective action, but also as a highly disruptive activity that needs to be cut down to size and subordinated to the requirements of market society. Consequently, underpinning the liberal ideology erected by generations of political economists is a common justificatory framework employed to assess social changes, institutions, actions, and values. This framework became a matter of public debate; one based on criteria of ‘feasibility’ able to tell us what kind of society and which institutional arrangement are compatible with the individual’s natural propensity to produce and barter freely, and in doing so unintentionally promote public happiness and social justice. Criteria of ‘desirability’, employed by the old moral economy, and of ‘electability’, advocated by market democrats, are progressively discarded as being unsound, or arbitrary, or hubristic, or some combination thereof.4
Recalling and synthesising the main insights of classical social theory, Polanyi painstakingly tries to dismantle this narrative of social change and question its ideological authority. His feat was to develop a powerful challenge to political economy’s epistemic hard core: its account of unintended consequences and theory of feasibility. For Polanyi, the attempt to build a market society is utterly utopian in that it is predicated upon the disembedding of the economy from its wider social milieu; an endeavour that could only produce negative unintended consequences having cumulative catastrophic effects on society and nature alike. This is the reason why, according to Polanyi, far from being self-regulating, the market pattern requires persistent external interventions to protect its working not only from the reaction of those who will lose out – those whose ‘social standing’, ‘social claims’, and ‘social assets’ are threatened (cf. Polanyi 2001 [1944]: 48) – but also from the inner competitive dynamic unleashed by the profit motive among the business classes: ‘even capitalist business itself had to be sheltered from the unrestricted working of the market mechanism’ (Polanyi 2001 [1944]: 201). The utopian nature of market society rests therefore on its own structural infeasibility; its inability to create and maintain the preconditions for its self-reproduction, and the social costs any attempt to prop it up politically is likely to generate.
Polanyi employs a blend of historical and analytical arguments to refute the idea of the naturalness of market society. History shows us that:
The logic of the case is, indeed, almost the opposite of that underlying the classical doctrine. The orthodox teaching started from the individual’s propensity to barter; deduced from it the necessity of local markets, as well as of division of labor; and inferred, finally, the necessity of trade, eventually of foreign trade, including even long-distance trade. In the light of our present knowledge we should almost reverse the sequence of the argument.
(Polanyi 2001 [1944]: 61)
Analytically, he makes clear that:
A market economy can exist only in a market society. […] A market economy must comprise all elements of industry, including labor, land, and money. […] But 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 [1944]: 74)
The market economy and the set of social relations and institutions it requires to work properly cannot, consequently, be the outcome of a spontaneous order but are the result of repeated and sustained political attempts to bring them into existence and maintain them. The Industrial Revolution was, on this account,
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.
(Polanyi 2001 [1944]: 42)
In relation to land, one of the three fictitious commodities discussed, he lists several ‘stages in the subordination of the surface of the planet to the needs of an industrial society’. These stages are then identified as (i) ‘commercialization of the soil, mobilizing the feudal revenue of the land’; (ii) ‘forcing up of the production of food and organic raw materials to serve the needs of a rapidly growing industrial population on a national scale’; (iii) ‘the extension of such a system of surplus production to overseas and colonial territories’. With this last step, Polanyi notes, ‘land and its products were finally fitted into the scheme of a self-regulating world market’ (Polanyi 2001 [1944]: 188). Similar analyses are also carried out in relation to labour and money – hence, Polanyi’s stark conclusion that ‘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’ (Polanyi 2001 [1944]: 147).
Such a proposition is much more than an attack on the extravagant claims of liberal ideologues old and new. First of all, it is an indictment of political economy as an intellectual discipline committed to the explanation of social change. As he puts it:
Nowhere has liberal philosophy failed so conspicuously as in its understanding of the problem of change. Fired by an emotional faith in spontaneity, the common-sense attitude toward change was discarded in favor of a mystical readiness to accept the social consequences of economic improvement, whatever they might be. The elementary truths of political science and statecraft were first discredited, then forgotten.
(Polanyi 2001 [1944]: 35)
In an almost Nietzschean manner, Polanyi develops a counter-genealogy of ‘the origins of our time’ based on the assumption that:
A blind faith in spontaneous progress had taken hold of people’s minds, and with the fanaticism of sectarians the most enlightened pressed forward for boundless and unregulated change in society. The effects on the lives of the people were awful beyond description. Indeed, human society would have been annihilated but for protective countermoves which blunted the action of this self-destructive mechanism.
(Polanyi 2001 [1944]: 79)
This counter-genealogy will serve Polanyi’s aim to develop an alternative account of change based on his notion of ‘double movement’ that will be the focus of the next sections.
A second, and possibly more destructive, charge against political economy is related to the political role the latter played in The Great Transformation. Besides its epistemic and heuristic shortcomings, it is the ideological cover supplied by political economy as discipline that Polanyi is keen to expose. To start with, he points out that the allegedly principled opposition to state intervention is a cultivated liberal myth:
Strictly, economic liberalism is the organizing principle of a society in which industry is based on the institution of a self-regulating market. True, once such a system is approximately achieved, less intervention of one type is needed. However, this is far from saying that market system and intervention are mutually exclusive terms. For as long as that system is not 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. […] 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. The only principle economic liberals can maintain without inconsistency is that of the self-regulating market, whether it involves them in interventions or not.
(Polanyi 2001 [1944]: 155)
Moreover, the interventions called for by liberals sought to base society ‘on a motive only rarely acknowledged as valid in the history of human societies, and certainly never before raised to the level of a justification of action and behavior in everyday life, namely, gain’ (Polanyi 2001 [1944]: 31). Indeed, so forceful is Polanyi’s disdain towards political economy that he gives the misleading impression that the changes set in motion by the Industrial Revolution are the result of its ideological activism: ‘the most violent outburst of religious fervor in history’ (Polanyi 2001 [1944]: 31) – rather than a concerted plan devised and carried out by a coalition of political and economic forces interested in imposing a novel and subtler form of domination at national and international level. In short, Polanyi’s opposition to mere materialistic explanations of change leads him to overstating his case, blaming the messenger for the message.
1.3 Elements of a nonmaterialistic social and political theory of change
As an analysis of the transformations brought about by the Industrial Revolution and heuristics of change in a market society, Polanyi’s masterpiece undoubtedly belongs to the ‘long’ nineteenth century, ‘extending from the Age of Enlightenment to the end of the First World War’ (Özveren 2007: 552). In many ways, it could actually be considered its closing act. The Great Transformation shares three main features with many of the classic works of that time: (i) the heroic ambition to retain a broad synoptic vision on complex social phenomena while subscribing to positivistic scientific values; (ii) the no less ambitious desire to derive useful normative prescriptions that aspire to be unprejudiced; (iii) a rich and fluid linguistic structure that engages the reader in creative interpretations. These characteristics render the classic texts of social theory vulnerable to critique concerning their indeterminacies and inconsistencies, especially when seen from the perspective of today’s highly professionalized and specialized research communities. However, their craftsmanship makes them akin to geological sediments that can be mined repeatedly without exhausting their ability to surprise and stimulate. In this section we present the main elements composing Polanyi’s theory of change by investigating their intellectual derivation and their usefulness for understanding the transformations at the roots of our own time.
1.3.1 Polanyi and classical social theory
The main influence acknowledged in Polanyi’s text is that of Max Weber. From the latter’s work in economic history, Polanyi derives the core element of his critique of political economy:
The outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. He 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.
(Polanyi 2001 [1944]: 48)
Other Weberian themes can be easily spotted in the text, even where not formally acknowledged. For instance, the similarities between Polanyi’s remarks on the shortcoming of the Marxist theory of class conflict and his far more nuanced account of collective identity and action are too close to Weber’s to be coincidental: ‘class interests offer only a limited explanation of long-run movements in society. The fate of classes is much more often determined by the needs of society than the fate of society is determined by the needs of classes.’ From this he concludes that ‘neither the birth nor the death of classes, neither their aims nor the degree to which they attain them; neither their co-operations nor their antagonisms can be understood apart from the situation of society as a whole.’ (Polanyi 2001 [1944]: 159). As with Weber, but much more forcefully than Weber himself, Polanyi rejects any materialistic account of change, be it utilitarian, historical, or dialectical, and with it both the artificial separation...
