Karl Polanyi and twenty-first-century capitalism

Radhika Desai, Kari Polanyi Levitt, Radhika Desai, Kari Polanyi Levitt

• Publisher: Manchester University Press
• Year: 2020
• Print ISBN: 9781526127884
• eBook ISBN: 9781526127907
• Edition: 1
• Topic: Philosophy
• Subtopic: Political Philosophy

As far right movements, social disintegration and international conflict emerge from the decay of the neoliberal order, Karl Polanyi's warnings against the unbridled domination of markets, is ever more relevant. The essays in Karl Polanyi for the 21st Century extend the boundaries of our understanding of Polanyi's life and work. They will interest Polanyi scholars and all interested in socialism and our future after neoliberalism. One asks whether, following Keynes and Hayek, Polanyi's ideas will shape the twenty-first century. Some clarify, for the meaning of money as a fictitious commodity. Others resolve difficulties in understanding the building blocks of Polanyi's thought: fictitious commodities, the double movement, the United States' exceptional development, the reality of society, and socialism as freedom in a complex society. And yes others explore how Polanyi sheds light on income inequality, world systems theory, comparative political economy.

1

Introduction: Karl Polanyi in the twenty-first century¹

Radhika Desai

Karl Polanyi’s intellectual influence has arrived at its current growth phase in a curious and unconventional manner. Charles Kindleberger noted it already in the 1970s. Commenting on The Great Transformation as one of the classics of the twentieth century, he said,

Some books refuse to go away. They get shot out of the water by critics but surface again and remain afloat. The Great Transformation by Karl Polanyi doesn’t exactly refuse to go away, but it was slow in arriving and it has kept on coming. Robert MacIver wrote a glowing preface for it when it was published in 1944, but few scholars took notice. Then it was discovered by economic historians. In the last decade, radical youth has adopted it as gospel. (Kindleberger, 1974: 45)

Polanyi’s thinking long remained confined to relatively marginal heterodox institutionalist economists and economic historians. He could secure a minor appointment at Columbia University in 1947 only because the institutionalist tradition had persisted there. Even so, Polanyi’s course on General Economic History did not address the recent historical developments discussed in The Great Transformation and it was not on the reading list. The course focused instead on economic institutions in primitive and archaic civilizations. No wonder the United States came to know Polanyi as an economic anthropologist, rather than as an economic historian.

Even in these decades of relative neglect, however, those Polanyi’s thought did reach felt its unmistakable pull. Abe Rotstein recalls (in this volume) how his substantivist approach was his ‘exit from the maze’ of neoclassical economics at the University of Chicago. Polanyi’s early following may have been small, but it was loyal. After Polanyi passed away in 1964, George Dalton published an influential collection of Polanyi’s essays (Polanyi, 1968) while Harry Pearson produced The Livelihood of Man from lecture notes and other unpublished writings in 1977.

If Polanyi was relatively unknown in the post-war ‘Keynesian’ decades, neoliberalism would surely have made matters worse. After all, its free market thinking rolled back the intellectual influence of the much more eminent John Maynard Keynes. Instead, however, the neoliberal decades witnessed a big rediscovery of Polanyi. Against neoliberal advocacy of free markets and rolling back the state, against its claim that globalization was an unstoppable juggernaut, Polanyi’s ideas proved natural intellectual weapons. A widening circle of critics of neoliberalism and globalization – activists, scholars and even politicians – began to wield them. In the wake of the 1997 East Asian financial crisis, Harvard economist, Dani Rodrik, for instance, relied on Polanyi to point to dangers the world economy had not faced since the 1930s (Rodrik, 1998). By the late 1990s, his thinking was entering the broad left of British political life (Marquand, 1997), while influential scholars such as Fred Block and Margaret Somers were extending his influence in US left-wing and progressive scholarship. Following the 1999 Seattle anti-globalization demonstrations, the New Right dubbed Polanyi ‘a kind of patron saint of globalization’s critics’ (Lindsey, 2001). In the new millennium, but most strikingly since the financial crisis of 2008, scholars across disciplines and political persuasions have cited Karl Polanyi in analyses of the wrongs of financial markets. Polanyi’s ghost even came to haunt the 2012 Davos World Economic Forum, where world leaders could not have been more aware of the problems neoliberalism had created and less capable of handling them (Elliot, 2012). In answer to the question of who will ‘guide us through the problems of the twenty-first century’, the liberal economist, J. Bradford DeLong (2016), identified Polanyi, alongside Tocqueville and Keynes.

The rediscovery of Polanyi is also leading many to unearth the full extent of his past influence. Daniel Immerwahr brought to light the link between Polanyi’s thinking and that of his lifelong friend, the post-war management guru, Peter Drucker (Immerwahr, 2009) who shaped so much of the US’s post-war intellectual life. A recent British study, which calls for reviving a moral critique of capitalism alongside the material critique of its inequality so prominent since 2008, puts Polanyi at the centre of the British socialist tradition. When Polanyi fled Hitler and fascism and arrived in Britain, he was naturally attracted to Christian socialism and the ‘moral economics’ of figures like R. H. Tawney and G. D. H. Cole (Rogan, 2017: 53–55). Polanyi linked their criticism of the morally corrupting effects of capitalism to continental political and intellectual traditions, including the Marxist. This very British socialism became influential in Corbyn’s Labour Party which aimed at ‘giving workers more bargaining power and influence over economic decisions[,] … constraining the power of finance, [a]nd … removing certain aspects of society from market exchange altogether’ (The Economist, 2018).

Why does Polanyi’s thinking resonate so widely and deeply today? While clear economic, social and political parallels between his time and ours lay down the necessary condition, the sufficient condition is provided only by the insight and prescience of his analysis. It was the product of the singular course of his life and intellectual evolution. Polanyi’s life (1886–1964) spanned the most tumultuous decades of human history and was tossed about by its defining events (Catanzariti, 2014: 221), giving Polanyi’s intellectual agenda its ambition as well as its personal and experiential depth (as Polanyi Levitt and Brie discuss in this volume). Add to this a mind formed in the fecund intellectual environment of belle époque Central Europe and you have an analysis to stand the test of time (on Polanyi’s biography and intellectual biography see, inter alia, Dale, 2010a, 2016a, 2016b, and Polanyi Levitt 1990b and in this volume).

Polanyi’s encompassing historical explanation of the ‘great transformation’ that Europe underwent in his time is so original in its components and their configuration that even those versed in history and interdisciplinary studies approach its full meaning only gradually. And it is so suggestive that it has kept generations trying. This collection contains many contributions, by established and new Polanyi scholars, that push back the bounds of our understanding on many fronts, whether the ideas of fictitious commodities, particularly money, and the double movement, of socialism or of the different historical evolution of continental, British and American societies. The following brief outline of Polanyi’s ambitiously original historical argument as it emerges from our collective efforts in this volume will help readers fit individual contributions in their proper places within it.

Polanyi’s historical diagnosis

Polanyi’s diagnosis of the most profound crisis of European civilization traces its genesis back not just decades, as so many did and still do, but centuries, implicating capitalism itself. The crisis persisted through the inter-war period, Polanyi argued, because major governments did not yet realize that the world of 1914 was the Humpty Dumpty that could no longer be put back together. The outlines of a civilization beyond it were only beginning to be glimpsed when war erupted again in 1939. They included an international economy beyond the gold standard, the movement of political opinion to the left (Marwick, 1964) with the realization that a liberal order could no longer be recreated, the New Deal and Soviet industrialization. In many ways, the Second World War sharpened the view of possibilities on the horizon and, by writing The Great Transformation, the condensation of his historical explanation, Polanyi was making his own contribution to their post-war realization and contesting the competing neoliberal vision that had already emerged (Desai, 2019).

Polanyi traced the crisis of nineteenth-century civilization to what he dubbed its utopian project of founding society on a self-regulating market. The words ‘utopian’ and ‘project’ are significant. Seeing it as a project rather than accomplished reality constituted a momentous correction. What made it utopian, in the worst sense of the word, was that it extended the market far beyond real commodities, that is, goods produced for sale. Three elements of society’s productive organization, its substance and very conditions of possibility – land, labour and money – were also commodified. They were, Polanyi argued, fictitious commodities. Unlike real commodities, they were either not produced at all, or not produced for sale. The crisis of societies that embarked on this project was as inevitable as the project was utopian.

Two implications were important. First, contrary to liberal ideology, market society was neither natural nor spontaneous. It had to be constructed through radically, indeed violently, transformative state legislation. In England, which was both paradigmatic of the process and its origin, the Poor Law Amendment Act of 1834, the Bank Act of 1844 and the Anti-Corn Law Bill of 1946 commodified labour, money and land respectively. Secondly, the need to maintain society against their onslaught induced a set of reactions, movements for social protection which, together with the spread of market society, formed the famous ‘double movement’. This reaction of social protection, essentially what the jurist, A. V. Dicey (1905) meant by the move from individualism to collectivism in English society, was spontaneous.

These implications were critical to Polanyi’s argument. With them, he overturned liberal views that treated market societies as spontaneous and natural and all effort to control them as artificial, violent and unnatural. On the contrary, Polanyi insisted that it was the creation of the market for these fictitious commodities by the state that was planned and violent. The social reaction, now involving the state in the protection of society from the dangers it had itself created, for its part, was spontaneous and natural.

The dialectic of this double movement, rather than the establishment of market society which remained both utopian and a project, framed nineteenth-century European developments and defined Europe’s liberal civilization. It culminated in the crisis that destroyed that civilization and, along with it, the quartet of institutions – the self-regulating market, the liberal state, the gold standard and the balance of power; two economic, two political; two domestic and two international – that sought to realize the project. Now liberal society – both the project of creating a market society and managing its impact in an ad hoc and spontaneous manner – was no longer viable. Illiberal alternatives, alternatives involving the state centrally, this time in consciously organizing other, non-market, forms of social integration, were bound to emerge. Would they be fascist and National Socialist or Socialist? Would they point towards reconstructing human, democratic and just societies or towards barbarity and the physical as well as moral destruction of humanity? Since refusing this choice in favour of trying to reconstruct the nineteenth-century liberal civilization of ‘universal capitalism’ would only once again prepare the soil for fascism, a new socialist civilization of national and regional planning was imperative (Polanyi, 1945). This was the great transformation to which the eponymous book referred.

Polanyi’s understanding of socialism is worth pausing over. He clearly distinguished it from the nineteenth-century spontaneous movement for social protection. Socialism, by contrast, had to be a consciously chosen and pursued goal. This understanding also draws a clear line between limited social reforms and socialism. The latter must re-make society, and our conceptions of it, root and branch. Secondly, socialism was not, he had concluded quite early in his life when he intervened in the socialist calculation debate, about a centrally planned economy in which money and markets played no role. Precisely because he understood both money and markets so well (as Desai argues in this volume), he assigned them clear roles in socialism. Money as purchasing power was a useful social institution and could serve an egalitarian and morally desirable form of society, unlike money as a store of value and capital, which could dominate and destroy society. Wellregulated markets limited to real commodities could serve society while those for the fictitious commodities undermined it.

Polanyi’s intervention in the socialist calculation debate also made clear to Polanyi that the alternative was not between unrestricted markets and central planning, as Ludwig von Mises’s opening salvo in that debate contended. Polanyi rejected that choice, as Brie (in this volume) so well explains. Polanyi agreed with Mises that the problem with central planning in ‘complex society’ was that it assumed a level of overveiew (übersicht) of one’s actions and their social consequences that was impossible. Taking inspiration from Guild socialism, he re-conceived of socialism as creatively designing social and productive arrangements such that they permitted ever-greater levels of overview in a society rendered complex by the machine age. As Brie discusses, this was why Polanyi thought of socialism as the realization of freedom in a complex society, the title of the closing chapter of The Great Transformation. This was not, however, the liberal ‘freedom that kills’ but a new freedom that was truer for being responsible.

Already a year after the publication of The Great Transformation, however, Polanyi knew that his vision of socialism would not be realized. The problem was that the Great Transformation had not advanced uniformly in different parts of the world. And the Second World War had dealt them very different hands. The United States had not undergone the great transformation and had, therefore, remained committed to realizing the liberal utopia. At the same time, it had emerged from the Second World War with its productive capacity massively boosted, while that elsewhere was destroyed. This placed it in a position to attempt to realize the liberal utopia on a world scale. And it was now zealously attempting to do so.

Even so, its power was not unlimited. As Polanyi Levitt and Somers and Block discuss in their different ways, the Keynesian welfare state of the West, the actually existing socialisms of the communist bloc, the developmental arrangements that emerged in the Third World and the international arrangements that permitted all three after the end of the Second World War were at least partial realizations of Polanyi’s vision. The US was forced to accept them. They furnished the world its ‘golden age’ but were brought to an end by their own incompleteness, making way for neoliberalism which, for four decades now, has been engaged in a renewed attempt to realize the liberal market utopia.

The neoliberal New Right was never without socially authoritarian politics (Desai, 1994, 2006), though the world remained mesmerized by its economic liberalism for decades. This ever-present authoritarianism has swelled after decades of zealous neoliberal ministrations, as Polanyi would have predicted. Today this is widely acknowledged. Our politics are taking ominous forms as virulent fascist foam appears on the crest of waves of right-wing ascendency, just as in the 1930s (Hobsbawm, 1994). Moreover, there are reasons to believe that the dangers this time are much greater. On the one hand, as Polanyi detected long ago and as Thomasberger (in this volume) shows, neoliberalism no longer relies on arguments about the naturalness or spontaneity of markets, making it harder to refute even as it becomes more urgent to do so (see also Crouch, 2011; Slobodian, 2018). On the other, neoliberalism’s discontents are being organized almost exclusively by the far and farther right. In the 1930s, socialist formations were, by contrast, much more prominent on the political landscape, fighting and limiting the appeal of fascism. Today, by contrast, just when socialist forces are needed to counter the appeals of the entire menagerie of the rough beasts of the right, we find most parties of the left bereft of the requisite political capacity.

They squandered it by following neoliberal economic policy nostrums, offering only a limited social liberalism without any economic socialist accompaniment. No wonder it failed to acquire broad appeal among populations suffering from unemployment or precarious employment, debt, social service erosion, degradation of urban and other environments, and, increasingly, physical insecurity and political marginalization. The manner in which the entirely salutary increase in productivity and the transformation of labour into higher and more productive forms plays out under neoliberalism only exacerbates these problems. Instead of liberating humankind from the less pleasant forms of labour, leaving it free to raise its levels of culture and knowledge as never before, these trends have contributed to deprivation, precarity and wearying uncertainty. This state of affairs recalls Polanyi’s profound analyses of ‘machine civilization’ and the conundrums they pose for humanity which Polanyi Levitt discusses (in this volume).

Unable to address these problems, most centre left parties are today part of the discredited establishment. From Trump’s United States to Brexit Britain to Macron’s France, Orban’s Hungary and lately even Merkel’s Germany, the ascendance of the forces of the far right has underlined Polanyi’s prescience. As Ann Pettifor points out in trying to make sense of the Brexit vote,

Karl Polanyi ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of figures
• List of tables
• Acknowledgements
• 1 Introduction: Karl Polanyi in the twenty-first century
• Part I: The great transformation and since
• Part II: Money as a fictitious commodity
• Part III: The double movement and socialism
• Part IV: Elective affinities
• Bibliography
• Index