The Great Transformation: the political and economic origins of our time
Evan Mowry
In the transition from mercantilism to free trade, western civilization went through great upheaval. In his book The Great Transformation, Karl Polanyi documents and analyzes the various changes the major powers of the time went through, and how society stumbled and righted itself in adjusting to the new system it had adopted. By dissecting liberal economic theory, the dissolution of the gold standard, the balance of power that existed between the major economic powers of the time prior to the rise of economic liberalism, and the nature of a self-regulating market (hereafter referred to as SRM), Polanyi, at times positively and at times normatively, paints a clear and vivid picture of the effects of his “great transformation” on the citizens of the nations surrounding, and involved in trade across, the Atlantic Ocean. Polanyi uses England as a lens to see the whole capitalist world during the period of transition from 19th to 20th century economics, and in doing so clearly reproduces in his writing how political influence, societal changes, and the attempts at engineering a free market economy interacted with each other.
Central to the book is Polanyi’s argument that an SRM; a worldwide market free of political or social restrictions, is impossible. He clearly defines the difference between markets and an SRM, and clearly outlines his unorthodox economic theories. In doing so, he exposes liberal economics as illogical in its assumption that an SRM exists already: a natural function of human interaction. His concept of reciprocity and his idea that people, as individuals, naturally participate in distributive systems explains the tendency of humans to trade and barter without implying a higher truth about economic ideals.
Polanyi makes very few direct generalizations about human nature, but the ones he does are quite simple. Society, he argues, isn’t a war between the classes; tension exists, that is true, but all the members of society only stand to lose with its loss. Society is mobilized in its own defense, and will reject aspects of it that threaten its existence. The SRM threatened its existence first by a drastic alteration in the life of the lower classes, and second through fluctuations in trade, so much so that the many classes and interested sectors banded together to pervert it for their own protection, to a point at which it could not be called a liberal free-market. You could say that he makes more generalizations about society than human nature. Throughout the book, though, he doesn’t disparage or praise human nature, merely comes to dispassionate conclusions by looking at historical evidence.
Most striking of The Great Transformation’s tendencies was that of viewing the sequence of events as just as important as the events themselves. When he refers to Speenhamland and the Poor Laws, Polanyi makes certain to state that it was not subsidies to the poor that nearly ruined the British economy, it was the watering down of the work force at a time when a competitive work force was needed most. I also very much appreciated Polanyi’s lack of charged character analysis when describing the acts of people, instead depicting them merely as fact. He does not view people as greedy, but for the most part self-interested.
In the chapter Freedom in a Complex Society, Polanyi does become concerned with the future of economics and society, and this is where The Great Transformation becomes most normative, and where perhaps the greatest number of his views on the nature of government and economics can be found. Polanyi’s disillusionment with liberal theory stems from the idea that economic policy must be subservient to society, and not a function of it. He sees hope in the tendency of modern nations in which “…the economic system ceases to lay down the law to society and the primacy of society over that system is secured.” (Polanyi, 251). He applauds the removal of rich influence from the economy, and the change in the nature of property that accompanies this loss of control. With this he tackles the question that had been irking me during the meat of the book: what is the “right” amount of interaction for government to undertake with an economy? At what point is freedom more or less desirable than governmental control, and what is the role of an economic system?
Because “The institutional separation of politics and economics, which proved a deadly danger to the substance of society, almost automatically produced freedom at the cost of justice and security.” (Polanyi, 253), Polanyi comes to the conclusion that pure freedom cannot exist in an SRM-based society; “Neither freedom nor peace could be institutionalized under that economy, since its purpose was to create profits and welfare, not peace and freedom.” (Polanyi, 253) The very freedoms that society, he believes, must strive to retain are infringed upon by the instability of an SRM more than they are by deliberate restrictions enacted to safeguard their existence. Polanyi’s contribution to political thought is much greater than a mere detailing of the fall of the market economy: he offers a new ideal for human society: a society as free as possible. Ironically, he asks whether a society can be freer with fewer economic freedoms.
The Great Transformation was extremely informative and interesting in theme. The writing is dense, and sometimes overly complex, even for someone who enjoys reading. His writing was helped by his chronological proximity to the events detailed in his work; I think it would have lacked context and clarity if it had been written much later after the events, due to the tendency society has of manipulating the way things are perceived from decade to decade. Finally, I very much appreciated an apparent unbiased in opinion of the events of the turn of the century; such empirical analysis is frequently lacking in political/economic theory such as this, due to the complexity of the ideas being linked.
The Great Transformation is an excellent tool for formulating a politico-economic philosophy. Karl Polanyi provides striking criticisms and insights into the effects of societal and governmental structures on economic theory, and does so in a rational, empirical manner. When a question is raised, it is exhaustively answered in the next chapter, or even paragraph, and the book is laid out logically, with a great deal of informative and intriguing tangents which only bring more color and lend credence to his arguments for government influence in markets.
Evan Mowry
In the transition from mercantilism to free trade, western civilization went through great upheaval. In his book The Great Transformation, Karl Polanyi documents and analyzes the various changes the major powers of the time went through, and how society stumbled and righted itself in adjusting to the new system it had adopted. By dissecting liberal economic theory, the dissolution of the gold standard, the balance of power that existed between the major economic powers of the time prior to the rise of economic liberalism, and the nature of a self-regulating market (hereafter referred to as SRM), Polanyi, at times positively and at times normatively, paints a clear and vivid picture of the effects of his “great transformation” on the citizens of the nations surrounding, and involved in trade across, the Atlantic Ocean. Polanyi uses England as a lens to see the whole capitalist world during the period of transition from 19th to 20th century economics, and in doing so clearly reproduces in his writing how political influence, societal changes, and the attempts at engineering a free market economy interacted with each other.
Central to the book is Polanyi’s argument that an SRM; a worldwide market free of political or social restrictions, is impossible. He clearly defines the difference between markets and an SRM, and clearly outlines his unorthodox economic theories. In doing so, he exposes liberal economics as illogical in its assumption that an SRM exists already: a natural function of human interaction. His concept of reciprocity and his idea that people, as individuals, naturally participate in distributive systems explains the tendency of humans to trade and barter without implying a higher truth about economic ideals.
Polanyi makes very few direct generalizations about human nature, but the ones he does are quite simple. Society, he argues, isn’t a war between the classes; tension exists, that is true, but all the members of society only stand to lose with its loss. Society is mobilized in its own defense, and will reject aspects of it that threaten its existence. The SRM threatened its existence first by a drastic alteration in the life of the lower classes, and second through fluctuations in trade, so much so that the many classes and interested sectors banded together to pervert it for their own protection, to a point at which it could not be called a liberal free-market. You could say that he makes more generalizations about society than human nature. Throughout the book, though, he doesn’t disparage or praise human nature, merely comes to dispassionate conclusions by looking at historical evidence.
Most striking of The Great Transformation’s tendencies was that of viewing the sequence of events as just as important as the events themselves. When he refers to Speenhamland and the Poor Laws, Polanyi makes certain to state that it was not subsidies to the poor that nearly ruined the British economy, it was the watering down of the work force at a time when a competitive work force was needed most. I also very much appreciated Polanyi’s lack of charged character analysis when describing the acts of people, instead depicting them merely as fact. He does not view people as greedy, but for the most part self-interested.
In the chapter Freedom in a Complex Society, Polanyi does become concerned with the future of economics and society, and this is where The Great Transformation becomes most normative, and where perhaps the greatest number of his views on the nature of government and economics can be found. Polanyi’s disillusionment with liberal theory stems from the idea that economic policy must be subservient to society, and not a function of it. He sees hope in the tendency of modern nations in which “…the economic system ceases to lay down the law to society and the primacy of society over that system is secured.” (Polanyi, 251). He applauds the removal of rich influence from the economy, and the change in the nature of property that accompanies this loss of control. With this he tackles the question that had been irking me during the meat of the book: what is the “right” amount of interaction for government to undertake with an economy? At what point is freedom more or less desirable than governmental control, and what is the role of an economic system?
Because “The institutional separation of politics and economics, which proved a deadly danger to the substance of society, almost automatically produced freedom at the cost of justice and security.” (Polanyi, 253), Polanyi comes to the conclusion that pure freedom cannot exist in an SRM-based society; “Neither freedom nor peace could be institutionalized under that economy, since its purpose was to create profits and welfare, not peace and freedom.” (Polanyi, 253) The very freedoms that society, he believes, must strive to retain are infringed upon by the instability of an SRM more than they are by deliberate restrictions enacted to safeguard their existence. Polanyi’s contribution to political thought is much greater than a mere detailing of the fall of the market economy: he offers a new ideal for human society: a society as free as possible. Ironically, he asks whether a society can be freer with fewer economic freedoms.
The Great Transformation was extremely informative and interesting in theme. The writing is dense, and sometimes overly complex, even for someone who enjoys reading. His writing was helped by his chronological proximity to the events detailed in his work; I think it would have lacked context and clarity if it had been written much later after the events, due to the tendency society has of manipulating the way things are perceived from decade to decade. Finally, I very much appreciated an apparent unbiased in opinion of the events of the turn of the century; such empirical analysis is frequently lacking in political/economic theory such as this, due to the complexity of the ideas being linked.
The Great Transformation is an excellent tool for formulating a politico-economic philosophy. Karl Polanyi provides striking criticisms and insights into the effects of societal and governmental structures on economic theory, and does so in a rational, empirical manner. When a question is raised, it is exhaustively answered in the next chapter, or even paragraph, and the book is laid out logically, with a great deal of informative and intriguing tangents which only bring more color and lend credence to his arguments for government influence in markets.
posted by evan at 10:49 AM
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