“The Great Transformation” by Karl Polanyi is a crucial text for comprehending the necessary restructuring of economic education today. This book presents a historical narrative of the emergence of the market economy and challenges traditional economic systems. Although it does not establish a distinct tradition in economics and economic history, Polanyi’s ideas are highly relevant for unorthodox economic theories. Regrettably, many economists lack familiarity with Polanyi’s arguments due to their intense focus on history and politics. Nevertheless, Polanyi offers a more realistic perspective on economics as a social institution compared to most economists by acknowledging the interdependence between economics and broader societal structures. In addition, he examines factors that contributed to both the rise and decline of the market economy, including the influence of the Industrial Revolution.
Polanyi’s work explores the drawbacks of an unregulated capitalist market and its social ramifications. He introduces the idea of contrasting a self-regulated economy with a socially controlled one, which encompasses the distinction between a market-based system and a socialist system. Polanyi demonstrates how government intervention is present in all aspects of society to ensure market dominance. This concept is particularly significant today due to the resurgence of economic liberalism that falsely promotes self-regulation in markets. While Polanyi does not fully reject markets, he acknowledges their advantages. However, he argues that markets are not truly self-regulating and should not be the guiding principle in society. Instead, Polanyi contends that a self-regulated market system is an impractical theoretical construct with significant societal costs, leading to the need for market regulation as a response. In chapter 4, Polanyi presents his fundamental critique of this self-regulating market system by utilizing historical and anthropological studies to illustrate how economic activities are intertwined with social relationships. The driving force behind individuals’ actions goes beyond protecting personal possessions; it focuses on safeguarding social status, claims, and assets. The maintenance of social connections, adherence to honor codes, and acts of generosity play pivotal roles in this aspectFailure to comply with these norms can lead to exclusion from society. Moreover, following customary norms benefits individuals because all obligations are reciprocal. According to Polanyi, economic systems in Western Europe prior to the end of feudalism were based on principles of reciprocity, redistribution, and individual or collective householding. These principles were institutionalized within a social organization that utilized patterns such as symmetry, centricity, and autarchy. In Chapter Six of his work, Polanyi extensively analyzes this concept. He emphasizes that for a genuinely disembedded market that self-regulates to exist, both humans and nature must be commodified as purely economic entities – whether real or fictional. The commodification of these factors is necessary for the emergence of a true market society.
The history of England, from the enclosures of the 1600s to the abolition of the Poor Laws in 1834, can be characterized as the process of commodifying society and nature. This imposition of market ideology caused social problems due to its inaccurate assumptions. The self-regulating market assumes that all factors of production can be turned into commodities. However, Polanyi disputes this notion by highlighting the concept of fictitious commodities, such as land, labor, and money. These items go beyond being mere objects for buying and selling. Despite this, they are treated as such within the self-regulating market. For example, labor is performed by human beings who cannot be treated solely as commodities. By treating labor as a pure commodity, it led to the harsh working conditions and exploitation of the Victorian workforce. Polanyi was a forward-thinking individual for his time. He did not necessarily oppose economic progress and market exchange. He acknowledged the necessity of the enclosure movement and recognized that self-regulating markets generated substantial material wealth. However, his objection lies in the social dislocation it causes. In “The Great Transformation,” Polanyi challenges the concept of a purely self-regulated market society and reveals its historical tendencies and struggles. He eloquently argues against an entirely self-regulated market society and emphasizes the continuous struggle to maintain a balance between personal gain and societal well-being.The Great Transformation offers a wealth of theoretical and empirical insights that remain relevant to the current issues of globalization, both now and six decades ago.
Summary-Response on Polanyi’s “The Great Transformation”
