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Summary-Response on Polanyi’s “The Great Transformation

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    We have just finished reading several chapters on Karl Polanyi’s, “The Great Transformation,” which is truly crucial to understanding how and why we need to restructure economic education today. The central thesis of this book was a historical description of the emergence of the market economy as a competitor to the traditional economy. Although he has not given a clear legacy to a separate tradition of economics and economic history, the importance of Polanyi’s thoughts to heretical economic ideas should not be underestimated. Unfortunately, the book is quite complex and Polanyi’s arguments remain unfamiliar to majority of economists, he includes far too much history and politics. Polanyi understood economics more realistically than most economists, and understood that economics does not stand alone, but exists within a large social institutional context. He highlights the rise and fall of the market economy and the factors that influenced them, including the great Industrial Revolution.

    In particular, Polanyi analyzes the deficiencies of the self-regulating market and and the social consequences of an unrestrained capitalist market. Polanyi to formulate the opposition between a self-regulating economy and an economy whose process of production and distribution is socially controlled and thus it allows to include the opposition between the market economy and the socialist economy as different systems of production and distribution. Polanyi shows the very visible hand of the government interfering in all aspects of society in order to insure market dominance. Now this point is especially relevant to us today. During the last several decades, we have witnessed a resurgence of economic liberalism. We were told once again that the market could self-regulate, and once again it has come crushing down, Polanyi is not anti-market, he believes that they are indeed beneficial, but they are not truly self-regulating, and more importantly the ethos of the market should not be ruling or even dominant ethic of society. The core contention i that self-regulating market system is Utopian theoretical constructs and can not be imposed on society for long because they create huge social costs; so society struggles back by demanding market regulation. Polanyi lays down his basic criticism of this self-regulating market system in chapter 4. Polanyi starts from historical and anthropological research that shows 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.” Maintenance of social ties, accepted code of honor, generosity are paramount. If not respected the individual finds himself as an outcast. Furthermore, since all obligations are reciprocal, the maintenance of costumes norm, also serve the individual best. Polanyi here says that all economic system up to the end of feudalism in Western Europe were organized on the following principles: reciprocity, or redistribution, or house-holding, or a combination of the three. These three principles were institutionalized with the help of a social organization making use of the patterns of symmetry, centricity, and autarchy. Polanyi’s analysis of this new idea is captured in Chapter Six. Polanyi makes it clar that a fully disembedded, self-regulating market, would require all human-beings and nature to be turned into pure commodities, whether fictitious or real. It is only when these factors are commodified that a true market society comes into existence.

    This history of England, from the enclosures of the 1600s to the abolition of the Poor Laws in 1834, was the history of the commodification of society and nature. The imposition of market ideology created social problems precisely because its abstract assumptions are not absolutely correct. The self-regulating market assumes that all factors of production can be commoditized. Polanyi disputes this, citing the fictitious commodities for land, labor, and money. These are fictitious commodities because they are more than merely items created to be bought and sold. Yet they are treated only as such on the self-regulating market. Labor for example, is an act preformed by human beings, who are not commodities. Treating labor as a pure commodity, led to the severe working conditions and abuses of the Victorian workforce. Polanyi was a very previsional thinker of his time. He was not necessary against economic progress and the market exchange. He says the enclosure movement was necessary. He gives around that self – regulating markets created unprecedented material wealth, his objection is limited to the social dislocation it causes. The Great Transformation confronts the concept of market society and reveals its historical tendencies and struggles. Polanyi eloquently attacks the idea of a purely self-regulated market society and shows that its history has been one of constant struggles for balance between personal gain and societal well-being. For anyone concerned with the current issues of globalization, The Great Transformation provides a surplus of theoretical and empirical observations that are as valid today as they were sixty years ago.

    Summary-Response on Polanyi’s “The Great Transformation

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