Karl Polanyi on economy and society: a critical analysis of core concepts

The Review of Social Economy was founded to highlight the irreducible social aspects of economic activity. Yet, the nature of the ‘social’ and the ‘economic’ are both unresolved, and they are much more problematic than often assumed. This article probes Karl Polanyi’s depiction of the relationship between the ‘social’ and the ‘economic’ and subsequent discourse on ‘embeddedness’. In his Great Transformation (1944) Polanyi associated the ‘economic’ with motives of material gain, while ‘social’ referred to norms of reciprocity and redistribution: his distinction between the ‘social’ and the ‘economic’ then focused primarily on different kinds of motivation. But in a 1957 essay he brought in different kinds of institutions that engender different types of motivation. Polanyi (1944) argued that after 1800 Britain was transformed into a market-oriented ‘economic’ system, based on motives of greed and material gain. He also proposed that an effective market system had to be ‘self-adjusting’ and free of political interference, despite his important additional claim that the state was involved in its creation. Some of Polanyi’s core concepts and arguments are contradictory and problematic, and need to be reconsidered, especially if his enduring insights are to be salvaged.     

“Social Freedom” in the Twenty-First Century: Rereading Polanyi

Karl Polanyi’s analysis of the genesis, crises, and institutional transformations of contemporary society is grounded on a theory of the basic features and dynamics of capitalism as a peculiar form of society. This article intends to develop this thesis on the basis of a reading of Polanyi’s The Great Transformation, with references to Polanyi’s preceding and later research. Polanyi’s theoretical and methodological achievements suggest a wide comparative outlook and offer a critique of economics, in addition to being deeply connected with his political philosophy. Polanyi’s approach seems to be nearer to the original institutional thought — from Karl Marx to Thorstein Veblen, from Max Weber to Adolf Löwe and Karl William Kapp — than to current neo-institutional tendencies in economics, sociology, and historiography. The hard problems society presently faces suggest the need to adhere to Polanyi’s radical point of view — that is, to a radical approach to Polanyi’s thought.     

Waves of Populism: A Recent Manifestation of Polanyi’s “Double Movement”?

Abstract:

Since the Global Financial Crisis (GFC) of 2008, there has been a new wave of populism in the United States and in Europe. The hypothesis of this article is that this GFC has created the conditions for the resurgence of populism. According to Polanyi’s work of 1944, The Great Transformation, the market is “utopian” and must be imposed by the state. Further, there is a disciplinary dimension, which separates the individual worker from the community, for the purposes of allowing the “prod of hunger” to be effective. This disciplinary dimension of the market, which is based on Polanyi’s analysis of the nineteenth and early twentieth centuries, can be extended. Several phenomena in the late twentieth and early twenty-first centuries have intensified the tensions inherent in the market: fragmented production by means of finely divided global supply chains, increasing inequality due to the market structure; automation, declining labor share; increasing indebtedness; financialization; and erosion of protective labor market institutions, such as welfare and unionization. Populist movements are part of the backlash or “double movement” against these tensions inherent in the market.

Polanyi’s analysis may contribute to a greater understanding of what may be a global inflection point at present.     

The Administered Labor Market: An Institutional Analysis

The purpose of this article is to offer a Polanyian perspective on the issue of guaranteed income (GI). In analyzing the debate over the Speenhamland system, especially as Karl Polanyi ([1944] 2001) describes it in The Great Transformation, he offered an important criticism of a GI program that some contemporary Polanyian economists have been struggling to come to terms with in their writings. Instead of defending a GI policy by seeking to reject Polanyi’s analysis of the problem, I suggest that we should consider embracing Polanyi’s concern by proposing a comprehensive twin policy that would complement a basic income program with a Keynesian full employment commitment.     

Defining and Defending a Progressive Market Square: Bringing Institutionalist Development Discourse in Line with the Reality of Post-Soviet Transition Experiences

Abstract:

This article is a response to two crucial ideas about progressive institutional change: the first is J. Fagg Foster’s principle of “minimal social dislocation,” which asserts that socio-economic changes should be implemented gradually, to avoid unraveling the social fabric of the community; the second is Karl Polanyi’s principles of redistribution of rights and powers by relevant authorities and reciprocity, a symmetrical and highly personalized exchange system, which is likewise a protective mechanism that society employs against anonymity and disintegration brought about by unregulated market. Using lessons learned in the thirty-year transition to market in post-Soviet countries, this article argues that to commence progressive institutional change in the honesty- and transparency-resistant cultures of former Soviet states, impersonal exchange and impartial rule of law must be given far greater weight than personalization of contacts and continuation of cultural traditions.     

Polanyi and Post-neoliberalism in the Global South: Dilemmas of Re-embedding the Economy

Although Karl Polanyi Studied a different epoch and focused on Europe, his ideas have inspired an outpouring of studies on contemporary problems and prospects in the neoliberal era. The bulk of these studies pertain to industrial countries or global economic issues. However, the human, environmental and financial impact of market deregulation is arguably more devastating in the ‘developing’ countries than in the core. A question thus arises: do Polanyi's reflections on progressive alternatives to liberalism clarify contemporary debates on development alternatives in the Global South? I contend that democratic socialism – Polanyi's preferred remedy to the ‘demolition’ of society and nature occasioned by market civilisation – is problematical in light of what we have learned from the twentieth century, but his framework for evaluating alternatives – featuring the re-embedding of economy in society – remains as powerful as ever, I support this argument with an exploration of socialism and social democracy – as well as community – based alternatives arising from ‘reciprocity’. Each possibility raises distinctive dilemmas, as an analysis of cases reveals.     

Thomas DeGregori’s “Back to the Future”: A Comment

A fundamental principle of Karl Polanyi's institutional outlook is that any economic system has to be considered as a whole and as a historically specific social organization. This principle implies a comparative method and a critique of conventional economics. Besides, the problem of the interrelation between the economic system and other aspects of social life cannot be avoided. On this basis, Polanyi points out the peculiar "economic" nature of the market-capitalist society and explains the institutional transformations characterizing its history. The opposition "embedded/disembedded," used by Polanyi to distinguish pre-modern economies from the market economy, has been widely adopted in recent times, particularly by economic sociologists, as a key for understanding current complex economic phenomena. However, the reference to Polanyi often presupposes a distorted interpretation of his theory, and a different kind of institutional approach.     

The Institution,the Economy and the Market: Karl Polanyi's Institutional Thought for Economists

This paper aims to clarify the logical structure of Karl Polanyi's concept of institution, especially with regard to his most important contribution to political economy—the conception of self-regulating markets as institutions. Although Polanyi did not provide a well-developed concept of institution, this article argues that such a concept exists in his work. Moreover, there is in Polanyi's work a sophisticated institutionalist account of the self-regulating market that has been largely overlooked as Polanyi does not present it explicitly. Analyzing the economy as an institutionalized process, as Polanyi does, reveals that the market is neither a natural nor a spontaneous phenomenon—a conclusion that runs counter to conventional economic thinking. Polanyi's approach enables us to view capitalism (the ‘market society’ in Polanyi's language) through a highly specific cultural fact: the fiction of the self-regulating market. This institutional perspective needs to be reassessed beyond new-institutionalist theoretical constructions.     

Changing knowledge in the early economic thought of Michael Polanyi

How did Polanyi, a middleman between Keynes and Hayek, see economics education as a way to save the challenged liberal economic system of the 1930s? The first part of the article explores how experts and non-experts were engaged in making and disseminating economic knowledge, what role perception had in these engagements, and how such practices contributed to a kind of mental division of labor in the early economic thought of Michael Polanyi. The second part reconstructs Polanyi’s endeavors to show how the visual presentation of social matters could foster these engagement practices and the construction of economic knowledge. The third part points out that top-down and bottom-up approaches were both present in Polanyi’s economic thought and explains why the latter is evolutionary in a sense that it is based on changing knowledge in cognitive, behavioral, social and technical domains. The fourth part discusses how public understanding of economic ideas connected interactional expertise and boundary work in Polanyi’s account, and how he was engaged in developing both as part of his social agenda. The article concludes by showing how Polanyi positioned his growth theory and social agenda to save liberal economic thought and our civilization.     

Banks as Continuous Reinvention

Of the several debates that revolve around the work of the economic historian and political economist Karl Polanyi, one that continues to exercise minds concerns his analysis of, and political attitudes toward, post-war capitalism and the welfare state. Simplified a little, it is a debate with two sides. To borrow Iván Szelényi's terms, one side constructs a ‘hard’ Karl Polanyi, the other a ‘soft’ one. The former advocated a socialist mixed economy dominated by redistributive mechanisms. He was a radical socialist for whom the market should never be the dominant mechanism of economic coordination. His ‘soft’ alter ego insisted that the market system remain essentially intact but be complemented by redistributive mechanisms. The ‘double movement’ – the central thesis of his ‘Great Transformation’ – acts, in this reading, as a self-correcting mechanism that moderates the excesses of market fundamentalism; its author was positioned within the social-democratic mainstream for which the only realistic desirable goal is a regulated form of capitalism. In terms of textual evidence there is much to be said for both interpretations. In this article I suggest a different approach, one that focuses upon the meaning of Polanyi's concepts in relation to their socio-political and intellectual environment.     

Financialization and Society’s Protective Response: Reconsidering Karl Polanyi’s Double Movement

Financialization challenges Karl Polanyi’s thesis of double movement, the thesis that efforts to extend the market evoke efforts to protect humans, nature, and means of production from market forces. Financialization refers to the increased power of financial institutions. The government protects the incomes and assets of financial institutions, but it does little to protect the incomes and assets of households, which are necessary for people to afford healthcare, education, emergencies, retirement, and so on. Polanyi criticized nineteenth-century civilization for transforming land, labor, and the means of production into commodities, using economic insecurity to motivate humans. The development of intangible property allowed business to expand the market in two ways: (i) restricting output to drive up profits and (ii) liquefying consumer assets to provide credit to consumers to increase spending. The implications of that process manifested themselves in the financial crisis of 2008. Market capitalism represented the attempt to organize commodities based on economic rationality. Similarly, the twentieth- and twenty-first-century capitalism represents the effort to “rationally” organize society according to the value of intangible assets. Both efforts failed, indicating the continued relevance of Polanyi’s thesis.     

The Last Gasp of Neoliberalism

The ideas of both Thorstein Veblen and Karl Polanyi shed light on understanding the last gasp of neoliberalism. The last gasp refers to Donald Trump’s abandonment of free trade, long considered a cornerstone of the neoliberal agenda, and his overt attacks on democratic institutions. In Trump, neoliberalism’s attempt to overcome the gridlock of liberal democracy has revealed its fascist leanings. Both Polanyi and Veblen warned about the trend towards fascism. Trump was elected, in part, by filling the void left by the factioning of neoliberalism, in part by the injustice felt by people in rural areas, those with stagnant incomes, white males, and others. Trump has transcended the neoliberal agenda, approaching market relations from the point-of-view of the fight. The emergence of a predatory culture, in both the domestic and international realms, resembles the culture outlined in Veblen’s The Theory of Business Enterprise. Trump’s actions reveal the need to extend Polanyi’s idea of social protection given the negative effects of modern technology and Trump’s efforts to dismantle or reduce some regulatory agencies. Changing demographics and the adverse reaction to Trump’s fascist leanings may yet see the emergence of a new progressive era, suggesting, at least, that Trump represents the last gasp of neoliberalism.     

Neoliberalism,Polanyi’s Protective Response,and Veblenian Waste

As capitalism unfolds, continual technological advance — in combination with the relentless accumulation imperative — serves to amplify material progress. The expanding economic sphere begins to pervade the everyday lives and thinking of the individual. The institutionalization of the market fundamentally changes the structure of society and, in so doing, fundamentally changes the institutional structure through which individuals are socialized. The social dislocation generated therein prompts Karl Polanyi’s protective response. Despite this market intensification, the existence of the economic surplus undermines the syllogistics of market-determined pricing. Evidence of the economic surplus and Veblenian waste as well as of the fact that the competitive law of value is not operable under neoliberalism is found in the lobby industry and campaign contributions. This research seeks to explicitly connect the concepts of Polanyi’s protective response with Veblenian waste and the economic surplus in order to better understand how the irrational system of neoliberalism continues to evolve.     

Sen’s criticism of revealed preference theory and its ‘neo-samuelsonian critique’: a methodological and theoretical assessment

This paper evaluates how Amartya Sen’s critique of revealed preference theory (RPT) stands against the latter’s contemporary, ‘neo-Samuelsonian’ version. Neo- Samuelsonians have argued that Sen’s arguments against RPT are innocuous, in particular once it is acknowledged that RPT does not assume away the existence of motivations or other latent psychological or cognitive processes. Sen’s claims that preferences and choices need to be distinguished and that external factors need to be taken into account to analyze the act of choice then appear to be irrelevant. However, while it is true that contemporary revealed preference theory (CRPT) partially evades Sen’s critique, I show that the latter is still relevant outside the restricted areas of consumer choice and market dynamics. In particular, Sen’s views regarding the importance of incomplete preferences and the multiplicity of levels of agency can hardly be integrated into the framework of CRPT. This is a significant limit, given the imperialistic claims of some of the proponents of the latter.     

Supra-National Money and the Euro Crisis: Lessons from Karl Polanyi

The paper seeks to examine some of the key features of Karl Polanyi’s ideas explaining the collapse of the pre-Great Depression unregulated market system by using his broad framework of analysis, as developed in The Great Transformation and published over 70 years ago, to explain the present Eurozone crisis. Emphasis is placed on the two key institutions of the pre-Depression era, namely haute finance and the gold standard, as well as his heterodox views on the nature and origin of money to shed light on the evolving crisis within the Eurozone. On the basis of Polanyi’s insights, the paper concludes that the cause of the latter crisis is similar and it lies primarily in the adoption of stateless or supra-national money that is even more restrictive on the behaviour of national authorities than the conditions imposed under the gold standard. The current situation of quasi-permanent austerity in the Eurozone is the inevitable consequence of its monetary architecture, and it will remain a long-term feature of Europe, unless significant institutional changes are put in place to bridge the gap between money and the state.     

Andre Gunder Frank: ‘Unity in Diversity’ from the Development of Underdevelopment to the World System

The purpose of this article is to critically review the work of Andre Gunder Frank. This is no easy task given the prolific and controversial nature of his life work. His main distinction is as a paradigm breaker and a paradigm maker. Frank is one of the founders of contemporary world system theory. He coined some memorable expressions such as the ‘development of underdevelopment’ and ‘Re-Orient’. Indeed, these two concepts highlight two distinct phases in his work. His first phase is characterised by his writings on dependency theory and his initial understanding of world system theory broadly in line with Amin, Arrighi and Wallerstein. His second phase is distinguished by what he considers to be the ‘Eurocentric’ interpretation of world system theory of Wallerstein and others as well as by his critique of his own earlier work. While some of Frank's analyses and assertions proved to be wrong, he provided much inspiration to a new generation of scholars and activists, some of whom provided the necessary empirical evidence and theoretical rigour lacking in parts of Frank's work. But he excelled in his mission of providing the big picture, asking the unimaginable questions and exploring hitherto inconceivable interrelationships.     

Darwinian paradigm,cultural evolution and human purposes: on F.A. Hayek’s evolutionary view of the market

The claim that the Darwinian paradigm of blind-variation-and-selective-retention can be generalized from the biological to the socio-cultural realm has often been questioned because of the critical role played by human purposeful design in the process of cultural evolution. In light of the issue of how human purposes and evolutionary forces interact in socio-economic processes the paper examines F.A. Hayek’s arguments on the “extended order” of the market (capitalism), in particular with regard to their policy implications. Its focus is on the tension that exists in Hayek’s work between a rational liberal and an agnostic evolutionary perspective. A re-construction of his arguments is suggested that allows for a reconciliation of these seemingly contradictory views.     

Remittances and Households in the Age of Neoliberal Uncertainty

International migration and remittance flows have been reframed as catalysts for poverty reduction and development through marketization. Growth, measurement, and promotion of global remittances have emerged against the backdrop of neoliberal structural adjustment programs and financialization. Those processes have paralleled the emergence of the transnational household as a global institution. The article suggests that transnational households characterize a new stage of neoliberal capitalist development. The article revisits Karl Polanyi’s The Great Transformation and discusses how active governance and neoliberal discourse regulate and frame labor and remittances as “fictitious commodities.” Further, it is argued that transnational households take active roles in Polanyi’s “double movement,” by providing social protection amidst narrow public responsibility for provisioning. The article identifies this as a new element of “the great transformation,” and referring to J. K. Galbraith, as a new age of neoliberal uncertainty.     

Economic Liberalism and the State: Dismantling the Myth of Naïve Laissez-Faire

The article offers a critique of the prevailing understanding of the relationship between neoliberalism and classic nineteenth-century liberalism in contemporary international political economy (IPE) and offers a redefinition inspired by Polanyi and Gramsci. Within critical IPE studies, a consensus has emerged that neoliberalism cannot be reduced to a simple attempt to roll back the economy and let loose free-market forces. However, this insight relies on contrasting neoliberalism with a classic liberalism, that is, a simple attempt to implement just this naïve laissez-faire ideology. In contrast, this article argues that nineteenth-century liberalism is also characterised by an active use of state and legislative power. Through a historical study of two cases from nineteenth-century Britain, Poor Law reform and the Gold Standard, the paper will argue that state action played a central role even during the heyday of laissez-faire liberalism. With a starting point in Polanyi’s dictum that ‘laissez-faire was planned’, this reinvestigation will point towards a need to develop a more nuanced understanding of the distinctions between economic theory, ideology, and practical policy, as well as pointing towards a general reinterpretation of the role of the state in liberal economic ideology.