Evaluation of Polanyi’s Framework
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TOC o “1-2” h z u Introduction PAGEREF _Toc373936357 h 3Discussion PAGEREF _Toc373936358 h 3The rise of “Economic Liberalism” PAGEREF _Toc373936359 h 3Laissez-faire and the Market Economy PAGEREF _Toc373936360 h 4The Great transformation PAGEREF _Toc373936361 h 5Embeddedness PAGEREF _Toc373936362 h 6Fictitious Commodities PAGEREF _Toc373936363 h 7A Protective Counter-movement PAGEREF _Toc373936364 h 7The Collapse of Lazier Faire PAGEREF _Toc373936365 h 8Socialism, Democracy and Freedom PAGEREF _Toc373936366 h 9Criticisms PAGEREF _Toc373936367 h 10Conclusion PAGEREF _Toc373936368 h 13References PAGEREF _Toc373936369 h 14
IntroductionThe Great Transformation is a book written by Karl Polanyi on his view about the political and social upheavals that occurred in England during, leading to the change from pre-modern to modern economy. The book was first published in 1944. Polanyi’s develops a framework that describes political, social and economic events and issues that led to the rise of fascism in Europe, economic meltdown prior to the beginning of World War II and World War I. Polanyi adopts a multi-disciplinary approach in the analysis (Stilwell, 2006, p. 161). The Great Transformation traces the causes of economic liberalism and self-regulating market system that are claimed by social scientists to have emerged during the pre-modern era. The work of Polanyi focuses on demonstrating that a self-regulating or self adjusting market system could not be possible. As well, Polanyi provides a powerful critique of the notion of market liberalism coined by classical social scientists (Amoore, 2005, p. 45). According to Polanyi, development of the modern market economies went hand in hand with the development of the modern state. He contents that the two changes were inexorably linked. This paper describes Polanyi’s framework. Precisely, the paper presents that main arguments advanced by Polanyi in his framework. To facilitate understanding, it will be vital to examine the main concepts that are raised in the framework. As well, it gives a brief overview of limitations of Polanyi’s analysis and some views of scholars who have criticized the analysis.
DiscussionThe main concepts that are described by Polanyi in his analysis are: the rise of economic liberalism; lazier faire and the market economy; the great transformation, fictitious commodities; protective counter-movement; the collapse of lazier faire; and socialism, democracy and freedom.
The rise of “Economic Liberalism”In his analysis, Polanyi starts by addressing the issues that led to the rise of economic liberalism during the period of industrial revolution in England. Polanyi defines economic liberalism as the “belief that both the global economy and the national societies can and should be organized through self-regulating markets” (Watson, 2009, p. 432). According to Polanyi, economic liberalism emerged in the late 18th and early 19th centuries and became the organizing principle behind the development of market economy. Polanyi’s analysis seeks to determine the origin of economic liberalization, which eventually led to social disruptions of the early industrialization. Polanyi criticizes the works of early political economists such as Malthus and Ricardo, arguing that they formulated theories of market liberalism as a response to apparent problems of poverty. Polanyi argues that, “out of the horrors of Speenhamland, men rushed blindly for the shelter of a utopian market society” (Polanyi, 2001, p. 85). Thus, Polanyi argues that economic liberalism emerged as a simple penchant for non-bureaucratic methods and later evolved into a veritable faith in mankind. Thus, According to Polanyi, the rise of economic liberalism represented a shift from the humanistic tradition described by earlier social theorists towards a more naturalistic vision of the society that did not require either government or law to function.
Laissez-faire and the Market EconomyThe belief in “Laissez-faire” became an influential creed early in the 19th century in England. By 1830s, it was the organizing principle of the economy of England. Later on, it spread to other parts of the world. As a result of England’s influence in the world during the 19th century, laissez-faire also became the organizing principle of many economies in the world (Polanyi, 2001, p. 88). Polanyi describes three tenets of Laissez-faire, namely, automatic gold standard, competitive labor market and free trade. According to Polanyi, the three tenets facilitated the establishment of market economy. Polanyi describes market economy as an economic system that is directed, regulated and controlled by market prices. According to Polanyi, production and distribution in the market economy is entrusted to the market system, which is self-regulating. Polanyi describes self-regulation to mean that all production done within a market economy is sold on the market and all incomes within the market are derived from such sales ((Polanyi, 2001, p. 88). This translates into the existence or establishment of markets within which all industrial elements are traded. The Industrial elements include products and services, money, land and labor. Further, Polanyi argues that within a market economy, there is institutional separation of the society into a political and economic sphere (Polanyi, 2001, p. 89). In turn, this translates into a maxim that markets are free and no policy should interfere with them. Lastly, the concept of market economy assumes that all human beings aim at maximizing their personal utility. In other words, the central principle of social organization is the “gain.”
The Great transformationPolanyi perceives market economy as a mechanism that is entirely new in the Western nations. He states “that the transformation from the earlier economy to the new system is so complete that it resembles more the metamorphosis of the caterpillar than any alteration that can be expressed in terms of continuous growth and development.” Thus, Polanyi’s analysis signals the wholeness and interconnectedness of the political, the economic and the social in this transformation. The industrial revolution, for instance, entailed vast improvement of tools of production as well as avalanche of human degradation and social dislocation. Polanyi perceived the transformation as lacking natural components. According to Polanyi, Laissez-faire did not evolve from natural causes; rather, it occurred as a result of centrally organized, controlled and continuous interventionism.
Polanyi argues that the notion of economy as equilibrating and independent system of integrated markets described by earlier social scientists is a fiction. He emphasizes that the notion contradicts the claim of economic liberalism (Watson, 2009, p. 433). According to Polanyi, the social system was never subordinate nor separated from the economic one. Further, markets were not perceived as more than accessories of social life. Rather, human economy was always embedded in nature and society. Polanyi described the term “embeddedness” to imply that economy is subordinate to social relations and politics and is never autonomous. Thus, Polanyi talks about the radical political and ideological shift that is associated with economic liberalism. According to Polanyi, the economy is traditionally organically embedded in nature and society. The process of creation of a distinct economic process with its own laws and regulations severed these organic links and subordinated nature and society to the economy. As noted by Polanyi, a “self regulating market economy” can be described as a stark utopia (Watson, 2009, p. 434). Polanyi criticizes the classical economists, arguing that they encouraged creation of an effectively disembedded economy and encouraged governments and politicians to pursue this goal. He mentions that the classical economists did not and could not have achieved this objective. In fact, Polanyi argues that the objective of a self-regulating, disembedded market economy is something that cannot exist (Watson, 2009, p. 433).
Fictitious CommoditiesAs he talks about self-regulating, disembedded market economy, Polanyi criticizes “fictitious commodities.” He argues that the extension of the market logic to the essential elements of money, land and labor is irrational and highly problematic. The notion that a market economy requires commodification of all industrial elements implies that every element in the industry is regarded as having been produced for sale on the same market. This means that all elements in the industry are subject to the laws of supply and demand. Polanyi argues that despite the fact that money, land and labor are essential to the market economy, they cannot be regarded as market commodities since they are not produced for sale in the same market.
Polanyi points out that, labor is “another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized” (Polanyi, 2001, p. 102). Similarly, land is natural and is not produced by human beings. Polanyi argues that money is simply a token of purchasing power which is not produced. Rather, it comes into being through the mechanism of state finance or banking. Thus, Polanyi argues that such commodities can be regarded as “ficticious commodities.” To include them in the market mechanism amounts to subordination of the substance of the society to market laws. To Polanyi, this would lead to demolition of the society.
A Protective Counter-movement Polanyi argued that the society could not stand the effects of “commodification,” unless its business organization and the natural and human substances were protected ‘against the ravages of this satanic mill.’ According to Polanyi, the society would respond automatically by establishing protective measures. However, Polanyi argues that the measures may not always have a “progressive” nature. Polanyi referred the process of developing protective measures as “double movement.” The protective measures would help to blunt the negative impact of the commodifcation of money, land and labor. However, according to Polanyi, the protective counter-movements impaired the self-regulation nature of the market. Thus, it endangered the society in another way. In other words, the double movement can be described as a reactive interaction between the needs and wants of social protection on one hand and of economic liberalism on the other hand. The former aimed at conservation of productive organization, man and nature, while the latter aimed at developing a self-regulating market. Social protection was supported by sections of those who were affected by the market and used restrictive legislation, protective legislation and other instruments as its methods. On the other hand, economic liberalism was supported by the trading class and used free trade and lazier faire as its methods.
The Collapse of Lazier Faire
Polanyi’s historical analysis shows that as the market economy continued developing and spreading both in real terms and geographically, institutions were set up to check the actions of the market relative to money, land and labor. According to Polanyi, the tension that emerged between social protection and economic liberalism led to disruption of social organization based upon it (Caporaso, 2009, p. 593). As well, the tension led the market system to change into a definite groove. Polanyi argues that between 1879 and 1929, the Western societies changed and became close-knit units that were characterized by powerful disruptive strains. The rate of impairment of self-regulation within a market economy was dependent on the speed of social change. Since the society was encouraged to conform to the needs and wants of the market mechanism, impairments in the functioning of the market system became inherent in the society. Polanyi argues further that the impairments led to strain in the zone of the market. The strain then spread to the political sphere and eventually to the whole society. The stress within nations was released only after the last institution of the market economy, the gold standard, was dissolved. Thus, Polanyi argues that the collapse of economic order and European peace can be perceived as a direct consequence of the conflict between the elementary needs of an organized social life and the market. The conflict emerged from the utopian attempt to change the society and organize it into a self-regulating market system. According to Polanyi, fascism in Europe emerged as a result of a similar utopian endeavor (Portes, & Roberts, 2005, p. 55). In general, Polanyi stated that the rise of fascism in Europe, the occurrence of economic meltdown in 1930s and the emergence of World War I are examples of consequences of the reactions of social counter-movements and impairment of a self-regulating market system.
Socialism, Democracy and FreedomAccording to Polanyi, the reality of the society emerges after discarding the notion of market utopia. Issues of compulsion, power and freedom are intrinsic to this debate. According to Polanyi, this forms the “dividing line” between fascism and socialism on the one hand and economic liberalism on the other hand (Cahill, 2010, p. 312). He argues that the notion of economic liberalism led to misconception of freedom since the presence of compulsion and power was obscured. He argues that, in contrast, both socialism and fascism accept that compulsion and power are part of social reality. But according to Polanyi, socialism and fascism differ on the issue of whether or not the idea of freedom can be upheld, in light of the knowledge. Polanyi argues that the discovery of society can be perceived as either the rebirth or the end of freedom. According to Polanyi, the socialism accepts the reality and upholds the claim of freedom. On the other hand, fascism glorifies power and relinquishes the claim of freedom. Thus, Polanyi argues that socialism usually signifies the rebirth of freedom. Polanyi perceives socialism as “the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society”. The idea of freedom links closely to his understanding of “freedom” in the society. According to Polanyi, freedom can be perceived as “a prescriptive right that extends beyond confines of political sphere into the intimate organization of the society” (Polanyi, 2001, p. 107). This means that members of a society are free to follow their conscience when doing things without fear of some of the administrative powers. Polanyi argues further that acceptance of the reality of the society gives individuals strength and courage to overcome injustices and to seek freedom. As long as individuals do not relent in their pursuance of freedom, they do not need to fear that either planning or power will destroy the freedom that they have built. Thus, Polanyi argues that this is the meaning of freedom in a complex society. Acceptance of the reality about the society signifies the rebirth of freedom, which in turn gives members of the society all the certainty they need. With regard to the market economy, Polanyi argues that freedom is predicated on superiority of social relations over the economy. According to Polanyi, this is essential to ensure that the market economy serves the interests of humanity and to protect society’s natural and human substance (Cahill, 2010, p. 314).
CriticismsAlthough Polanyi’s framework provides crucial insights to major issues that occurred during the pre-modern era, it has been criticized for its various limitations. As noted by Munck, Polanyi worked within the parameters of “methodological nationalism.’ methodological nationalism’ is the assumption that social worlds exist only within boundaries of national territories (Munck, 2006, p. 179). It also entails the analysis of the economic, political and social processes that take place within social worlds through the lens of the nation-state. Munck further criticizes the Eurocentric nature of Polanyi’s framework and the interconnectedness of various economic, political and social processes in the analysis. In other words, Munck questions Polanyi’s analysis for its sole focus on European experience as if Europe could exist in isolation from other regions in the world (Munck, 2006, p. 179). Further, Munck argues that Polanyi’s framework does not explain clearly how double movement may operate (Munck, 2004, p. 258). De Sousa Santos also criticizes Polanyi’s framework for disregarding the importance of insurgent cosmopolitanism (counter-movements). De Sousa Santos argues that counter-movements should not be taken for granted. According to de Sousa Santos, the emergence of counter-movements is intrinsically problematic and unstable (De Sousa Santos, 2006, p 397). Thu, De Sousa Santos argues that it is important not to ignore the fact that such social movements are heterogenic in nature (De Sousa Santos, 2006, p 397). There is high possibility of conflict of interests among diverse social movements. Further, Polanyi’s analysis’ findings lead to political dilemma that counter-movements might take either a progressive or a reactionary form (Dale, 2010, p. 55).
North criticizes Polanyi’s claims that economic mentalities of mankind during the pre-modern era were less rational and utility maximizing. According to North, Polanyi confused redistribution and reciprocity with side-payments by the Coase Theorm, which would occur rationally (McMichael, 2006, p. 17). Further, North argued that every society uses markets, redistribution and reciprocity to allocate resources. North concluded that there is need for further analysis of Polanyi’s claims to investigate whether individuals had different economic mentalities during the pre-modern era. Alex Nowrasteh, on the other hand, disagreed with Polanyi’s claim that the market determined the rise of fascism. Nowrasteh acknowledges that Polanyi’s analysis of the interwar era is more evocative and accurate than the analysis of many scholars who have focused on the era. However, Nowrasteh argues that the emergence of fascism was more complicated than argued by Polanyi ((McMichael, 2006, p. 17). Further, Nowrasteh criticizes Polanyi’s analysis due to its lack of clear differentiation between the appeals of fascism and socialism to opponents of the market during the pre-modern era.
Hexter criticizes Polanyi’s claims about pre-nineteenth century societies, lack of markets and self-regulating markets. According to Hexter, Polanyi’s arguments are often distorted and highly generalized. Hexter explains that the concept of economic production and markets were widely prevalent in Western Europe and traditional societies than Polanyi thinks. Dale argues that there are problems with Polanyi’s linkage of emergence of fascism and the market. According to Dale (2010, p. 55), Polanyi’s argument that fascism was caused by impairments in the market is too general. Although Polanyi argues that international and domestic tensions during the pre-modern era were caused by war reparations, he does not explain thoroughly how the reparations impact on his thesis. In addition, Polanyi does not consider the significance of imperialistic and racial themes in Nazism and how the themes helped or hurt the appeal of fascist parties (Dale, 2010, p. 55). In addition, Polanyi does not explain clearly why socialism emerged in Russia. Polanyi argues that fascism and socialism opposed production for individual gain and the free market. Further Polanyi argues that market was the determining factors of politics during 1930s. However, Polanyi fails to explain the reasons why socialist parties did not attain as much support as fascist movements.
Despite existence of limitations n Polanyi’s framework, he came up with original concepts that have continued to have analytical salience until today. His analysis has occupied an importance space in history and has continued to be relevant in the contemporary world (Portes, 2010, p. 1560). The contemporary world is characterized by unprecedented levels of interdependency, interconnectedness, tension, possibility and rapid change. Yet, there is much to draw from Polanyi’s framework. In fact, many scholars today rely on Polanyi’s framework in order to understand changes that occur in the contemporary world brought by neo-liberal globalization (Portes, 2010, p. 1561).
ConclusionIn conclusion, Polanyi’s framework offers insights about the changes that occurred in England, leading to transformation from pre-modern to modern market economies. The framework describes the political, social and economic events and issues that led to the rise of fascism in Europe, economic meltdown in 1930s and World War I. Polanyi develops various concepts in his explanation of the changes that occurred during the transformation from the pre-modern state to the modern state in England. However, Polanyi’s framework has been criticized by numerous scholars due to its limitations. Despite the limitations, Polanyi’s concepts were original and have continued to be quite informative to social scientists in the contemporary world.
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