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The Great Transformation: The Political and Economic Origins of Our Time. - book reviews
American Journal of Economics and Sociology, The, Oct, 1994 by Daniel Brook
KARL POLANYI, in The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, 1944) analyzes the history of the rise and fall of nineteenth century market society. In doing so, Polanyi adeptly illuminates the political economic "antecedents" and "consequences" of that market society. Where the primary cause of market society appears to be conscious State action in conjunction with business interests, the most significant result, in the twentieth century, is fascism with its inherently deadly dynamic. Polanyi explains the rise and fall of market society and in doing so foreshadows the fall of capitalism, as well. Polanyi seeks, and, at least implicitly, predicts the collapse of market systems which control society. For Polanyi, the market society must be replaced by a society with democratic control of both political and economic institutions. These institutions can no longer control society, but should instead be controlled by society. In the constant tension between democracy and capitalism in market societies, fascism would essentially dispose of democracy in order to support capitalism, whereas, at the other pole, socialism would sacrifice capitalism in order to strengthen democracy. According to this scheme, one of these must prevail at the expense of the other.
Polanyi demonstrates that the movement toward a market society was a conscious and planned phenomenon in which State action was the driving force. There was no natural evolution towards this occurrence. Polanyi employs the case study of Speenhamland in order to make this and other points. As Block and Somers make clear:
Speenhamland illustrates the nonevolutionary and discontinuous nature of market development. The rise of the labor market did not occur automatically - it had to be institutionalized by the political intervention of the Poor Law Reform. This emphasis on the role of the state in the unleashing of market forces is essential to Polanyi's argument about the historical novelty of the nineteenth century market economy and its concomitant ideological distortions. The road to the free market was paved with continuous political manipulation. . . The political mechanization surrounding the Speenhamland interlude - its institutionalization, its dynamics, and its final repeal - all serve to demonstrate the degree to which the 'natural' self-regulating market was politically constructed in its origins.(1)
As opposed to the careful and deliberate construction of market society, "Polanyi argues that the counter-movement was spontaneous, unplanned, and came from all sectors of society in response to the devastating impact of the market" (57). This counter-movement of protectionism was a movement of general interest toward the goal of general welfare; it especially included workers, yet also incorporated capitalists. All sought some form of protection from the vagaries and perils of the self-regulating market. The protection gained by the counter-movement impeded the efficiency of the self-regulating market, which in turn created more severe economic conditions and another round of demands for protection. Indeed, throughout the nineteenth century, increasingly "workers agitated against unemployment, capitalists against a fragile banking system, and farmers against falling prices" (59). The market system was unstable and its instability generated fear and action. Polanyi demonstrates, historically and comparatively, that market encroachment and political repression immediately inspire resistance and rebellion.(2)
Social demands against economic uncertainty and market malaise placed heavy pressure on the State to react with political intervention. The ensuing State action would have to, at least nominally, provide some relief and protection. More importantly, the State would have to diffuse the present socio-economic crisis, perhaps ushering in an entirely new State form. Alan Wolfe, in The Limits of Legitimacy: Political Contradictions of Contemporary Capitalism (New York: The Free Press, 1977), discusses the use of new State forms as a means to disguise and ameliorate capitalist crises. Wolfe explains that in liberal (i.e. capitalist) democracies there exists a fundamental tension as evidenced by the amalgamated label used to describe them. Confronted with demands for increased democracy--that is, popular demands for participation, self-determination, meaning, and community--capitalism responds in a self-preserving manner. In its effort toward self-preservation, capitalism changes the nature of the State and effectively, albeit temporarily, postpones the (seemingly) inevitable annihilation of the forced marriage of capitalism and democracy.(3) Wolfe, following James O'Connor (The Fiscal Crisis of the State, 1973) and Jurgen Habermas (Legitimation Crisis, 1975), outlines the political economic evolution of capitalist democracies in terms of the forms that States have taken in order to ensure the dominance of capitalism while simultaneously maintaining some degree of democracy. The legitimacy of both capitalism and democracy, however, have been ardently defended by the ruling classes. New State forms less take the place of old ones as much as they are built upon them. State forms, therefore, are increasingly eclectic, grasping at straws for the permanent solutions that will never be.(4)
