This is something that I am working on for a project: It should be slightly shorter than this. So, some editing will be necessary.

Karl Polanyi: Freedom in a complex society

The 1990s saw a revived interest in the writings of Karl Polanyi, in particular in his The Great Transformation (Beacon Press: Boston, 1944). Given that this book is an exhilarating and insightful account of the dislocation that the social construction of capitalism has generated, this revived interest should not be surprising: In the 1990s, from the shock therapies for the transition economies of ex-Soviet bloc to the structural adjustment programs for the global South, the world went through a radical transformation. Those who wanted to understand the trajectory of capitalism in the 1990s, found it useful to revisit Polanyi’s account of the emergence of capitalism.

Polanyi maintained that market exchange, along with redistribution and reciprocity, have existed, albeit in different institutional forms, throughout the history of humankind. Nevertheless, during the nineteenth century, first in England and then in Western Europe and North America, as land, labor, and money gradually became commodities (fictitious commodities), market exchange turned into the structuring principle of the society. Under the market society, the price mechanism and the profit motive, and not social deliberation or negotiation, determine the criteria with which the resources are allocated.

The disembeddness of the economy, for Polanyi, was not only undesirable but also, if fully realized, (socially and ecologically) unsustainable. He believed that the social body will develop spontaneous responses to protect itself against the advent of the calculative logic of the markets. Polanyi used to term double movement to describe the social dialectics between the dislocating thrust of the rule of markets and the defensive reflexes of the social body.

Polanyi’'s analysis of the non-spontaneous construction of market institutions was informed by his critique of the formalism of the then-ascendant Neoclassical economic theory. Neoclassical economists argued that the nature of “the economic problem” was invariant for all societies, past and present, western or non-western: the optimal allocation of scarce resources. In contrast, Polanyi believed that this particular form of economic rationality is specific to market societies and it is an “economistic fallacy” to apply the axioms and assumptions of Neoclassical economics to social formations where land, labor, and money are not bought and sold. More importantly, Polanyi was worried about the social consequences of economic theory: In TGT and elsewhere, he carefully studied the role that the economic theories play in the design, implementation, and further entrenchment of the rule of markets. Today, given that the structural adjustment programs of the World Bank are informed, shaped, and formatted by the exact same economic formalism that Polanyi criticized insistently, this insight may be more relevant than ever.

Nevertheless, there is a tension in Polanyi’s framework: On the one hand, he positions the social and the economic against one another: When the advent of the economic logic destroys the social fabric, the latter protects itself by, for instance, demanding the regulation of labor markets (labor), environmental pollution (land), and financial speculation (money). Note that in this picture, not only the society is represented as a homogeneous and unified entity but also the economy is treated as an autonomous extra-social logic. On the other hand, when he explains the role that “the economistic fallacy” in shaping and legitimizing the market society (privatization, financial liberalization, free trade, labor market deregulation, etc.), we learn that the market society is also socially embedded.

It is impossible to reconcile these two positions unless we include the missing element of the puzzle: class struggle. When Polanyi pegs “the society” against “the economy,” it becomes difficult to see how “society” may be divided between those who do and do not benefit from the rule of markets.

What’s more, there is nothing that guarantees that the defensive reflexes of the social body to the rule of markets will be democratic. Writing during World War II, Polanyi was well-aware of the possibility of the double movement paving the way for the Fascist alternative. In contrast, if we wish to realize “freedom in a complex society,” we need to deliberately imagine and enact solidaristic and democratic ways of social re-embedding of the economy.