Karl Polanyi

Question 1

What is Karl Polanyi’s lifespan?

Answer 1

1886-1964

Question 2

What is Polanyi’s nationality?

Answer 2

Austro-Hungarian

He was born in Vienna and grew up in Budapest

Question 3

What main book(s) did Karl Polanyi write, and when was it published?

Answer 3

The Great Transformation (1944)

Question 4

What work did Karl Polanyi do when in Britain?

Answer 4

He moved to London in 1933

He became a leading figure among the Christian Left.

He worked as foreign editor of the Austrian Economist while in London.

He taught for the Workers Educational, and delivered courses on British socioeconomic history.

Question 5

Where did Karl Polanyi write The Great Transformation?

Answer 5

The Phony War (1940) prevented Polanyi returning to England, so he took up a position at Bennington College, Vermont.

Here, he completed the manuscript for The Great Transformation (with help from the Rockefeller Foundation).

Question 6

What economists did Karl Polanyi take inspiration from, but still critiqued?

Answer 6

Karl Marx

John Maynard Keynes

Question 7

How did Karl Polanyi support and critique Karl Marx?

Answer 7

Polanyi’s socialism made him oppose the rule of private property, similarly to Marx

However, he was not convinced by his analogy that everything comes down to class conflict, and that class was deterministic of economic systems/behaviour

He also didn’t like Marxism’s tendency to reduce the particularities of national histories into universal laws.

Question 8

How did Karl Polayni support and critique John Maynard Keynes?

Answer 8

Polanyi was sympathetic to many of Keynes’ theories

However, Polanyi found that dysfunctional markets were too fundamental to just be solved/rebalanced by state intervention. The elusive search for ‘equilibrium’ would tame the wild beasts of the market.

Question 9

What are the Key Claims of The Great Transformation?

Answer 9

Polanyi wanted to change the way we think about capitalism, the market and the state.

The self-regulating market is a stark utopia, but an oxymoron.
It requires the disembedding of the economy from a sociopolitical sphere.

This diesembedding is not good for the economy; and cant exist for very long without instability & distorting the nature of society

Key notions: Fictitious commodities, The ‘Double Movement’

Question 10

What is looked at in The Great Transformation?

Answer 10

Polanyi deals with the:
History of the International System in Part One,
The Rise and Fall of the Market Economy in Part Two.

The book largely focuses on the development of industrial capitalism in 19th century England and English-speaking countries.

The he looks at Capitalism’s contradictions and crisis-prone nature in the first half of the 20th century.

Question 11

What did the Whigs argue about 19th century England?

Answer 11

The Whigs argue that the industrial revolution:

supplies material wealth and technology for the founding of great empires,

and secured domestic prosperity

Question 12

What does Polanyi view 19th century England as?

Answer 12

Contrary to what might be called the Whig view of European economic history, Polanyi sees the history of the nineteenth century as:

one of failure…

Question 13

What are the 4 chief causes of failure regarding the 19th century?

Answer 13

The balance of power system
The international gold standard
The self-regulating market
The liberal state

Question 14

What does Polanyi believe WW1 was a direct result from?

Answer 14

A period of relative peace from 1815-1914 ended in WWI.

Polanyi sees this as a direct consequence of:

the imposition of the Anglo-Saxon doctrine of laissez-faire and the triumph of self-regulating markets.

Question 15

What is the double movement?

Answer 15

Market liberalism lead to a change in the traditional means of employment, exchange, belief systems and government.

This inevitably produced a counter reaction – a push back against the inhumane rule of the market.

Marketisation lead to social protection against the marketisation.

Question 16

The double movement is similarly talked about in Marx’s work. What does Marx say?

Answer 16

During development, the material productive forces of society eventually come in conflict with the existing relations of production/property relations that they’ve been at work with

These relations turn into restraints. Then begins an epoch of social revolution.

Question 17

What is the gold standard?

Answer 17

The system by which the value of a currency was defined in terms of gold, for which the currency could be exchanged.

Question 18

How did the gold standard collapse?

Answer 18

Inevitably balance of trade deficits led to a drain on gold reserves that could only be arrested through deflation – stifling domestic demand sufficiently by the cost of credit and a reduction in employment to the point where external balance was restored. But only at the expense of bank failures, mass unemployment and a contracted economy.

Better Explained: There were inevitable balance of trade deficits, meaning imports>exports. Low exports mean you’re not getting a lot of international selling, basically. Therefore, deflation would occur, meaning lower prices to increase competitiveness of their gold (as its cheaper, more want to buy it). This would restore balance, but at the expense of fewer jobs (lower cost of product means lower revenue so less money around), bank failure and a contracted economy.

Question 19

What did the collapse of the gold standard cause?

Answer 19

The collapse of the gold standard was the chief cause of the Great Depression of the 1930s– by the time it failed ‘most of the other institutions had been sacrificed in vain effort to sustain it’.

Question 20

What is laissez-faire capitalism?

Answer 20

The policy of leaving things to take their own course, without interfering.

Governments are absent from interfering in the workings of the free market.

Question 21

What is a balance of trade deficit?

Answer 21

When imports > exports

Question 22

What is economic contraction?

Answer 22

When GDP has declined for at least 2 consecutive quarters

Question 23

How does the Gold Standard link to war?

Answer 23

Attempting to get round the straight jacket of the gold standard led to:

• the imposition of protective tariffs (double movement)
• the search for new colonial markets and resources – i.e. imperialism.

Imperialism and national chauvinism dragged the world into WW1 (one of the bloodiest wars in history).

Question 24

What is a Self-Regulating Market?

Answer 24

An economic market system that directs all of economic life, without outside help or interference, is called self-regulating.

No one had the power.

In other words “everything is for sale on the market” and “all incomes derive from such sales.”

Question 25

What did Polanyi believe would happen during a self-regulating market.

Answer 25

‘such an institution could not exist for any length of time without annihilating the human and natural substance of society’.

Question 26

What did the market and economy look like before the Self-Regulating Market?

Answer 26

Up until the industrial revolution, regulation and markets co-evolved together. The self-regulating market was unknown.

Economic activity had served the social order.
The economic system was absorbed in the social system, and the current principle of behaviour predominated the economy.

The presence of the market pattern was just found to be compatible with it.

Markets have always been embedded within human society; which means subordinate to political, social, religious relations and values.

Question 27

What happened as a result of the self-regulating market?

aka, What does a self-regulating market demand to happen?

Answer 27

Market relations were dis-embedded from their social context.

A self-regulating market demands society to separate into 2 institutional spheres: an economic and a political sphere.
Such a separation is a restatement from the point of view of society as a whole, of the existence of a self-regulating market.
It might be argued such separation of the two spheres obtains in every type of society at all times.

Question 28

What does embeddedness refer to?

Answer 28

In economics and economic sociology, embeddedness refers to the degree to which economic activity is constrained by non-economic institutions.

The term was created by economic historian Karl Polanyi as part of his substantivist approach.

Polanyi argued that in non-market societies there are no pure economic institutions to which formal economic models can be applied.

Question 29

What are fictitious commodities?

Answer 29

Anything treated as market commodity that is not created for the market/for sale

Question 30

What are the main fictitious commodities?

Answer 30

Land
Labour
Money

Question 31

How were the fictitious commodities treated, regardless of them being fictitious?

Answer 31

Because there is a market for all three, we treat them as if they were commodities. This therein lay the principle tragedy of market failure.

Polanyi said “no arrangement or behaviour should be allowed to exist that might prevent the actual functioning of the market mechanism on the lines of the commodity fiction”

Question 32

How are the fictitious commodities not fictitious?

Answer 32

Land: Land stands for our natural surroundings, the place we live, and if we treat it like a cornucopia of goodies we’ll foul our own surroundings and make our lives miserable.

Labour: Labour is human beings, who are part of society, not some product.

Money: Money is a social creation, not a commodity produced for sale.

Question 33

What is a commodity?

Answer 33

A raw material or primary agricultural product that can be bought and sold

e.g. copper or coffee.

Question 34

What happened to genuine and fictitious commodities with the spread of the self-regulating market?

Answer 34

As the self reg market spread like a virus across the world –

the trade in genuine commodities increased
there was an attempt at restriction for the fictitous ones (which Polanyi calls a double movement.)

Question 35

What did Polanyi view as the Double Movement?

Answer 35

As the self-regulating market spread globally, there were restrictions (attempted to be) made against the fictitous commodities.

Question 36

What attempts were made to restrict the amount of fictitious commodities?

Answer 36

Limits on the sale of money, land and labour

A ‘push back’ which sometimes involved government. In terms of labour, it included a combination of the government, and workers.

EspL trade unions and collective actions, strikes, riots, sabotage etc – as well as political movements such as Chartism.

Question 37

How did classical economists and Polanyi view disembeddedness?

Answer 37

Classical political economists tried to present the economy as ‘disembedded’ from society (like Smith and esp. Ricardo)

But Polanyi believed this to be a falsification (false info given), even at the height of 19th century English laissez-faire

Question 38

What is the self-regulating market known as by Polanyi?

Answer 38

A stark utopia

An oxymoron

Question 39

What is an oxymoron?

Answer 39

A figure of speech in which apparently contradictory terms appear in conjunction

Question 40

Why does the disembedding of a market have a tendency to fail?

Answer 40

As the self-regulating market is an oxymoron, this will probably lead to the exhaustion and destruction of nature and ultimately society itself.

The state must therefore ‘re-embed’ markets in order to prevent or rescue society from market failure.

Question 41

What is the significance of The Great Transformation?

Answer 41

TGT remains influential across a broad range of social science disciplines.

Joseph Stiglitz wrote that Polanyi’s great contribution to economic thought was to demonstrate that self-regulating markets never work. He also wrote: ‘Economic science and economic history have come to recognize the validity of Polanyi’s key contentions’.

Question 42

How has The Great Transformation been relevant?

Answer 42

Neoliberalism’s Dominace since the 1980s

The 2008 Crash/Global Financial Crisis

Question 43

Why has Polanyi’s work been relevant since the 1980s?

Answer 43

Neoliberalism has become the dominant market ideology since the 1980s (and forms the basis of the Washington Consensus)

Polanyi’s analysis of neoliberalism is therefore, a lot more relevant. His analogies do match with what has occurred since neoliberalism’s dominance.

Question 44

What things have occured since neoliberalism’s dominance that supports what Polanyi had to say?

Answer 44

Polanyi’s analysis can seem even more relevant in terms of:

• increasing evidence that the economic system has been dominated by ‘fictitious commodities’,
• the rise of counter-movements from the ‘indignants’ of Greece and Spain to Occupy Wall Street
• the increasing instability of the international financial system
• the rescuing of private finance capital by publicly funded ‘bail outs’ etc.

Question 45

How was Polanyi’s work relevant in the 2008 crash?

Answer 45

Threre is a focus on the need to maintain a fictitious value for the fictitious commodity of money.

This happens through the Gold Standard, or the exchange value of the Dollar/Yen/Yuan/ Euro.

This is still relevant, even after the 2008 Crash; as money and credit value maintenance distorts all other economic priorities, through global dis-embedding and de-politicisation.

Question 46

What are the critiques made of The Great Transformation? (list)

Answer 46

Contradictions made

Strength of free-market liberalism

Different cause of The Great Depression

Intervention isnt perfect

Question 47

What contradiction was made in The Great Transformation?

Answer 47

There were ontradictions in Polanyi’s account of the commodification of labour.

He sees it as being both inevitable and impossible (because labour is a fictitious commodity) – hence we lack a consistent theory of value in KP’s economic theory.

Question 48

Despite what Polanyi argues, how has free market liberalism occurred in real life?

Answer 48

The material and ideological grip of free market liberalism on political society remained strong throughout the nineteenth century, and even survived the Depression of the 1930s

This shows that although it may have a tendency to fail (like what Polanyi writes), that doesn’t necessarily happen

Question 49

What was seen as a different cause to The Great Depression, than what Polanyi argued?

Answer 49

The Great Depression was seen as the consequence of too much embedding
– there was too much state intervention, too many restrictive practices by labour unions, too much welfare

This view asserts nthe Hayekian claim that as markets were never fully allowed to be self-regulating, this caused The Great Depression.

Question 50

What do critics of Polanyi say about state intervention?

Answer 50

Critics of Polanyi argue that historical examples of crisis are merely proof, that unless markets are completely deregulated from state interference, even modest interventions will cause market distortions leading potentially to long periods of economic instability.

Question 51

What does utopia mean?

Answer 51

An imagined community or society that possesses highly desirable or nearly perfect qualities for its citizens

A ‘stark utopia’ is a completely perfect utopia, and what Polanyi calls the self-regulating market.

Question 52

What are some further assumptions of the self-regulating market?

(Hint: regarding market formation, market actions, incomes, prices, and policies)

Answer 52

Nothing is allowed to inhibit the formation of markets, and there should be markets for all elements of industry.

Incomes should not be permitted to be formed, otherwise than through sales.

There must be no interference with the adjustment of prices to changed market conditions—whether the prices are those of goods, labor, land, or money.

No measure or policy should be countenanced that would influence the action of these markets.

Price, Supply and Demand are not allowed to be fixed or regulated – The only policies/measures allowed are those that help ensure the market’s self-regulation, through creating conditions which make the market the only organising power in the economic sphere.

Question 53

What is wrong with the demand of a self-regulating market?

Answer 53

A self-regulating market demands society to dis-embed into an economic and sociopolitical sphere.
Such an inference, however, would be based on faulty reasoning:

True, no society can exist without a system of some kind which ensures order in the production and distribution of goods.
But that does not imply the existence of separate economic institutions; normally, the economic order is merely a function of the social order.
Neither under tribal nor under feudal nor under mercantile conditions was there, as we saw, a separate economic system in society.
19th century society, in which economic activity was isolated and imputed to a distinctive economic motive, was a singular departure.

Question 54

How was the statement “A market economy can exist only in a market society.” concluded?

Answer 54

This was concluded on general grounds in the analysis of market pattern.

Question 55

Why was the statement “A market economy can exist only in a market society.” concluded?

Answer 55

A market economy must comprise all elements of industry, including labour, land, and money.

Money is not included in the market mechanism with large industrial consequences, but it is essential to industrial life.

However, labour is nothing more than just humans themselves. And land is the natural surroundings in which things exist.

If you want to include them in the market mechanism, you have lower the rank of society itself to fit the laws of the market.

Question 56

In way way does Polanyi believe a more better economy form can be developed?

Answer 56

Polanyi says we are now in the position to develop a more concrete form of the institutional nature of a market economy (Institutionalisation), and the perils to society which it involves.

Question 57

How does Polanyi believe a more better economy form can be developed?

Answer 57

• Polanyi says we are now in the position to develop in a more concrete form of the institutional nature of a market economy (Institutionalisation), and the perils to society which it involves.

o We will, first, describe the methods by which the market mechanism is enabled to control and direct the actual elements of industrial life
o Secondly, we will try to gauge the nature of the effects of such a mechanism on the society which is subjected to its action

Question 58

What is the Commodity Concept?

Answer 58

Every element of industry is regarded as having been produced for sale, as only then will it be subject to price being affected by the supply-and-demand.

Question 59

What is the significance of land, labour and money markets?

Answer 59

Land, labour and money are essential elements of the industry and economic system. They also must be organised in markets.

Question 60

Why is land, labour and money not a commodity?

Answer 60

The suggestion that anything that is bought and sold must have been produced for sale is emphatically untrue in regard to them.

In other words, they don’t fit the empirical definition of a commodity.

Question 61

Why is land not a genuine commodity?

Answer 61

Land is only another name for nature, which is not produced by man.

It is not produced for sale.

Question 62

Why is labour not a genuine commodity?

Answer 62

Land is only another name for human activity - which goes with life itself. In turn it is not produced for sale, but for entirely different reasons.

Also, that certain activity of labour cannot be detached from the rest of life, nor be stored or mobilised.

It is not produced for sale.

Question 63

Why is money not a genuine commodity?

Answer 63

Actual money is merely a token of purchasing power. As a rule, it is not produced at all, but comes into being through the mechanism of banking or state finance.

It is not produced for sale.

Question 64

What is the issue with Land Power?

Answer 64

Nature would be reduced to its elements, neighbourhoods and landscapes defiled, rivers polluted, military safety jeopardised, the power to produce food and raw materials destroyed.

Question 65

What is the issue with Labour Power?

Answer 65

For the alleged commodity ‘‘labour power’’ cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity.

In disposing of a man’s laboer power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘‘man’’ attached to that tag.

Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation.

Question 66

What is the issue with Money Power?

Answer 66

The market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society.

Question 67

What is the issue with land/labour/money power?

Answer 67

To allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demolition of society.

Question 68

What was the Process of Production like in the Middle Ages?

Answer 68

Industrial production for export was organised by wealthy burgesses, and carried on under their direct supervision in the home town.

Question 69

What was the Process of Production like in the Mercantile Society?

Answer 69

o Industrial production was organized by merchants and was not restricted any more to the towns; this was the age of ‘‘putting out’’ when domestic industry was provided with raw materials by the merchant capitalist, who controlled the process of production as a purely commercial enterprise.

o It was then that industrial production was definitely and on a large scale put under the organizing leadership of the merchant.
 He knew the market, the volume as well as the quality of the demand; and he could vouch also for the supplies which, incidentally, consisted merely of wool, woad, and, sometimes, the looms or the knitting frames used by the cottage industry.
 If supplies failed it was the cottager who was worst hit, for his employment was gone for the time; but no expensive plant was involved and the merchant incurred no serious risk in shouldering the responsibility for production.

o For centuries this system grew in power and scope until in a country like England the wool industry, the national staple, covered large sectors of the country where production was organized by the clothier

Question 70

What was the Process of Production like with more Complicated Systems?

Answer 70

The more complicated industrial production became, the more numerous were the elements of industry the supply of which had to be safeguarded.
o Three of these, of course, were of outstanding importance: labor, land, and money.
o In a commercial society their supply could be organized in one way only: by being made available for purchase. Hence, they would have to be organized for sale on the market—in other words, as commodities.
o The extension of the market mechanism to the elements of industry—labor, land, and money— was the inevitable consequence of the introduction of the factory system in a commercial society. The elements of industry had to be on sale.

Question 71

Why did complicated systems have a focus on labour?

Answer 71

o The fiction of their being so produced became the organising principle of society. Of the three, one stands out: labour

o Labour is the technical term used for human beings, insofar as they are not employers but employed

o It follows that henceforth the organisation of labour would change concurrently with the organisation of the market system. But as the organisation of labour is only another word for the forms of life of the common people, this means that the development of the market system would be accompanied by a change in the organisation of society itself.

o All along the line, human society had become an accessory of the economic system

Question 72

What did the market look like in the Tudore-Early Stuart period?

Answer 72

• The Tudors and early Stuarts saved England from the fate of Spain by regulating the course of change so that it became bearable and its effects could be canalized into less destructive avenues.
• But nothing saved the common people of England from the impact of the Industrial Revolution.
o A blind faith in spontaneous progress had taken hold of people’s minds, and with the fanaticism of sectarians the most enlightened pressed forward for boundless and unregulated change in society.
o The effects on the lives of the people were awful beyond description. Indeed, human society would have been annihilated but for protective counter-moves which blunted the action of this self-destructive mechanism.

Question 73

What was the social history of the 19th century like?

Answer 73

• Social history in the nineteenth century was thus the result of a double movement:
o The extension of the market organization in respect to genuine commodities was accompanied by its restriction in respect to fictitious ones.
• On one hand, markets spread all over the face of the globe and the amount of goods involved grew to unbelievable dimensions. On the other hand a network of measures and policies was integrated into powerful institutions designed to check the action of the market relative to labor, land, and money
• While the organization of world commodity markets, world capital markets, and world currency markets under the aegis of the gold standard gave an unparalleled momentum to the mechanism of markets, a deep-seated movement sprang into being to resist the pernicious effects of a market-controlled economy.
• Society protected itself against the perils inherent in a self-regulating market system—this was the one comprehensive feature in the history of the age.
• There is a ‘double movement’ of the self-regulating market and social protection,

Question 74

What are the Strengths to Polanyi’s viewpoints?

Answer 74

• Invisible hand does have its flaws of course
• Polyani uses history to back up what he is saying, providing a unique viewpoint
• Its more relevant to today’s modern society
• “we argued that if Polanyi were alive today, he would recognise our crisis-ridden, neoliberal moment all too well, as he would see it as a further, intensified stage of the nineteenth century’s profound shift to market rationality – in a way, a second Great Transformation.”

Question 75

What are the weaknesses to Polanyi’s viewpoints?

Answer 75

• it has also introduced deep structural tensions that today threaten to overwhelm human societies. When ‘the Great Transformation’ occurred, Polanyi argued, markets became regarded as autonomous forces – ‘self-regulating systems’ – in their own right. The presumption was that these market forces should organise all of society. We have been dealing with the consequences ever since.

Question 76

What happened to the Gold Standard after the war?

Answer 76

WW1 did not prevent a mass return to the gold standard in its aftermath.

Also, Bretton Woods in 1944 with the Dollar as the gold backed international ‘hard currency’.

Question 77

What did Polanyi view as a negative double movement?

Answer 77

Fascism was seen by Polanyi as a negative double movement because it sought to legitimate the denial of human freedom in the interest of national salvation

Question 78

What are the Assumptions of a Self-Regulating Market?

Answer 78

Assumptions:

• Supply will equal demand at the market price
• It assumes the presence of money
• Production and distribution will be controlled by prices.

Question 79

Why does a lack of regulation for fictitious commodities have a tendency to fail?

Answer 79

A lack of regulation for fictitious commodities could lead to wild price fluctuations in the value of money.

This will lead to mass unemployment, possibly leading to social disorder and even revolution

This may happen in the case of land overcrowding and dangers to public health or the undersupply of food to the general population.

Question 80

What are the Assumptions of the Commodity Concept?

Answer 80

In practice this means that:

there must be markets for every element of industry

in these markets, each of these elements is organised into a supply and a demand group

each element has a price which interacts with demand and supply.

These markets are numberless, and interconnected to form One Big Market.