First UK edition (publ. Victor Gollancz, 1945)
|Publisher||Farrar & Rinehart|
|Followed by||Trade and Markets in the Early Empires (1957)|
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|Social and cultural anthropology|
The Great Transformation is a book by Karl Polanyi, a Hungarian-American political economist. First published in 1944 by Farrar & Rinehart, it deals with the social and political upheavals that took place in England during the rise of the market economy. Polanyi contends that the modern market economy and the modern nation-state should be understood not as discrete elements but as the single human invention he calls the "Market Society".
A distinguishing characteristic of the "Market Society" is that humanity's economic mentalities have been changed. Prior to the great transformation, people based their economies on reciprocity and redistribution across personal and communal relationships.As a consequence of industrialization and increasing state influence, competitive markets were created that undermined these previous social tendencies, replacing them with formal institutions that aimed to promote a self-regulating market economy. The expansion of capitalist institutions with an economically liberal mindset not only changed laws but also fundamentally altered humankind's economic relations; prior to the great transformation, markets played a very minor role in human affairs and were not even capable of setting prices because of their diminutive size. It was only after industrialization and the onset of greater state control over newly created market institutions that the myth of human nature's propensity toward rational free trade became widespread. However, Polanyi asserts instead that "man's economy, as a rule, is submerged in his social relationships," and he therefore proposes an alternative ethnographic economic approach called "substantivism", in opposition to "formalism", both terms coined by Polanyi.
Polanyi argued that the development of the modern state went hand in hand with the development of modern market economies and that these two changes were inextricably linked in history. Essential to the change from a premodern economy to a market economy was the altering of human economic mentalities away from their grounding in local social relationships and institutions, and into transactions idealized as "rational" and set apart from their previous social context.Prior to the great transformation, markets had a very limited role in society and were confined almost entirely to long distance trade. As Polanyi wrote, "the same bias which made Adam Smith's generation view primeval man as bent on barter and truck induced their successors to disavow all interest in early man, as he was now known not to have indulged in those laudable passions."
The great transformation was begun by the powerful modern state, which was needed to push changes in social structure, and in what aspects of human nature were amplified and encouraged, which allowed for a competitive capitalist economy to emerge. For Polanyi, these changes implied the destruction of the basic social order that had reigned throughout pre-modern history. Central to the change was that factors of production, such as land and labor, would now be sold on the market at market-determined prices instead of allocated according to tradition, redistribution, or reciprocity.He emphasized the greatness of the transformation because it was both a change of human institutions and human nature.
His empirical case in large part relied upon analysis of the Speenhamland laws, which he saw not only as the last attempt of the squirearchy to preserve the traditional system of production and social order but also a self-defensive measure on the part of society that mitigated the disruption of the most violent period of economic change. Polanyi also remarks that the pre-modern economies of China, the Incan Empire, the Indian Empires, Babylon, Greece, and the various kingdoms of Africa operated on principles of reciprocity and redistribution with a very limited role for markets, especially in settling prices or allocating the factors of production.The book also presented his belief that market society is unsustainable because it is fatally destructive to human nature and the natural contexts it inhabits.
Polanyi attempted to turn the tables on the orthodox liberal account of the rise of capitalism by arguing that “laissez-faire was planned”, whereas social protectionism was a spontaneous reaction to the social dislocation imposed by an unrestrained free market. He argues that the construction of a "self-regulating" market necessitates the separation of society into economic and political realms. Polanyi does not deny that the self-regulating market has brought "unheard of material wealth", but he suggests that this is too narrow a focus. The market, once it considers land, labor and money as fictitious commodities, and including them "means to subordinate the substance of society itself to the laws of the market."
This, he argues, results in massive social dislocation, and spontaneous moves by society to protect itself. In effect, Polanyi argues that once the free market attempts to separate itself from the fabric of society, social protectionism is society's natural response, which he calls the "double movement." Polanyi did not see economics as a subject closed off from other fields of enquiry, indeed he saw economic and social problems as inherently linked. He ended his work with a prediction of a socialist society, noting, "after a century of blind 'improvement', man is restoring his 'habitation.'"
Based on Bronislaw Malinowski's ethnological work on the Kula ring exchange in the Trobriand Islands, Polanyi makes the distinction between markets as an auxiliary tool for ease of exchange of goods and market societies. Market societies are those where markets are the paramount institution for the exchange of goods through price mechanisms. Polanyi argues that there are three general types of economic systems that existed before the rise of a society based on a free market economy: redistributive, reciprocity and householding.
These three forms were not mutually exclusive, nor were they mutually exclusive of markets for the exchange of goods. The main distinction is that these three forms of economic organization were based around the social aspects of the society they operated in and were explicitly tied to do those social relationships. Polanyi argued that these economic forms depended on the social principles of centricity, symmetry, and autarky (self-sufficiency). Markets existed as an auxiliary avenue for the exchange of goods that were otherwise not obtainable.[ page needed ]
The sociologists Fred L. Block and Margaret Somers argue that Polanyi's analysis could help explain why the resurgence of free market ideas has resulted in "such manifest failures as persistent unemployment, widening inequality, and the severe financial crises that have stressed Western economies over the past forty years." They suggest that "the ideology that free markets can replace government is just as utopian and dangerous" as the idea that Communism will result in the withering away of the state.
In Towards an Anthropological Theory of Value: The False Coin of Our Own Dreams, anthropologist David Graeber offers compliments to Polanyi's text and theories. Graeber attacks formalists and substantivists alike, "those who start by looking at society as a whole are left, like the Substantivists, trying to explain how people are motivated to reproduce society; those who start by looking at individual desires, like the formalists, unable to explain why people chose to maximize some things and not others (or otherwise to account for questions of meaning)."While appreciative of Polanyi's attack on formalism, Graeber attempts to move beyond ethnography and towards understanding how individuals find meaning in their actions, synthesizing insights of Marcel Mauss, Karl Marx, and others.
In parallel with Polanyi's account of markets being made internal to society as a result of state intervention, Graeber argues the transition to credit-based markets from societies with separated "spheres of exchange" in gift giving was likely the accidental byproduct of state or temple bureaucracy (temple in the case of Sumer).Graeber also notes that the criminalization of debt supplemented the enclosure movements in the destruction of English communities, since credit between community members had originally reinforced communal ties prior to state intervention:
The criminalization of debt, then, was the criminalization of the very basis of human society. It cannot be overemphasized that in a small community, everyone normally was both lender and borrower. One can only imagine the tensions and temptations that must have existed in a community—and communities, much though they are based on love, in fact, because they are based on love, will always also be full of hatred, rivalry and passion—when it became clear that with sufficiently clever scheming, manipulation, and perhaps a bit of strategic bribery, they could arrange to have almost anyone they hated imprisoned or even hanged.
Economist Joseph Stiglitz favors Polanyi's account of market liberalization, arguing that the failures of "Shock Therapy" in Russia and the failures of IMF reform packages echo Polanyi's arguments. Stiglitz also summarizes the difficulties of "market liberalization" in that it requires unrealistic "flexibility" amongst the poor.
Rutger Bregman, writing for Jacobin , criticized Polanyi's account of the Speenhamland system as reliant on several myths (increased poverty, increased population growth and increased unrest, as well as "'the pauperization of the masses,' who 'almost lost their human shape';" "basic income did not introduce a floor, he contended, but a ceiling") and the flawed Royal Commission into the Operation of the Poor Laws 1832.
Both Bregman and Corey Robin credited Polanyi's view with Richard Nixon moving away from a proposed basic income system because Polanyi was heavily quoted in a report by Nixon's aide, Martin Anderson and then ultimately provided arguments for various reductions in the welfare state introduced by Ronald Reagan, Bill Clinton and George W. Bush..
Economic historians (e.g. Nobel prize Douglass North) have criticized Polanyi's account of the origins of capitalism.Polanyi's account of reciprocity and redistributive systems is inherently changeless and thus cannot explain the emergence of the more specific form of modern capitalism in the 19th century.
The book was originally published in the United States in 1944 and then in England in 1945 as The Origins of Our Time. It was reissued by Beacon Press as a paperback in 1957 and as a 2nd edition with a foreword by Nobel Prize-winning economist Joseph Stiglitz in 2001.
In trade, barter is a system of exchange where participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish barter from gift economies in many ways; barter, for example, features immediate reciprocal exchange, not delayed in time. Barter usually takes place on a bilateral basis, but may be multilateral. In most developed countries, barter usually only exists parallel to monetary systems to a very limited extent. Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable or simply unavailable for conducting commerce.
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, a price system, private property and the recognition of property rights, voluntary exchange and wage labor. In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in capital and financial markets whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
In economics, a free market is a system in which the prices for goods and services are self-regulated by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority, and from all forms of economic privilege, monopolies and artificial scarcities. Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.
Economic anthropology is a field that attempts to explain human economic behavior in its widest historic, geographic and cultural scope. It is an amalgamation of economics and anthropology. It is practiced by anthropologists and has a complex relationship with the discipline of economics, of which it is highly critical. Its origins as a sub-field of anthropology began with work by the Polish founder of anthropology Bronislaw Malinowski and the French Marcel Mauss on the nature of reciprocity as an alternative to market exchange. For the most part, studies in economic anthropology focus on exchange. In contrast, the Marxian school known as "political economy" focuses on production.
Karl Paul Polanyi was an Austro-Hungarian economic historian, economic anthropologist, economic sociologist, political economist, historical sociologist and social philosopher. He is known for his opposition to traditional economic thought and for his book The Great Transformation, which argued that the emergence of market-based societies in modern Europe was not inevitable but historically contingent. Polanyi is remembered best as the originator of substantivism, a cultural version of economics, which emphasizes the way economies are embedded in society and culture. This opinion is counter to mainstream economics but is popular in anthropology, economic history, economic sociology and political science.
In cultural anthropology, reciprocity refers to the non-market exchange of goods or labour ranging from direct barter to forms of gift exchange where a return is eventually expected as in the exchange of birthday gifts. It is thus distinct from the true gift, where no return is expected.
Embedded liberalism is a term for the global economic system and the associated international political orientation as they existed from the end of World War II to the 1970s. The system was set up to support a combination of free trade with the freedom for states to enhance their provision of welfare and to regulate their economies to reduce unemployment. The term was first used by the American political scientist John Ruggie in 1982.
The law of the value of commodities, known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic The Poverty of Philosophy (1847) against Pierre-Joseph Proudhon with reference to David Ricardo's economics. Most generally, it refers to a regulative principle of the economic exchange of the products of human work, namely that the relative exchange-values of those products in trade, usually expressed by money-prices, are proportional to the average amounts of human labor-time which are currently socially necessary to produce them.
An economy is an area of the production, distribution and trade, as well as consumption of goods and services by different agents. Understood in its broadest sense, 'The economy is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources'. A given economy is the result of a set of processes that involves its culture, values, education, technological evolution, history, social organization, political structure and legal systems, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions. In other words, the economic domain is a social domain of human practices and transactions. It does not stand alone.
Substantivism is a position, first proposed by Karl Polanyi in his work The Great Transformation (1944), which argues that the term 'economics' has two meanings. The formal meaning, used by today's neoclassical economists, refers to economics as the logic of rational action and decision-making, as rational choice between the alternative uses of limited (scarce) means, as 'economising,' 'maximizing,' or 'optimizing.'
In cultural anthropology and sociology, redistribution refers to a system of economic exchange involving the centralized collection of goods from members of a group followed by the redivision of those goods among those members. It is a form of reciprocity. Redistribution differs from simple reciprocity, which is a dyadic back-and-forth exchange between two parties. Redistribution, in contrast, consists of pooling, a system of reciprocities. It is a within group relationship, whereas reciprocity is a between relationship. Pooling establishes a centre, whereas reciprocity inevitably establishes two distinct parties with their own interests. While the most basic form of pooling is that of food within the family, it is also the basis for sustained community efforts under a political leader.
Inclusive capitalism is a term composed of two complementary meanings: (1) poverty is a significant, systemic problem in countries which have already embraced or are transitioning towards capitalistic economies, and (2) companies and non-governmental organizations can sell goods and services to low-income people, which may lead to targeted poverty alleviation strategies, including improving people's nutrition, health care, education, employment and environment, but not their political power.
The Origin of Capitalism is a 1999 book on history and political economy, specifically the history of capitalism, by scholar Ellen Meiksins Wood, written from the perspective of Political Marxism. It was reviewed as an "Outstanding Academic Book" by Michael Perelman.
Throughout modern history, a variety of perspectives on capitalism have evolved based on different schools of thought.
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. In these cases economic activities such as "provisioning" are "embedded" in non-economic kinship, religious and political institutions. In market societies, in contrast, economic activities have been rationalized, and economic action is "disembedded" from society and able to follow its own distinctive logic, captured in economic modeling. Polanyi's ideas were widely adopted and discussed in anthropology in what has been called the formalist–substantivist debate. Subsequently, the term "embeddedness" was further developed by economic sociologist Mark Granovetter, who argued that even in market societies, economic activity is not as disembedded from society as economic models would suggest.
The opposition between substantivist and formalist economic models was first proposed by Karl Polanyi in his work The Great Transformation (1944).
The concept of social ownership refers to various forms of ownership for the means of production in socialist economic systems. These systems may encompass state ownership, employee ownership, cooperative ownership, citizen ownership of equity, common ownership, or collective ownership. Historically social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned by a single entity or network of entities representing society, but the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy. Social ownership of the means of production is the common defining characteristic of all the various forms of socialism.
The archaeology of trade and exchange is a sub-discipline of archaeology that identifies how material goods and ideas moved across human populations. The terms “trade” and “exchange” have slightly different connotations: trade focuses on the long-distance circulation of material goods; exchange considers the transfer of persons and ideas.
Historical materialism, also known as the materialist conception of history, is a methodology used by some communist and Marxist historiographers that focuses on human societies and their development through history, arguing that history is the result of material conditions rather than ideals. This was first articulated by Karl Marx (1818–1883) as the "materialist conception of history". It is principally a theory of history which asserts that the material conditions of a society's mode of production or in Marxist terms, the union of a society's productive forces and relations of production, fundamentally determine society's organization and development. Historical materialism is an example of Marx and Engels' scientific socialism, attempting to show that socialism and communism are scientific necessities rather than philosophical ideals.
The Double Movement is a concept originated by Karl Polanyi in his book The Great Transformation. The phrase refers to the dialectical process of marketization and push for social protection against that marketization. First, laissez-faire reformers seek to "disembed" the economy in order to establish what Polanyi calls a "market society" wherein all things are commodified, including what Polanyi terms "false commodities": land, labor, and money. Second, a reactionary "countermovement" arises whereby society attempts to re-embed the economy through the creation of social protections such as labor laws and tariffs. In Polanyi's view, these liberal reformers seek to subordinate society to the market economy, which is taken by these reformers to be self-regulating. To Polanyi, this is a utopian project, as economies are always embedded in societies.