Karl Polanyi provides `a vital intellectual resource' for ecosocialists

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. For the alleged commodity "labor 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 labor 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. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed – from Karl Polanyi's The Great Transformation (1944)

Karl Polanyi's The Great Transformation is generally acclaimed as being among the most influential works of economic history in the twentieth century, and remains as vital in the current historical conjuncture as it was in his own. In its critique of nineteenth-century "market fundamentalism" it reads as a warning to our own neoliberal age, and is widely touted as a prophetic guidebook for those who aspire to understand the causes and dynamics of global economic turbulence at the end of the 2000s – from Gareth Dale's Karl Polanyi: The Limits of the Market, Polity Press (2010)

Review by Derek Wall

Karl Polanyi: The Limits of the Market
By Gareth Dale
Polity Press, 2010

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August 14, 2010 – British governments since the mid-1970s have advanced an agenda of marketisation. In 1976 the International Monetary Fund (IMF) demanded that the British government slash public spending and liberalise the economy in return for financial help. This led to deep divisions between the Labour government and the trade union movement. The government called for pay restraint to satisfy the IMF, unions went on strike during the "winter of discontent". The 1979 general election saw the victory of the Conservative Party's Margaret Thatcher, a right-wing populist, who over three terms of government mounted a full-scale attack on the unions and privatised much of the economy. With some variation the succeeding Conservative government under John Major and "New Labour" governments under Tony Blair and Gordon Brown continued the neoliberal trend.

The increasing dependency of the UK economy on financial markets, together with deregulation of banking, helped trigger a severe economic crisis during 2009. The crisis, at least briefly, in Britain led to a modest reversal of fully blooded market-based policies, with the government injecting cash into the economy in a Keynesian maneuvre to avert meltdown.

Brown's Labour government lost the 2010 general election. The Conservative Party lacked a majority in the House of Commons but have been joined by the Liberal Democrats, a party that arguably has shifted from the centre to the free-market right, after the victory of neoliberals from the Yellow book group. Now the debt created by the banking crisis is being used to justify cuts of 25% in government spending. Such cuts will radically transform an economy which is already highly market based, will massively weaken trade unions and redistribute yet more resources from the poor to the rich.

It is possible that widespread public resistance of the kind that brought Thatcher down in 1990, defection by the Liberal Democrats or a return to recession created by such cuts, or a combination of all three, will bring the government down. The point though is that a crisis created by marketisation of the economy is now being used to justify a more market-based economy.

The market is still seen as a solution to all ills and the failure of socialists to make a persuasive case for alternatives to marketisation has created huge problems for the left. In just about every part of world outside Latin America, the left remain in a weak position and alternatives to neoliberalism remain marginal, so intellectual resources that show that the market is neither an inevitable nor an efficient means of running the economy are vital. One of the most important resources in the ideological struggle for a socialist economy that sustains the environment, promotes social justice and creates democratic control of the means of production, is the work of the late great Hungarian thinker Karl Polanyi.

Who was Karl Polanyi?

Gareth Dale, a socialist and academic from the UK, has produced a excellent book which describes the political and social thinking of Polanyi. Polanyi is best known for his book The Great Transformation. His essential thesis was that the market economy, far from being "natural", was both artificial and highly destructive. Dale, who is highly active in the campaign to tackle climate change, argues that Polanyi is a vital figure if we are to understand both the crisis of the capitalist economy and the threat of ecocide. Indeed he concludes his book with the following words:

While humankind busily builds a funeral pyre for tens of thousands of species, including conceivably itself, it would be faintly ridiculous were the social sciences to be preoccupied with a narrow, business-as-usual agenda. The age calls for vision, for the sort of critically engaged social science of which Karl Polanyi is an outstanding representative (p. 250).

So who was Karl Polanyi? Born in 1886 in Vienna, then part of the Austro-Hungarian Empire, he studied law, became a barrister and was a cavalry officer in the first world war. Between 1924 and 1933, he was a foreign correspondent for the newspaper Der Oesterreichische Volkswirt but with the arrival of the far right he was exiled to Britain where he taught for the Workers' Educational Association, before becoming an economics lecturer at the Columbia University in New York City.

Polanyi was influenced by notions of Christian socialism, Fabianism and Marxism. Despite his interest in the Fabians, who were famously paternalistic and middle class, Polanyi feared that the workers' movement would be taken over by the middle classes. Some of his earliest work examined the economics of socialism but he is best known for his critique of the market. His interest in economics flowered when, exiled in Britain, he became a lecturer and researcher.

In The Great Transformation he argues that markets, far from being natural, are just one way of running an economy, among many other alternatives. He argues that where markets do exist they are generally embedded in society, and markets have to be restrained because marketisation causes social chaos. Equally he argues that it is wrong to split the market from the state, as state action is needed to marketise economies in the first place.

The Great Transformation was followed by decades of work in the field of economic anthropology where Polanyi investigated numerous economic systems found in the past arguing that economists project the market economy on to the past without looking at the evidence that suggested that markets either did not exist or were severely restrained.

Polanyi is often cited, for example by ecosocialists such as James O'Connor and Joel Kovel. Keynesian critics of neoliberalism like Joseph Stiglitz and George Soros also cite him, indeed a recent edition of The Great Transformation has an introduction by Stiglitz. Naomi Klein's book The Shock Doctrine is also inspired by Polanyi's insight that marketisation is driven by often repressive state action; an iron fist is needed to enclose land owned by the community, to crush trade unions and to put down revolts against poverty. The "free market" economic experiment introduced after the coup in Chile in 1973 is a textbook example of Klein's thesis and Polanyi's reasoning.

‘Counter movement'

Polanyi also introduced the concept of the "counter movement", the idea that the chaos and poverty caused by marketisation lead to popular resistance, which restrain the market through political and institutional change.

As Gareth Dale suggests there are numerous modern examples of such a process of counter movement. One thinks in particular of the International Monetary Fund (IMF) and other "Washington consensus" bodies attempting to liberalise economies by cutting state spending, attacking trade unions and shifting tax burdens on to the poorest. In fact, I would suggest that the resistance in Bolivia to water privatisation and the riots in Caracas in 1989, known as El Caracazo, are good examples of counter movement that led to the emergence of social movements and governments dedicated to challenging capitalism. Perhaps Polanyi predicted Hugo Chavez, and there is not much doubt he would have been lauded by Polanyi for his attempts to reverse neoliberalism.

Polanyi's work is complex, vast and nuanced, it cannot be easily summarised without distortion. Avoiding such distortion, Gareth Dale provides a detailed, accessible, well-referenced and readable guide to Polanyi's work. His book is both sympathetic and critical. It deals with a wide range of debates about Polanyi's work, including discussions of his relationship to Marxist thought, the strengths and weaknesses of his key ideas and an examination of his methodology. Dale has read a huge range of Polanyi's work, including unpublished material in both England and German, and he has also gained from interviewing Polanyi's daughter, Kari Polanyi-Levitt. Dale is also publishing a second biographical book on Polanyi, which will show the complex personal influences on his life and work. This will also be worth reading.

In this first book from Dale on Polanyi I would have liked to have learnt more about Polanyi's attitudes to Indigenous economies given the growth, particularly in Latin America, of Indigenous social movements that challenge the market. Karl Marx, as we know, had a strong focus on Indigenous economics. It would have been interesting to learn more about Polanyi's approach to the environment and ecology. However given the sophistication and varied concerns of Polanyi's work it would be difficult to cover everything. The book is closely argued, balancing the needs of readers who are both activists and academics.

Those of us on the left are often told that we are utopians, dreaming of a plan from nowhere; as Dale notes, Polanyi reverses this argument, suggesting instead that marketisation is a utopian experiment.

Like Professor Elinor Ostrom, Polanyi illustrates using empirical research a key element of socialist thinking. Ostrom, originally from a free-market background, has shown that collective, as opposed to private or indeed state property, can be used to conserve the environment and provide democratic control of resources. Polanyi illustrates Marx's point that the economy we have at present is neither natural nor inevitable.

However like Ostrom, and despite his thesis of the counter movement, Polanyi tends to gloss over questions of political change and especially class conflict. Dale also notes that some of Polanyi's insights in The Great Transformation and in his work on economic anthropology have been challenged by later researchers. Yet, as Dale persuasively argues, if we are to create a post-capitalist society that sustains life on our planet, particularly in the face of climate change, Polanyi provides us with a vital intellectual resource.

[Derek Wall is former principal speaker of the Green Party of England and Wales. A founder of the Ecosocialist International Network and the socialist Green Left group inside the Greens, he works closely with the Peruvian ecosocialist and Indigenous leader Hugo Blanco.]