Introduction: Polanyi Matters
In 1944, as World War II was wrecking all parts of the globe, a 250-page long book written by a professor at Bennington College was published in New York. The Great Transformation: The Political and Economic Origins of Our Time narrates the advent of the modern market economy in the 19th-century and its brutal collapse in the 1920s and 1930s.
What is now a must-read for social scientists, politicians and historians alike would yet remain largely unnoticed for approximatively three decades. When Polanyi died in 1964, he was mainly renowned for Trade and Market in the Early Empires, an Economic History book focusing on ancient societies. However, starting in the 1970s, the resurgence of market fundamentalism with the rise of the New Right prompted a rediscovery of Polanyi’s masterpiece. This series of events is also what paradoxically proved his predictions wrong. For The Great Transformation (TGT) reads as an obituary of liberalism - Polanyi believed that liberalism would be forever discredited as a viable economic system and that Industrial economies would slowly progress towards a form of centrally-planned economy - this prediction does not stand well today.
Only forty years after the publication of TGT, neoliberal economics, bolstered by its renewed faith in the market system, rose from the ashes of classical liberalism to become the dominant paradigm in economic policymaking. Yet, Mark Blyth shows in Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century, Polanyi has not lost his relevance. Polanyi’s pioneering approach, focusing on the role of ideas and institutions provides a unique understanding of contemporary economic developments. ‘The very mark of towering intellectuals’, wrote Fred Block and Margaret Somers about Polanyi ‘is that we can learn from them even when their predictions are proven wrong’. Hence, this project has been particularly inspired by Blyth’s ambition to ‘pick up where Polanyi left off’, i.e. in 1944 when The Great Transformation was published. In turn, the aim is to pick up where Blyth left off when his book was published in 2002. Since then, the world has undergone countless economic transformations and crises to which Polanyi’s contributions to Political Economy, Economic Sociology and Social Sciences as a whole can serve as invaluable companions. Not only did he laid the foundations of a constructivist approach to Political Economy, challenging the “naturality” of the almost God-given market of Smith and Ricardo, but he also developed concepts and notions like economic embeddedness or commodification that are now indispensable elements of a social scientist’s toolbox.
Born in 1886 in Vienna, Karl Polanyi moved to Budapest in his early childhood where he was raised in a bourgeois Jewish family. In his young years, Gareth Dale explains, he was a prominent member of the radical counter-culture of late imperial Hungary. After graduating from the faculty of Law, Polanyi founded the Galileo Circle, a club and discussion group dedicated to liberal and socialist ideas. He entered politics in 1914, becoming the general secretary of the Radical Bourgeois Party which joined forces with the Social Democrats in 1918 to install Count Mihály Károlyi as the new head of the Hungarian State. When the Károlyi government collapsed and was replaced by a Communist-led government headed by Bela Kun, Polanyi, despite his anti-Bolshevik sentiments, accepted a position in the People’s Commissariat of Social Production. He left Budapest for Vienna in June 1919 due to health imperatives but would never return to the Hungarian capital following the restoration of the Hungarian Kingdom under the authoritarian leadership of Admiral Horthy in 1920.
In Vienna, he became familiar with the work of marginalist economists Carl Menger, Ludwig Von Mises and Fredrich Hayek, taking part in the “socialist calculation” debate which opposed the former to Marxist economists. In 1933, amid growing instability in Austria and the rise of fascism, Polanyi was forced to relocate again, this time to England, where he found work as a teacher for the Workers’ Educational Association. Travelling from town to town, his interest in Economic History and more precisely in the advent of modern market economies was fuelled by his regular contacts with the English working class and the transformation it had been subjected to in the past century. During World War II, he moved to the United States where he taught first at Bennington College, Vermont then at Columbia University in New York. There, Polanyi’s research focused on Economic Anthropology and the study of institutions in primitive and archaic societies, which resulted in the publishing of two books Trade and Markets in the Early Empires and Dahomey and the Slave Trade.
One fascinating aspect about this short and far from exhaustive account of Polanyi's life is the diversity of thinkers and intellectual traditions he has engaged with throughout his academic and political career. Richard Thurnwald, Robert Owen, Max Weber, Karl Marx, Carl Menger have all in some way influenced the work of Polanyi who made a point of never subscribing to an all-encompassing theory or worldview, adding both to the complexity and the richness of his thought. Take for example his work on the aforementioned “socialist calculation” debate. His attempt at reconciling some form of price-making markets with central planning in what he labelled the "oversight" model resulted in a somewhat complex but incontestably pioneering contribution.
Polanyi and the post-Covid world
As I write these lines, the global pandemic is disrupting the life of billions of people across the globe, shedding the light on yet another key aspect of Polanyi’s work: ‘the reality of society’. This concept is one of Polanyi’s key ontological, epistemological and methodological claims. Ontological because it disputes marginalism’s assumption that rational and utility-maximizing behaviours are inherent to human nature. ‘Aristotle was right: man is not an economic, but a social being’, commented Polanyi in a 1947 article ‘He does not aim at safeguarding his individual interest in the acquisition of material possessions, but rather at ensuring social good-will, social status, social assets’. Epistemological and methodological because it challenges marginalist economists' attempt to build an abstract ideal type of human nature, the infamous Homo Economicus of which Polanyi was a staunch critique. He affirms that ‘society’ exists not as a mere aggregation of individuals but as ‘as a social fact over and above the individuals that constitute it’ and that it represents a more relevant object of study than the fantasied Homo Economicus. The Covid-19 crisis, Fred Block and Margaret Sommers observe, has challenged ‘the reign of individualism’ entrenched in neoliberalism, allowing the ‘reality of society’ to resurface. The worldwide call to social and economic solidarity, thirty-three years on from Margaret Thatcher’s ‘there is no such thing as a society’, demonstrates that there is indeed such a thing as a society, an intangible force that transcends individualism and binds us together. This time, Polanyi’s prediction was right, only it took a global pandemic claiming nearly a million lives to realize it.
Polanyi truly is a thinker for the 21st century, a thinker of rapid economic transformation, a thinker of economic and social crises, a thinker of radical politics, a thinker of globalisation, a thinker of morality and individualism, phenomena that he knew all too well. Beyond the Covid crisis, Polanyi invites us to reflect on numerous aspects of modern societies: the steady growth of the gig economy, the marketization of environmental policy, the role of big corporations, the relationship between Christianism and the Left, the influence of economists on public opinion, to list but a few. Of course, Polanyi was no prophet, his work is not free from contradictions, inaccuracies or mistakes. There is therefore a need to engage critically and constructively with Polanyi’s thought or even sometimes to re-engineer some of his concepts and ideas. Only then, his genial work can be exploited to its full potential to make sense of our modern world.
Many see Polanyi as the standard-bearer of social democracy whereas others prefer to cast him as the heir of Karl Marx and Antonio Gramsci. In reality, Polanyi is the spokesman of no particular politics. While he was unequivocally critical of liberalism, he gave little indication about how to replace it and what was to come after. His own political views varied a great deal throughout his life. Still, his work shows us that another society and another economy is possible. By challenging the determinism of Marxism and the naturalism of classical political economy, he paves the way to a new economic system that can be achieved through reforms rather than revolutions, putting an end to the destructive strains of market fundamentalism.
To conclude this already lengthy introductory piece on a more personal note, I would like to express my gratitude to Jack Copley, my Professor at the University of Bath, who, throughout my final year of undergraduate studies, has fed my interest in Political Economy and Polanyi and without who this project would have never existed.