The debate about Karl Polanyi’s theory of markets is important. But perhaps it can be elevated a bit.
Dismissing Polanyi’s theory, as Gavin Kennedy does, claiming it was “invented to suit his sociology based on early anthropology, then strongly influenced by Engels and Marxism,” is simply not useful.
More useful is to focus on Polanyi’s major contributions, which I think are three: (1) the distinction between markets and the market-system; (2) the argument that a market-system was not the outgrowth of a so-called natural propensity to “truck, barter, and exchange” but, instead, of the activity of the state; and (3) the claim that the market-system, if allowed to develop without controls, would more or less inevitably lead to economic and social crises. Clearly, the three contributions place him at odds with Adam Smith and many others who have celebrated the existence of a market system.
On the first, Polanyi argued, while individual markets have existed in various economies throughout human history, the market-system—defined as a form of social economy in which land, labor, and money have become commodified, and in which the rest of society is subject to the dictates of markets—is a relatively recent invention.
Second, the market-system did not begin as a laissez-faire system, which was only later characterized by government intervention. His argument, in contrast, is that national markets were created in and through the active intervention of the state.
Third, once the market-system exists, it tends to provoke economic and social crises, thus requiring social reforms in order to control and ameliorate its effects. The so-called self-regulating market-system simply can’t regulate itself.
There’s no doubt that Polanyi, writing in 1944, was strongly influenced by the world around him—one world war, the Great Depression, and another impending world war. Who could write paeans to free capitalist markets in such a context? But Polanyi’s work, especially The Great Transformation, informed as it was by a wealth of intellectual and empirical research, can’t simply be dismissed as a project of finding evidence to fit an existing theory.
Generations of anthropologists have critically appropriated and extended Polanyi’s research. Economists would do well to study their work instead of merely repeating Smith’s assertion of the naturalness of capitalism based on a supposedly universal and transhistorical propensity to “truck, barter, and exchange.”
I have thought for a while that there is a need for political parties here (Ireland) that have complained about the damage the markets have done (and still do — they haven’t gone away, you know, to take a quote from a different context) need to explain how we would redesign markets to give us the benefits they provide without allowing the gross inequalities to arise in the style of Jerry popping up under the rug at a different place from where Tom has just bashed it.
Thanks for the pointer to a literature,
Smith’s ‘celebration’ of the market system – or the ‘Age of Commerce’ – was conditioned, not by some ideological obsession, but by the simple observation that the meanest of labourers in 18th-century Britain had access domestically to far greater ‘necessities and conveniences’ of life than the most powerful of tribal ‘chiefs’ in Africa and North America. He credited this to the Age of Commerce, rude and crude as it was in his day, and which its subsequent history to the 21st century has magnified those discrepancies in one direction only.
Now those discrepancies had long historical roots that combined the remarkable fact that the per capita income of the labourers – the majority numerically throughout the millennia remained near subsistence yet population grew slowly, and the rising total “GNP” was appropriated by the elites, who deployed the ‘surplus’ on stone-built civil monuments, churches and palaces, and warfare. The age of commerce raised productivity and living standards to unprecedented levels for rich AND poor.
The Age of Commerce developed from the exchange propensity – buying-selling from ‘truck, barter, and exchange – already present from the preceding millennia, first manifested in the evolution of language (agreement on which word sounds meant whatever). See Smith’s 1761 essay on the Origins of Language, part of a major 18th-century debate; and Moral Sentiments (1759) on the mediation amongst early and later humans on agreed moral conduct. While the exchange propensity was and remains universal, the world produced thousands of different languages and different moral codes. Neither of them evolved by human design. No State invented agriculture 11.000 years ago. nor the market.
[...] I’ve written before, the Polanyi-bashers fail to understand his three major contributions: (1) the distinction between [...]
[...] Karl Polanyi argued, in The Great Transformation, argued that capitalism, as a self-regulating market system, was based on three fictitious commodities: labor, land, and money. Occupy Wall Street has successfully contested the commodification of money, in the form of large banks and the stock market. Occupy Our Homes is the natural extension of that movement, because it challenges the intersection of the commodification of money and land calls for people to be able to move back into their foreclosed properties and to defend the properties of families facing eviction. [...]