The limits of Karl Polanyis anti-market approach in the struggle

for economic democracy

by Keith Hart

I am a fully paid-up member of the Karl Polanyi fan club. In the past few
years I have published, with my collaborators, a collection of essays on the
significance of The Great Transformation for understanding our times
(Blanc 2011, Holmes 2012) and have made him a canonical figure for my
versions of economic anthropology, the human economy and the history
of money. I have also published two short biographical articles on him. I
have contributed in this way to the recent outpouring of new work on
Polanyi to which this book is a significant addition. I am a believer, but
some believers also have doubts. I still have reservations about a Polanyian
strategy for achieving economic democracy and these are linked to his
historical vision of market society. Theories are good for some things
and not for others and, in my view, the plural economy would be best
served by a plural approach to theory and politics. But first let me
summarise what I most value personally in what I have learned from
Polanyi.
Most anthropologists take their lead from the academic work done by
Polanyi and his collaborators at Columbia University after the war. Trade

and Market in the Early Empires (1957) established the substantivist

school of anthropologists and historians who were committed to analysing
the economies of non-industrial societies. I reject that division of
economic anthropologys subject matter and so did Polanyi when he
wrote The Great Transformation (1944). I love his masterpiece for its vivid,
erudite and passionate writing. It is truly a work of literature as well as being
visionary. I know of few works of any kind with similar power to make such
an impact on first-time readers. His discussion of money there is a source

of endless inspiration for me and I have recently drawn on a late paper,

Money objects and money uses (1964), to explain the collapse of the
twentieth-century money system. Polanyi, with Georg Simmel, is the key
figure for me in helping to explain the current world economic crisis.
Polanyi sees money and markets as ways of extending societies beyond
their local insularity, thereby introducing a permanent tension between
their external and internal dimensions. If nature, humanity and society
should not be treated as fictitious commodities (land, labour and capital),
Polanyi implies that money is the most inclusive means of our social
interdependence and must not be bought and sold like a sack of potatoes.
I have never found much use for Polanyis typology of modes of transaction
as a set. But his vision of human economies as being articulated by a limited
number of institutional forms found widely across human history is an
essential part of how I think now. So too is his reminder that the social
solidarity embodied in associational life is as vital for economic democracy
as the interaction of states and markets. The concepts of solidarity
economy, plural economy and human economy overlap considerably
and find common inspiration in Polanyis work, possibly more than any
other single author. This undoubtedly accounts for his current popularity
at a time when many people around the world are seeking to move beyond
the sterile contrast between revolutionary and reformist approaches to
improving the economy.
The core of a human economy approach (Hart, Laville and Cattani
2010), in my view, is its emphasis not just on local institutional particulars
or its humanism, reflecting what people concretely do, think and want
wherever they live, but also on the need for an economic vision to bridge
the gap between everyday life and humanitys widest associations which are
inevitably impersonal and lie beyond the actors point of view. It is urgently
imperative (a new human universal) for all humanity to learn how to live
together in world society. Polanyi, writing towards the end of what has been

described as the second thirty years war, epitomises this idea in his
masterpiece, where the word human crops up repeatedly in the context
of economy. The question is how far opposition to large-scale
bureaucracies, whether governments or business corporations, along with
a preference for initiatives grounded in local social realities, can take us
when our aspirations for economic democracy must somehow embrace the
movement of the world we live in. And here Polanyis theoretical
framework shares some deficiencies with other strands of the socialist
tradition.
What after all is the great transformation of human history that we are
living through? In 1800 the worlds population was around one billion. At
that time less than 3 in 100 people lived in cities. The rest lived mainly by
extracting a livelihood from the land. Animals and plants were responsible
for almost all the energy produced and consumed by human beings. A bit
more than two centuries later, world population has reached seven billions.
The proportion living in cities is about a half. Inanimate sources converted
by machines now account for the bulk of energy production and
consumption. For most of this period, the human population has been
growing at an average annual rate of 1.5%; cities at 2% a year; and energy
production at around 3% a year. This last figure is double the rate of
population increase, a powerful index of the economic expansion of the
last 200 years. As a result, many people live longer, work less and spend
more than they did before. But the distribution of all this extra energy has
been grossly unequal. A third of humanity still works in the fields with their
hands. Americans each consume 400 times more energy than the average
Ugandan.
This hectic dash of humanity from the village to the city is widely assumed
to be driven by an engine of economic growth and inequality known as
capitalism. But several social forms have emerged to organize the process
on a large scale, not all of them reducible to this single term: empires,

nation-states, cities, corporations, regional federations, international

organizations, capitalist markets, machine industry, global finance and
telecommunications. There is a pressing need for more effective social
coordination at the global level and the drive towards local self-organization
is strong everywhere. Special-interest associations of every kind proliferate.
Resistance to the unequal society we have made often takes the form of
denigrating the dominant bureaucratic institutions the state and
capitalism being favourites in this regard in favour of promoting smallscale self-organized groups. Polanyi may be read as supporting such a
move. Yet it is inconceivable that any future society of this century could
dispense altogether with the principal social forms that have brought us to
this point. So the real task is to work out how states, cities, big money and
the rest might be selectively combined with citizens initiatives to promote
a more democratic world society. This requires us to emancipate ourselves
from viewing the economy exclusively in national terms.
Polanyis vision of human history was deceptively simple. He presented the
emergence of market society in the nineteenth century as a radical
break. Marx and Engels likewise believed that what they were witnessing in
Victorian England entailed an irreversible change for the world as a whole.
They were right. But or course their dialectical method is quite different
from Polanyis and they would never have used Polanyis idea of market
society. Polanyi was aware of historical continuities in the longue dure.
Nonetheless, he insisted that we should acknowledge the qualitative change
that took place when market society first became dominant. This
moment was marked by Britains repeal of the Speenhamland law in 1834,
when human labour was consequently reduced to the status of a fictional
commodity. Polanyis characterization of this new social form as the
market (sometimes the self-regulating market or its counterpart in
economic ideology, the free market) leaves out some important features
of the bureaucratic revolution that underpinned a shift to mass production
and consumption in the late nineteenth century.

The modern synthesis of the nation-state and industrial capitalism may be

termed national capitalism (Hart 2009): the institutional attempt to
manage money, markets and accumulation through central bureaucracy in
the interest of a community of citizens. It is linked to the rise of large
corporations as the dominant form of business and it represented a new
alliance between capitalists and the traditional enforcers (the military
landlord class) formed with the aim of containing the urban masses
unleashed by the industrial revolution. It was in essence Hegels recipe
in The Philosophy of Right (1821), the idea that only state power could
contain the inequality intrinsic to capitalist development, while markets
could in turn limit excessive concentrations of political power. Marx
certainly didnt envisage anything of this sort, nor did Polanyi see it in
retrospect; but Max Weber could hardly miss the dualism of East and West
in the new German empires ruling partnership between Prussian
bureaucracy and Rhineland capitalism. National capitalism is still the
dominant social form in our world, even if it may now be on the brink of
collapse.
All the agrarian civilizations of Eurasia tried to keep markets and money in
check, since power came from the landed property of an aristocratic
military caste which feared that markets might undermine their control over
society. This was expressed in medieval Europe as an opposition between
the natural economy of the countryside and the commerce of the city.
Long before this Aristotle, Alexander the Greats tutor when the
Macedonian cavalry overran the Greek cities, located society in the selfsufficiency of manorial estates, declaring that markets geared to profitmaking were anti-social. This view of economy (oikonomia, literally
household management) prevailed until the dawn of the modern era,
when Jane Austen could describe one of her characters as a poor
economist for her inability to handle the servants in a large country house.
When Marx and Engels claimed that history had been a struggle between

town and countryside, they had this conflict between landed power and
urban commerce in mind.
Even in stateless societies, markets were usually kept marginal and subject
to regulation by the agents of dominant social institutions. Why are markets
supposed to be subversive of traditional social arrangements? Because
commerce knows no bounds all markets are in a sense world markets
and this threatens local systems of control. They offer a potential means of
escape to the dominated classes: women, young people, serfs and slaves,
ethnic minorities. The power of long-distance merchants often modified
the autonomy of local rulers. This dialectic of local and global economy
defined the struggle between competing interests long before it became a
prominent feature of how we perceive the modern world. Adam Smith
knew what he was taking on when he proposed that society had nothing to
fear from markets and indeed much to gain. He stopped short of claiming
that societys interests as a whole were best served by markets left to their
own devices; but these reservations have largely been forgotten since then.
The last two centuries have seen a strident debate between capitalist and
socialist camps insisting that markets are either good or bad for society. The
latter draws implicitly on the pre-industrial apologists for landed rule whose
line was, broadly speaking, Aristotles. Karl Marx himself considered
money to be indispensable to any complex economy and was radically
opposed to the state in any form. However, many of his followers, when
they did not try to outlaw markets and money altogether, preferred to
return them to the marginal position they occupied under agrarian
civilization and were less hostile to the state, pre-industrial societys
enduring legacy for our world. Polanyi falls within this anti-market camp
since he acknowledged Aristotle as his master and considered the selfregulating markets contradictions to have been the principal cause of the
twentieth-centurys horrors.

A less apocalyptic version of socialism in the tradition of Saint-Simon

acknowledges the social damage done by unfettered markets (what Joseph
Schumpeter called creative destruction), but would not wish to do away
with the wealth they produce. Indeed the leading capitalist societies at one
stage all signed up for the idea that states should try to contain the inequality
and ameliorate the social misery generated by markets. The BRICS are
entering this stage now. The emphasis has shifted over time between
reliance on states and on markets for managing national economy, between
social and liberal democracy of various colours. The general economic
breakdown of the 1930s turned a large number of American economists
away from celebrating the logic of markets towards contemplating their
repair. This institutional economics persists as the notion that markets
need self-conscious social intervention, if they are to serve the public
interest. John Maynard Keynes produced the most impressive synthesis of
liberalism and social democracy in the last century. Much recent writing on
Polanyi would place him within this tendency rather than as a card-carrying
anti-marketeer. He did recognize a role for the market and lined up with
those who sought institutional means to correct capitalisms ills.
The markets apologists likewise divide between some for whom it is a
trans-historical machine for economic improvement best left to itself and
those who acknowledge a role for enlightened public management of
commerce. Classical liberals promoted markets as a means towards greater
individual freedom as a corrective to the arbitrary social inequality of the
Old Regime. But the industrial revolution brought about a shift to urban
commerce that made vast new populations of wage labourers rely on
markets for food, housing and all their basic needs. Under these
circumstances, in Britain especially, society itself seemed to retreat from
view, being replaced by an economy characterized this time by market
contracts instead of domestic self-sufficiency. Indeed, Margaret Thatcher,
one of the architects of the contemporary revival of market
fundamentalism, once said There is no such thing as society. Others hold

that societys remaining defences are simply too weak to hold out against
the rising tide of global money: you cant buck the markets. Unregulated
markets are engines of inequality, so this notion of markets as a natural
force beyond social regulation serves also to legitimize wealth and even to
make poverty seem deserved.
The founders of modern social theory all considered markets to be
progressive in that they broke up the insularity of traditional rural society
and brought humanity into wider circles of discourse and interaction. But
they differed over the consequences of this move. Marx and Engels
considered that the power of private money (capital) was too fragmented to
organize the urban societies brought into being by machine production of
commodities; so they looked to the enhanced social potential of large
concentrations of workers for a truly collective remedy. Weber recognized
that the formal rationality of capitalist bureaucracy led to the substantive
deterioration of livelihood for many. But, as a liberal, he considered
wholesale state intervention in markets to be a recipe for economic disaster.
Durkheim and Mauss were both cooperative socialists who wanted to
emphasize the human interdependence entailed in an expanded social role
for markets and money, while rejecting the Social Darwinist claim that an
unfettered capitalism ensures the survival of the fittest. Marcel Mauss
gave higher priority to the human drive towards greater social inclusiveness,
for which money and markets in various forms are indispensable, than to
the consolidation of territorial states.
It is odd that Polanyi sometimes reduces the structures of national
capitalism to an apolitical self-regulating market. For his analysis of
money, markets and the liberal state was intensely political, as was his
preference for social planning over the market. His wartime polemic,
reproducing something of his opponents abstractions, was more a critique
of liberal economics than a critical account of actually existing capitalism.
This would explain the lingering confusion over whether he thought a

disembedded market was possible or was just a figment of liberal

ideology, market fundamentalism. Similarly, we might argue today either
that neoliberalism did effectively disembed the market economy or that its
claim to have done so was a mystification of the invisible political processes
of rentier finance in which markets are still embedded. In either case, the
post-war turn to social democracy or embedded liberalism the apogee
of national capitalism was hardly anticipated by The Great

Transformation. We should not repeat this error when we draw inspiration

from Polanyi in the struggle for economic democracy today.

References
Blanc, J. 2011. Compte rendu de lecture: C. Hann and K. Hart
(eds) Market and Society: The great transformation today, Cambridge:
Cambridge University Press (2009). Revue Franaise de Sociologie 52, 4:
812-815.
Hart, K. 2009. Money in the making of world society. In C. Hann and K.
Hart (eds) Market and Society (see above), 91-105.
Hart, K., J-L. Laville and A.D. Cattani (eds) 2010. The Human Economy:

A citizens guide. Cambridge: Polity.

Holmes, C. 2012. Problems and opportunities in Polanyian analysis
today, Economy and Society, 41, 3: 468-484.