The Great Transformation
Karl Polanyi
The Great Transformation is a canonical piece of work in modern economics and social sciences. You can definitely feel this when you’re reading it. A lot of ideas that I’ve seen in David Graeber and Wallerstein seems to be originating from this specific work. For instance, the launching pad of Graeber’s economic ideas in Debt, Myth of Barter, seems to be originating from this work. More importantly the state-sanctioned markets theory that was throughly analysed in Debt was also present in this book. Albeit in a rougher form.
As for the influence on Wallerstein, I can easily say Wallerstein’s absolute basis relies on Polanyi. Wallerstein’s work is mostly unpacking Polanyi’s idea of the “illusion” of self-regulating market. Polanyi’s main focus in this book is to show that markets are not essentially “self-regulating” such that they always create balanced and optimal socioeconomic conditions when left alone. But his work is more of a historical account where Wallerstein builds a theory of international relations based on this idea. That’s why Polanyi’s categories of pre-capitalist economic systems are so important for Wallerstein. These categories are:
Reciprocity: Goods are exchanged based on systems of symmetrical relationships like kinship, neighbourhood etc. almost on a long-term, untracked “favour” basis.
Redistribution: Goods are distributed through a central authority based on need or favour. This authority can the state, patriarch, temple. leader etc.
Householding: Individual households produce and consume for subsistence
Polanyi then goes on to argue that purely market-based economic activity is artificial, and a unique characteristic of our times. Not universal across space and time.
Wallerstein then goes to map his economic systems model to these categories where; Mini-Systems are systems where householding and reciprocity is dominant. These are usually enclaved economic systems where actors have close, interpersonal relationships. World-Empires are systems that were able to construct systems of redistribution on a larger scale, usually around a state apparatus that becomes the “empire”. And World-Economies where the primary median of exchange is the market. These allow for multiple political systems and structures to coexist, thus eliminate the need for constant territorial expansion like we would have seen in World-Empires.
Back to Polanyi though, his second major idea (and the one that he invokes many historical examples on), is that belief in “self-regulation” of the market drives a “double-movement” where purely economically motivated actors strive to turn everything into tradable commodities, and rest of the society takes protectionist measures against it like unions, social protections, or a stronger state. He argues that this ultimately leads to chaos where relationship between the actors of an economy becomes anarchic. Thus it is not a sustainable economic model.
A side-note on here. One could argue that historically, the systems that prioritised market driven motives so far seem to have survived this chaos the best. For instance, the 17th century conflict between the colonialist catholic empires like Spain and Portugal, versus mercantilist protestant states like Netherlands and England was won by the market driven protestants. In early 18th century, the conflict between reformed England that was a market driven society headed by a capitalist elite, versus reformed France headed by various revolutionary or autocratic forces like Napoleon again was won by England. The major late-19th early-20th century conflict between market-driven England and revisionist forces like Germany and Japan that had a capitalist elite but mostly as an apparatus/extension to the state, didn’t produce a champion in Europe, but produced the US we know today. Which is again another market-driven society. Lastly, the final conflict we saw between the autocratic, redistributive USSR and market-driven US is also decisively won by the US. If one looks closely though, it seems as though the inevitable side-effect (and perhaps the cost) of winning these conflicts is to turn yourself into a World-Empire system. Where the capital is organised increasingly around empire-like patterns that rely on redistribution based on favouritism, political positioning, and the social-class one borns into. I think there can be an interesting argument to be made here. Needs more research though.
Lastly, I think it’s important to mention Polanyi’s idea of “fictitious-commodities”. Polanyi argues that land, labour and capital are ultimately “fictitious”, meaning that they are not necessarily part of the markets but they are treated as though they fully are (ie, they are universally buyable and sellable). Treating them as such is the drive of the “double-movement” that’s mentioned earlier. This notion is especially important because I think it cements the idea of “shared fictions” that was articulated quite well by Harari in his recent work Sapiens, and developed for specific areas like Nationalism by Benedict Anderson in his Imagined Communities (note that I haven’t read this book yet but I’m familiar with it’s main arguments. It’s in my book list though).
I want to finish this entry by saying despite appreciating the arguments, it was a tough read for me. I think it’s partially because I tried to read it in English which is not my first language, but also the language used by Polanyi which was at times maze-like. I would like to return to this book in the future. I think there could be many more important arguments inbetween the lines so to say. However, for now I will treat it as Hegel’s Phenomenology of the Sprit. A canonical book nonetheless, but one that requires more of a trained eye to truly appreciate.