Karl Polanyi’s The Great Transformation and the Wall Street Crisis

Dr Girish Mishra has a very informative piece on Karl Polanyi’s book The Great Transformation (1944). Polanyi’s name has figured in a quite a few places of late in light (or the shadow!) of the Wall Street financial crisis. As neo- liberalism recedes- its most articulate proponents now reduced to a tiny die- hard group of ostriches, it is pertinent to speculate on how things will shape now. Lessons from history may not provide recipes, but help in providing a perspective. The concluding words from the article indicate a much desired possibility, at least on the medium to long term.

A few excerpts:

The mission to create a totally self-regulating market economy is predicated on the assumption that both the human beings and natural environment are turned into pure commodities, that is, they are freely bought and sold.

Polanyi emphatically underlined that a completely self-regulating market, which was fully disembedded from the society was nothing but a chimera. It could not be realized in reality. In his own words, “Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus engendered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.”

It is interesting to note that both socialism and fascism were “rooted in a market society that refused to function.” Further, fascism was directed against self-regulating market system as well as against its competitor, socialism. Polanyi points out, “In reality, the part played by fascism was determined by one factor: the condition of the market system.”

It is not true that there is no alternative to the on-going globalization based on the Washington Consensus or neo-liberalism. From a reading of Polanyi’s book, it emerges that the alternative lies in a combination of socialism and democracy. “Polanyi’s vision depends on expanding the role of government both domestically and internationally. He challenges the now fashionable views that more government will lead inevitably to both bad economic results and excessive control of social life.”


Author: bhupinder singh

an occasional blogger

3 thoughts on “Karl Polanyi’s The Great Transformation and the Wall Street Crisis”

  1. obviously there has to be government intervention to regulate the rapacious profit making of the capitalists but the question is what kind of government. as long as there is centralised governance over highly centralised production and distribution systems there will always be dissonance and inefficiency of one kind or other. therefore the challenge is to bring about decentralised governance. this is a difficult task because willy nilly the economy has become highly centralised and so without decentralising the economy it will be difficult to bring about true decentralised governance.

  2. I do not believe that the question is between a centralized and a de- centralized model. There are things that are better done by centralization especially when resources are limited (just as there are things better done in a de- centralized model).

    The question is how to balance the two and make them work. I personally feel that computers and communication technologies provide a very good mechanism for bringing transparency and accountability within a centralized model.

  3. I think that question is not of centralization or decentralization or balance between these two tendencies. Market as mechanism encloses both the tendencies and uses both for benefits of the few. Democracy also includes both with different accentuation at different times. Perhaps question is the relationship between direct democracy (not merely decentralization) at the level of production site, habitat, etc. and representative democracy, which will provide a (higher) forums for representatives of grass root institutions). But how will this be achieved in the sphere of economic or productive activities?

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