The Great Transformation is a book by Karl Polanyi, a Hungarian-American political economist.
First published in 1944 by Farrar & Rinehart, it deals with the social and political upheavals
that took place in England during the rise of the market economy. Polanyi contends that
the modern market economy and the modern nation-state should be understood not as discrete elements
but as the single human invention he calls the "Market Society".
A distinguishing characteristic of the "Market Society" is that humanity's economic mentalities
have been changed. Prior to the great transformation, people based their economies on reciprocity
and redistribution across personal and communal relationships. As a consequence of industrialization
and increasing state influence, competitive markets were created that undermined these
previous social tendencies, replacing them with formal institutions that aimed to promote
a self-regulating market economy. The expansion of capitalist institutions with an economically
liberal mindset not only changed laws but also fundamentally altered humankind's economic
relations; prior to the great transformation, markets played a very minor role in human
affairs and were not even capable of setting prices because of their diminutive size. It
was only after industrialization and the onset of greater state control over newly created
market institutions that the myth of human nature's propensity toward rational free trade
became widespread. However, Polanyi asserts instead that "man's economy, as a rule, is
submerged in his social relationships," and he therefore proposes an alternative ethnographic
economic approach called "substantivism", in opposition to "formalism", both terms coined
by Polanyi.
== General argument == Polanyi argued that the development of the
modern state went hand in hand with the development of modern market economies and that these
two changes were inextricably linked in history. Essential to the change from a premodern economy
to a market economy was the altering of human economic mentalities away from their grounding
in local social relationships and institutions, and into transactions idealized as "rational"
and set apart from their previous social context. Prior to the great transformation, markets
had a very limited role in society and were confined almost entirely to long distance
trade. As Polanyi wrote, "the same bias which made Adam Smith's generation view primeval
man as bent on barter and truck induced their successors to disavow all interest in early
man, as he was now known not to have indulged in those laudable passions."The great transformation
was begun by the powerful modern state, which was needed to push changes in social structure,
and in what aspects of human nature were amplified and encouraged, which allowed for a competitive
capitalist economy to emerge. For Polanyi, these changes implied the destruction of the
basic social order that had reigned throughout pre-modern history. Central to the change
was that factors of production, such as land and labor, would now be sold on the market
at market-determined prices instead of allocated according to tradition, redistribution, or
reciprocity. He emphasized the greatness of the transformation because it was both a change
of human institutions and human nature. His empirical case in large part relied upon
analysis of the Speenhamland laws, which he saw not only as the last attempt of the squirearchy
to preserve the traditional system of production and social order but also a self-defensive
measure on the part of society that mitigated the disruption of the most violent period
of economic change. Polanyi also remarks that the pre-modern economies of China, the Incan
Empire, the Indian Empires, Babylon, Greece, and the various kingdoms of Africa operated
on principles of reciprocity and redistribution with a very limited role for markets, especially
in settling prices or allocating the factors of production. The book also presented his
belief that market society is unsustainable because it is fatally destructive to human
nature and the natural contexts it inhabits. Polanyi attempted to turn the tables on the
orthodox liberal account of the rise of capitalism by arguing that “laissez-faire was planned”,
whereas social protectionism was a spontaneous reaction to the social dislocation imposed
by an unrestrained free market. He argues that the construction of a "self-regulating"
market necessitates the separation of society into economic and political realms. Polanyi
does not deny that the self-regulating market has brought "unheard of material wealth",
but he suggests that this is too narrow a focus. The market, once it considers land,
labor and money as fictitious commodities, and including them "means to subordinate the
substance of society itself to the laws of the market."This, he argues, results in massive
social dislocation, and spontaneous moves by society to protect itself. In effect, Polanyi
argues that once the free market attempts to separate itself from the fabric of society,
social protectionism is society's natural response, which he calls the "double movement."
Polanyi did not see economics as a subject closed off from other fields of enquiry, indeed
he saw economic and social problems as inherently linked. He ended his work with a prediction
of a socialist society, noting, "after a century of blind 'improvement', man is restoring his
'habitation.'"
== Before the market society ==
Based on Bronislaw Malinowski's ethnological work on the Kula ring exchange in the Trobriand
Islands, Polanyi makes the distinction between markets as an auxiliary tool for ease of exchange
of goods and market societies. Market societies are those where markets are the paramount
institution for the exchange of goods through price mechanisms. Polanyi argues that there
are three general types of economic systems that existed before the rise of a society
based on a free market economy: redistributive, reciprocity and householding.
Redistributive: trade and production is focused to a central entity such as a tribal leader
or feudal lord and then redistributed to members of their society.
Reciprocity: exchange of goods is based on reciprocal exchanges between social entities.
On a macro level this would include the production of goods to gift to other groups.
Householding: economies where production is centered on individual households. Family
units produce food, textile goods, and tools for their own use and consumption.These three
forms were not mutually exclusive, nor were they mutually exclusive of markets for the
exchange of goods. The main distinction is that these three forms of economic organization
were based around the social aspects of the society they operated in and were explicitly
tied to do those social relationships. Polanyi argued that these economic forms depended
on the social principles of centricity, symmetry, and autarky (self-sufficiency). Markets existed
as an auxiliary avenue for the exchange of goods that were otherwise not obtainable.
== Support == The sociologists Fred L. Block and Margaret
Somers argue that Karl Polanyi's analysis could help explain why the resurgence of free
market ideas have resulted in "such manifest failures as persistent unemployment, widening
inequality, and the severe financial crises that have stressed Western economies over
the past forty years." They suggest that "the ideology that free markets can replace government
is just as utopian and dangerous" as the idea that Communism will result in the withering
away of the state.In Towards an Anthropological Theory of Value: The False Coin of Our Own
Dreams, anthropologist David Graeber offers compliments to Polanyi's text and theories.
Graeber attacks formalists and substantivists alike, "those who start by looking at society
as a whole are left, like the Substantivists, trying to explain how people are motivated
to reproduce society; those who start by looking at individual desires, like the formalists,
unable to explain why people chose to maximize some things and not others (or otherwise to
account for questions of meaning)." While appreciative of Polanyi's attack on Formalism,
Graeber attempts to move beyond ethnography and towards understanding how individuals
find meaning in their actions, synthesizing insights of Marcel Mauss, Karl Marx, and others.
In parallel with Karl Polanyi's account of markets being made internal to society as
a result of state intervention, Graeber argues the transition to credit-based markets from
societies with separated "spheres of exchange" in gift giving was likely the accidental byproduct
of state or temple bureaucracy (temple in the case of Sumer). Graeber also notes that
the criminalization of debt supplemented the enclosure movements in the destruction of
English communities, since credit between community members had originally reinforced
communal ties prior to state intervention:
The criminalization of debt, then, was the criminalization of the very basis of human
society. It cannot be overemphasized that in a small community, everyone normally was
both lender and borrower. One can only imagine the tensions and temptations that must have
existed in a community—and communities, much though they are based on love, in fact,
because they are based on love, will always also be full of hatred, rivalry and passion—when
it became clear that with sufficiently clever scheming, manipulation, and perhaps a bit
of strategic bribery, they could arrange to have almost anyone they hated imprisoned or
even hanged.Economist Joseph Stiglitz favors Polanyi's account of market liberalization,
arguing that the failures of "Shock Therapy" in Russia and the failures of IMF reform packages
echo Polanyi's arguments. Stiglitz also summarizes the difficulties of "market liberalization"
in that it requires unrealistic "flexibility" amongst the poor.
== Contents == Part One The International System
Chapter 1. The Hundred Years' Peace Chapter 2. Conservative Twenties, Revolutionary
Thirties Part Two Rise and Fall of Market Economy
I. Satanic Mill Chapter 3. "Habitation versus Improvement"
Chapter 4. Societies and Economic Systems Chapter 5. Evolution of the Market Pattern
Chapter 6. The Self-regulating Market and the Fictitious Commodities: Labor, Land, and
Money Chapter 7. Speenhamland, 1795
Chapter 8. Antecedents and Consequences Chapter 9. Pauperism and Utopia
Chapter 10. Political Economy and the Discovery of Society
II. Self-Protection of Society Chapter 11. Man, Nature, and Productive Organization
Chapter 12. Birth of the Liberal Creed Chapter 13. Birth of the Liberal Creed (Continued):
Class Interest and Social Change Chapter 14. Market and Man
Chapter 15. Market and Nature Chapter 16. Market and Productive Organization
Chapter 17. Self-Regulation Impaired Chapter 18. Disruptive Strains
Part Three Transformation in Progress Chapter 19. Popular Government and Market
Economy Chapter 20. History in the Gear of Social
Change Chapter 21. Freedom in a Complex Society
== Editions == The book was originally published in the United
States in 1944 and then in England in 1945 as The Origins of Our Time. It was reissued
by Beacon Press as a paperback in 1957 and as a 2nd edition with a foreword by Nobel
Prize-winning economist Joseph Stiglitz in 2001.
Polanyi, K. (1944). The Great Transformation. Foreword by Robert M. MacIver. New York: Farrar
& Rinehart. Polanyi, K. (1957). The Great Transformation.
Foreword by Robert M. MacIver. Boston: Beacon Press. ISBN 9780807056790.
Polanyi, K. (2001). The Great Transformation: The Political and Economic Origins of Our
Time, 2nd ed. Foreword by Joseph E. Stiglitz; introduction by Fred Block. Boston: Beacon
Press. ISBN 9780807056431.
== See also == Capitalism
Capitalist mode of production Economic anthropology
Economic sociology Political economy
The formalist vs substantivist debate
== Notes ==
== References == BooksBlock, F., & Somers, M. R. (2014). The
Power of Market Fundamentalism: Karl Polanyi's Critique. Harvard University Press. ISBN 0674050711
Polanyi, K. (1977). The Livelihood of Man: Studies in Social Discontinuity. New York:
Academic Press David Graeber, Toward an Anthropological Theory
of Value; The False Coin of Our Own Dreams, Palgrave, New York, 2001
David Graeber, Debt: The First 5000 Years (Brooklyn, NY: Melville House Publishing,
2011. Pp. 534. ISBN 9781933633862 Hbk. £55/US $32)ArticlesBlock, F., & Polanyi, K. (2003).
Karl Polanyi and the Writing of "The Great Transformation". Theory and Society, 32, June,
3, 275-306. Clough, S. B., & Polanyi, K. (1944). Review
of The Great Transformation. The Journal of Modern History, 16, December, 4, 313-314.
Review of The Great Transformation from Economic History Services
Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi
Karl Polanyi's Battle with Economic History. Libertarianism.org
The free market is an impossible utopia (18 July 2014), The Washington Post
Something That Changed My Perspective: Karl Polanyi’s The Great Transformation (2 January
2015), Naked Capitalism
== External links == Excerpt from Chapter 4, Societies and Economic
Systems, of The Great Transformation The Karl Polanyi Archive – Concordia University,
Montreal Karl Polanyi, The Great Transformation (1944),
at Archive.org (another copy, another copy).