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Resources for study of Polanyi’s Great Transformation

from Asad Zaman

Summary: My 1000+ word summary of Polanyi’s classic: “The Great Transformation: The Political and Economic Origins of Our Times” has been wildly popular, remaining constantly among the top ten on the RWER Blog since it was was published nearly five years ago.  I have recently (25/12/26) revised and updated the post to clean up extraneous elements and clarify the substance in light of readers comments as well as my own improved understanding. Perhaps the most important element of this post is that it explains how living in a market society shapes our thoughts to conform with the commercialization it creates. Creating radical changes requires the first step of liberating our selves from these blinders, to be able to imagine radical alternatives.  I have also recorded a 28m video-talk on this topic, which has been added to the original post. This post provides links to additional material that I have written about Polanyi over the past five years.

Methodology: Moving forward from critique, Polanyi’s analysis is based on methodological principles radically different from those currently in use. Understanding and implementing these principles woujld allow us to create a new approach to economics and social sciences. My 20 page paper explaining the three fundamental principles used by Polanyi was published in the WEA Journal: Asad Zaman (2016) ‘The Methodology of Polanyi’s Great Transformation.’ Economic Thought, 5.1, pp. 44-63. A brief 1000 word explanation of this methodology is available in a WEA Pedagogy Blog post:    The Methodology of Polanyi’s Great Transformation. The post also provides a link to a 45m video lecture on this topic. (This lecture has been by far my most popular video-lecture, with more than 2000 views.) Polanyi’s analysis provides the basis for a radically different approach to economics, which considers politics, society, environment, and economics as inter-related subjects which cannot be understood in isolation. One of the deep insights of Polanyi is that economic theory itself is a product of a power struggle between different social classes and cannot be understood outside its historical context.

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  1. Rob Reno
    December 30, 2017 at 1:31 am

    I look forward to studying your wrirings Prof. Zaman. The first book I read on Islam was Smith’s Understanding Islam when around 17. Over the years I have spent many hours in study (my life long passion has been the study of religion). As I approach 60 it seems more than ever we need wisdom and knowledge together in our troubled times.

  2. December 30, 2017 at 3:27 am

    I really value Polanyi’s work, and your cogent summary. Many thanks!

    Putting my mind to it, I think Polanyi has only captured two-thirds of the story. Here’s my tentative version of what really happens:

    Historically, we have used three ways of distributing the necessities of life, reflecting the spectrum from trust to distrust: giving, trading and stealing. This gives us three basic economic systems:

    • The social economy, based on reciprocal giving
    • The market economy, based on monetary exchange
    • The war economy, based on intimidation, violence and war

    Among people who we trust and depend on, we practice reciprocal giving in a social economy. This builds the bonds of friendship and trust.

    Among strangers, who may become friends but who may equally become enemies, we prefer to trade in a market economy. This sustains a relationship, while hopefully preventing it from becoming violent. When a trade is felt to be generous, friendship and trust may grow. When it is felt to be unfair, resentment and anger and violence may follow.

    Among those who we knowingly distrust, and believe we can dominate, we prefer to steal, using bullying and violence in a war economy:

    This helps us to understand any economy, where all three methods of exchange may be present.

    Each approach has its own spectrum of difference:

    • Within a social economy, the giving can range from the absolute giving of mother to her child, to fair reciprocal giving among most members of the tribe, to the power giving that is inherent in a potlatch ceremony.
    • Within a market economy, trading may range from selfish or monopolistic trade (the selfish market), to fair trade in a well-regulated market (the social market), to price-controlled trade (the state market).
    • Within a war economy, stealing may range from casual cattle theft or the theft of office supplies, to corporate theft using violence and intimidation, to the outright theft of slaves, land and resources using warfare and violence.

    In today’s economy we practice the social economy within the family, the market economy almost everywhere, and the war economy for some critical resources such as oil and minerals that are obtained through violence and intimidation in countries where global corporations exercise undue influence and power.

    When Polanyi wrote about the take-over of the social economy by the market economy, he could have furthered his analysis by observing that even within the traditional social economy, people practiced the market economy with strangers and the war economy with enemies.

    Two things of relevance happened during the 18th and 19th centuries. First, the bonds of social life were weakened by innovations in transportation, causing us to meet many more strangers with whom we had little trust, making market relations preferable.

    And second, the dominating elites, who were used to getting their way by bullying, force, rent and taxation in a war economy, extended that assumption into the growing market economy.

    The market economy is not a “thing”; it exists along a spectrum, with what may be termed the selfish market at one end, based on assumptions of greed and self-interest (merging into attitudes of the war economy), the social market in the middle, based on fair regulation by countervailing forces of justice and fair play, and the state market at the other end, with price-controls by the government, as in Soviet Russia.

    I have come to the conclusion that the term “the free market” is not a thing, but a brand, a linguistic deception that serves as a useful smokescreen to disguise the selfishness of the neoliberal market, which seeks to commodify and profit from everything in the name of capital maximization.

    Guy Dauncey, http://www.thepracticalutopian.ca

    • Blissex
      December 31, 2017 at 12:37 pm

      «the giving can range from the absolute giving of mother to her child»

      Ahem, traditionally mothers have raised children as pension assets, ruthlessly, for example “aborting” most female children as they are less profitable then male ones. “Tiger moms” even today make very clear to their son that they were raised to be maximally profitable.
      If there are fewer “tiger moms” today, and in many countries there has been a large fall in childbearing, it is because women have found that working and accumulating financial assets is more profitable for them than bearing and raising sons.

      «When Polanyi wrote about the take-over of the social economy by the market economy, he could have furthered his analysis by observing that even within the traditional social economy, people practiced the market economy with strangers and the war economy with enemies»

      I think that he would have agreed with that, being an “institutionalist”: different institutional arrangements for different situations. His focus was however on the “great transformation” that was still happening, at different speeds in different parts of the world. To some extent his focus was not merely that there are different institutional arrangements, but that there was a transformation in progress where the relative weights were changing, and the political consequences in particular.

      «the term “the free market” is not a thing, but a brand, a linguistic deception that serves as a useful smokescreen to disguise the selfishness of the neoliberal market»

      I have a related point: that what even neoclassical Economics says is that all the benefits come from (infinitely) competitive markets, not “free” markets which in practice get usually dominated by rent extractors. But curiously the well paid heralds of big business interests never say “competitive markets”, but always “free [to be dominated by big business] markets”.

      «which seeks to commodify and profit from everything in the name of capital maximization»

      There was this german guy in London, Karl something, who said something similar :-).

  3. Blissex
    December 31, 2017 at 12:46 pm

    «a radically different approach to economics, which considers politics, society, environment, and economics as inter-related subjects which cannot be understood in isolation.»

    I suspect that Polanyi would confess that the institutionalist approach was not entirely discovered by himself :-).

    «One of the deep insights of Polanyi is that economic theory itself is a product of a power struggle between different social classes and cannot be understood outside its historical context.»

    Perhaps again Polanyi would confess that in his vast readings he drew inspiration from previous authors, some perhaps several centuries before him, in regarding social theories as institutional arrangements themselves :-).

    Overall Polanyi was one of the greats, but he was also very aware that his work rested on a mountain of previous and similar insights, and that his main contribution was to highlight and focus on the political shifts both promoting and resulting from the shift in relative importance of the transaction/market economy and the relationship/social economy. Both political economies, but of different political basis and consequences.

  4. December 31, 2017 at 5:19 pm

    Asad, your post as “revised and updated” – and also Guy’s searching response to it – deserve a lot more attention that they seem to be getting.

    Guy is of course right in that Polanyi doesn’t delve into personality differences, and right in that behavioural differences involve a combination of both personality development and education, i.e. understanding of theory. His conclusion illustrates your brilliantly put point 6 on [Machiavellian] deception in warfare. But this why we need to dig even deeper than Polanyi’s historical contexts of the beginnings of ideologies, using radical abduction to the beginning of time when there were no observers to muddy the choice of axioms and arguments, to retrace the evolution of what it has become possible to know given the methods possible then, via how our brain structures can learn to control actions and distinguish truths from falsehoods, to how Polanyi saw the inhumanity of a self-controlling market economy before others saw how information and control systems work. What is even more instructive is how control systems can fail to work, particularly when misunderstood.

    The key issue missing here but prominent in your longer paper, Asad, is the Malthusian view of capitalist economics as population control, offset on the one hand by more widespread education and on the other made more significant by medical advances. Again, the answer would be to hand as a simple application of PID control theory, should anyone be willing to consider it. Not that urban financiers, bureaucrats and political front-men would take that seriously: they can make more money by allowing the building of skyscrapers for billionaire foreigners to leave empty while those they have made homeless are left to die on the streets.

    • December 31, 2017 at 5:34 pm

      Ah, yes, well … Blissex!

    • Blissex
      January 2, 2018 at 11:55 am

      «the Malthusian view of capitalist economics as population control»

      As to that that german guy in London points out in the footnotes to chapter 25 that Malthus simply repeated what others had said before him:

      https://www.marxists.org/archive/marx/works/1867-c1/ch25.htm#n6
      https://www.marxists.org/archive/marx/works/1867-c1/ch25.htm#n17
      https://www.marxists.org/archive/marx/works/1867-c1/ch25.htm#n27

      «offset on the one hand by more widespread education and on the other made more significant by medical advances.»

      I reckon that the unmalthusian population explosion of the past 2 centuries was actually malthusian, in the sense that it was due almost entirely to fossil fuels: the coal and oil field are the most fertile land ever discovered, in the sense of calories per sq km and cost of cultivation. As to “education” there is a neoliberal/politically correct myth that it reduces women’s fertility, but it is actually pensions that do that.

  5. January 2, 2018 at 3:12 am

    Just for clarification, in response to Blissex, my brief and simplified expositions of Polanyi are meant for students of conventional economics (like myself) who receive little or no exposition to un-orthodox views. For them, views of Polanyi are indeed very radical. My posts are not meant as intellectual history, nor as an assessment of Polanyi’s contribution, relative to the pre-existing schools of institutional and Marxist economic thought.

    • robert locke
      January 2, 2018 at 8:51 am

      I’m glad to read your clarification, because, as an historian who has studied World Civilizations and taught courses on them, I never learned much of anything from Polanyi, but I can well imagine how reading him for students of conventional economics would be an eye-opener, since they are historically dumb.

      • January 2, 2018 at 9:44 am

        I’m surprised by this negativity from you, Bob. I find it good to find a different point of view refreshing my understanding of what I already know. Given a barrel of rotten apples it hardly seems important to know the rot started with just one of them, as in Polanyi’s version of the Robinson Crusoe story, but it matters a lot, if one is trying to salvage some decent fruit from the mess, that one is aware how rot spreads from individual apples, just as good fruit grows from good seed. We still need to salvage what we can while we are planting new seed, for it takes time to grow and mature.

        Happy New Year to you and all, anyway.

    • Blissex
      January 2, 2018 at 11:36 am

      «my brief and simplified expositions of Polanyi are meant for students of conventional economics (like myself) who receive little or no exposition to un-orthodox views. For them, views of Polanyi are indeed very radical.»

      In that they are very useful — one of the tragedies of “end of history” neoliberalism is that it has meant that departments of political economy with courses in history of economic thought and economic history have become departments of business economics without regard to historical developments in particular as to economic theories.

      I also like the market/social/war economy contrast in general, as it is quite useful.

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