Home > Uncategorized > The enduring popularity of ‘The Great Transformation’ by Polanyi

The enduring popularity of ‘The Great Transformation’ by Polanyi


Source: International Labour Organization

The most popular post on this blog is a summary of ‘The Great Transformation‘ by Polanyi. Which is remarkable as it is an old book about even older events: the transformation off traditional economies with a low rate of investment and little wage labor into modern economies with a high rate of investment and high levels of wage labor (Polanyi does not stress investments too much but see, in about the same period, Kuznets (1955) and Rostow (1959)). This economic process went together with a cultural revolution like the commodification of labor and time. Fortunately, people are not puppets and all kind of institutions mitigating the alienating aspects of the modern economy evolved, like the International Labour Organization, which turns one hundred this year and which is the worlds leading authority on labour statistics. Or the eight-hour working day, which also turns about one hundred this year (differences between countries, though). But modern research has shown that these processes started much earlier than Polanyi indicated (Hejeebu and McCloskey (1999)) and Van Bavel (2017). On Voxeu a titbit about the fascinating history of the commodification and marketization of time can be found So, why is he still popular?

It’s the economy… The transformation is still going on. Wage-employment is still getting more important (as the International Labour Organization measures). And investment rates are still taking off.



I might however also use the word ‘summary’ a little more often in the title of my blogposts.

  1. Ken Zimmerman
    March 3, 2019 at 12:30 pm

    Matthew Watson, Christopher Holmes and Ben Clift, of the University of Warwick explain why The Great Transformation is a splendid alternative to the ideas of John Maynard Keynes, Karl Marx, or Friedrich Hayek. Which perpetuates its popularity. “The Great Transformation is a remarkable book on a number of levels. It’s a thrilling read. Karl Polanyi has an engaging, polemical style which draws you in and, over its relatively few pages, takes you on a journey through 400 years of economic history and 400 years of the economic ideas that surround that history. We’re now at a really important juncture. Broadly speaking we experienced 30 years of Keynesian economic ideas in the post-war period before we moved to a much more free market, Hayekian approach, which recent financial crises have shown to be flawed in a number of ways. Since 2008, there’s been a search for a new set of economic ideas by which we might understand the world and implement change to resolve problems of financial crisis and other economic problems such as inequality. The Great Transformation has an extraordinary diversity of style and the ability to draw so many different threads into one narrative. Rather than trying to present one, coherent set of ideas which can be applicable in any time or space, like Hayek did with The Road to Serfdom or indeed Karl Marx or John Maynard Keynes did in their own ways, Karl Polanyi instead chose to understand the economic problems of the period by looking back at the history of ideas that constituted them. He said that to understand pivotal historical events, including the breakup of the Gold Standard and the breakdown of international relations during the first half of the twentieth century, we have to consider the role of economic thought accumulated over centuries which influenced how those events took place and were understood. It’s having that broad sweep of history and that wide intellectual canvas that makes his work really unique.”

    • Robert Locke
      March 3, 2019 at 2:27 pm

      Ken, Polanyi is talking about history. I assure you historians in the vast historiographical literature that has been amassed to explain the modern world do not pay much attention to Polanyi. I find, as an historian, this romance with Polanyi just another example of how nonhistorians, e. g., economists, social scientists, handle history. When I was reading for my PhD, Lynn White Jr. told us that the great analytical book of modern Europe was Marc Bloch’s study of the landholding systems of Europe and their evolution. We could have heard more from him, had he not been murdered by the Nazis.

      • Robert Locke
        March 3, 2019 at 2:43 pm

        Marc Bloch was a French historian who cofounded the Annales School of French social history. He was captured and shot by the Gestapo in 1944 for his work with the French Resistance. He is the author of Méthodologie Historique, French Rural History: An Essay on Its Basic Characteristics, Feudal Society: Vol 1: The Growth of Ties of Dependence, and many other titles.

      • Ken Zimmerman
        March 4, 2019 at 12:33 am

        Robert, thank you for the great overview. The creation of Europe of the 20th century is not something I know a lot about. But I have read Bloch’s work. I agree, he is a great historian. And yes, damn Nazis.

        But I wonder what you think of Watson, Holmes, and Clift’s arguments for the continuing popularity of Polanyi among economists and others?

        On a somewhat related topic. Max Boot, a conservative historian and opinion writer for the Washington Post published a piece in the Post that’s creating a lot of push back and some anger from historians. Entitled “Americans’ ignorance of history is a national scandal,” found here, https://www.washingtonpost.com/opinions/americans-ignorance-of-history-is-a-national-scandal/2019/02/20/b8be683c-352d-11e9-854a-7a14d7fec96a_story.html?utm_term=.67ef2bc73dbf

        Spent some time with two friends yesterday with whom I attended graduate school. Both retired Professors of History. They split. One believes Boot makes valid points. The other calls Boot a kook. If you have the opportunity would you look and let me know what you think. I won’t tell you my reaction to Boot’s article so as not to prejudice your view.

      • Robert Locke
        March 3, 2019 at 3:47 pm

        Ken, here is what one reviewer wrote of Bloch’s book on rural society.

        “Bloch is sort of a historian hero, in a way. In the 1930s he became the best medievalist in France, and then in WWII he was executed by the Nazis for working in the French Resistance. Damn Nazis.
        Bloch is interested in grand structures, and long, long term change over time. What clues can we find in the landscape, in material culture, in French agricultural history, that can help us understand how France came to be the way it is today, and why differences arose between France and Germany and Britain, etc. Bloch uses linguistics- analyzing the names of places and whether they come from Frankish words, or Latin, or earlier languages- to try to piece together how the land was cleared and settled. He looks at the size and shape of parcels of land, and the way crops were rotated, and shows how for centuries France was a border area between two very different systems of agriculture. He uses logical reasoning too- to get at plausible explanations for all sorts of developments of centuries ago. For the most part the style is great- almost conversational. It plays like a good lecture, from the sort of professor who clearly loves his topic and wants you to understand why he finds it so fascinating.”

        Why would I choose Bloch over Polanyi, because it explains the political, social, and economic divergence of Europe in the 19th-20th centuries much better.

      • Robert Locke
        March 4, 2019 at 11:24 am

        Ken, most people do not know much history. But there is a difference between Europe and America, people respect historians; they are included on panels in public debate. Once I wrote to the editor of the Atlantic Monthly, sending along a paper on a topic that I wanted the journal to publish. His reply: journalist, i.e., himself, decided what enters the public domain, not university professors. And that was that.

    • Robert Locke
      March 4, 2019 at 11:07 am

      “Karl Polanyi instead chose to understand the economic problems of the period by looking back at the history of ideas that constituted them. He said that to understand pivotal historical events, … we have to consider the role of economic thought accumulated over centuries which influenced how those events took place and were understood. It’s having that broad sweep of history and that wide intellectual canvas that makes his work really unique.”

      In my response to this rhetoric, I pointed out that, to understand the “political, social, and economic divergence of Europe in the 19-21st centuries we would be better off studying Marc Bloch’s work on the evolution of land tenure systems, than Polanyi’s the Great Transformation. That we don’t is a result of Anglo-saxonian economists and social scientists ignorance of history; they make their own particular story the focus of history, when if we read Marc Bloch’s Les caracteres originaux de l’historire rurale francaise, we would realize it is not.the case.

      1, First Point, from Marc Bloch we learn to separate the French Revolution from the Industrial Revolution. That runs counter to all we learned about the land-management revolution, the enclosure moment, the Agricultural Revolution. Bloch tells us that the French revolution was not about depriving the French peasantry of their land; they already had it and kept it. But, as Arthur Young describes provincial France, on he eve of the French Revolution, these small peasant proprietors were sunk in poverty and agricultural backwardness.

      Well, if the French Revolution is not about modern industrialization, what was it about. It was what RR Palmer called a political and social revolution in the Age of the Democratic Revolutions. Brits and Americans, as well as Marxists, are always tying the French and Industrial Revolution together, which they should not; they make the democratic upheavals of the 18th century precursor to the great industrial transformations of the 19th. It took years for me to disentangle the two in my studies of 19th century French politics; (See my French Legitimists and the Politics of Moral Order in the Early Third Republic, Princeton, 1974, in which I do just that) This disentanglement is absolutely necessary if people want to understand how the most politically and socially radical country in Europe, France, remained industrially backward throughout the 19th century.

      Second Point. If we learn from Bloch and others (Alfred Cobban, for example, the English historian who wrote about the French Revolution, that it was a political-social not an economic event) we also learn from Marc Bloch why the great political struggle of the pre=modern industrial era, turned out differently in Central Europe than in Western. Bloch noted the dominance of the large land owners, east of the Elbe River, who in league with autocratic Prussia, destroyed democratic=respresentative government in Prussia, under Bismarck, and then in the newly United German Empire. Did this mean, that the consolidation of the feudalistic aristocratic, militaristic, bureaucratic control in the new Germany led to its economic backwardness.

      Obviously not, and it leads to the conclusion that those who actively opposed the French political-social revolution, did not oppose the commercial and industrial transformation of their states in the Second Industrial Revolution, as the rise of an economically and technological-science based Imperial Germany, testifies c. 1914. I’ve written a lot about this in my studies of systems of higher education.

      • Robert Locke
        March 4, 2019 at 6:23 pm

        Ken, about Cobban, with whom I spoke in London at Senate House in 1962, after finishing my own researches during two years in France, working in French private archives, the national archives, and the national library.

        Cobban believed that the Revolution did little to change French society, in direct opposition to the orthodox Marxist school, which saw the Revolution as the rise of the bourgeoisie and proletariat against the nobility and the transition from feudalism to capitalism.

        Cobban claimed that the quality of daily life after the Revolution remained basically unchanged, identifying that France was still a rural society with small farms. “Probably some 95 per cent of France’s 26 millions lived in isolated farms, hamlets, villages, and small country towns. Agriculture, little influenced by the new methods developed in eighteenth-century England, followed its routine of the Middle Ages. Industry was still largely domestic. In all these fundamental respects it matters little whether we are writing of 1789 or 1799.
        The French Industrial Revolution came later in the nineteenth century as most cities retained a majority of small workshops and artisans’ small enterprises (often employing around four people) rather than large-scale production facilities (factories).

      • March 4, 2019 at 8:45 pm

        While I agree with you France was different, wasn’t the French Revolution about accumulation of money leading to “Let them eat cake”? What I see different in France from Germany and Britain was that most of France only had agricultural resources, so its industrial development too was in the regions north and east of Paris where it had coal and iron. (With its size, though, it has long been a leader in development of railway transport).

        I’m struggling to see why you are down-playing Polanyi, Robert. He was simply following the development of capitalism in the context in which it began, though it is good to be reminded that the politics played out differently in Central Europe.

      • Robert Locke
        March 4, 2019 at 9:26 pm

        Dave, as a Catholic, I would think you would be more sympathetic to other views about capitalism. The Catholic entrepreneurs I studied did not look on society like the mill operators in Manchester or Oldham; ever hear of Frederic LePlay, of Lamenais, Benoist d’Azy and others who took a general interest in forms of capitalism of a socially responsible nature. Benoist d’Azy in the 1850s, worked out sickness and accident provision, old age retirement schemes for his workers and their families at the forges and foundry’s of Alais. I read all the correspondence between father and son that set them up.

      • March 4, 2019 at 9:50 pm

        Okay. Thanks. That’s the positive side of your story we needed to hear, along with the Owen story in Polanyi.

      • Robert Locke
        March 4, 2019 at 10:12 pm

        Dave, as I understand it, central to Polanyi is that factors of production, are sold on the market at market-determined prices instead of allocated according to tradition, redistribution, or reciprocity. This was the great transformation.

        In central Europe, I’ve learned that the locus of economics is not in markets but in the firm. I learned this when studying the development of business economics, the most studied subject in German higher education. Germans have always believed in protectionism, kartellization, the formatiion of trade associations to protect firm interests, and in government intervention to counter the ravages of markets. And so have other state-entities, including the US. That is how capitalism works.

      • Craig
        March 4, 2019 at 10:32 pm

        The obvious reason the French and any other revolution never ended tyranny is because it didn’t change the monetary paradigm which is the deepest and most insidious aspect of the problem we face. C’mon, you guys can see that, you’re not dumb. You’re all extremely smart, it’s just that your perspective is stuck in the weeds of details and in lower levels of mental integration that prevent you from seeing that the NECESSITY is a paradigm change. That’s the problem here. Nobody but me is addressing that necessity.

      • Robert Locke
        March 5, 2019 at 7:30 am

        Craig, you obviously do not know much about the French revolution, which scared the hell out of the privileged for over a century. It did end tyranny. In the Declaration of the Rights of Man and Citizen, in creating a representative democracy. On every French public building one reads “Liberty, Equality, Fraternity.” France’s problem is that its revolution was not part of an industrial revolution that generated the wealth necessary for the political and social equality to exist. That dilemma exists now, in the yellow veste’s still fighting for equality, but in an economy that is not productive enough to support it, because the French Revolution was not an economic one. I can explain all this and have. The French Revolution did change the monetary paradigm, that was what it was all about, it ended the tax-exemption status of the privileged orders. We need a French revolution in America.

      • Craig
        March 5, 2019 at 8:00 am

        I know plenty about the French Revolution, and much more importantly I also know that “Liberty, Equality, Fraternity” are all aspects of the natural philosophical concept of grace. As you yourself pointed out the “revolution was not part of an industrial revolution that generated the wealth necessary for the political and social equality to exist”. So it wasn’t actually a PATTERN/PARADIGM change.

        “The French Revolution did change the monetary paradigm, that was what it was all about, it ended the tax-exemption status of the privileged orders.”

        No it didn’t. It merely changed a structural component/abusive regulatory aspect of the economy. A paradigm change is an entire PATTERN change….like from individual income scarcity and systemic austerity to abundance of same….like Wisdomics-Gracenomics does.

      • Robert Locke
        March 5, 2019 at 7:23 pm

        Dave, you are right; the industrial revolution because of the mineral and coal deposits in Wallonia, developed as intensively in Belgium as in Britain, from where the French later recruited skilled workers as well as in from the U.K. The French have a great tradition in civil engineering, which is associated with the Ecole polytechnique, the Ecole centrale, the Ecole des Mines, and the Ecole des Ponts et Chaussees. They are always building, tearing up, and extending the country’s superstructure. But this elitest form of education did not serve France well in science-based manufacturing.

      • Robert Locke
        March 6, 2019 at 8:50 am

        “Dave, as I understand it, central to Polanyi is that factors of production, are sold on the market at market-determined prices instead of allocated according to tradition, redistribution, or reciprocity. This was the great transformation.”

        But the capitalism I studied didn’t have much to do with the competiveness of markets.

        I’m talking about a capitalism centered on the firm, not markets, that emerged in the late 19th century Imperial Germany

        German banks played central roles in financing German industry. Different banks formed cartels in different industries. Cartel contracts were accepted as legal and binding by German courts.

        The cartel movement took hold after 1873 in the economic depression that followed the postunification speculative bubble. It began in heavy industry and spread throughout other industries. By 1900 there were 275 cartels in operation; by 1908, over 500. By some estimates, different cartel arrangements may have numbered in the thousands at different times.
        The ultimate wealth of the empire proved immense. German aristocrats, landowners, bankers, and producers created what might be termed the first German economic miracle, the turn-of-the-century surge in German industry and commerce during which bankers, industrialists, mercantilists, the military, and the monarchy joined forces.

        Most American economists believed that markets, the invisible hand, assure economic efficiency, right up until Alfred Chandler argued that the visible hand of management hierarchies does.

        German path to modern economy depended on a cartelized economy guaranteeing efficiency within firms. That was a big and popular story, even among US economists, c. 1900.

        We need to learn something about this alternative capitalist industrialization, not just prattle on as if anglo-saxon economics is sufficient to deal with the rivalry of nations.

      • Ken Zimmerman
        March 6, 2019 at 12:05 pm

        Robert, “But the capitalism I studied didn’t have much to do with the competitiveness of markets.” Your comments underscore some major differences between Germany and the USA regarding industrialization and capitalism. But they are not the differences usually cited. Like Germany American capitalism didn’t have much to do with competitiveness, either. American firms formed cartels, like German ones. But the American firms only formed the cartels to win the competition and eliminate other firms from “the market.” And this is the reason the American national government passed laws to “bust” cartels. Cartels impeded competition. Americans have a strong belief in competition as the best means to achieve economic success, for both firms and consumers. So, cartels were pursued and busted where ever possible. That is, till Ronald Reagan became President. Then began the era of massive cartels with immense economic and political power. Some industries had been allowed to form cartels since the end of WWII. Such as oil, airplane manufacturers, arms manufacturers, etc. It was claimed these industries were so expensive to create and operate that competition simply was infeasible. But this didn’t allay the fear of most Americans of these cartels. So, the federal government pledged to maintain oversight of and regulate these cartels. And generally, the government did just that. But Reagan’s administration began the era of forgetting the government’s promise. The existing cartels were largely cut free of oversight and regulation. This inspired new cartels in banking, stock trading, financial services, pharmaceuticals, etc. Which also were lightly regulated or not regulated at all. Now Americans are attempting to once again get control of these cartels. With little success thus far. Congress in now holding hearings over these concerns regarding the pharmaceuticals, telecommunications, social media, and health care cartels. So far, we’ve seen some sparks of anger, lots of very pointed questions, and increasing public anger, but few suggestions for solutions that have wide support among “professional” politicians. The public, however, is fed up, ready to explode.

      • Robert Locke
        March 6, 2019 at 12:39 pm

        Ken, about Kartell’s. What you write is a typical American reaction to cartels, trusts, and monopolies. After WWII, we made every effort to impose this view on Germany, but what I found in Germany, studying the evolution of firms, is a much more positive appreciation of how cartels protect jobs and communities, the sustainability of employment, and ward off the detrimental effects of competitive environments. Creative-destruction might be popular with anglo-saxon economists, but the sustainability of firms is a much more popular elsewhere, and how it is brought about. That is why the continentals from the beginning of their fight with English ascendancy in the 18th and early 19th century, spent so much time thinking about the creation of a a mental capital that would permit their firms to adapt and cope with the technological and scientific demands of a modern economy. as those demands changed. Without this wherewithal, economics cannot begin to be a useful subject.

      • Ken Zimmerman
        March 7, 2019 at 9:17 am

        Robert, most Americans worry about cartels, monopolies, and trusts. In fact President Theodore Roosevelt earned the nick name “Trust Buster” for his turn of the century concentrated efforts to break trusts in steel, oil, etc. This dislike and distrust of trusts is the result of two trends in American history. First, the tradition of the conman or huckster. As a new and sometimes confused and unsettled nation, America was a good hunting ground for speculator and confidence criminals of all sorts. Many Americans still believe today that competition will force these “take your money” artists out of the wood work. Second, as a multicultural and multilingual society, Americans looks skeptically on anyone who owned or operated a business. After all the owner and/or operator might be of a different religion, from a different part of the world, or have unusual cultural notions. Rather than destabilizing the nation, competition brings stability and fairness, particularly in prices and access. For most of its history since the American Civil War private businesses and citizens in the USA have been suspicious of one another, if not frequently hostile toward one another. This distrust and animosity generally were not present when America was a nation of small businesses and farms. Bad feeling grew with industrialization and the creation of large (today super large) firms, including banks. The feeling also grew as firms, banks, etc. began to expand their political power and profits. I just helped to complete interviews with “typical” Americans today. The hatred for social media, communications, pharmaceutical, health care, etc. firms is surpassed only by the hatred for financial companies (including large banks).

        All of this can be understood in terms of the four stories that history teachers sometimes use to summarize the history of the USA. 1) triumphant individual – the individual who works hard, plays by the rules, and makes a successful life (see, Horatio Alger novels for examples); 2) benevolent community – the community where the members take care of one another (see, early Puritans in America “preached” the Christian obligation for charity and responsibility of people for one another); 3) the mob at the gate, outside forces threatening America (see, frontier Americans fighting Indians, the English invaders, invading Mexicans, Communists, Muslims); 4) rot at the top, malevolence of cultural and political elites who undermine and betray the common citizen and the USA (see, Willie Stark, All the King’s Men, the rich who persecute and take advantage of the poor).

  2. Craig
    March 4, 2019 at 2:44 am

    Lots of erudite scholarship, but I’m sorry, it eventually boils down to a bunch of mental masturbation by comparison to discovering the single concept that defines the new paradigm and how it integrates into the body of knowledge/area of human endeavor so as to create an entirely new pattern/culture.

    Once you see it you can’t deny it. It resolves too many things. It fits too many things. It has “knock on” beneficial effects in other areas, especially if the new paradigm is in an area that constantly and increasingly effects everyone negatively and/or the old/current paradigm has been in effect for a long time…like economics and the money system….where the paradigm of Debt Only has been in effect for the entire history of human civilization.

    Just sayin’.

  3. March 5, 2019 at 12:15 pm

    Let me skip over Craig’s interruption and go back to what Robert was saying to me on
    March 4, 2019 at 10:12 pm.

    “Dave, as I understand it, central to Polanyi is that factors of production, are sold on the market at market-determined prices instead of allocated according to tradition, redistribution, or reciprocity. This was the great transformation”.

    Robert, what you are seeing is the outcome. What I see is Polanyi’s interest in the reasons for it, which I picked up as being the unexpectedly perverse outcomes of Speenhamland and the Malthusian interpretation of Townsend’s story of the Robinson Crusoe island.

    In a curious way I found him like Keynes, telling his own story but then drawing attention to the more practical significance of people like Gesell and Douglas. Polanyi likewise ends with Notes on Sources, where in view of the present discussion numbers 10 and 11 are worthy of close scrutiny.

    • Robert Locke
      March 5, 2019 at 1:42 pm

      “Robert, what you are seeing is the outcome. What I see is Polanyi’s interest in the reasons for it, which I picked up as being the unexpectedly perverse outcomes of Speenhamland and the Malthusian interpretation of Townsend’s story of the Robinson Crusoe island.”

      Nice local history, Dave, but it is a big world, which cannot be contained in a British universe. I don’t know if you are acquainted with Arno Daastol’s 2012 dissertation on Friedrich List, which contains the thought history, in very great detail, of Central European economists. Neoclassical economists claim they lost out because of the superiority of market-oriented economics, which was not the case. I’m acquainted with them, through my study of German history, just as I am acquainted with the academic traditions that spawned the technical Hochschulen in Germany and the Handelhochulen, which provided the mental capital essentially to the development of the science=technological induced industries of the Second Industrial Revolution. The Americans saved neo-classical economics after WWII; and imposed it in university departments of economics and business schools. The outcome I see hasn’t much to do with Speenhamland and the Malthusian interepretations of Townsend story of the Robinson Crusoe island. It is, as List says, about great power politics, and the Americans winning. Good that the Americans won; bad that they have turned that victory, in the form of investor finance capital, into the graveyard of democracy.

    • Craig
      March 5, 2019 at 5:00 pm

      You can skip over the necessity of the ultimate tipping point known as paradigm change, but you can never run away from it unless you’re unconscious of its necessity or do not heed its imminent signatures like intellectual rigidity and unwillingness to consider integrating the particles of truth in opposite perspectives. Another of its imminent signatures is social and political unrest and eventually chaos. The history of human civilization is replete with examples of economic reforms that momentarily palliated the necessity of monetary paradigm change…and failures to do so which resulted in the imminent signatures above. After 5000 years of failures and palliatives isn’t it time we focused on the actual solution?

      The reason why Polanyi is interesting is because his is a philosophical view which is a mental integration above mere theoretics and/or looking at the problem from one or another of the compartmentalized and fragmented scientific viewpoints. Science like food is endlessly intellectually interesting, delicious, necessary, on an ascending scale is epistemologically below philosophy and resides entirely within the integrative digestive tract of wisdom.

      And paradigms and paradigm perception are a mental integration above philosophy.

      • Robert Locke
        March 5, 2019 at 7:05 pm

        Stay with Polanyi, and leave me, a poor mortal, in the happiness of a fulfilled life, alone.

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