Monday, October 19, 2015

Karl Polanyi: Capitalism as a Utopian Movement

Karl Polanyi, a native of Austria, wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US. He argued that capitalism was an ideological movement that ruthlessly imposed its will on Europe in the mid 19th century. On his view the reaction against capitalism in the late 19th century was a natural movement of "social protection" against the scouring tide of the supposed "self-regulating market." Today the paperback features a Foreword by the center-left economist Joseph E. Stiglitz who argues that:
His arguments -- and his concerns -- are consonant with the rioters and marchers who took to the streets in Seattle and Prague in 1999 and 2000 to oppose the international financial institutions.
So Polanyi stands in the great tradition inaugurated by Marx that capitalism and free markets are a murrain on a truly social society.

Polanyi begins with an appreciation of the Hundred Years Peace in the 19th century.
Nineteenth century civilization rested on four institutions. The first was the balance-of power system... The second was the international gold standard... The third was the self-regulating market which produced an unheard-of material welfare. The fourth was the liberal state.
The center of this was the "self-regulating market." The other institutions were really supporting players.
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 surrounds 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 endangered society in yet another way.  
 To Polanyi, the cataclysm of two world wars mark the end of "the idea of a self-regulating market system... it closes a distinct stage in the history of industrial civilization." But the fundamental fact of the Hundred Years Peace from 1815 to 1914 was an "acute peace interest." "The backwash of the French Revolution reinforced the rising tide of the Industrial Revolution in establishing peaceful business as a universal interest." Initially the peace interest was maintained by the old reactionaries like Metternich and his Holy Alliance. Later it was regulated by the Concert of Europe and that shadowy institution, "haute finance". Although the bankers then and now try to keep "in" with government and power, war disrupts their carefully laid plans, and so while bankers aren't exactly pacifists they have a solid interest in "peace, if it was possible to attain it without [excessive] sacrifice."

But then it all fell apart when Britain and France and Russia formed the Triple Alliance, and Europe was reduced to "two hostile power groupings" in the fateful years that led to World War I.

What was the "true nature of the highly artificial economic organization on which peace rested"? Stay tuned for the next exciting installment of Karl Polanyi's Great Transformation.

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