Monday, November 2, 2015

Karl Polanyi: A World Without Markets in Labor, Land, or Money

Karl Polanyi 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. It is a ringing critique of the market economy.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement, followed by "Great Depression Failure of the English System" and "History of Exchange Prior to the Modern Market" and "The Self Regulating Market and Its Fictions" and "Speenhamland and the Poor Law" and "The Social Crisis of Poverty and Commodity Labor" and "The Market Economy Means Annihilation of Land and People."

It all comes down the the utopian economic liberal creed, and so Polanyi takes a look it in "The Special Pleadings of the Laissez-faire Creed."

The market destroys the traditional relationships, so the workers and the landowners  demanding protection  as we discuss in "Land and Labor and Resistance to the Market."

In "The Contradictions of Market vs. Self Protection" argues that the contradiction between the attempt to maintain markets in labor, land, and money in the 1920s to the crash of 1929. And the result was fascism, because people are nations before they are classes.

In Part III: Transformation and Progress, Karl Polanyi begins by reviewing the catastrophe at the end of the 1920s when, for him, the basic contradiction between the utopian economic liberal ideology and the self-protection movement ended in economic and political meltdown.

To Polanyi the events of the 1920s echo the events of early capitalism. Just as in the abolition of Speenhamland and the separation of economy and politics, in the modern crisis of the 1920s the reigning ideology, formalized in Montesquieu's separation of powers, ordered the separation of the people from the power over their own economic life. Nominally, the commodification of labor, land, and money removed politics from interference in economic questions. In the 1920s:
Economic liberalism made a supreme bid to restore the self-regulations of the system by eliminating interventionist policies which obstructed the freedom of markets for land, labor, and money.
What economic liberals insisted upon in the 1920s was deflation, and that policy created an unbearable strain that broke the self-regulating economy. And this weakened "the democratic forces which might otherwise have averted the fascist catastrophe."

To the workers, it seemed natural that the markets should be subordinated to democratic society. But the accompanying specter of socialism undermines market confidence. So when markets collapsed and propertied people feared the seizure of their property,
Fear would grip the people, and leadership would be thrust upon those who offered an easy way out at whatever ultimate price. The time was ripe for the fascist solution.
Fascism provided for a forcible reform of the failed market economy "at the price of the extirpation of all democratic institutions."

For Germany, as a victim of the victorious powers in World War I, fascism was a useful tool. It enabled her to cut loose from the economic liberal system to "lessen the hold of the outer world upon her" and break the rules of the international order on her bid for world domination.

For Russia, now the Soviet Union, the deflation of the 1920s was ruinous to her export trade in "grain, timber, furs, and some other organic materials." This is what forced the Soviets into collectivization of agriculture.

The verdict on the meltdown of 1929-33 is this.
[T]he conflict between the market and the elementary requirements of an organized social life provided the century with its dynamics and produced the typical strains and stresses which ultimately destroyed that society.
In the future, "the market will no longer be self-regulating, even in principle, because it will not comprise labor, land, and money." Not just conditions of work but the "basic wage" itself will be "determined outside the market". Land too, including "the homestead, the cooperative, the factory" and so on "are removed from the jurisdiction of the market." "The removal of the control of money from the market is being accomplished in all countries in our day." Really, with the destruction of the "commodity fiction" we are restoring "human reality."

OK, so if labor and land and money are removed from the market, what will replace it? After a few pages about the importance of freedom and "the right to nonconformity as the hallmark of a free society" we come down to Polanyi's solution to the failure of the market economy: Planning.

Oh yeah. "Planning and control are being attacked as a denial of freedom... Yet the victory of fascism was made practically unavoidable by the liberals' obstruction of any reform involving planning, regulation, or control." But the economic liberal position is a fantasy, the idea that if you are "paying your way" and "in nobody's debt" you were "unentangled in the evil of power and economic value."
But power and economic value are a paradigm of social reality... The function of power is to ensure that measure of conformity which is necessary for the survival of the group... Economic value ensures the usefulness of the goods produced... Any opinion or desire will make us participants in the creation of power and in the constituting of economic value. No freedom to do otherwise is conceivable.
 The root of the problem is the excessive individualism inspired by Christianity.
There are three constitutive facts in the consciousness of Western man: knowledge of death, knowledge of freedom, knowledge of society.
Knowledge of death comes from the Old Testament; knowledge of freedom from the "discovery of the uniqueness of the person in the teachings of Jesus[.]" Knowledge of society comes "through living in industrial society." On this view Polanyi concludes the following:
The fascist answer to the recognition of the reality of society is the rejection of the postulate of freedom. The Christian discovery of the uniqueness of the individual and of the oneness of mankind is negated by fascism.
The way of of the fascist ditch is to recognize, as Robert Owen did, that "the Gospels ignored the reality of society." Christianity enables a radical individualism that cannot work in a complex industrial society.

Thus "power and planning" are needed to steer between the fascist glorification of power and the fantasy that society can operate without it. But there is good news. If man resigns himself to the reality of society "he need not fear that either power or planning will turn against him and destroy the freedom he is building by their instrumentality."

Nobody dares to advocate for "planning" today. Since World War II, when Polanyi was writing, we have seen where planning leads, both in the failures of European social democratic parties and the miserable train-wreck of the Soviet Empire and Maoist China. The problem is the old one: Quis custodiet ipsos custodes, or who will plan the planners?

No doubt the "self-regulating economy" fails to self-regulate; it is human after all. But the market learns from its mistake. The trouble with planners and politicians in general is that, in the words of Kevin D. Williamson, they fail to learn.

We will critique Karl Polanyi's "story so far" of the rise of the West and his proposed solution in the final exciting installment of this series.

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