Tuesday, October 27, 2015

Karl Polanyi: The Market Economy Means Annihilation of Land and People

The Austrian 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.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

In "The Self Regulating Market and Its Fictions" Polanyi talks about the commodification of labor, land, and money as "fictions."

In "Speenhamland and the Poor Law" Polanyi looked at how that the Speenhamland welfare law lowered wages in Napoleonic era England.

Then, with Speenhamland having demoralized the workers of England, along came the full-on commodification of labor in the national labor market, in "The Social Crisis of Poverty and Commodity Labor."

We now turn to Polanyi's "Part II. Self-Protection of Society," in which he develops the idea that the anti-capitalist politics and legislation of the later 19th century was "more than the usual defensive behavior of a society faced with change."

The growth of the market economy meant that, by 1914, "a new way of life" had spread across the world, like any religion. But this was a way of life solely "on a purely material level." It was a "dislocation which attacked the very fabric of society[.]"
Robert Owen's was a true insight: market economy if left to evolve according to its own laws would create great and permanent evils.
"Production is interaction of man and nature" and the market economy requires that labor and land be commodified, for sale, with labor for sale at a "price called wages" and land "at a price called rent".
Capital invested in various combinations of labor and land could thus flow from one branch of production to another, as was required for an automatic levelling of earnings in the various branches.

But while production could theoretically be organized in this way, the commodity fiction disregarded the fact that leaving the fate of soil and people to the market would be tantamount to annihilating them. 
For Polanyi, the self-protective politics of interventionism arose to stop this annihilation. And, of course, an enterprise could be annihilated not just by a "fall in costs" elsewhere in the economy but by "monetary" factors.

Thus factory legislation was "required to protect industrial man" from the "commodity fiction [of] labor power", "land laws and agrarian tariffs" were needed to protect land from the commodity fiction of land rent, and "central banking and the management of the monetary system" were needed to protect from the "commodity fiction as applied to money."

So we have a "double movement" that had a class basis. The trading classes believed in economic liberalism and a "self-regulating market" and free trade. The "working and the landed classes" believed in "protective legislation, restrictive associations... and intervention" to push back against the market. But the trading classes could not see the damage they were causing, in "exploitation... of the worker, the destruction of family life," etc., that "did not affect profits."

It all ended up with the various interests using political and economic means as weapons in their sectional struggles, and that led, after World War I, to the fascist crisis that sent Karl Polanyi into exile.

Obviously, the driving force behind the push for the market economy was "the liberal creed" and Polanyi devotes the next two chapters to this topic.

1 comment:

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