Thursday, October 22, 2015

Karl Polanyi: The Self-Regulating Market and Its Fictions

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.

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.

For Polanyi, a market system is ruled by three "fictitious" commodities, labor, land, and money. And above all prices. The supposed self-regulation depends upon prices. It assumes that supply will equal demand at the market price; it assumes the presence of money; it assumes that production and distribution will be controlled by prices. In other words "everything is for sale on the market" and "all incomes derive from such sales."

If everything is bought and sold at a price then everything, including labor, and, and money, are treated as commodities, completely different from the pre-industrial era when they were not commodities but rather "part of the social organization itself," In the feudal order, land was a military, political thing, removed from buying and selling. So also was labor in the guild system run according to custom and rule of the town. Things were no different in the mercantilist era: all interests, whether crown or town or noble, oppposed "commercializing labor and land". Then came the birth of the self-regulating market and a complete upset of old relationships, in particular the "separation of society into an economic and a political sphere." This was new.

The separation of economy and politics means a subordination of society to the economy, for labor and land are human beings. Now they were to be subordinated to the market system as commodities. But labor is not a commodity; it is an "activity that goes with life itself". Land is just "another name for nature". Money comes into being through "banking or state finance." These commodities are "entirely fictitious."

And yet it is on this fiction that the entire market economy is based, a "postulate that cannot be upheld." It would mean the "demolition of society." You cannot just shove around humans as commodity "labor power". Nature as commodity would be destroyed, human settlements defiled and rivers polluted. Shortages and surfeits of money are just as band as "floods and droughts." Society must be protected against this "satanic mill."

Why then did this inhuman system and its reduction of labor, land, and money to fictitious commodities arise? It was the complications introduced into the economy by the factory system. If the factory system was to work, everything "had to be on sale" and thus society had to be subordinated to the market.

It was natural for the fictitious commodities to rise up and object to their commoditization.
Social history in the nineteenth century was thus the result of a double movement: the extension of the market in respect to genuine commodities was accompanied by its restriction in respect to fictitious ones... Society protected itself against the perils inherent in a self-regulating market system[.]
Next up is the history of society's great effort to resist its commodification: the English Speenhamland Law.

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