Righting an upside-down world

Karl Polyani:

A Life on the Left

In his 1944 magnum opus The Great Transformation, Karl Polanyi demonstrated that markets have never been—nor could they ever be—self-regulating. Furthermore, he argued, even attempting to create an autonomous sphere for markets to operate apart from society had wrought havoc on communities during the late nineteenth and early twentieth centuries. Forcing communities to prostrate themselves to distant market maxims left individuals dislocated, atomized, powerless, and deprived of community-based safety nets during hard times. All this resulted in a political backlash that swept fascists and socialists into power during the interwar period of the 1930s. 

Today, as neoliberalism continues apace in privatizing profit and socializing risk, people around the world are again abandoning centrist positions and seeking protection in fascism and socialism. To understand this trend, many students are revisiting the political economy of the Hungarian Christian-Socialist Karl Polanyi. It is amid this renewed interest that Gareth Dale has penned Karl Polanyi: A Life on the Left, an intellectual biography that guides readers through the experiences and influences that informed Polanyi’s research. Throughout, Dale explores the relevance of Polanyi’s contributions while also cautioning against treating his work as a panacea for contemporary problems.

Born into a wealthy family in fin de siècle Budapest, young Polanyi studied in the finest schools, gamboled in the poshest neighborhoods, and socialized in the cosmopolitan world of his parents. His father was a businessman with an attachment to Western liberalism and English literature. His mother was a feminist activist whose radical politics were shaped by her reading of Russian literature and philosophy. By his teenage years, Polanyi had absorbed the eclectic intellectual and political traditions of his parents, perhaps auguring the unorthodox approach he would take to political economy.

During World War I, Polanyi volunteered as a cavalry officer in the Austro­Hungarian army. He quickly became disillusioned by the horrors of war, often marveling at the creative energy devoted to developing destructive technologies. Just as the war induced in him a sense of meaninglessness, Polanyi, sick and bedridden in a military hospital, began a deep reading of the New Testament. He discovered in Christianity a guide for living a meaningful life by constructing, as Dale writes, “an ethical community” and fostering a belief that there exists something greater than “personal self-interest.” For Polanyi, these ideas served as prerequisites for—rather than constraints on—radical political projects. 

After the war, Polanyi served as a functionary in the coalition government of Mihály Károlyi. As Hungary’s short-lived experiment with social democracy collapsed in 1919, giving way to the Hungarian Soviet Republic, Polanyi escaped to Vienna, Austria, where he began nearly two decades of vagabonding. Polanyi’s immersion in the socialist milieu of “Red Vienna” proved personally and politically transformative.  He met and married a fellow Hungarian exile, Llona Duczynska, whose communist activism energized his staid, cerebral disposition. It was also in Vienna that his lifelong intellectual project began to crystalize as he isolated social disintegration—spurred by market society—as a danger without precedent in human history.

Unique among socialists in the 1920s and ’30s, Polanyi believed both communism and capitalism overlooked important staples of humanity: Capitalism weakened social life and community power by ignoring human sociality and by reducing all decisions to individual economic choices; Soviet-style communism, on the other hand, imposed top-down planning that often reduced individuals to numbers. For Polanyi, the goal of social reunification required a philosophy that recognized both individuality and sociality, a philosophy that existed, he believed, not in Marxism but in the New Testament teachings of Jesus. 

Through his early years in Vienna, Polanyi had explicitly rejected Marxism as a vehicle for accomplishing social reunification. He saw Marxist determinism as limiting individual agency and he feared it would engender collective nihilism by rendering ethical decisions—and even life itself—meaningless. But Polanyi’s interpretation of Marx did an about-face after he read Marx’s earlier writings on alienation and commodity fetishism. In these writings, Polanyi discovered that Marx was deeply concerned about the impact of market society on individuals, particularly because industrial capitalism had deskilled labor and killed the pride once taken in work while also creating a society in which human relationships were mediated primarily by commodity exchange.

Although he began describing his position as a Christian approach to Marxian analysis, which he believed was unconsciously infused with Western Christian values, Polanyi never became a strict Marxist.

Polanyi was forced to flee again in the 1930s as fascists rendered Vienna unlivable for prominent socialists. After a term of exile in London, Polanyi accepted a teaching position in the United States, where he completed his most vaunted work, The Great Transformation: The Political and Economic Origins of Our Time. A fiercely critical book, The Great Transformation borrows from anthropology to strike at the core of classical economic theory. Rather than representing a mythical pre-state law of economics, Polanyi reveals that so-called free markets are utopian, unattainable, and undesirable. In reality, humans are social creatures—not the isolated individuals of economic theory—and their markets are social constructs that are brought into existence by social relations and mediated not by natural law but by community values and rules. Markets, in short, are necessarily defined by the rules humans ascribe to them, and they cannot exist free from politics or culture.

During the nineteenth century, however, governments tried to legislate free or self-regulating markets into existence. This process required state support in preventing communities—the traditional locus of market regulation—from shaping the rules governing their markets. As Polanyi wrote, the trend was from markets “embedded” in communities and subordinated to social institutions to markets “disembedded” from communities. Within disembedding economies, communities and social institutions were forced to respond to the whims of impersonal markets. And removing markets from local political constraints resulted in social disintegration by disempowering communities and rendering individuals isolated and helpless against distant economic forces. Everything was subordinated to the cold calculus of market logic.

Three trends expedited the disembedding process and served as prerequisites for the self-regulating economy. First, new transportation technologies and government support for national roads, canals, and railroads combined to unite previously disconnected markets. The railroad was, as Marx wrote in Grundrisse, an “annihilation of space by time” that helped large and impersonal markets overpower intimate community markets, thus forcing production to respond not to local needs but to market maxims. Second, the commodification of labor devastated workers, forcing them by threat of starvation to sell their labor. Families, in turn, weakened as members left home in search of work in cities. Third, as governments embraced the gold standard, they inadvertently hamstrung themselves from responding to future economic crises. Alongside developments in transportation technologies and the creation of laws favorable to big businesses, it was the commodification of land, labor, and money that largely subordinated community to markets and pushed nations as close as possible to disembedded, free-market economies.

This near golden age of utopian self-regulating markets could not endure. As urban workers faced privation in a world without community support systems, the state had to intervene to fill the void left by older voluntary associations. This is what Polanyi called the double-movement. Governments simultaneously advocated self-regulating markets and began mitigating their socially destructive effects, as evidenced by the growth of safety net programs and the abandonment of the gold standard. The tension created by economic instability led, in Polanyi’s theory, to fascist and socialist countermovements geared toward protecting people from disembedding markets. Under fascism, the tension would be reconciled by subordinating democracy to totalitarian nationalism. Socialists, however, recognized that capitalism and democracy had become incompatible and sought to alleviate the tension by subordinating economics to democracy. 

In the years after writing The Great Transformation, as Dale illustrates, Polanyi used his position at Columbia University to further his research in economic anthropology. Although critics viewed it as a retreat from politics, Polanyi understood the study of “pre-modern” economies as the most radical component of his project because it undermined the premises of economics. By studying other economies, Polanyi could show that economic theory, which posits that humans are by nature self-interested and endlessly desirous of material gain, is deeply flawed.  In fact, people in capitalist societies are likely driven less by an innate desire to accumulate ad infinitum than by the social status their culture attaches to amassing fortunes. If, for example, Donald Trump had been raised in a gift economy—in which distribution occurs through gifting and reciprocity, and status and power are ascribed to those who give the most—he would almost certainly rush to give away his fortune. The self-interested and acquisitive individual, who economists believe represents human nature, turns out to be merely a mascot for our economic culture.

Certainly, Polanyi’s research in comparative economics demonstrated that market society—far from the norm—is an aberration in human history. Further, it underscored the fact that contemporary economic theory, riddled as it is with false assumptions, cannot even make sense of most human economies. Yet, as Gareth Dale suggests, Polanyi sometimes went too far in rejecting the existence of market price-setting mechanisms in earlier historical eras, perhaps developing blinders that prevented him from acknowledging outliers to his broadly correct narrative. Nevertheless, Polanyi’s comparative economics program inspired a generation of students at Columbia, including Immanuel Wallerstein and Marshall Sahlins, who have since built upon his legacy. Unfortunately, though anthropologists and sociologists laud his realignment of economics and human history, Polanyi’s work remains largely unknown among academic economists.

Karl Polanyi: A Life on the Left skillfully explores the dialectical relationship between Polanyi’s personal and intellectual life, as well as the impact of Polanyi’s work in academia and its continuing relevance for those seeking reformation in economic theory. However, Polanyi’s work—despite its obvious pertinence in our contemporary conditions—was not written in the era of financial- or techno-capitalism and cannot offer precise policy prescriptions for today’s problems.

Still, revisiting Polanyi’s work is imperative at this historical juncture: First, Polanyi’s interdisciplinary approach to economics is a necessary first step in correcting foundational flaws in economic theory and toward building an intellectually honest discipline—one grounded in human history—from the shards of a pseudoscience that gives cover to the designs of power under abstruse jargon and lazy theory; second, as traditional political coalitions fracture, Polanyi’s Christian-Socialism inspires hope that Christians and socialists can find common ground in the fight against extremist market ideology. Polanyi’s unstinting analysis of how market society disempowers communities—and, by extension, families and churches—provides a framework for presenting socialist critiques to Christians. Gareth Dale’s book is an excellent starting point for reflection on Karl Polanyi’s contributions and, perhaps unwittingly, for imagining a reinvigorated Christian-Socialism.

Issue #96

Spring 2015

Race, surveillance, and empire

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