Karl Polanyi would be astonished and flattered to find himself cited, in The Economist, no less, as the guru of the left-Labour tradition of which Jeremy Corbyn and John McDonnell are today the leading lights. He was a follower—even from faraway Hungary and Austria—of Britain’s Labour Party. A lifelong anglophile, he swallowed the self-serving anglo-liberal lore that holds traditions of religious tolerance, democracy, humanitarianism, and cosmopolitan peace and progress to be, in his term, “Anglo-Saxon.” And when in 1933 he arrived, a Viennese exile, in Britain, he entered directly into the circles of the Labour luminaries of the age: Douglas Cole, Richard Tawney and Harold Laski. Nowadays Polanyi’s name outshines theirs.
Why is this? What accounts for the inversion of fortunes? One reason is that Tawney and Cole were ‘party men.’ Their writings and activity were keyed to the organisation’s needs. Polanyi’s relationship to social democracy was quite different: more detached and conditional. It is not simply that he was perennially troubled by the tension between liberalism and socialism that lies at the heart of social democracy, or that he would occasionally throw barbs into its mainstream, or that he veered between its syndicalist and Fabian wings. In all this he barely differed from Tawney or Cole. That he was more willing than they to lend support to rival political projects—bourgeois radicalism, anarchism, and Stalinism—may be a contributing factor, too. It certainly helps to explain why his work speaks to a variety of audiences, including radical socialists and Greens, as well as social democrats.
That Polanyi’s name cannot be pinned firmly to a particular tradition may add to his popular appeal in an age that views party allegiance with a raised eyebrow. Unlike Tawney and Cole, he was temperamentally disinclined to launch into organised political projects. The underlying sentiment is expressed eloquently, if allusively, in an essay on Hamlet, in which Polanyi empathises with the hero’s refusal to “set the world right.” Hamlet’s equivocation “springs from his dread of becoming part of a world he now detests more bitterly than ever.” In the end, is it nobler to take up arms against the corrupt King and in so doing become corrupted, or to futilely suffer the slings and arrows?
There is, too, a diversity in Polanyi’s intellectual formation that one does not quite find in Cole or Tawney. Like them, he was shaped by nineteenth century liberalism, a current that was experiencing creative turmoil as it reckoned with the callousness of classical political economy, the suffering of the impoverished classes, and the terrors of war. But the influences on the young Polanyi were uniquely rich. There was his mother’s Russophilia (the fervour of the populist and student movements), his father’s Anglophilia (the philosophy of J.S. Mill, Fabianism, and Christian and guild socialism), Budapest’s fin-de-siècle counterculture (with its syndicalist, idealist and bourgeois-radical threads), Austrian philosophy and economics (Ernst Mach’s positivism, Austro-Marxism, and marginalist economics), as well as German social thought, notably the sociology of Marx, Tönnies and Eduard Bernstein, and the Historical School of political economy (with its insistence that capitalist modernity depends on social and cultural conditions that it does not itself reproduce—a postulate that Polanyi made his own).
With these ingredients, as they were baked in the ovens of war, revolution, fascism, and the capitalist collapse of the 1930s, Polanyi worked up the theses that were to make his name. In The Great Transformation he proposed that the economic-liberal policy regime of his era—the godmother of today’s neoliberalism—was a crucial determinant of the interwar crisis, including both world wars, the Great Depression, and fascism. These were not discrete phenomena that just happened to coincide. They were symptoms of a deeper interconnected social emergency, a crisis of liberal civilisation. For what was fascism if not a furious final throw of the dice by capitalist elites in face of working-class revolt and a succession of crises that culminated in the Great Depression? And what was the Great Depression if not the outcome of a series of ‘disruptive strains’—Polanyi’s term for the tensions and imbalances that had arisen as social fall-out from the operation of the gold standard? And what was the gold standard but the worldwide institutional embodiment of free-market economics. And where did free-market economics come from? From the pens of Robert Malthus and David Ricardo. Hence Polanyi’s celebrated dictum: “In order to comprehend German fascism, we must revert to Ricardian England.”
Ricardo was central to Polanyi’s argument in that he unambiguously identified the core agenda of economic liberalism as the commodity treatment of land, labour, and money. These, the ‘factors of production’ in classical economics, must all be highly responsive to the forces of supply and demand if a liberal market economy is to function. Ricardo put the point bluntly, when writing of the economic role of government, in his rhetorical questioning as to why it should “have the power to fix the price of labour, more than the price of bread, meat, or beer?” Against this, Polanyi argued that the commodification of labour, and that of land and money, were based on a ‘fiction,’ in that they are not produced for sale. “Land has not been produced at all, and as for men, well”—he remarked in one of his drier moments—“they are produced for a variety of motives.”
What of money? As Kurtuluş Gemici explains, it is for Polanyi fictitious in that money is in essence a symbolic token and means of payment, its availability always determined by states. And yet it is treated in liberal economic theory as if simply a commodity, available according to the ‘laws’ of supply and demand. Once again, Ricardo is the bête noire. For him, gold is a produced commodity and therefore must, like any other, be subject to the vagaries of market forces. He “indoctrinated” nineteenth-century Britain, Polanyi alleged, with the conviction that money was essentially “a medium of exchange, that bank notes were a mere matter of convenience, their utility consisting in their being easier to handle than gold, but that their value derived from the certainty that their possession provided us with the means of possessing ourselves at any time of the commodity itself, gold.” From this critique, Polanyi reasoned that where money is identified with a commodity, and especially where that belief is institutionalised at the global level (with gold as the basis of the international monetary system) the consequence is mayhem, as price levels fluctuate with capricious volatility. The global liberal order, at least in his lifetime, was propagating not doux commerce but economic and geopolitical instability.
In destabilising society, the commodification of labour, land and money elicited a reaction, or ‘countermovement.’ Groups affected by the ripping of the social fabric fought back. They pressed for state intervention, in the form of factory laws, social legislation, tariffs, and central banking, through which the market’s destructive effects on people, nature and money could be checked. The countermovement’s signal achievement was to empower the state in its roles as regulator of the economy and guarantor of basic social welfare. It also lent itself to nationalism. Together with a number of British Marxists of his era, and pre-empting Tom Nairn, Polanyi suggested that nationalism thrives in reaction against the socially anarchic consequences of free-market economics.
It is assumed by some that Polanyi’s argument stops here, with ‘society,’ in revolt against marketisation, bringing forth the welfare state and national protectionism. But there is a further twist. State intervention and market expansion in the early twentieth century, Polanyi proposed, could no longer coexist harmoniously. This was for several reasons. One was that government interference with the price mechanism causes “impaired self-regulation” of the market system, resulting in lower growth and deeper crises. (Here, he subscribes to the pre-Keynesian orthodoxy.) Another is that a contradiction had developed between the international stage on which market expansion unfolds and the national level at which protectionist policies were implemented. But most importantly, the separation between the political and economic spheres, which the market system had wrought, was now, in the age of democratisation, coinciding with, and imparting explosive power to, the struggles between the major social classes. Workers were using the vote to press for social protection, and this, when viewed through Polanyi’s pre-Keynesian lens, came at the price of increasing “difficulties in the industrial sphere.”
Democracy and capitalism, in short, had become irreconcilable enemies. The outcome was an impasse, its morbid symptoms manifested in wars, crisis and fascism. Society’s need for a reunification of the economic and political spheres would reassert itself, either in a reactionary and bogus form, exemplified by fascism and with total domination of government by business, or in a progressive form, as a democratic planned socialist order. Liberal capitalism was dead. The only choice, Polanyi came to believe, was fascism or socialism. The ‘great transformation’ on which he pinned his hopes was the dying of the old liberal world and the birth of a new regionalised order, in which the prevailing system would be socialist.
Polanyi’s writings, arguably, resemble the work of Keynes, in the sense they give of liberal civilisation arriving at a turning point, at which radical change is the best option, a sea-change without revolution. But whereas the Keynesian imperative is to preserve capitalism, Polanyi wishes for system transformation. His Great Transformation, although not quite a manifesto, fuses passionate cri de coeur with forensic analysis of market society and its operation. It is near-unrivalled in its portrayal of the cultural consequences of the imposition of the market system, above all its account of the disintegration of Britain’s social fabric, and more generally in its conjuring of market society as a sorcerer’s-apprentice world in which the skeins of market exchange enmesh us all in coercive webs. A further strength is its debunking of the myth of the industrial revolution as a purely private process supervised by a hands-off ‘nightwatchman’ state. In fact, Polanyi shows, behind the market system lay a programme of social engineering steered by states that were far more intrusive than any pre-modern polity. In this, he upends the familiar right-wing indictment against socialism: that it represents an artificial experiment in social engineering, anti-human in its suppression of catallactic spontaneity. In his schema, by contrast, economic liberals are the utopian extremists, while their opponents are channelling a “spontaneous reaction of social protection.” After Polanyi, any university course on political extremism that omitted economic liberalism, or neoliberalism, would be plainly incomplete.
It was during the neoliberal age that Polanyi’s star rose. His critique of Victoria-era market fundamentalism could be re-targeted against its Thatcher-era revival. Since 2008, his work has inspired, in addition, renewed theorisation of capitalist crisis. Here, a particularly noteworthy contribution is that of Nancy Fraser in her attempt to integrate the crisis theories of the “Two Karls”—Polanyi and Marx. I’ll look at Fraser’s essay in some detail, for it is representative of a tranche of writing on Polanyi, in which he appears yoked with the other Karl. I’ll suggest that this coupling works less well than it may at first sight appear.
Fraser’s interest is in developing a critical theory of capitalist crisis. By this she means one that analyses the structure of crisis and the underlying contradictions of the social order and also provides a social action perspective, identifying the struggles that arise in response to those contradictions and disclosing emancipatory potential. Both Karls were engaged in a critical project of this sort. For Marx, capitalism’s fundamental contradiction is, Fraser supposes, “internal to its economy.” For Polanyi, by contrast, capitalism’s tendency to structural crisis consists “in a set of inter-realm contradictions” between the economy and its social and natural surroundings. Polanyi goes beyond Marx in that he eschews economism and sees ecological degradation and social dislocation not as accidental but as endogenous to the social system. His work enables “an expanded understanding of capitalism, which includes not only the economy proper but also its background conditions of possibility.” He is alive to the fact that social conflicts in capitalism repeatedly assume the guise of struggles over nature and social reproduction, and his double movement concept “offers us the chance to expand upon Marx’s overly restrictive, class-centric concept of capitalist conflict.” Marx, however, “offers something that Polanyi lacks: namely, the concept of capital as self-expanding value.”
If we home in on the substantive core of Fraser’s essay, bracketing out references to Marx and Polanyi, we find an original and creative sketch of a crisis theory for our times. Its juggling of the various vectors of crisis (profitability, nature-society relations, social reproduction and so on) and their inter-relations, with precise attention to questions of exploitation and oppression and alive to the abundant diversity of anti-capitalist struggles, is compelling and often brilliant. But the pairing and parsing of the Karls works less well. A warning sign is in the citations: Polanyi’s (only) book on capitalist society, which comprehensively elaborates all his major theses, as against one volume of Marx’s many books on capitalist society, Capital Volume III (whose remit is quite technical: the internal differentiation of the capitalist class and the competition among capitals). Were this Marx’s only work, the charge of ‘economism’ might stick, but it is not. His subject is social change and crisis on a range of theoretical and historical scales and rhythms, approached through such concepts as the forces and relations of production, alienation (on which Polanyi himself drew in his own critique of capitalism), and the metabolism of capitalist society and nature. The latter is grasped by Marx as an ‘inter-realm contradiction,’ and one, moreover, that he perceived to be not only of importance per se, but with a fundamental bearing on capitalist crisis tendencies—as has been conclusively demonstrated in the recent scholarship. Similar applies to social struggles. Marx’s understanding of social conflict certainly is “class-centric” but he treats class struggle as necessarily political, cultural and ideological, and rarely in an economistic manner. His interest in conflict in capitalism extended to questions of imperial, national and ‘racial’ oppression, and with some insights on women’s oppression and social reproduction too.
Fraser’s Marx-Polanyi dichotomy is problematic not just in assuming Marx’s economism but also in downplaying the same disease in the other Karl. As Mike Davis observes, despite insisting on the role of states in constructing markets, Polanyi “simultaneously reified the ‘Market’ as automata.” His work contains little, if any, critical theory of race or gender, or indeed of struggles over social reproduction or nature, and while he does discuss nations and imperialism it is as likely to be a defence of great-power dominance as a radical critique. In other respects, too, his conception of capitalism is narrow. For example, due to his preoccupation with economic liberalism, an asymmetry entered his treatment of the free-market economy and its ‘others’, with the latter assembled into an ill-shapen residual category that receives definition only indirectly, in the mirror of the abstraction that is the former.
Unlike Polanyi, Fraser notes, Marx develops a concept of capital as self-expanding value. It is rooted in a critical, social-relational understanding of the commodity—including, above all, labour-power. But is the other Karl’s conception of commodities, central to Fraser’s evaluation his framework’s complementarity with Marx’s, not incompatible with it? For Polanyi, commodities are things to be bought and sold at the market—as in neoclassical economic theory except that, with a Tönniesian twist, he distinguishes between natural and fictitious commodities. Even in its own terms, this approach is problematic. Take for example money. As Samuel Knafo has shown, Polanyi’s thesis relies on the supposition that liberal economists made and won an argument, that money is a simple commodity, an argument on which institutions were built, notably the gold standard. Yet this was as often as not merely a rhetorical ploy. Those same economists were perfectly aware that money is anything but a simple commodity, and the policies they promoted show that. The history of the gold standard, in particular, demonstrates the fundamental role of government in the creation and administration of money.
A more deep-seated problem with the lack of a theory of the commodity form, or of capital or capitalism, in Polanyi’s work, is that it inhibits analysis of such central processes of contemporary world economy as exploitation, the accumulation drive, capital concentration and centralization, and uneven development. Likewise the social-conflict correlate of fictitious-commodity theory, the ‘double movement.’ Heuristically, or intuitively, the double movement undoubtedly makes sense. Turning over vital elements of human social life to the calculus of purchase and sale does indeed produce socially corrosive tendencies, such that demands for ‘protection’ are inevitable. But when given a more determinate content, ambiguities appear. Consider for example the 2013 Gezi Park protests in Istanbul. They can be theorised as a counter-movement, for they challenged the market-driven steamrollering of a popular urban habitat. However, the Justice and Development Party (AKP) that steered the steamroller has been depicted (by at least one prominent Polanyian) as a ‘reactionary counter-movement,’ in that it presents itself as a communitarian-Islamist opposition to the homogenising trends of globalisation. What is missed here is that every bourgeois regime seeks to govern in the interests of capital accumulation, with its exploitative, polarising and socially disruptive consequences, and so must simultaneously present itself as a mitigatory centre, the upholder of stability, nation, community and so on—whether on conservative, liberal-centrist or social-democratic lines.
In conclusion: Karl Polanyi is a rich thinker, at his inspirational best when conveying the searching spirit of interwar socialism—above all in his raising of the question ‘what to do about capitalism?,’ and in his insistence, drawing on his research in economic history, that modern economies need not be organised through a market system. As regards the morphology of capitalism itself, he has less to say, and while he has deservedly received acclaim for having drawn attention to the pivotal role played by polities, specifically the British state, in engineering conditions propitious to market economics, he paid little heed to the ways in which states had themselves become systematically geared to the interests and imperatives of capital accumulation. One scours his writings in vain for a recognition that the bodies that organise the political affairs of capitalist society are in any meaningful sense capitalist states. As even his devoted admirers concede, Polanyi’s framework was ill-suited to exploring “power dynamics” and tended “to treat the state as an impartial arena for the double movement.” His belief that victorious parties in a parliamentary democracy control the state underpinned the illusion, which he fondly held in 1945, that when Labour ministers assumed office in Whitehall they were inaugurating a radical socialist transformation. History suggests otherwise: they stabilised and reinvented British capitalism. If Corbyn and McDonnell are indeed working in a Polanyian tradition, how should movements of our time relate to this?[book-strip index="1" style="display"]