The Maelstrom of the Market: On the Embedding of Society in the Market Form

The Maelstrom of the Market
On the Embedding of Society in the Market Form

“Nothing is better suited to obscure our view
of social interrelations
than economic prejudice."
(Polanyi)

by Franz Schandl

[This article posted on 11/5/2024 is translated from the German on the Internet, https://www.streifzuege.org/2024/der-mahlstrom-des-marktes/.]


Rarely has a book inspired me as much as The Great Transformation by the economic historian and social anthropologist Karl Polanyi (1886–1964), but it has also left me feeling ambivalent and even at a loss. The great achievement of his book “The Great Transformation” (1944) is the strict and consistent historicization of the market economy. Our author proceeds with all the necessary redundancy. No one has formulated a more determined and insistent rejection of the market and the economy named after it than Karl Polanyi.

Historicization instead of projection

“Economic liberalism was trapped in the fallacy that its practices and methods were the natural consequence of a general law of progress. In order to adapt them to this pattern, the principles underlying the self-regulating market were projected back onto the entire history of human civilization.” (T 365) This is, of course, more than a mistake; it is necessarily false consciousness, an ideological tour de force that is fully in line with market-compliant interests, underpinning them ideologically. Since the future was thought of as the present, the past must have been the same. As George Orwell says: “Who controls the past, controls the future; who controls the present, controls the past.” (1984, Ullstein 1976, p. 228)

In any case, social setting has to appear as nature. However, it is not consciously activated, but rather happens with great vehemence. Nobody has contrived it, nevertheless, or perhaps precisely because of this, it develops an immense power because it is directly fed by the circumstances. Its force creates facts. How can we understand what happens daily through our actions, what we constantly do, other than as natural? The wrong, in its immediacy, imposes itself as absolutely necessary. Its confirmation is the result of our activity. And this is permanent in character, structural, and appears to us not as a domination, but as factual and thus inescapable. Adaptation is inevitable. Experience tells us nothing other than that what is must also be. The simple proof lies in our daily reproduction. Common sense, as conformity with the appearance of the world, is the powerful partner of such declamation.

Of course, nothing is natural, everything social, especially every ruling constitution wants to appear quasi-natural, and that is why it propagates itself in this way. Our concept of economics is a child of its time, the era of capitalism. “The economic rationalism that has come down to us regards a certain form of action as economically sui generis.” (Ö 186) We are dealing here with a “secular religion” (T 192). “It was only in the 1830s that economic liberalism broke out with the zeal of a crusade, and laissez-faire became a downright militant creed.” (T 189) “Nothing is better suited to obscure our view of social interrelations than economic prejudice.” (T 219) “Indeed, under the influence of today's schools of thought and reinforced by the authority of science and religion, of politics and business, it has come to pass that these exclusively time-bound phenomena are seen as timeless and as surviving the market age. Overcoming such a doctrine, which restricts our minds and souls and makes it more difficult to adapt in a life-saving way, requires nothing less than a change in our consciousness.“ (Ö 131)

“In terms of the past, such a view is merely an anachronism; in terms of the future, it is a prejudice,” (Ö 131) according to Polanyi. “The isolated savage who collected food and hunted only for himself or his family never existed. Rather, the practice of attending to the needs of one's household first becomes a feature of economic life at a more advanced level of agriculture; but even then it has nothing in common with either the pursuit of profit or the institution of markets. The model here was provided by the self-contained group.” (T 84) For pre-capitalist societies, our author states: “On this one negative point modern ethnographers are unanimous: the absence of the pursuit of profit, the absence of the principle of labor for pay, the absence of the principle of least effort, and especially the absence of any separate and specific institution based on economic motivations.” (T 76-77) He cites countless examples (see T 361). “In such a community, the idea of profit is excluded, haggling and bargaining are frowned upon, generous giving is considered a virtue, and the alleged tendency towards exchange, bartering and trading does not appear.” (T 79) “It is not the tendency towards bartering that predominates here, but the reciprocity of social behavior.” (T 81)

Market and markets

For capitalism, on the other hand, “the motive of subsistence must be replaced by the motive of profit. All transactions are transformed into monetary transactions, and these in turn require the introduction of a means of payment in all forms of productive life. All income must therefore come from the sale of something.” (T 70) Where buying becomes an obligation, selling is a condition. And vice versa. Those who have nothing to sell will not be able to buy anything. You have to have something to sell, even if it is your own labor power. The transformation of every transaction into a monetary transaction is characteristic of metabolism in bourgeois society. Buying and selling, in turn, require codification through the contract. The state formulates the corresponding laws. It enforces, but it also prescribes, by converting a commodified tendency into a legitimized constitution. “There was nothing natural about the practice of laissez-faire; free markets would never have come about merely by letting things take their course.” (T 192)

Polanyi writes: “Machine production in a commercial society ultimately means nothing less than the transformation of the natural and human substance of society into commodities.” (T 70) The things we make, the relationships we enter into, they are all to be defined as and through commodities. They are not originally such, but in the market society they have to be or become so. Nothing else should be conceivable. That is the universal message of Adam Smith and all the apologists of the market.

In complete contrast to the numerous apologists, Polanyi describes the market economy or the market as such as an attack against nature (T 243): “The extreme artificiality of the market economy is rooted in the fact that in it the production process itself is organized in the form of buying and selling.” (T 109) This is quite a strong point: what is most natural for us is the most artificial! The expansion and enforcement of the market economy are inconceivable without state intervention. “The market was, on the contrary, the result of conscious and often violent intervention on the part of the government, which imposed the market organization on society for non-economic reasons.” (T 331) And he boldly concludes: the market economy is “a threat to the human and natural components of social substance.” (T 207)

Markets refer to a multitude, but a market refers to a superordinate unity of that multitude. Only when markets are brought together not only sporadically but continuously do we speak of the market and the market economy. According to Polanyi, the market form is not one among many; it claims a universalistic character: “The market form, associated with a specific end in itself, exchange, barter, is capable of producing a specific institution, the market. This is ultimately the reason why the domination of the economic system by the market is of immense significance for the overall structure of society: it means nothing less than treating society as an appendage of the market. The economy is no longer embedded in social relations, but social relations are embedded in the economic system.” (T 88f.) ‘Never before our time has there been an economic system that would have been, even in principle, market-directed.’ (T 71) The ‘also of the markets’ did not yet constitute a market, let alone a world market. ”A market economy can only exist in a market society.” (T 106) “These markets – and there are innumerable ones – are interconnected and form a single large market.” (T 107)

The market then steers more than itself; it has become the superstructure of society. “A market economy is an economic system controlled, regulated and steered exclusively by markets; the order of commodity production and distribution is left to this self-regulating mechanism.” (T 102) “Market economy means a self-regulating system of markets; to be more precise, it is an economic system that is controlled solely by market prices. Such a system, which is capable of regulating the entire economy without external assistance or interference, can rightly be called self-regulating.” (T 71) “Self-regulation means that all production is for sale in the market and that all income arises from these sales. Accordingly, there are markets for all economic factors, not only for goods (always including services), but also for labor, land and money, the prices of which are respectively called commodity prices, wages, land rents and interest rates.” (T 103) “The designation of labor, land and money as commodities is thus completely fictitious.” (T 108) But it is effective.

In the context of the convention

Nevertheless, the study is over-focused, because it simply hides far too much. Polanyi concentrates on a central point, undoubtedly unearthing something fundamental, but reducing the entire sifting to it. We are dealing here with a fragmented radicalism. One that shines in some approaches, but without finding continuation. In one eminent point, Polanyi goes beyond previous findings, but in other questions he lags behind them. Polanyi should therefore be regarded as a partial, not a fundamental critic of capitalism.

This is a shame, as the tools for critical analysis would certainly have been available. Polanyi is an author who may pave a way for himself, but then does anything but follow it consistently. The chains of bourgeois structures and their ideology are broken at one point, only to avoid loosening them at all the other points. So he only goes very far on one point, everything else remains within the bounds of convention. The positive connotation of value and work, of plan and markets, of democracy and state, formulates an apologia that disappoints. The definition of labor is more a matter of common sense than of a more intense reflection: “Labor is merely another term for human activity, which is part of life itself, which in turn is produced not for the purpose of sale, but for entirely different purposes; nor can this activity be separated from the rest of life, preserved or made fluid.” (T 107) This naturalistic concept of labor is not acceptable for capitalist modernity. It is terminologically impure.

Nothing about the context of value form and market form either. Without a market, there is no realization of value, but without value, there is no setting of the market. This interrelatedness is ironclad, not just the result of external references that could easily be severed. In Polanyi's work, capitalism appears primarily as a relationship of circulation, not as a mode of production. This also leads to numerous inaccuracies, for example in the determination of profit. The general urge to make money is not identical with the specific motivation to make more money out of money, even if the second is often a consequence of the first and builds on it. The income of the vast majority of people does not come from profit.

The obvious realization that the rigorous historicization of the market and the market economy could also apply to the entire bourgeois universe does not even seem to have occurred to Polanyi. Chapter 20 on “Democracy and the Market Economy” (T 314ff.), for example, is extremely unproductive and unilluminating. Democracy once again serves as an all-purpose cipher, as the master key of emancipation, not as a critical category of bourgeois rule. Democracy is nothing more than the market in politics. Politics is not only put to the vote by buying and selling, but also by buying and selling votes. The quorum is the price of a party, list or person set at a specific point in time for a specific period.

Ultimately, the radical critic of the market ends up embracing the markets, where these should no longer be more than “a useful but subordinate element of a free society” (T 311). “Nor does the end of market society mean that there will be no markets. They continue to exist in various ways to ensure the freedom of consumers, to show changes in demand, to influence producers' incomes, and to serve as an instrument of national economic accounting, but they are no longer an organ of economic self-regulation.” (T 333) “The wage contract ceases to be a private contract, except in subordinate or secondary points.” (T 332) Wages and prices should remain socially acceptable without any profit. In this respect, it is not surprising but only logical that Polanyi is fundamentally concerned with socialist accounting (Ö 81ff.), and not with overcoming value and money.

Markets should not form a market, they should be embedded in society. Labor, land and money should be taken out of the market. (T 332f.) The next Great Transformation would be nothing more than a major reburial. Self-regulation is followed by regulated or planned markets. The economy should be limited to individual markets. This sounds very real-socialist, more like a state economy than a free association. The question of practicality also arises. And isn't it an illusion to assume that at the level of industrial production, markets would be possible without a market? Wouldn't it be necessary not only to eliminate the market, but also to cross out the markets? Isn't it an absolute contradiction to take work out of the market but continue to allow wages and prices? Ultimately, this is an admission that buying and selling, that is, exchange, will remain, come what may.

“Markets are anti-commons,” writes Andreas Exner: ”Nevertheless, in the commons debate, it is often insisted that markets would also have to exist in a commons-based society, and that they themselves could be regulated as a commons. On the one hand, the market is criticized in this way, but on the other hand, it is affirmed precisely in its function of creating an overarching social context in the exchange of equivalents. This contradiction is often countered by referring to the works of Karl Polanyi. Polanyi, so the argument goes, has shown that markets represent a fundamental constant of human life. From this it follows that the social embedding of the market determines its character. A fundamental critique of the market, which is certainly implied in the commons debate, would therefore be the wrong conclusion. We have to distinguish between the market as a place and the market as an abstract space. While the latter has to be overcome, markets as concrete places of exchange would also have to play an important role in a society based on the commons.” (The ‘Great Transformation’ to ‘Great Cooperation’, Commons, Market, Capital and State, Streifzüge No. 49/2010)

The following question also suggests itself: Is there only a “maelstrom” (T 260) from the market to the markets, is there not also a maelstrom from the markets to the market? Another problem is that in this captivating approach, the plural occurs before the singular, the terms (semantically still most closely related) are introduced as a temporal sequence, and not as a logical developmental context. They are primarily positioned in a historicist way and not structured logically. Polanyi helps himself by distinguishing between different categories of trading places, which he does not see reduced to marketplaces and market trade. (p. 233ff.)

Incidentally, the “freedom of consumers” mentioned almost always assumes that they can pay. Freedom of purchase is always linked to money. Those who don't have it have lost their freedom. In the last few paragraphs, the author's terminology does not stray from the well-trodden path of political economy, nor is it grounded in a critique of it. Polanyi firmly believes that “wage differences must, by their very nature, continue to play an essential role in the economic system.” (T 332) Wage is labor (or more precisely: the commodity labor power) in price form. On the one hand, the author laments the transfer of labor to the market, while on the other, he affirms the execution of this transfer, even lending wage and wage differences a brazen character. Thus, in the form of wage and price, value is perpetuated in Polanyi. This is not a perspective, but a bad utopia. Liberation means more than being a high-earning customer who can take advantage of offers.

Capital is more than a market and capitalism, which is a market economy, is more than a market economy. It is the material and ideal enforcement of value-based socialization in all areas of human life. This must be overcome, not just the market, which is only the retort of this socialization.

Marx and Polanyi

The economic historian does not even bother to mention the author of “Capital”. Except for a few modest (and very instrumental) references in the appendices, there is nothing of any relevance that would suggest any engagement with or even intensive reading of the work. The passage quoted by Polanyi (O 433) from the third volume of Capital (MEW 25: 859) is one of the few places where Marx explicitly pays homage to a positive and supra-historical concept of value, and thus only identifies himself as a value theorist. In fact, Marx occasionally oscillated between value theory and value criticism. It is also significant that the concept of capital plays no role in the entire volume, nor does Polanyi comment on the specificity of capitalist production and the particular use of the commodity labor power. On the other hand, his examination of industry and industrialism is strangely neutral, even when he lists its ugliness. The intrinsic connection between capital and industry is hardly mentioned. (See T 331; but in contradiction to this, there are also passages on T 70.)

Polanyi's criticism of the overestimation of the economy in history (T 204), which he also accuses Marx of, cannot be completely dismissed. A simple base-superstructure scheme certainly has more pitfalls than merits. Other objections also make sense. For example, when he points to the belief in progress attributed to both liberalism and Marxism and claims that the theory of developmental history is wrong, that there is no natural sequence of ascending formations: “In any case, the forms of integration do not mean ‘stages’ of development.” (Ö 226) But even here, because Marx is more differentiated than a deterministic Marxism, it would have been better to treat him in a more differentiated way than to simply locate him in the canon of historical materialism. The definition is also limited: “Socialism is, in essence, the tendency inherent in an industrial civilization to go beyond the self-regulating market by consciously subordinating it to a democratic society.” (T 311) There is no substantial examination of the issues, but rather a rehashing of conventional insights, not to mention prejudices. Polanyi's examination of Karl Marx is, all in all, not particularly passionate, considering how much space other authors (e.g. Robert Owen) have been given.

What is striking today is that Polanyi is appropriated by a wide range of different schools of thought. Sometimes he is even presented as a pioneer of the “social market economy” or a forerunner of the so-called Third Way. But perhaps we are being too harsh on our thinker when we consider the precarious living conditions and scientific conditions of the time in which “The Great Transformation” was written. This applies in particular to the years after the war. The conditions for producing critical theory were not particularly favorable, especially for an academic and socialist outsider. From the late 1940s, for example, he was effectively barred from the United States because his wife Ilona Duczyńska was banned from entering the country due to her involvement in the Hungarian Soviet Republic and her membership of the Communist Party of Austria (KPÖ) from 1934 to 1937. The aggressive anti-communism of the McCarthy era undoubtedly narrowed this. Perhaps Polanyi had to embed his radical considerations in this market economy-democratic framework himself, just to be able to do research at all. In this respect, this is also a vague attempt to unbed Polanyi himself. Perhaps someone would have had even more to say than he could have said under these circumstances. But that remains speculation.

Literature:

T: Karl Polanyi, The Great Transformation. Political and Economic Origins of Our Time. (1944) Translated by Henry Jelinek, London 1946.

Ö: Karl Polanyi, Ökonomie und Gesellschaft. Mit einer Einleitung von S. C. Humphreys. Translated by Heinrich Jelinek, Frankfurt am Main 1979.