Dynamic Markets vs. Cohesive Community

Dynamic Markets vs. Cohesive Community
AP Photo/Mary Altaffer, File

A clever turn in Karl Polanyi's argument in The Great Transformation is that implementation of the market system resulted from intentional government design while reaction to the self-regulating market system arose spontaneously. I don't know how seriously Polanyi means his readers to take the argument. He advanced the argument mainly as rhetorical counterpoise to Adam Smith's claim that markets reflect natural, non-political human behavior with which governments only artificially intervene. Polanyi argues, “The road to the free market was opened and kept open by an enormous increase in continuous, centrally organized and controlled interventionism.”

He marshals his evidence selectively, however. The ending of the Speenhamland system in England, necessary to the creation of a nation-wide labor market which was, in turn, necessary for the commodification of labor in the country, was manifestly a governmental act. In a passing concession, albeit one that distinguishes his argument from the Marxists', Polanyi notes, “In the end the free labor market, in spite of the inhuman methods employed in creating it, proved financially beneficial to all concerned.” The critical limitation in the sentence, however, is that the benefits of the free labor market were only “financial.” The human costs necessary to realize these financial benefits for Polanyi — the loss of human community in the subordination of society to the “unregulated market,” and the transition costs to the unregulated market — were greater than the financial benefits of that transition.

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